agricultural value chain financing by chavarin saila bank for agricultural and agricultural...
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Agricultural Value Chain Financing
By
Chavarin Saila
Bank for Agricultural and Agricultural Cooperatives
(BAAC)
- Established in 1966
- As a Specialized Financial Institution
- State Enterprise under the Jurisdiction of the Ministry of Finance
BAAC Historical Background
To promote the improved social and economic well-being
of Thailand’s farming population through the provision of financial assistance for agricultural production, investment and
marketing purposes.
Objectives
BAAC Vision
“To be a secured rural development bank with modern managerial technology focusing on the uplift of small-scale farmer’s quality of life.”
“Standing side by side and Recognizing the Value of People”
Value
Mission
• To render integrated credit services to enhance farmers’ opportunity for effectively improved productivity
• To streamline social development regarding agriculture-based learning for the improved quality of life of farmers so that they will be valuable human resource assets and worthy members of society
• To administer funds in such a manner that the cost is kept at the appropriate level reflecting the banks key mission with emphasis on liquidity and stability
• To develop new areas of services to effectively and productively meet farmers needs on the strength of high-caliber staff with sound judgment
AMC
BAAC Financing on Value chain
Financial Service
Learning Support
Activities
Risk Mitigation Support
Activities
Domestic Consumption/
Export
Agricultural Produce
Processing
Agricultural Activities
BAAC’s Model in Agricultural Value Chain Financing
• Agricultural value chain financing would be successful if following aspects are well addressed:
- supervised credit management
- productivity enhancement supporting : productivity increasing and production costs reduction
- marketing channel creation: group formation, stop selling to middlemen
- knowledge supporting to be self-reliant : capacity building
- providing of safe guard against risks
15.45 15.82
5.916.11
5.575.27
2.65 2.531.93 2.04
1.41 1.520.83 0.74
1.14 1.09
3.413.59
0
2
4
6
8
10
12
14
16
Mil.Person
Farmer Manufacturing Construction CommunityService
Others
Labour Force Survey As of August 2010
Year 2009
Year 2010
Farm Households Serviced by BAAC, FY 2005-2009
5.54
5.68
5.91
6.07 6.10
5.20
5.40
5.60
5.80
6.00
6.20
2005 2006 2007 2008 2009
Million Unit
Rice Cultivation Area in Thailand (Rai)
> 2,000,000
1,000,001 - 2,000,000
500,001 - 1,000,000
100,001 - 500,000
< 100,000
= 0
Converted Area :1 rai = 1,600 sqm2
2.5 rais = 1 acre
6 rais 400 sqm2 =1 hectare
Thai Rice Exporting in 2009
Bangladesh
44 Tons
Bangladesh
44 Tons
Pakistan 40 Tons
Pakistan 40 Tons
Ceylon
288 Tons
Ceylon
288 TonsIndia
41 Tons
India41 Tons
Indonesia
219,643 Tons
Indonesia
219,643 Tons
Philippines
156,033 Tons
Philippines
156,033 Tons
Iran24,144 Tons
Iran24,144 Tons
Germany25,604 Tons
Germany25,604 Tons
Cambodia
42,667 Tons
Cambodia
42,667 Tons
Malaysia 162,437
Tons
Malaysia 162,437
Tons
Total : 8,592,830 Tons
Total : 5,027 Million US$
I Credit ServicesCredit services for individual farmers
- short term loans for agricultural production (working capital)
– loan for seasonal expenses
– repayment term within 1 year (in special cases repayment term < 1 ½ year)
- Medium and long term loans for investment– loan for investment in assets which last more than 1 years, in
special cases loan term can last up to 20 years, e.g. loan to buy agricultural land and machinery
– payment in installment, loan terms more than 1 year
Financial Services
I Credit ServicesCredit services for individual farmers
- Loans for sale postponement of farm produce : Crop Pledging Schemes: to provide funds to farmers to meet their
immediate expenses while waiting for crop prices to rise after the harvest season, avoiding thinned to sell their crops when prices are low. Repayment of this type of loan is normally due within six months.
- Cash credit lines : To provide a convenient way for clients to obtain BAAC loans. Clients can withdraw cash from his account as he needs up to an agreed ceiling and within the period of loan agreement.
- Long term loans for refinancing old debts
- Loans for farm-related and non-farm activities
Financial Services
I Credit ServicesCredit services for individual farmers
- Loans for overseas working
- Loans for quality of life- Housing- Education- Medical care
- Advanced Credit (A-Cash) -instant cash credit facility for meeting their urgent needs. The clients can obtain and repay credit amount at their convenience
Financial Services
I Credit Services
Credit services for farmer’s Institutions
- Re-lending to members
- Procurement of farm inputs and equipment
- Long term agricultural investments
Financial Services
Learning Support Activities
First Phase Self-Reliance
- change way of living- Practice of keeping detailed accounts of household expenses- abandoning gambling habit- have occupations that generate extra income,- cutting down unnecessary expenses- Form savings habit
Second Phase Inter-dependence
- Stronger community take part In planning, preparing community data and analyzing strengths and weaknesses- Conducting joint business ventures- buying and selling collectively - Acting as a group e.g. occupation, savings, resources conservation and fringe benefits
- Development of strong community to create community business network
- Advocate joint trading and setting up of an economic network at community level
Model of Sufficiency-economy-oriented CommunityProject
Third PhaseCommunity Economic
Network
- Farmer becomes confident that they will be compensated in times of drought that caused damage to their crops
- Indemnity payment is utilized to fund a repeated cultivation
- BAAC in collaboration with the General Insurance Association has rendered the weather index insurance service to maize farmers.
- Service areas currently covering 5 provinces
- Drought index is based on data supplied by eight rainfall stations under the auspices of the Meteorological Department.
Risk Mitigation Support Activities
Weather Index Insurance
- Insurance premium is fixed at 100 Baht per rai with maximum indemnity payment of 1,228 Baht per rai.
- Indemnity appraisal relies on rainfall measurement criteria as stated in the insurance policy and differs from : - degree of risk prevailing in each locality
- rainfall at each station
- starting of cultivation and crop stage, i.e. planting, growing or budding
Risk Mitigation Support Activities
Weather Index Insurance
- Were set-up in BAAC branch premises to support provision of
quality agricultural inputs and developing marketing channels
for agricultural products produced by client farmers.
- Crop collection: Support from AMC to collect and sell farm produce.
Crop collection is convenient way for farmers to sell their crops
directly to buyers without any intervention from middlemen at
fair prices in accordance with quality and quantity.
Agricultural Marketing Cooperatives (AMCs)
Marketing Support Activities
to help client to sell paddy at fair prices and on fair terms and conditions
Marketing Support Activities
Central Paddy Markets
Agricultural Marketing Cooperatives (AMCs)
- Advantages for client farmers include:
- To purchase farm inputs at fair prices with good after- sale services
- To sell farm products through the AMCs collectively with fair prices
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