1. Page 1 | 28 March 2011 | Value Chain Finance Value Chain Finance lunch May 2012

2. Page 2 | 28 March 2011 | Value Chain Finance Questions for VCF discussion What role do MFIs play in VCF? In relation to this In what way, if at all, should MFI’s be concerned with VCF? What is the role of banks and other financial institutions to finance in the Chain?? How can synergy be achieved between donors of VCD and funders of VCF? Presentation:  Brief on general lessons learned  Case study Harbu MFI winner Award 2010

3. Page 3 | 28 March 2011 | Value Chain Finance CHAIN ACTORS CHAIN SUPPORTERS (SERVICE PROVIDERS - FACILITATORS) CHAIN CONTEXT Source: SNV-LA The Value Chain concept

4. Page 4 | 28 March 2011 | Value Chain Finance Financial services in chains: Commercial banks Banks, MFI’s, Companies, Unions Commercial bank, Companies MFI’s, Sacco’s Companies, Associations Long term loans, Guarantees or equity Medium term loan, Leasing, Short and medium term Loans, leasing Short term loans, Savings, group loans Industrial processors exporters Local processors, wholesalers Local traders, Producer associations Small producers and Micro entrepreneurs

5. Page 5 | 28 March 2011 | Value Chain Finance Donor – Investor dilemma's Mismatch in the past between FS and NFS Lenders often faced with relatively high PAR on agricultural portfolios: risk mitigation is crucial New VCF approach for agricultural lending: – Joint Action Agendas donor & investor – Thorough VC analysis & CB needs assessment – Plan for both NFS and FS to ensure profitable business ready for appropriate finance – How to support MFI’s in this

6. Page 6 | 28 March 2011 | Value Chain Finance Good practice in VCF for MFI’s(1) Chain & partner identification 1.Ensure the value chain is viable (and so is financing the chain) 2.Safeguard both the connection and the distinction with value chain development 3.Facilitate the ‘orchestration’ of a promising VCF strategy Establish links with financial institutions right from the start of VCD 4.Exploit chain opportunities for risk mitigating measures. 5.Maintain the perspective for growth towards maturity in the value chain (graduation). Core issues:  How to ensure proper role division? And ensure that non financial services are available  What is role of MFI’s  Need to coordinate / harmonise interventions of donors and DFIs  VCF: How to create synergy between grant aid and debt finance, what to subsidize

7. Page 7 | 28 March 2011 | Value Chain Finance Experience of Harbu MFI soya chain Profile: MFI with over 20.000 clients, works in rural areas with Self Help groups. Mother NGO self help very active Harbu is now in Soya, Honey and coffee chains Financial performance good. PAR30 below 2%, Oss> 130%

8. Page 8 | 28 March 2011 | Value Chain Finance SH G Cluster association Harbu Injection of external fund SHG Access to loan Repayment and saving SH G

9. Page 9 | 28 March 2011 | Value Chain Finance Overall value chain Consum ption Production Collection and input supply Process ing Packagi ng Distribu tion Sales Process FCE: Advise, training and capacity building FCE Jimma residen ts FarmersFMOSHGs Actor Harbu Harbu: Microfinance for Farmers, FMO’s and SHG set-up Focus on SHG’s

10. Page 10 | 28 March 2011 | Value Chain Finance Value chains are important: Farmers get good price for their product Can also assist women to improve their livelihood Loans are secured we have connection to different actors in the chain Brings economic development to the area. Challenges: New financial products even leasing and we had to adjust to that we have to do more then finance, also training and looking for markets Marketing and especially packaging is a problem

11. Page 11 | 28 March 2011 | Value Chain Finance Lessons learned Collaboration with other actors e.g. FCE, companies and research institutes (certification) is very important. Collaboration with FCE has been good. Also donors (Terrafina Microfinance and Sosfaim) need to have good collaboration and clearly have same vission on the chain development and finance. Advantage of MFI: we can also provide other financial products for clients eg savings, insurance. To make it cost effective we have to upscale production and reach more farmers.

12. Page 12 | 28 March 2011 | Value Chain Finance Harvested soya beans

13. Page 13 | 28 March 2011 | Value Chain Finance Beans ready for transportation

14. Page 14 | 28 March 2011 | Value Chain Finance Women processing the soya into milk

15. Page 15 | 28 March 2011 | Value Chain Finance The end product

16. Page 16 | 28 March 2011 | Value Chain Finance CONTACT P.O. Box 8190 3503 RD Utrecht The Netherlands T +31 (0)30 880 18 96 mariiel.mensink@terrafina.nl www.terrafina.nl