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Transcript FINANCE - Ning.com
Helping Women to Grow!
FINANCIAL SERVICES IN AGRICULTURE
VALUE CHAINS
Potato
Dairy
Extensive
Livestock
Domestic
Horticulture
Coffee
Tuesday 25th May 2010
Consultants and Trainers
RESEARCH METHODOLOGY
Desk
study of relevant materials
and past studies, literature review
Depth interviews with stakeholders
and chain actors
Survey (potato farmers)
Engagement of stakeholders at
various sectoral forums e.g.
exhibitions
Case study
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IMPORTANCE OF AGRICULTURE
GDP
• Direct contribution to GDP 24%
• Indirect contribution 27%
JOBS
• 75-80% of all labour force directly and
indirectly
EXPORTS
POVERTY
• More than 65% of all exports
• Poverty eradication and food security
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INTRODUCTION
Analysed Allocation of Bank Credit to Private Sector for 12 months to Feb 2010
Building and Finance &
construction insurance
4%
4%
Agriculture
5%
Real estate
7%
Trade
16%
Private
households
15%
Consumer
durables
7%
Transport &
communication
s
9%
Mining and
quarrying
2%
Manufacturing
12%
Business
services
9%
Other
activities
10%
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POTATO SUB-SECTOR
Background
2nd most important food crop after maize
Direct and indirect employment 2.5m. Gender parity
Contribution of about KShs.10B (Farmers KShs. 5B,
Brokers KShs.1B, Others KShs. 4B)
Declining production vs. Increasing consumption????
Farmer
NM=75.2%
Wholesaler/
Transporter
NM=18.09%
Market
Retailer
Stall
Owner
NM=24.52%
NM=22.52%
Supermarket
Processor - Fries
GM=259.33%
NM= 100%
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POTATO SUB-SECTOR
FINANCIAL ISSUES
AVAILABLE PRODUCTS
Large players can access funds from banks and
MFIs
Generally no specialised products for sub-sector
except by AFC (Nanyuki and Molo areas only)
Group loans through ROSCAs helpful to farmers
Microcredit by MFIs especially for traders
Government funds e.g. Njaa Marufuku, ASCU
RECOMMENDED HIGH-IMPACT PRODUCTS
Value Creation – Inputs and irrigation
Value Preservation – Cold storage and efficient
transport
Value Addition – Processing and marketing
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POTATO SUB-SECTOR - CONCLUSION
MAJOR CHALLENGES TO SECTOR FINANCE
Low productivity – Inputs, clean seeds
Lack of cold storage for seed and ware potato
Climate risks – drought, floods, frost
Price instability/Market access
Excessive intermediaries - brokers
LINKAGES AND OPPORTUNITIES
Horizontal – Farmer cooperatives for linkage
Vertical –e.g. Deepa Industries e.g. Midlands
CONCLUSIONS
Mobilisation of farmers crucial to financial
access
Cold storage and vertical linkages – long term
More development organisations needed
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DAIRY SUB-SECTOR
Background and Value Chain
Contributes 4% to the GDP
About 2.25 million Kenyans involved
80 % of marketed milk sold unprocessed. Consumption
(100 ltr per capita) not rising to match production
Dairy hubs changing the sub-sector rapidly
Sector facing crisis due to glut – Over KShs 1 B worth of
stock held, prices reduced, capacity installed
Production
Processing
Transport
Distribution
Chilling
Retail
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DAIRY SUB-SECTOR-FINANCE
AVAILABLE PRODUCTS
Many specialised products available
Processor guaranteed loans and advances on delivery
e.g. Equity, Coop Bank
Input finance – inputs supplied on credit e.g. Githunguri
Dairy
SACCOs loans – for capital and operations
Equity investments e.g. Aureos Capital, members
Micro-leasing e.g. Juhudi Kilimo – Purchase cow
Dairy loans by MFIs e.g. Sisdo
Wholesale loans e.g. MESPT – ABD for ASALs
Various projects e.g. EADD, KDSCP, MESPT, SDCP, IQAM
RECOMMENDED HIGH-IMPACT PRODUCTS
Value Creation – Purchase of superior breed
Value Preservation – Chilling plants/Cold transport
Value Addition – Processing long-life products
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DAIRY SUB-SECTOR-CONCLUSION
MAJOR CHALLENGES TO FINANCE
Low productivity – Inputs, clean seeds
Production seasonality – gluts, low prices
Unlinked farmers are locked out
Excessive informality in distribution (hawking)
Low investment in long-life processing capacity
Diminished market prospects – supply inconsistency
LINKAGES AND OPPORTUNITIES
Mobilise horizontal and vertically unlinked farmers
International and regional markets
CONCLUSIONS
Marketing is the key threat to finance for the sector
Producer prices below production costs
Inclusion of milk in strategic food reserves urgent
More dairy hubs necessary for increased access to finance
Replication of success models e.g. Githunguri DFCS/Fresha
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DOMESTIC HORTICULTURE
Background and Value Chain
Largest foreign exchange earner KShs 71.6 B
Vegetables,
herbs and spices
34.2%
Fruits and nuts
Flowers
40.4%
25.4%
Market Value as of 2007
Domestic – Fruits and vegetables, flowers (6%)
Tomatoes (1) & passion fruits (5) among most valuable
Production
Processing
Transport
Distribution
Wholesale
Retail
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DOMESTIC HORTICULTURE - FINANCE
AVAILABLE PRODUCTS
Many specialised products available
Asset finance loans for greenhouses (Amiran kit) by
Coop Bank, Equity, KWFT etc
Agriculture loans by many MFIs e.g. Sisdo, Pawdep
Wholesale loans e.g. MESPT-ABD for ASALs
Seasonal and modified loans e.g. pay as you harvest from
AFC, Pawdep, KADET etc
Micro-leasing for assets such as drip irrigation e.g.
