Transcript New evolutions

Recent advances agricultural
finance: supply and
strategies
The French Microfinance Network
Cécile Lapenu (Cerise/RFM)
Our approach
Literature review and summaries of experiences
of French Microfinance Network members
Lack of reliable, complete and comparable data
on ag finance (essentially financial data
collected by networks, donors, etc.)
Agricultural interventions imply diverse contexts
=> Analysis of trends and opportunities rather
than quantitative and definitive conclusions
Specificities of ag finance
 Rural constraints: distance, low population
density, weak infrastructure, etc.
 Seasonality of production and income
 Agro-climatic risks
 Price and market risks
 But...an increasingly favorable context in
recent years (increase in ag prices)
Renewed interest for
agriculture
 Ag sector making a comeback (2008
WDR) after years of neglect; recognized
as key sector for development; new
perspectives
 But, two-speed development: growing
disparities in some regions (Sub-Saharian
Africa)
Evolution of ag finance
 1960-70’s, government-led intervention with
agricultural development banks
1970’s, rural financial markets approach
Both approaches revealed limitations:
government failure and market failure
Desire to development pragmatic
approaches, synergies and
complementarities with PPP, public policies
Two entry points for rural
finance
 Financial sector: MFIs, coops, banks
Advantages: wide range of products and services,
external resources, stable supply…
 Limitations: poor knowledge of risks, lack of guarantees…
 Value chain approach
 Advantages: personalized, trust, information, integrated
guarantees, TA, contracts, role of professional agricultural
organizations (PAOs)
 Limitations: reduced range of products and services, ST
lending, focused on production, liquidity constraints,
monopoloies and exclusion, distribution of added value?...
Insufficient supply
Financial inclusion rate is lower in countries where no. of
people working in agricultural is higher, and where
agriculture contributes more to GDP
(Servet, Morvant, 2007)
Ag credit is small proportion of
overall credit
Country
Ag credit/Total
credit
Ag credit/Total
rural pop.
Bolivia
8.7 %
83 USD
Chile
4.6 %
1479 USD
Paraguay
28.0 %
167 USD
Avg 18 Countries
8.0 %
232 USD
Latin American 2004-2005 data (Trivelli, Vénéro, 2007)
Portion of ag credit is most often smaller than the participation of
agriculture in GDP (10.1% en 2004 sur les 18 pays)
Country differences, depending on size of financial sector (Chile vs.
Paraguay)
Financial sector actors
 MFIs: solidarity group guarantees, coops,
hybrid models => important role in ag
finance but major constraints
State dvpt banks: making a comeback...
Advantages and risks?
Commercial banks: involved in building
inclusive financial systems, but what
about ag sector?
Governance and rural finance
models
 Model not necessarily influencing factor for
offering ag finance...what is important are linkages
with other actors and sectors
 Size/Decentralization: confronting systemic risks
involved covering one region or production sector
(pests, drought, price crash)
=> How to offer proximity while diversifing risks?
Workshop 1 on models and forms of organization
Sustainability
 Management: clear procedures, HR (rural
constraints), MIS (decentralization),
auditing
=> Profitabilty and cost control
 Links with urban finance: a way to make
ag finance viable, but governance must
maintain rural orientation
Workshop 5 on conditions for sustainability
Value chain finance
 Long history of export chains (cotton in West
Africa, Coffee in Latin America)
 Renewed interest in commercialization linkages:
Professional agricultural organizations, fair trade,
outgrower schemes
Draw lessons and adapt existing solutions
Workshop 4 on PAO/MF and Plenary 2 and the example of Grameen
Food
Microfinance-PAOs
 Structuring PAOs: defend interests of
agriculture, offer support services to small
farmers
 How have financial access strategies
evolved: internalized credit activities, external credit likages,
PAO-FI partnerhips, enabling policy environment
 Advantages of innovative sectors for PAOs
Workshop 4
Needs
 Needs of family farmers
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Short term: plantation, livestock, inventory, processing…,
Medium & long term: equipment, machinary, sustainable crops, land
Family needs: personal, durable goods, housing
Savings, insurance
Non-financing services: monitoring demand, extension services,
technical assistance
 New needs
 Prof Ag Organizations:
prefinancing input stocks, working
capital for commercialization and marketing, equipment needs,
buildings...monitoring demand
 Ag enterprises:
considerable cash needs (acquiring and
developing land, ag buildings, etc.), innovations
Products and innovations…
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Challenges of term finance, equipment loans
Leasing / Hire-purchase
Inventory credit / “Warrantage”
New information technologies
Indexed ag insurance
Non-financial services
Workshops 2 and 3 on product innovation and Workshop 6
on non-financial services
… that need wider dissemination
 Poor communication policies and information
sharing between institutions (but less and less
true...)
 No real donor agenda until now, but different
initiatives (Niger, Madagascar, Bolivia…)
 Ill-adapted resources...even though each
product has specific needs
 Still too costly for beneficiaries?
=> How can we reduce these constraints?
New partnerships
 Linkages between different actors to
secure ag loans: PAOs, processing,
commercialization sectors…
 Synergies to facilite access to
resources: migrant remittances, guarantee
funds, credit lines (new donor tools, guarantees,
refinancing from commercial banks…)
Workshops 4 & 6, Plenary 2 and 3
Public policies
 Redistributive policies are emerging:
subsidies for new intermediaries; reappearance of
discounts for ag investment and management of
such investments by MFIs
 Regulation that enables ag finance
and innovation
 (Re)creation of government
intermediation: what form of governance?
What impact on private sector institutions? What
kind of PPPs?