Prepared: Calvin Miller, Emilio Hernandez FAO-AGS Presented: Diana Tempelman, FAO Representative Tanzania 1 FAO: Emerging agricultural value chain and value chain finance approaches for inclusive development Conference of Financial Institutions: "Financing Agriculture and Agribusiness in Tanzania: Opportunities and challenges“ November Arusha, Tanzania

2 Global population 9 billion in % extreme poverty in rural areas 14% global population aged yrs Economically stagnant rural areas  livelihood opportunity rural youth

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CLIMATE CHANGE in 2013 – Global carbon emissions increased by 2.3% – 22 million people displaced by natural disasters, 97% in developing countries EFFECTS ON FOOD AND FINANCE – need to: ↑ investment in insurance (esp. developing countries ) ↑ investment in low-carbon agriculture ↑ finance and investment into irrigation, flood control and new farming systems 4

5  MARKET OPPORTUNITIES  BIOTECHNOLOGICAL ADVANCES  KNOWLEDGE

6 An agricultural value chain: all stakeholders in a coordinated production and value addition needed to make food products. A SUSTAINABLE agricultural value chain: economic sustainability social sustainability and is fair* environmental sustainability Fairness in a value chain: farmers get market rate prices.

Financial Services Input Suppliers Growers Food Processing Industrie s Food Retail Industries CONSUMERS Business Support Services Production Agri-food Industries Operating Environment Transport Storage Services Logistics & VC Services Input Suppliers Financial Services  Stakeholders role in agricultural VCs 7

8 Agricultural value chain finance (AgVCF) – financial products and services flowing to and/or through the value chain to address the needs of those involved. Principal objectives:  Align and structure financial products to fit the chain  Reduce costs and risks of finance Agri-finance value chain approach? –All chain actors, processes and markets –Transaction focus –Risk mitigation –Direct and indirect financing

1. ORDER GOODS 3. SHIP GOODS 2. MAKE LOAN 4. PAY FOR GOODS 5. REMIT PAYMENT Small farmers & agribusinesses 9

10 Increase financing to agriculture at all levels of the chain Credit and financial intermediation Technical assistance and capacity development Governmental enabling environment

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ASOPROF Apex farmer organization model - BOLIVIA Farmer Coops ASOPROF Bean Association National Buyers International Buyers Producer Organizations Farmer Coops Producer Organizations Farmer Coops ASOPROF Services: Seed production Technical assistance Processing Marketing/export Member profit share Financing linkages (not direct financing) Individual growers 12

Icam Chocolate Uganda Ltd Icam SPA, Italy Local microfinance organizations Loans to farmers Reimbursements Cocoa exports Loan channeling ICAM Chocolatier Italy relation with cocoa farmers - GHANA 13

FAO supports interventions to improve productivity. RABO offers guidelines on market needs FAO brokers dialogue between groups and local buyer and supports organizational capacities. RABO supports loan management capacities RABO uses existing relations with off-takers linking them with farmer groups and monitor market requirements RABO monitors warehouses registered with TWLB 14 FAO – RABOBANK/NMB Foundation - TANZANIA

15 MODEL HIGHLIGHTS & REVIEW Warehouse Receipt System

16 1 – Tanzania highlights

17 Year Volume of coffee traded (tonnes) Coffee value received by farmers (US$ equivalent) Net gains captured by farmers (US$/ton) 2002/03120,86550, /04151,70768, /05144,36260, /06163,152179, /07224,874263, Trade by the Tarakea Rural Cooperative Society under WRS 1 – Tanzania –continued _

18 2 – Niger highlights

2 – Niger -continued- 19

20 Efficiency gains WRS - TanzaniaWarrantage – Niger ↑external finance to bulkers / traders to buy from smallholders ↑external finance for rural HHs’ non- farm rural activities ↑Production and trade: coffee, tobacco, cotton, cashew, & sunflower ↔ smoother household cash flows ↑Price gains within national AVC, varying / crop ↑stability of grain supply for domestic and export markets Review of the experience

21 Limitations WRS – Tanzania Warrantage – Niger Governance problems Productive capacity producers remains very volatile Negative impact Government trade policy interventions selected crops Limited repayment due to poor business environment for off- farm enterprises No assessment of loans to production processes. No assessment loans to production processes. Review of the experience - continued

22 FAO and 3 Rome-based Agencies

23 * Weak capacities and limited access to services for producers and SMAEs inhibit potential profitable investments * Investors seek technical support to strengthen the weakest linkages of the value chain FAO helps facilitate public and private investments by enabling value chain actors to be reliable partners for agribusinesses and investors

24 Facilitate credit access Complement financial intermediaries’ guarantees Partial backing of intermediaries in loan collection Promote participation of private agents Reduce capitalization requirements

25 Investment funds Post- investment support for increased impact Pre-investment support for potential investee SMEs Enabling environment Public investment Policy advice linked to public investment Access to finance (MFIs and Banks) $ Existing TAF

 Principles of Responsible Investments in Agriculture  Financial Inclusion and Agric Dev.  Spatial development initiatives 26

27 * Rural Infrastructure and Agro-Industries Division (AGS) Website * Rural Finance Learning Centre: * Contract Farming Resource Center