AgFiMS Tanzania 2011 Vodacom Presentation Irma Grundling 13 February 2012

The problem … Smallholder & agri-business finance perceived as risky There is lack of financial services suited for agriculture Limited penetration of financial services into agri/rural areas

AgFiMS objectives The overall aim - A survey to: Assess the need for financial services and support Assess factors prohibiting access to financial services Facilitate interventions to address the need AgFiMS has two complementary components: Demand side component Supply side component To quantify the degree and type of finance provision

Objective Land-size or turnover- based selection criteria applied ?

AgFiMS Tanzania 2011 sample  Representative sample of 626 EAs drawn by NBS  Listing & screening exercise provided the sampling frame  face-to-face interviews were conducted with agribusiness owners  interviews with producers  104 interviews with processors  256 interviews with service providers  The survey is representative at:  National, urban-rural, and agricultural zonal levels (including Zanzibar) for producers  National level for processors and service provide

Size & Scope of the AgFiMS Tanzania 2011 identified Agribusiness Market

AgFiMS Tanzania 2011 Agri-businessesTotal AgFiMS qualifiers Number of qualifiers % qualifying Producers - farmers selling more than they consume and earning an income from cash crop, food crop or livestock farming earn at least $600 p.a. OR use at least 5acres 25.5% Processors earn at least $1500 p.a. 39.0% Service Providers earn at least $1500 p.a. 30.1% TOTAL % +- 7m farming households +- 5m households with farming as main income source AgFiMS – 2 million agri-businesses

AgFiMS Tanzania 2011

AgFiMS Tanzania 2011 Business Profile

Business Profile Most agribusinesses focus on crop farming as main source of income

Business Profile Most livestock businesses focus cattle as main source of income

Business Profile Service providers are mainly retailers

AgFiMS Tanzania 2011 Business Owner Profile

Business owners demonstrate entrepreneurial characteristics

Business owners manage their money wisely and are willing to take calculated risks

Business owners make sound financial decisions

AgFiMS Tanzania 2011 Business Environment Is the environment conducive for these entrepreneurs to achieve business success?

‘Ownership’ of land is a perception for most producers More than 90% producers claim land ownership although less than 10% have title deeds

Most producers use more land than they ‘own’; Lack of capital affects productivity for 1 in 5

Lack of access to irrigation systems and reliance on natural water resources further inhibits productivity

Although the level of access to infrastructure is not conducive for business activities, mobile phone access provides connectivity

Limitations in the business environment seems to result in distressed sales Distressed sales? 12% sell on contract 10% sell all products on contract

Agribusinesses have virtually no coping mechanisms to rely on when faced with business risks

Income diversification offering protection? 86.1% diversify their income sources

AgFiMS Tanzania 2011 Support Services

Lack of access to networks and information support increases vulnerability

AgFiMS Tanzania 2011 Financial Business Operations

Sound financial decision-making does not result in high levels of financial inclusion for agribusinesses

Multiple financial strategies – A matter of choice or no options? BankedServed by non-bank formal and/or semi-formal institutions Unserved (55.6%) Informally served 43.5%

Landscape of access…

banked … What do they use banks for?

use non- bank formal products/services … What are they using?

use the informal sector … What do they use it for?

Financial behaviour …

78.5% business owners save but most prefer to save at home rather than putting their money in a bank

Status quo : Credit Bank SACCOs MFIs SACCOs MFIs Informal Friends/ family 4% business owners 7% business owners 27% business owners 14% business owners USD 36m 68.9% of credit 11.7% of borrowers USD 6m 12.2% of credit 21.3% of borrowers USD 8m 15.1% of credit 79.3% of borrowers USD 2m 3.8% of credit 40.2% of borrowers USD 52m

Financial needs.... ‘Capex’, ‘operational expenditure’, ‘business assurance’

AgFiMS Tanzania 2011 Identifying Development Needs

Perceived obstacles to growth

Key capacities for Agri-businesses Usage of financial services & products Accessing credit Access to/usage of credible financial advisory resources Access to/usage of credible business advisory resources Access to/exposure to appropriate agricultural advice/support Access to networks &support structures; coping mechanisms Access to infrastructure Access to markets Access to/usage of credible financial advisory resources Access to/usage of credible business advisory resources Access to/exposure to appropriate agricultural advice/support Social capital – Access to networks &support structures; coping mechanisms Formal inclusionTop income category

AgFiMS Tanzania 2011 Evidence-led Intervention Approach?

