presenter slides - e-workshop: agricultural risk management with fao and ilo
TRANSCRIPT
Agricultural Risk ManagementInnovations you should know about
Patricia RichterTechnical Officer Social Finance Programme
Pranav PrashadMicroinsurance Officer of the MicroinsuranceInnovation Facility
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use #Commit100M
Emilio HernandezAgricultural Finance OfficerAgribusiness and Finance GroupRural Infrastructure and Agro-industries Division (AGS)
Use the Q&A box on the top-right to send questions to the Panelists.
Campaign Commitment E-Workshop Series
Agricultural Risk ManagementInnovations you should know about
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To know more about ILO, please visit www.ilo.org or write to [email protected]
To know more about FAO, please visit www.fao.org or write to [email protected]
The reactive increase in supply has been similar across the world
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Total production of different commodities in Asia, LAC and Africa (in thousands of MT)
Source: FAOSTAT
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Asia Latin America
Africa
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Cereals
Fruits and vegetables
Meats
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Some agricultural products are increasing in value more than others
Total export value of different commodities in Asia, LAC and Africa (in millions of USD)
Source: FAOSTAT
Asia Latin America
Africa
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Cereals
Fruits and vegetables
Meats
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The supply response has been driven by a rise in productivity
Average yields for different commodities in Asia, LAC and Africa (in thousands of Hg/Ha)
Source: FAOSTAT
Asia Latin America
Africa
Cereals
Fruits and vegetables
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A critical determinant of productivity has been long-term investment in agriculture
Agricultural capital stock in Asia, LAC and Africa (in million of 2005 USD)
Source: FAOSTAT
Asia Latin America and the Caribbean
Africa
680000
700000
720000
740000
760000
780000
800000
820000
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17000001750000180000018500001900000195000020000002050000210000021500002200000
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Dominance of domestic private investments in total agricultural capital stock
Components of agriculture investment for a sample of 31 developing countries
Source: ODI, 2012
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The lag of formal financial services in rural areas
Credit market served
by informal sectorSavings market served
by informal sector
Source of savings and credit services for the rural population in LAC in 2011
Fuente: FINDEX, 2012
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Ahorró dinero el añopasado, zona rural
Ahorró en una instituciónfin. el año pasado, zona
rural
Usó préstamo el añopasado, zona rural
Préstamo de instituciónfin., zona rural
% o
f ru
ral p
op
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Fuente: FINDEX, 2012
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Saved any money in thepast year, rural
Saved at a financialinstitution in the past
year, rural
Loan in the past year,rural
Loan from a financialinstitution in the past
year, rural
% r
ura
l po
pu
lati
on
Credit market served
by informal sectorSavings market served
by informal sector
The lag of formal financial services in rural areas
Source of savings and credit services for the rural population in South East Asia and Pacific in 2011
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Fuente: FINDEX, 2012
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Saved any money in thepast year, rural
Saved at a financialinstitution in the past year,
rural
Loan in the past year, rural Loan from a financialinstitution in the past year,
rural
% r
ura
l pip
ula
tio
n
Credit market served
by informal sectorSavings market served
by informal sector
The lag of formal financial services in rural areas
Source of savings and credit services for the rural population in Subsaharan Africa in 2011
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The lag of formal financial services to agriculture from the firm’s perspective
Ag. credit as a share of total credit vs. ag. GDP as a share of total GDP for select countries in Asia during 2010
Source: FAO and WDI, World Bank
0 5 10 15 20 25 30 35 40
Cambodia
Pakistan
Vanuatu
Bangladesh
Bhutan
Indonesia
Sri Lanka
Thailand
Philippines
Samoa
Maldives
Korea,…
Ag credit as share of total credit (%)Ag GDP as share of total GDP (%)
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The lag of formal financial services to agriculture from the firm’s perspective
Ag. credit as a share of total credit vs. ag. GDP as a share of total GDP for select countries in Latin America during 2010
Source: Centro de Estudios Peruanos, 2011
6,068,5
0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0
MéxicoPerú
Rep. DominicanaColombia
PanamáCosta Rica
El SalvadorHonduras
GuatemalaBolivia
EcuadorChileBrasil
ArgentinaNicaragua
UruguayVenezuela
ParaguayLAC / Promedio
América Latina y el Caribe: Porcentaje del PIB agropecuario respecto al PIB total y del crédito agropecuario respecto del crédito total
Cartera agropecuaria /Cartera total bruta (%)2010
PIB agropecuario / PIBtotal (%) 2010
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The lag of formal financial services to agriculture from the firm’s perspective
Ag. credit as a share of total credit vs. ag. GDP as a share of total GDP for select countries in Africa during 2010
Source: FAO and WDI, World Bank
0 10 20 30 40 50
Ethiopia
Liberia
Burundi
Rwanda
Malawi
Ghana
Tanzania
Uganda
Kenya
Sudan
Nigeria
Zambia
Namibia
Botswana
Seychelles
Ag credit as a share of total credit (%)
Ag GDP as a share of total GDP (%)
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Inequality in the economic benefits seized from agribusiness investment opportunitiesThere is evidence of feasible agribusiness investment opportunities not being seized in poorer developing countries where there is more potential for socio-economic impact.
