Private Sector Development in Agriculture: How does M&E support Smallholder Farmers? December 3, 2008

2 How does IFC support the agri sector including small holder farmers?

3 IFC Investment in Agribusiness Value Chain Exceeded US$1.3 Bil in FY08 Financial Institutions Market Infrastructure Farm Productio n Inputs Agri. Marketin g Processin g Marketin g Distributio n Risk Sharing Facilities Pre-Harvest FinanceTrade Finance Fertilizers and other Chemicals Land Project/Corporate Finance Retail Infrastructure/Logistics CIT – Access to Markets Farm production is just one part of the agri value chain in which IFC invests…

4 IFC achieves greater reach through financial & non financial intermediaries Farmers IFC Finance On-Lending BANK Farmers/ Agribus IFC Finance/Risk Sharing On-Lending AGRI TRADER/ PROCESSOR

5 IFC has a number of current advisory projects to increase farmer financing  Ukraine Leasing Program  Ukraine Agrifinance  Ukraine Agri Insurance Development Program  Sth Tajikistan Cotton Lending Program  Farmer Ownership Model – Nth Tajikistan  Indonesia Warehouse Receipt Program Agri Business Finance Projects – 7 Active Projects - $8.8 million  Tanzania Leasing Program  Malawi - AMSME Program  NBS Bank  FMB

6 IFC has also worked on improving farmer productivity and market access… Seaweed Farmers - Indonesia Maize Farmers - Indonesia Cocoa Farmers - Indonesia Apple & Tomato Farmers - Ukraine Bamboo Growers - Vietnam Apple Farmers - China Dairy Farmers - Russia & Ukraine Shrimp Farmers - Aceh

7 How does IFC measure and evaluate its work in the agri sector?

8 Every IFC project includes results measures, E.g. Agribusiness Finance Advisory… ProductOutcomeImpact Agribusiness Finance Core indicators # of all outstanding loans in Agribusiness Value of all outstanding loans in Agribusiness (US$) # of all loans disbursed in Agribusiness Value of all loans disbursed in Agribusiness (US$) Value of loans>90 days overdue in Agribusiness (US$) Number of new products for Agribusiness Finance Core indicators: Value of investment / financing facilitated by advisory services (US$)

9 IFC agri advisory projects are beginning to undertake cost/benefit analysis… COST/BENEFIT PROCESS STEPS 1. IDENTIFY and QUANTIFY the project’s DIRECT and INDIRECT BENEFICIARIES. 2. ESTIMATE quantity of OUTPUT PRODUCED. 3. ESTIMATE total UNITS of CULTIVATION. 4. ESTIMATE COSTS of INPUTS with & without project. 5. ESTIMATE PRICES of OUTPUTS with & without project. 6. ESTIMATE NUMBER of BUYERS and their MARKET SHARES, with & without project. 7. IDENTIFY (a) PROJECT-RELEVANT FACTORS, and (b) EXTERNAL FACTORS that may affect productivity, costs, prices, and other considerations, with & without project. 8. COLLECT these DATA at the BASELINE (at project-start), and THROUGHOUT program IMPLEMENTATION. Cost/Benefit analysis gives a better sense of who benefits and whether farmer incentives are likely to align…

10 IFC has also undertaken a number of detailed evaluations of its agri work China: New Hope for Dairy Farmers. July ‘08 Ukraine: Vinnytsya Dairy Supply Chain Project. July ‘07 India: Farm Forestry program. December ‘06 Indonesia: Seaweed Program Survey. July ‘06 Findings have been distilled into easy to read “Monitor” notes

11 IFC is developing an M&E “Toolkit” for agri supply chain projects with farmers Terms of Reference for M&E Toolkit Work with IFC and its external partners to produce an M&E framework covering key areas of IFC agri supply chain project work - productivity, standards and access to finance Develop an approach to “baseline” survey instruments Be consistent with IFC M&E structures Develop clear performance measures to help clearly gauge project success Articulate a process for measuring impact on key project stakeholders/beneficiaries at the farmer level Partners to IFC project work see M&E as a key value added

12 IFC is using peer & specialist review of new projects to share lessons learnt… Selected Lessons Learnt Farmer access to finance is often a constraint (…and requires specialist input/support…) During design identify specific market failures (…gain detailed market knowledge…) Costly to scale up and expand projects that deliver farmer specific information (…plan for expansion in advance…) Net farmer incentives to join supply chain project are not always clear and need to align (…otherwise redesign or kill the project…) IFC now more systematically draws together local needs with global knowledge and lessons learnt…

13 So, how does M&E help small farmers? Better target overall sector support (not just farmers) Track and so help increase finance to sector (inc. farmers) Better assess whether projects provide net farmer benefits Learn from and improve ag advisory (inc. to farmers) Stop “weak” agri projects so funds might be re-applied ID projects with “strong” results to drive partner uptake

14 Chris Richards Adviser IFC Agribusiness Department e: p:

15 Agribusiness Committed Portfolio By Sector $2.2 Billion Committed Portfolio As Of June 30, 2008 By Region

16 Why banks do not finance Agri Business  Cost to serve  Seasonality and loan term structure  Climate change risk  Heterogeneity of Farming  Production and Yield Risks  Market and Price Risk  Risk of Loan Collateral Limitations  Moral Hazard Risks Source: Adapted from Better Practices in Agricultural Lending, FAO/GTZ, 1999, pp

17 Product Range US$1 B Program Bank Guarantees 62 Issuing Banks 740 Guarantees Issued US$ 780 million Global Trade Finance Agribusiness, Agricultural SMEs & farms Agri-Insurance Ag Leasing Corporate Governance Advisory Services Convertible Debt Sub Debt Mezzanine Finance Partial Credit Guarantees Risk Participation Facilities Securitization Structured Finance Common Shares Preferred Shares Straight Equity Sustainable Finance Cleaner Production Energy Efficiency Renewable Energy Sustainable Supply Chain Senior Debt Term Loans Acquisition Financing Warehousing Facilities Syndicated Loans