Capacities needed for formal financial services usage Access to/usage of credible financial advisory resources Access to/usage of credible business advisory resources Access to/exposure to appropriate agricultural advice/support Access to/usage of credible financial advisory resources Access to/usage of credible business advisory resources Access to/exposure to appropriate agricultural advice/support Access to networks &support structures; coping mechanisms Information Structure/organisation Infrastructure & access to market

Info Hub BUSINESS ADVICE Financial management principles Record keeping; Debt management; Income diversification; Cash flow management Strategic business decisions Competitive edge; Pricing; Marketing; Contracting; Group/networking Risk management Price; Weather; etc. BUSINESS ADVICE Financial management principles Record keeping; Debt management; Income diversification; Cash flow management Strategic business decisions Competitive edge; Pricing; Marketing; Contracting; Group/networking Risk management Price; Weather; etc. AGRI RELEVANT INFO Inputs Sources, pricing, credit/advance, security., risks Process Preparation, prevention, remedial, labour, best practices Yield Storage, transportation, timing, surplus/demand & price AGRI RELEVANT INFO Inputs Sources, pricing, credit/advance, security., risks Process Preparation, prevention, remedial, labour, best practices Yield Storage, transportation, timing, surplus/demand & price FINANCIAL ADVICE Products, services & requirements Financial education Financial advice Investments; debt; insurance Long-term; short-term planning FINANCIAL ADVICE Products, services & requirements Financial education Financial advice Investments; debt; insurance Long-term; short-term planning STRUCTURING/FORMING GROUPS How Requirements; Obligations; Responsibilities Management Structure STRUCTURING/FORMING GROUPS How Requirements; Obligations; Responsibilities Management Structure Establishing info hubs as a first step

INFORMATION HUB VALUE CHAIN PLAYERS GOVERN- MENT RESEARCH INST RESEARCH INST ACADEMIC INS NGOS FINANCIAL INST FINANCIAL INST BUSINESS INST BUSINESS INST PRICING AUTHORITY PRICING AUTHORITY DONORS/ INVESTORS DONORS/ INVESTORS AGRI BUSINESSES AGRI BUSINESSES 2-way Information sharing 2-way Information sharing

INFORMATION HUB VALUE CHAIN PLAYERS GOVERN- MENT RESEARCH INST RESEARCH INST ACADEMIC INS NGOS FINANCIAL INST FINANCIAL INST BUSINESS INST BUSINESS INST PRICING AUTHORITY PRICING AUTHORITY DONORS/ INVESTORS DONORS/ INVESTORS AGRI BUSINESSES AGRI BUSINESSES OPPORTUNITY DEVELOPMENT OPPORTUNITY DEVELOPMENT Benefits for all role-players

-TECHNOLOGY-BASED -FACE-TO-FACE -SEMINAR/CONFERENCE INFORMATION HUB Platform....

-SUSTAINABILITY through SHARED RESPONSIBILITY -Give & take -INFO SHARING RULES & ETHICS INFORMATION HUB Rules of the game...

-TECHNOLOGY-BASED -FACE-TO-FACE -SEMINAR/CONFERENCE -SUSTAINABILITY -RESPONSIBILITY -INFO SHARING RULES INFORMATION HUB -TECHNOLOGY EXPOSURE FOR AGRIBUSINESSES -INTEREST GROUP MEMBERSHIP/NETWORKING -MICRO CREDIT SYSTEM / CREDIT BUREAU OPPORTUNITY More than an info hub....

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