Source: World development indicators
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Low income
Lower middle income
Upper middle income
High income
Agr
icu
ltu
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alu
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mil
lion
s o
f 2
00
5U
SD)
Low income
Lower-middle income
Upper-middle income
High income
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Two Core Questions
Client valueWhether and under what
circumstances do insurance services provide value to low-income households?
How to improve client value of products and services through implementation and innovation?
Business caseWhether and under what
circumstances can insurance programmes be viable and sustainable for all stakeholders
How to enhance viability through processes and tools : demand enhancement, products, channels!
People in rural areas need access to a range of financial and non-financial services for various productive and protective purposes:
• Purchase stock, equipment and agricultural inputs
• Maintain infrastructure
• Contract labour for planting/ harvesting
• Transport goods to markets
• Make/receive payments
• Manage peak season incomes to cover expenses in low seasons
• Invest in education/ shelter/ health or deal with emergencies
• Climate change adaptation and mitigation
Farmers, agri-based industry, non-farm enterprises, household consumers
ILO approach to rural development
1. Innovate, experiment,
test
2. Analyze, document and develop tools
3. Disseminate
4. Promote: policy dialogue
and capacitybuilding
Financial innovations
Non-financialinnovations
Training materials
Research papers
Other publications
Other tools
ILO internal
ILO external
Policy dialogue
Capacity building
Results of rural innovations (1)
AMK, Cambodia => Financial Education Programme to improve clients’ RM strategies
1) Reduction of 3.4% in late payments2) Increase of 10% in insurance uptake3) Reduction of 8% in clients’ believe that it is impossible to save, increase of 1% in clients’ association of savings and security, through improved handling of debt, as well as attitude towards borrowing
NWTF, Philippines => Entrepreneurship Training to improve clients’ RM strategies
1) 13% effect in perception of lower barriers to entrepreneurship2) Business profit increased by PHP 2’000 (approx. USD 50)3) Ownership of motorized vehicles increased by 3.5%4) Incidents of late repayment decreased by 4%, taking out a loan to repay another loan decreased by 10%5) 5% increase in use of microinsurance to cover unforeseen expenses
Results of rural innovations (2)
Nyèsigiso, Mali => Integrated client training on child labour, enhancing agricultural productivity, financial education
to address working conditions (child labour risk ) amongclients
1) Incidence of child labour decreased by 26% for girls2) Some evidence that training increased awareness on child labour (perceived age at which children could start full-time work, importance of secondary schooling)
BASIX, India => Client training on improving productivity by reducing occupational safety and health risks
1) Positive results in safety and health at the workplace: 11% decrease in workplace illnesses and injuries, and more clients having a first aid box2) 37 USD increase in the monthly income3) Increase in the ability to cover costs (25%) 4) Increase in the adoption of new technologies and practises (to ease physical labour, reduce cost of inputs or increase yield) (54%)5) Improved working conditions: average daily work hours reduced by -73 minutes
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On client value: Better financial choices in the absence of a shock: productive impact
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On client value: Lower reliance on burdensome coping strategies
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Impact On client value: Lower out-of-pocket spending
PACE!!
