Building successful AgVCF Business Models: lessons from India, Bangladesh and Thailand

PRASUN KUMAR DAS, Asia-Pacific Rural & Agricultural Credit Association (APRACA) BANGKOK, THAILAND

AGENDA 1. Business models in AgVCF 2. Indicators of successful business models 3. Steps to build successful value chain financing models 4. Successful cases from India, Bangladesh and Thailand

Business Models in AgVCF

DEFINITION: In agricultural value chains, the business model refers to the drivers, processes and resources for the whole system, even if the system comprised of multiple businesses.

TYPES: In General 4 types of Business Models Producer-driven Buyer-driven Facilitator-driven Integrated

1. Producer-Driven Business Model Facilitator-Driven Business Model

Integrated Business Model 2. Buyer-Driven Business Model

Drivers Objectives

• Small Scale producers especially when formed into groups such as association or cooperatives

• Large Scale Farmers

• New Markets • Higher Market Price • Stabilize market position

Drivers Objectives

• Processors • Exporters • Retailers • Traders, wholesalers and

other traditional market actors

• Assure supply • Increase supply volumes • Supply more discerning

customers

Drivers Objectives

• NGOs & other technical support agencies

• National & Local Governments

• Make markets work for the poor

• Regional & Local development

Drivers Objectives

• Lead Firms • Supermarkets • Multi-nationals

• New & higher value markets

• Low prices for good quality

• Market monopolies

Business Models in AgVCF

5 Indicators of successful business models

1. Enhance efficiency of the value chain and all of its actors. 2. Ensure all actors in the value chain are integrated and avail the

higher-value market opportunities 3. Make the value chain more inclusive by making resources available

for small-holders to improve their income and reduce costs and risk 4. Mandated for customer focus (both backward and forward) and

rural development by increasing the scope of its operations 5. Innovations in product, systems and process to foster public interest

and awareness

Producer-driven business model: Tapioca in Thailand

Village Enterprises

Individual Farmers Production

Support Services

Value Chain Activities Value Chain Actors

Export

Primary Processing &

Marketing

Aggregation

Processing

Kasetsart University

BAAC

Provincial Office,

Yasothorn

R & D to support producers and processors

Credit + Research Funds + Capacitation

Admin cooperation +Technical support

Village Enterprises

Sub-District Enterprises

Sub-District Enterprises

Agri Marketing Cooperatives

Ethanol Refinery

Animal Feed

Flour Factory

Snack Factory

EXPORTERS

Producer-driven business model: Palm Oil

Palm Oil plantation

102,710 acres Yield =522,000 MT

Thasae Land Settlement Cooperative with 3,700 Coop Members

Appropriate Farm

Practices

Scientific Harvesting &

Collecting

Production loan and input supply by

Cooperative

Farm Practices

Supervision by coop

Farmer/Coop collection

center

Coop crude Palm Oil

extraction facility

Coop crude

Palm Oil marketing

Waste water

treatment

Private Refining Factory

Coop biogas

power (1.82 KW/hr)

Provincial Electricity Authority

Financial Support to coop for on-lending (working capital and investment)

Capacity building of coop International banking services

Coop BAAC

Profit from CPO Business: US$3.7 million Produce price gain to members US$1.6 million Organic manure returned : US$0.8 million Substantial return from electricity generation Job creation: 218 employees Welfare measures for members

Buyer-driven business model: Doi Chaang Coffee Doi Chaang Foundation

Farmer Groups

AMC

Coffee Farmers

Doi Chaang Coffee

Company

Oversea Importers

Domestic Coffee Traders

Domestic Consumers

Oversea Consumers

Bank For Agriculture and Agricultural cooperatives

Flow of Funds Flow of Tech Assistance Flow of Products

BRAC, Bangladesh

Contract farming with marginal farmers to grow

potato seeds

Technical support and working capital

POTATO SEED DEALERS

Grading, Packaging and

selling

Payment made directly

to BRAC

Payment made to farmers after deducting the cost

COMMERCIAL BANKS

Working capital loans

Direct Repayments

Buy back the seed produced

Facilitator-driven business model: BRAC

1. Retailers/Wholesalers 2. Community enterprises 3. AMCs 4. Supermarkets 5. Exporters

PREOCESS FOLLOWED: 1. Search for MAIN ACTIVITIES in the Up/Middle/Downstream 2. Search for main actors of each activity in AgVCF

3. Search for appropriate VCF Products (Savings, Credit, Insurance)

4. Search for factors of success and failure to come up with correction and prevention measures

1. Community Enterprises 2. Agri Coops (AMCs) 3. Logistics 4. Processors 5. Buyers

1. Input Producers 2. Input sellers 3. Farmers/Growers

• Savings Product • SMART FARMER Credit • Crop Insurance • Production Credit • Machinery Credit

• Consumption Credit

• Entrepreneur Credit (Legal Entity) • Logistic/Warehouse Credit

• Credit for Postponement of Sale of Produce

• Investment Credit

• Packing Stock Credit • Credit for Export Business

• Credit for gathering + buying of produce

• Credit for improvement, maintenance of quality, environment overseeing

AIM: 1. Increase productivity& develop efficiency of the actors throughout the agriculture value chain. 2. Supply premium grade commodities to the market 3. Satisfaction of consumers for product and service 4. To strengthen its role as a public bank to facilitate sustainable rural finance 5. Targeted disbursement

Integrated AgVCF Framework of BAAC, Thailand

Tea Processing company

YES Bank Ltd

Small Tea Growers

Bank provides loans (4)

Bank conduct due diligence (3)

Supply green tea leaves (5)

Pay rest of the money (8)

Provide information on due diligence (2)

Repayment of loans taken by small farmers are made based on their authorization (7)

Conduct due diligence (1)

Submit authorization(6)

Milk CompanyYES Bank Ltd

Milk Aggregators

Bank opens SB account with debit mandate(4)

Bank conduct due diligence(3)

Supply milk (6)

Pay rest of the money (8)

Recommends to the bank regarding credit worthiness(2)

Milk company deposit the value of milk supplied and the commission to savings account of aggregators (7)

Identify aggregators(1)

Bank provide loans and transfer to SB account (5)

Bank deduct loan amount from savings account of

aggregators (8)

Innovative Models of AgVCF: YES Bank Ltd., India

Customized financial product for milk aggregators Financing models to Small Tea Leaf Growers

Thanks for your patience listening!

prasun@apraca.org