Juhudi Kilimo
Business loans for horticulture traders e.g. AFC, Equity
RECOMMENDED HIGH-IMPACT PRODUCTS
Value Creation – Greenhouses and drip irrigation
Value Preservation – Cold chains for domestic
Value Addition – Juice extraction, drying, fruit
concentrates etc
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DOMESTIC HORTICULTURE-CONCLUSION
MAJOR CHALLENGES TO FINANCE
Climate risks – droughts, floods, extreme cold
Market risks – postharvest gluts too low prices
Wastage 30-40% post-harvest losses
Lack of diversification by farmers despite the many
opportunities e.g. herbs, over 40 vegetables
Low value addition despite high potential
Poor market linkages – horizontal and vertical
High quality just for exports LINKAGE AND OPPORTUNITIES
Mobilise farmers for horizontal and vertical linkage
Importation of concentrates for juices???
CONCLUSIONS
Over-reliance on rain-fed system need to be reduced
Mobilisation of farmers require further effort
Linkages will be key to accelerating finance
Greater integration into higher value chain activities
Cold chains are an urgent issue for sustainability
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COFFEE SUB-SECTOR
Background and Value Chain
4th Largest forex earner. Rising prices
Sub-sector facing a continuous decline
high of 130,000 MT to average 50,000 MT
Low domestic consumption
but increasing via coffee shops
Long and complex value chain
Production
Marketing
Pulping
Roasting
Milling
Retail/Export
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COFFEE SUB-SECTOR- FINANCE
AVAILABLE PRODUCTS
Few specialised products available
Advances/Seasonal loans by Coffee Development Fund
(CODF) <= 2 kg per coffee tree
Coffee Rehabilitation loan by CoDF < 1kg per tree
Cash-crop loans by AFC for 2-8 years
Advances on delivery by millers e.g. Nyambene Mills
SACCO loans e.g. Taifa SACCO
Supplier credit available to most farmers
Grant - Value Chain Based Matching Grant Fund
RECOMMENDED HIGH-IMPACT PRODUCTS
Value Creation – Warehouse receipting system, Input
finance (guaranteed lending)
Value Preservation – Upgrade pulping technology
Value Addition – Coffee shop setup and operation
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COFFEE SUB-SECTOR-CONCLUSION
MAJOR CHALLENGES TO FINANCE
Climate risks – droughts, floods, extreme cold
Poor attitude towards coffee farming and the industry
Deep mistrust among chain actors
Outdated pulping technology
Exposure to global economic risks. Export overreliance
Lack of traceability. No pay for quality
Poor corporate governance by cooperative
Too much government
LINKAGE S AND OPPORTUNITIES
Coffee act to be changed to allow farmers to control the
product along the entire value chain
Coffee shops – more players are needed
CONCLUSIONS
Domestic market and diversification of international markets
Transparency regarding margins by chain actors
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EXTENSIVE LIVESTOCK
Background and Value Chain
Annual Production Value figures in
KShs Billions
Read Meat
4.66
1.2
0.062
White meat
5.9
Egg production
34.4
2.47
Bee-keeping
industry
Hides and skin
Wool
Production
Distribution
Trade
Butchery
Slaughter
Retail/Export
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EXTENSIVE LIVESTOCK - FINANCE
AVAILABLE PRODUCTS
Few specialised products available
Livestock purchase loan for traders – Equity/CARE
Livestock business/project loan by Kenya Livestock
Finance Trust
MFI loans for poultry farming (tied to farming cycle)
Supplier credit available to poultry farmers
Grant – By Government for restocking after drought
Livestock insurance by Equity and UAP Insurance
RECOMMENDED HIGH-IMPACT PRODUCTS
Value Creation – Loans for quality breeds
Value Preservation – Micro-leasing for freezers
Value Addition – Equipment to add value e.g. meat
mincers and electronic scales by butcheries
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CONCLUSION - FINANCE
Farmer
mobilisation most crucial for
financial access
Climate change adaptation key risk
mitigation
Market driven development of
financial services
Training of MFIs on agriculture
finance critical
Grant should be used as last resort
Record-keeping by farmers too poor
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CONCLUSION - GENERAL
Consider
entire portfolio of value
chain for a farmer
Ongoing regional integration to
impact on value chains
Harmonisation of NGO activity in
value chains. Cooperation vs
competition
Collapse of government extension
services hurting all sub-sectors
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THANK YOU FOR YOUR KIND
ATTENTION
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