• A client value assessment tool developed by the ILO’s Impact Insurance Facility – Assesses value from microinsurance products in relation to
alternatives providing protection for similar risks
– Takes a client’s perspective
– Low-cost; can be applied in a few days
– Measures four key dimensions of value: product, access, cost and experience
– Looks at both client specifications and related processes
• Developed in response to the microinsurance industry’s demand for a simple yet holistic approach to understanding client value in real time
• NOT a substitute for demand or impact studies; PACE focuses on improving value, not proving it24
Technical guide available on our website
PACE: Many dimensions of value
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Product Coverage, service quality,
exclusions, waiting periods Sum insured to cost of risk Eligibility criteria Value-added services
simple
affordable
appropriate
Access Choice &enrollment Information &
understanding Premium payment method Proximity
Cost Premium to benefit Premium to client income Other fees & costs Cost structure and controls
Experience Claims procedures Claims processing time
& quality of service Policy administration &
tangibility Customer care
accessibleresponsive
Key Points
• PACE can help you improve the value proposition
• Value creation is a process
– Mature products often provide better value
– If your product remains stagnant while others’ evolve, you will lose market share
– It is important to keep abreast of clients’ risk-management needs and preferences
• Small changes in product design make a big difference
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Additional ILO tools for Rural Service Providers…
MF4DW Diagnostic Toolkit=> Purpose:
Help interested MFIs to detect DW challenges among clients.
=> Elements:• Introduction to Microfinance for Decent Work• Implementation guidelines for the MFI• Guidelines for interviewers• Training materials
– Goals of training– Training agenda– Role play
• Decent Work questionnaire• Interviewer feedback form
ILO Rural Capacity Building toolsTitle of product Description Type
Empowering rural communities through financial inclusion
Policy brief on financial inclusion for rural communities. Policy advise
Protecting the Poor: A Microinsurancecompendium. Vol. II
Contains chapters on climate change, next-generation index insurance for smallholder farmers, livestock insurance.
Knowledgeproduct
Making insurance work for microfinance institutions: a technical guide to developing microinsurance
Guide for MFI managers on the design and operation of basic insurance products. Introduces fundamental insurance concepts, outlines the prerequisites needed for an MFI and describes the key features of five types of insurance products.
Knowledgeproduct
Financial Education: Trainers’ Manual
A series of training materials designed to teach vulnerable groups – including women and men in poverty, families with working children, youth and migrant workers – financial knowledge and management skills
Training Tool
Making Microfinance Work: Rural Microfinance
A chapter and stand-alone course (in development) in the MFI management training programme “Making Microfinance Work: Managing Product Diversification”
Training Tool
Village Banking and the Ledger Guide
Practical tool for strengthening village banks as a means of giving poor women and men in rural and often remote areas access to financial services (savings and credit), social empowerment and a higher quality of life.
Training Tool
Rural Academy: Decent Work in the Rural Economy
2-week training event with a 3-day elective on rural finance. TrainingCourse
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Thank you!
“Agriculture vulnerability and poverty go hand in hand, but insurance holds out the promise of breaking a part of the
cycle that ties them together.”
Adapted from Jonathan Morduch, Economist, New York University
Social Finance ProgrammeInternational Labour Organisation
www.ilo.org/socialfinancewww.ilo.org/impactinsurance
Pranav [email protected]
Patricia [email protected]
• Produce 2 reports (Africa and Latin America) on effective delivery of agricultural finance services and risk mitigation tools.
• Publish a set of policy guidelines and training manuals for designing services and risk management tools for smallholders.
• Deliver trainings in Africa, Latin America and Asia on value chain finance analysis as a way of improving service delivery.
• Make publicly available all policy and training material related to rural finance and investment on the Rural Finance and Investment Learning Centre (www.ruralfinace.org)
• Publish 6 studies on the value of innovative insurance models and cost effective means for scaling.
• Expand agricultural insurance activities into 5 new countries by 2017.
• Holding three microinsurance-related webinars by end 2015.
• Publishing an analysis on how Social Protection Floors and the financial inclusion can help lift people out of poverty by end of 2015.
• Produce a publication on how microfinance can contribute to job creation.
Campaign Commitment Makers in 2014
See more at www.microcreditsummit.org/make-a-commitment.html