melvin edwards ex-officio world council of credit unions [email protected] improving agri food...
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Melvin EdwardsEx-officio
World Council of Credit [email protected]
Improving Agri Food Financing Through CREDIT UNIONS
Improving Agri Food Financing Through CREDIT UNIONS
CTA Caribbean Rural Development Briefings, Caribbean Week of Agriculture (CWA) Grenada, October 18-19, 2010
CTA Caribbean Rural Development Briefings, Caribbean Week of Agriculture (CWA) Grenada, October 18-19, 2010
Credit Unions Worldwide
183 million members
49,000 credit unions
97 countries
Co-operatives – A Distinct Economic Sector
Promoting the sustainable development and
empowering people around the world
to grow through access
to high-quality, affordable financial services.
Improving people’s lives through credit unions
PromotingInternational Credit Union Principles• Safety and
Soundness
• Operating
• Governance
• Consumer Protection
Philosophy is Good Business
One Vote per Member
No discrimination
Business operates for
Members’ Benefits only
Elected Volunteer Leaders
• Affordable rates for comparable services
• Continuing Education
• “Co-operation among Co-operatives”
• Redistribute Surpluses Dividends pro rata Education & Training Community & Culture
SECTOR GOALS
Expanding Inclusive Finance services to consumers and producers in greatest need
Supporting economic development through the financial empowerment
Representing credit union organizations and supporting their efforts to serve
members
Caribbean Credit Unions
2.4 Million Members[40% pop]
342 Credit Unions
Assets US $4.1 BillionPursuing Modernised Institutions
Product Innovation & Diversity
Consolidation Strategies
Business Expansion
Some Statistical Data
Affiliates C. Unions Members Loans Assets
Jamaica 47 968,558 $0.42B (64%) $0.66B
Trinidad 130 575,000 $0.86B (72%) $1.2 B
Barbados 35 130,000 $0.52B (79%) $0.66B
OECS 60 266,000 $0.45B (70%) $0.64B
Belize 13 118, 383 $0.17B (65%) $0.26B
Total 342 2,366,000 $3.19B (72%) $4.45B
• ACCESS for the unbanked and underserved• Strengthening the rural economy• Developing integrated business networks• Supporting communities-at-risk• Encouraging policy, legislative and
regulatory system reform • Rebuilding during and after disaster or conflict• Partnering to address priority needs• “Quality Credit Unions For Everyone”
Approaches To Development
• Bahamas, Jamaica, 7 OECS, Trinidad, Bermuda
• PEARLS Prudential Standards & Monitoring
• AML, CTF, IFRS Compliance
• Stringent Capital and Investment Provisions
• Risk-based Lending and Efficient Collections
• Tighter Audit & Disclosure Rules
• Higher “Fit and Proper” Criteria for Directors
Drafting Harmonised Sector-Specific Legislation & Regulations, and Lobbying
• Removal of Cap on Dividends
• Development Fund – Mandatory, Pooled
• Community Investment & Youth Involvement
• Mergers, Conversions, Shared Services, Branch
• Low-cost Savings, Loan, Funeral Insurance for every member. New Consensus Acts passed Barbados, Bermuda, Antigua, Grenada.
Drafting Harmonised Sector-Specific Legislation & Regulations, and Lobbying
Promoting good governance and supporting effective credit union legislation through Model Law for Credit Unions
Model Regulations for Credit Unions distributed worldwide in four languages
Credit Unions Know Agri-Food Challenges
• Instability in input prices,
• Inconsistency of supply e.g. losses from spoilage and post harvest handling,
• High inventories burden on processors
• Alternatives to grow, use working capital
• Attract investors to finance upscaled units
• Stable /enforceable marketing contractsImpact purchasing power CollaborationOwnership, Management, Governance in FOs
Market Studies Indicate
• Entrepreneurs want higher borrowing limits, customised facilities, convenient locations
• Credit Unions are the most accessible FIs
• Microcredit is ≤15% of loans portfolio
• Av. Loan Size @ CUs=$1975, NDF $10,000
• Same process for MSME & Consumer loans
• Low incidence of Saving for the business
• Public Service environment is unfriendly to small and micro entrepreneurs
• Ministries & Agencies dominate Agri-Sector.
Market Studies Indicate
• Few mega farms, most are micro
• No mega Co-operatives, too many micro
• Farmers’ Organisations are weak at all levels
• Food Security Policies and Strategies lack Implementation
• After CL Financial, more FIs keen to create wealth at home
• Capacity and Confidence GAPs need risk reduction partnerships
Sustainable Rural Agriculture Financing
Must be profitable for both borrower and lender
Competitive agricultural lending efforts have focused on:
1. Value Chain Financing
2. Capacity Building
3. Improving Delivery Mechanisms
4. Markets Integration
5. Risk-based and Supervised Credit Methods
6. Replication of Successful Ventures.
The Value Chain Comprises
Anyone who helps Farmer:
• cultivate
• grow/harvest crops
• Market the crops
• process them into by-products
• deliver them to consumers
5 key requirements
from participants:
1. Trust
2. Credibility
3. Commitment
4. Diligence
5. Competence
Establishing a Successful Value Chain
Credit Union Expansion
includes value chain
financing and helping rural
producers meet their goals.
