icco desk-study on linking rural financial services to producers in the context of a value chain...
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ICCO desk-studyICCO desk-studyon linking Rural Financial on linking Rural Financial Services to producers in Services to producers in the context of a value the context of a value
chain chain &&
Roadmap Value Chain Roadmap Value Chain DevelopmentDevelopment
19 November 200919 November 2009
11 Cases - Rich diversity of 11 Cases - Rich diversity of VCFVCF
5 main finance 5 main finance arrangements:arrangements:
Fully embeddedFully embedded MFI financeMFI finance
Bank financeBank finance MFI –> actor –> MFI –> actor –>
producersproducers [Bank -> actor -> [Bank -> actor ->
producer]producer]
Source of finance
Type chain actors
Service Providers
Facilitators
Chain actors Banks MFIs SACCOs Producer
organization
Producer Organizations
Marketing org. Processors Traders
Production services
BDS Information
services Group mobilizers Quality &
certification
Donors NGOs Consultants Government
3 Institutional 3 Institutional modalities/dynamicsmodalities/dynamics
Finance by value chain operators: Finance by value chain operators: ‘All-in-one’: Actor/promoter/financier ‘All-in-one’: Actor/promoter/financier
Finance by specialised finance Finance by specialised finance providers (MFIs) that evolved out of a providers (MFIs) that evolved out of a value chain actorvalue chain actor
Finance by a FSP (MFI/Bank) that was Finance by a FSP (MFI/Bank) that was linked up to the value chain actorslinked up to the value chain actors
Levels of maturity & Frontier Levels of maturity & Frontier areas in VCFareas in VCF
Value Chain Volume
Maturevalue chains
DevelopingVCs
Number of farmers
Commercial large scaleagriculture
Family agriculture
Embryonic and emergingvalue chains
Bank finance barrier
DevelopingValue Chains
Inclusion barrier
VCF = chemistry between VCF = chemistry between VCD and financeVCD and finance
A complicated A complicated
Chemistry.Chemistry.
Bottom line: Bottom line:
risk mitigationrisk mitigation
Chain Governance
Chain Intelligence
Horizontal linkages(producer
organization)
VCF management & control
Forging vertical linkages
(producer - market)
Lessons learned (1)Lessons learned (1)
Identification:Identification: Strong lead partnerStrong lead partner Orchestration of promising Orchestration of promising
VCF strategy (South)VCF strategy (South) Orchestration of VCD/VCF Orchestration of VCD/VCF
departments / officers departments / officers (North)(North)
DesignDesign Lead chain actor = designerLead chain actor = designer Based on VC analysis & Based on VC analysis &
feasibility studyfeasibility study Assess institutional Assess institutional
modalities in local contextmodalities in local context
DesignDesign Separate facilitator and Separate facilitator and
provider rolesprovider roles Identify sources of risk Identify sources of risk
reductionreduction Perspective for growth to Perspective for growth to
maturity in VCFmaturity in VCF Embedded finance: limits Embedded finance: limits
& benefits& benefits Assess need CB and Assess need CB and
design programdesign program Change of mind set chain Change of mind set chain
actors (double loop actors (double loop learning)learning)
Lessons learned 2)Lessons learned 2)
Engaging FSPsEngaging FSPs Identify finance potential and potential Identify finance potential and potential
financiersfinanciers How to facilitate the link?How to facilitate the link? Facilitate (gradually) increasing exposureFacilitate (gradually) increasing exposure
Choice of instrumentsChoice of instruments Avoid crowding out with grantsAvoid crowding out with grants Choose appropriate financial instrumentChoose appropriate financial instrument
Thank YouThank You