1. Value Chain Financing

2. Value Chain
A value chain is a chain of activities that a company operating in a specific industry performs in order to deliver a valuable product or service for the market.

3. Value Chain Finance
The term “value chain finance” refers to the flows of funds to and among the various links within a value chain.
It refers to both internal ( conventional) and external ( emerging concept) forms of finance:
• Internal value chain finance is financing that takes place within the value chain, such as when a supplier of inputs or a buyer provides credit to a farmer.
• External value chain finance is financing from outside the chain made possible by value chain relationships and mechanisms; for example, when a bank issues a loan to a farmer based on a contract with a trusted buyer/ value chain partner.

4. Why Value Chain Financing?
In order to spur growth from relatively low-risk lending, Khushhalibank has been exploring avenues in value chain financing (VCF) which may allow the bank to not only expand its customer base and build a healthy loan portfolio but also drive growth in areas which have hitherto remained untapped.
The main idea behind value chain financing is to bridge the gap between unexplored markets and financial institutions .

5. Win Win For All Farmer Bank VC partner Access to finance
Quality inputs at door step
High quality seed – Higher yield
Less input cost
Free of cost technical advisory services
Secure sales- buy back agreement.
Produce grading – for different end users
Bank
Large untapped market
Growth opportunity
Minimum operations cost
Lesser credit risk
Almost guaranteed repayment .
VC partner
Quality Produce at reasonable price
Scaling up opportunity
Consistent supplies ( Registered farmers)
Addressing the needs of various high end/retail market segmentation
Employment/ Entrepreneurship creation ( suppliers, collection center, Fresh Mart ( micro franchises) etc

6. Win Win For All Farmer Access to large market/ franchises
Free packaging and Transportation
No commission to Arthi/Middleman
Alternate cropping ( Potato replaced Tobacco in Swabi and Mansehra)

7. Target Segment - VCF
VCF will target customers who are in relation with Value Chain Partner (VCP) organization. This relationship of the prospective borrowers with the VC partner will be in the form of registered growers / suppliers or end users.
Value Chain Financing will cater to the financing needs of the following:
Certified/registered growers/suppliers of either public or private agri-based organizations of repute.
Primary/Secondary dairy milk suppliers.
Artisans, craftsmen, entrepreneurs & small traders involved either in supply/manufacturing of raw material or finished goods.
End users of technology & energy solutions
Educational institutions (Schools, colleges, vocational training centers).

9. Value Chain Model

10. Value chain Lending Process Flow
AC Opening
of VCP
& Suppliers
with KBL
Sharing of Farmer’s
data base with KBL
Due Diligence & Appraisal
by KBL
Customer’s Account Opening
at KBL Branch
Loan Processing &
Disbursement
Amount transfer to VCP A/C for seed and inputs
Payment to
Supplier
by VCP
Input Distribution to
Farmers by VCP
Packaging , transportation &
selling of
produce to End user
Payment by End Users to VCP in KBL A/C
KBL Loan’s Settlement of Ind. Borrowers
By VCP
Transfer of remaining amount in borrowers deposit A/C
Process Ends
Agreement BW
KBL & VCP
Value chain Lending Process Flow

11. Connecting Agro Value Chains ‘CAVC’
Sarsabz Karobar
Connecting Agro Value Chains ‘CAVC’

12. Value Chain Partners Connecting Agro-Value Chain Private Limited (CAVC)
VCF for Agri Growers
KBL commenced its 1st value chain financing pilot by partnering with CAVC – a registered firm which supplied ‘Lady Rosita’ potatoes to PepsiCo International for the manufacture of ‘Lays’ potato chips. The pilot was kicked-off at Swabi branch was later replicated at 11 locations with CAVC for different crops.

13. End User ( Value Chains)
Whole sale
Sale points in Faisalabad, Lahore and Islamabad whole sale markets
Super Stores
Metro ( Lahore and Islamabad)
Green Valley
Madina Cash and Carry
Processors
JB foods ( frozen food and French fries)
PEPSI (lays)
Retail
Fresh Marts
Small hotels and Chips shops

14. Sarsabz Karobar
‘United Stars Kino’

15. Energy Solutions ‘SRE’
Sarsabz Karobar
Smart and Renewal
Energy Solutions ‘SRE’

16. Sarsabz Karobar ‘Friends Flowers’

17. Thank You