value chain finance

Pagina 1 | 26 oktober 2009 | [Presentatie titel invullen]


Value Chain Finance

workshop April 2011


A joint initiative


Questions for VCF discussion

1. What role do MFIs play in VCF? In relation to this In what way should TMF be concerned with VCF? Should it be concerned at all?

2. How should the link be with value chain development (VCD)? How can non-financial services (NFS) best be facilitated and by whom??

3. What is the role of banks and other financial institutions to finance in the Chain??

4. How can synergy be achieved between donors of VCD and funders of VCF?

5. What are the implications for TMF policy and action for the TMF consortium?


CHAIN ACTORS

CHAIN SUPPORTERS (SERVICE PROVIDERS - FACILITATORS)

CHAIN CONTEXT

Source: SNV-LA

The Value Chain concept

04/08/235


Value chain finance

Towards more inclusive value chains

Frontier areas in Value Chain Finance

Commercial finance

Development finance

Microfinance

Value chain development programsProducer organizationMarket development

Value Chain Volume

FullyCommercialvalue chains

EmergingVCs

Number of farmers

Commercial large scaleagriculture

Family agriculture

Family agricultureLocalized markets only

Bank finance barrier

EmergingValue Chains

Inclusion barrier

Interventions

VCF

VCD


The challenging VCD-VCF link

• How to help create more value added for primary producers (link to attractive markets) ?

• Chain organisation: How to ensure sufficiently strong horizontal linkages (producer organisation) and vertical linkages (farmer-processor-trader etc) ?

• How to mitigate risks in the chain ?

• How to ensure the necessary non-financial services in the chain without threatening the viability of the operation?


Donor – Investor dilemma's• Mismatch in the past between FS and NFS

• Lenders often faced with relatively high PAR on agricultural portfolios: risk mitigation is crucial

• New VCF approach for agricultural lending:

– Joint Action Agendas donor & investor– Thorough VC analysis & CB needs assessment– Plan for both NFS and FS to ensure profitable

business ready for appropriate finance


Good practice in VCF (1)

Chain & partner identification

1. Select partners with VCD/VCF point of view

2. Safeguard both the connection and the distinction with value chain development

3. Identify an effective lead partner in the chain

4. Facilitate the ‘orchestration’ of a promising VCF strategy

5. Create conditions for synergy between grant and debt finance

Core issues: VCD: How to turn a

supply chain into a value chain?

How to ensure proper role division?

Need to coordinate / harmonise interventions of donors and DFIs

VCF: How to create synergy between grant aid and debt finance



Design & Assessment

6. Support a chain actor driven design

7. Acquire knowledge on the value chain

8. Work towards clear separation of roles (PO, marketing, NFS, FS)

9. Exploit chain opportunities for risk mitigating measures.

10. Base interventions on a solid assessment of needs for capacity building / NFS.

11. Maintain the perspective for growth towards maturity in the value chain (graduation).

Core issues: Facilitator driven chain

development Chain actor driven.

Who should do the coordination? How to ensure “Return on

Investment” for donors Graduation perspective



Engaging Financial Service Providers12.Establish links with financial institutions right from the start of VCD13.Focus VCD and VCF on the full array of risk mitigating measures

Production risks Supply risks Finance risk Marketing risk Price risks

Issues: What role have MFIs to

play in VCF? What is the scope of risk

mitigation measures in VCF?Good practice in VCF



Choice of aid instruments - implementation

14. Avoid crowding out with grants

15. Before considering financial interventions, consider non-financial alternatives

16. Facilitate the use of appropriate financial instruments

Core issues: What to subsidize on VCD?

How long? What to subsidize in VCF?


Smart aid? Monitoring and evaluation

17. Consider the parallel with ‘good donor practice’ in microfinance18. Agree on key performance indicators and targets. 19. Expect (target) and monitor return on investment20. Plan your own exit

Diagram: Smart Aid criteria for donors in microfinance

Strategic clarity

Appropriate instruments Staff capacity

Knowledge management Accountability for results

Effectiveness


Questions for discussion on groups

1. How can Value Chain Finance contribute to risk mitigation in rural lending?

2. How to separate VCD from VCF while at the same time ensuring synergy??

3. How to ensure sustainable access to finance in a Value Chain context, especially grant and debt financing considerations?


Questions for plenary discussions

1. What role do MFIs play in VCF? In relation to this In what way should TMF be concerned with VCF? Should it be concerned at all?

2. How should the link be with value chain development (VCD)? How can non-financial services (NFS) best be facilitated and by whom??

3. What is the role of banks and other financial institutions to finance in the Chain??

4. How can synergy be achieved between donors of VCD and funders of VCF?

5. What are the implications for TMF policy and action for the TMF consortium?


CONTACT

P.O. Box 8190

3503 RD Utrecht

The Netherlands

T +31 (0)30 880 18 96

[email protected]

www.terrafina.nl

value chain finance

Business

supply chain

chain organisation

value chain graduation

value chain work

value chain concept

value chain development

value chain finance

vcf discussion