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Pagina 1 | 26 oktober 2009 | [Presentatie titel invullen]
Pagina 2 | 26 oktober 2009 | [Presentatie titel invullen]
Value Chain Finance
workshop April 2011
Pagina 3 | 26 oktober 2009 | [Presentatie titel invullen]
A joint initiative
Pagina 4 | 26 oktober 2009 | [Presentatie titel invullen]
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?
Pagina 5 | 26 oktober 2009 | [Presentatie titel invullen]
CHAIN ACTORS
CHAIN SUPPORTERS (SERVICE PROVIDERS - FACILITATORS)
CHAIN CONTEXT
Source: SNV-LA
The Value Chain concept
04/08/235
Pagina 6 | 26 oktober 2009 | [Presentatie titel invullen]
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
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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?
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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
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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
Pagina 10 | 26 oktober 2009 | [Presentatie titel invullen]
Good practice in VCF (2)
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
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Good practice in VCF (3)
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
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Good practice in VCF (4)
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?
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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
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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?
Pagina 15 | 26 oktober 2009 | [Presentatie titel invullen]
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?
Pagina 16 | 26 oktober 2009 | [Presentatie titel invullen]
CONTACT
P.O. Box 8190
3503 RD Utrecht
The Netherlands
T +31 (0)30 880 18 96
info@terrafina.nl
www.terrafina.nl