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Financing African Agriculture: Perspective from the Private Sector Hans Balyamujura African Continental Briefing, Yaoundé 3 rd to 5 th December 2013
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Financing African Agriculture: Perspective from the Private Sector
Hans Balyamujura
African Continental Briefing, Yaoundé
3rd to 5th December 2013
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• Limited small scale/smallholder finance.
• Limited long term and development finance.
• Limited ability to manage agricultural market risk.
• Poor appetite for entrepreneurial risk.
• Poor integration of value chains.
• Some policy environments not strong enough for value chain finance.
Regulatory environment too flexible thus poor stability of value.
• Value chain finance not compensating for the perceived primary
agricultural risk.
• The producer still carries the bulk of the risk.
Agricultural Finance Challenges …
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One Ship load of razor blades
Trucks loads
Pick up loads
Bicycles loads
Rural consumer
Typical Trend with African Imports …
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Smallholder farmers
Bicycle loads
Pick up loads
Truck loads
Ship load of maize
Missing Piece for Effective Trade …
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Limited Access to Agricultural Finance ...
Small Scale Farmers(Majority of the African Farmers)
Agricultural Entrepreneurs
Input Supplies
Growing Crop Harvested Produce
Food & Energy
Store
Produce Store
ProcessTransport
Plant Harvest
ConsumerManufacture
Transport
Co
mm
erci
al B
anks
Co
mm
erci
al B
anks
Figure 1: The Small Scale Farmers and the Agricultural Value Chains
Characteristics (Right)• Less risk• Access to multiple financial institutions• Limited local supply (size of operations)• Limited local demand (purchasing power) and
scale is too small for profitable international export.
Characteristics (Left)• Less risk • Access to multiple financial institutions• Growth among actors is too slow
Limited repeat business (Most are new farmers)
Characteristics of the Missing Middle• Activities led by the NGO sector• Individual scale very small• Poor profitability of the smallholder farmers• Lack of adequate security/collateral
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Input Supplies Growing Crop Harvested ProduceFood & Energy
Store Produce Store ProcessTransport Plant HarvestInternational/Local marketManufacture Transport
Flow of Money
VALUE
Financial Solutions
Banking Relationship
RISK
Value and Risk along the Value Chain …
Figure 2: Perception of Risk in a Non-Integrated Value Chain
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• Movement of signals along the chain to the front and back
• Storage capacity.
• Markets (local and international).
• Good and effective Logistics.
• Strong and effective demand.
• Income per capita - Affordability.
• Multiple uses of the produce (animal feed, beer, human food, breakfast cereal, etc.).
• Is production in line with growing demands of the ‘middle class’
• Well defined policy environment.
Reliable Value in the Chain ...
Source:www.ebay.co.uk
Source:www.northerntool.com
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Commercial Banks
Micro Finance Institutions
Farmer/Peer Groups
Social Services
Annual plants
Perennial plants and grasses
Shrubs
Softwood trees
Hardwood trees
Lichens
Farmers
Farmers
Farmers
Farmer Group Logistics/Processor Market
Figure 3: Small Scale Farmers and the Agricultural Value Chain
Inputs
Value Chain of Financial Services …
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National
Provincial
Regional
Farmer/Peer Groups
Social Services
Annual plants
Perennial plants and grasses
Shrubs
Softwood tress
Hardwood trees
Lichens
Figure 4: Farmer Organisations and Financial Services
Value Chain of Financial Services and Farmer Organisations …
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Social Services
Farmer/Peer Groups
Regional
Provincial
National
Annual plants
Perennial plants and grasses
Shrubs
Softwood tress
Hardwood trees
Lichens
Figure 4: Farmer Organisations
Addressing Access for the Missing Middle …Focus of activities/Start point
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Advisory
Inputs Primary Farming
Food processing ConsumersFarmer Organisations
StoreTransportManufacture
Produce
Store
PlantHarvest
Transport
Farmer Organisation Investments
Investments to Integrate Value Chain Operations …
Figure 5: Aggregation of Activities within the Value Chain
• Strategic investments (Interests).
• No control: Leverage private sector skills (Avoid ownership of technical
skills).
• Access income across the value chain.