Financing Facilities in place• Factoring• Buffer Funds• Lines of Credit• Guaranteed Lending• Direct Lending
Match Services For Agri-Food MSMEs
• Business Services –Registration Forms, Business Plans, Applications.
•TA helps farmers understand markets, improve soil quality, records & food safety, increase crop yields, and move from subsistence to small commercial farming.
•Training in Entrepreneurism, Business Mgt, Finance.
•Strengthen Organisation capacity.
•Future plans may include crop insurance to protect loans in years of bad harvests, etc.
SAVINGS-DRIVEN MICROFINANCE
Members’ Shares, Members’ Deposits, Institutional Capital primarily.
Technology, Technical Assistance, TrainingInternational and Regional donors: USAID,
USDA, IDB, IFAD, UNDP, CDB, World Bank, EU, Bill and Melinda Gates Foundation,
Commonwealth Secretariat.GOVERNMENTS
Micro-lending Foundation established as an
adjunct to a Co-operative Credit Union• Capitalised by donors, lenders, Government• No Savings or Payment functions• Eligible – All micro, small, medium
entrepreneurs• Women and Rural Clients dominate.
NDF – Montserrat [1987]
Financing MSMEs – CU Scenario 2
Financing MSMEs – CU Scenario 3
Small Business Window within the CUproviding savings, payment, insurance credit and financial education products• City of Kingston CU – Jamaica• Eastern – Trinidad & Tobago • Public Workers – Barbados• La Immaculada, Blue Creek – Belize• Grenville CU (120 vendors) – Grenada• Roseau & Central (hucksters)- Dominica
• Micro-lending Foundation converted to an Enterprise Credit Union
• Capitalised by borrower clients and new entrepreneurs–high average equity, savings
• Women and Rural Clients dominate• Agri-Food loans demand less than 10%
FNDECCU – SKN [October 2009]
Financing MSMEs – CU Scenario 4
CUSO providing specialised, risk-based screening and appraisal of applicant entrepreneurs referred from affiliate CUs
• Optimal use of improved delivery technology
• Facility owned by Co-operative Sector• Endorsed by EU RESTORE Project,
[St. Lucia Dec. 2009]
Financing MSMEs – CU Scenario 5
MICROFINANCE INSTITUTION OWNED by CO-OPs • Direct Financing for Micro, Small, Medium Enterprises• Scope–All types of member-owned for-profit MSMEs• Special Financing - youth, women, rural MSEs• Business Savings at MFI• Personal Savings continue at home CU • Capitalised bu the National League, affiliated CUs,
Farmer/Fish/Service CO-OPS• Current engagements transferred to MFI
St. Vincent - October 2010
Financing MSMEs – Scenario 6
MatchSavings.org is a microfinance program that gives you the opportunity to promote savings before credit as a way
to overcome poverty.
• Introduce the unbanked & underserved to credit unions
• IRNet® has paid out more than $2.8 billion in remittances to 8 countries since 2001
•
International Remittances
Development Programs in 7 Countries
• 250,000+ lives lost, 1 million homeless, • Major damage/loss of government structures• 12 caisses populaires damaged/facing balance
sheet losses• Employees/family members/enterprises devastated • US$1.1 million+ raised globally for Haiti Relief• Focus on repairing/rebuilding credit unions• Raising CU operating standards while rebuilding • Aiming at improved delivery technology
Focus on Haiti – Post Earthquake
KOTELAM Branch BEFORE Earthquake
KOTELAM Branch AFTER Earthquake
Haiti: Post-earthquake Living Conditions
The Future of Haiti?
• Africa: 14,404 CUs and 16 million members
• Asia: 21,233 CUs and 36 million members• Caribbean: 556 CUs and 3 million members (Haiti incl.)
• Europe: 2,418 CUs and 9 million members
• Latin America: 1,784 CUs and 15 million members
• North America: 8,653 CUs and 102 million members
• Oceania: 282 CUs and 4 million members
CUs by World Region
Source: WOCCU’s 2009 Statistical Report
How YOU Can Get Involved• 2012 : United Nations Year of Co-operatives
• Participate in WOCCU training opportunities– World Credit Union Conference, Glasgow July 2011
– 54th Caribbean Convention, Curacao June 2011
• Celebrate International Credit Union Day (Oct. 21,2010) Theme: Local. Trusted. Serving You.
• Stay informed
– Credit Union World, eCommuniqué, www.woccu.org, www.facebook.com/woccu
Opening Flag Ceremony
Melvin EdwardsEx-officioWorld Council of Credit [email protected]
Thank you