Presentation by Francois Stepman CAAST-Net workshop in Arusha, Tanzania 26 October 2012

“The growing global demand for agricultural innovation makes it vital

to assess the characteristics that separate effective from ineffective

innovation fund mechanisms”

DESIGNING AND IMPLEMENTING AGRICULTURAL INNOVATION FUNDS:

Lessons from Competitive Research and Matching Grant Projects© 2010 The International Bank for Reconstruction and

Development/ The World Bank

What went wrong with

funding agricultural research for development?

The absence of well-elaborated national policy, over-compensated by an excess of donor initiatives

The unrealistic time frame of donor initiated-development goals

The frequent ‘adjustments’ according to the donors’ own priorities and the methods and procedures in fashion

Donors and their aid administrators have short memories, repeating the same mistakes

Too many disorganized, uncoordinated and technically weak actors at all levels, resulting in a multitude of fragmented, competing, contradicting, parallel activities which have often interfered with the development of national institutional capacities by enticing the best people to come and work for them

Low enabling environment for private investments and for farmers to re-invest in their farms

How to finance innovation in groundnut?

As agriculture and agribusiness modernize with increased integration and interdependent relationships, the opportunity and the need for value chain finance becomes increasingly relevant

It can improve the overall effectiveness of those providing and requiring agricultural financing.

It can improve the quality and efficiency of financing agricultural chains

Meeting the challenges of consumer trends and the demand for more processed or value added products requires increased investment in equipment, working capital, and skills and knowledge.

Such investment is not only costly for individual value chain businesses, but can only be undertaken if there is an assurance from elsewhere in the chain for supplies, produce or markets.

identifying financing needs for strengthening the chain;

tailoring financial products to fit the needs of the participants in the chain;

reducing financial transaction costs through direct discount repayments and delivery of financial services;

using value chain linkages and knowledge of the chain to mitigate risks of the chain and its partners.

Agricultural Value Chain Finance Tools and LessonsCalvin Miller and Linda JonesPublished by FAO and Practical Action Publishing 2010195 pages

• What is value chain finance, how is it applied and what can it offer to strengthen agricultural development?

• How can financial systems, governments and services be prepared for the demands of financing modern agri-food chains?

• How does agricultural value chain financing affect inclusion, especially for small producers and what can be done to make these systems more inclusive?

• What can governmental and non-governmental (NGO) agencies do to support increased and more effective agricultural financing through value chains?

Value chain financingDonors support more and more

Farmer organisationsPrivate business development National research callsValue chain based funding

Most businesses focus on managing their operations. They are not necessarily focused on how to improve their competitiveness through innovation?

Many businesses have limited ability to develop good proposals. Developing concept notes and grant proposals and assembling the required documentation entails transaction costs (time, resources). The private agri-sector may find it very difficult (or reluctant) to provide time and cash to match the grant?

Limited experience and mistrust make the private sector reluctant to engage with NGOs or government-“driven” research activities and thereby prevent actors outside the private sector from entering into collaborative arrangements?

Besides, the challenges of working with smallholders in outgrower schemes limits the private sector’s interest in submitting proposals