1. Value Chain Financing Overview Prof. Ronald T. Chua Asian Institute of Management

2. Value Chain Financing Overview Review of the Value Chain Framework Review of the Value Chain Framework Value Chain Development and Value Chain Financing Value Chain Development and Value Chain Financing

3. Why a Value Chain Perspective? Microenterprises/rural agricultural households part of a bigger economic system Microenterprises/rural agricultural households part of a bigger economic system Increasing microenterprise/rural agri household incomes may require interventions beyond the enterprise/household level Increasing microenterprise/rural agri household incomes may require interventions beyond the enterprise/household level

4. Value Chain Approach Objectives A tool/approach for identifying opportunities and constraints for: A tool/approach for identifying opportunities and constraints for: improving chain growth and competitivenessimproving chain growth and competitiveness benefit more marginalized participantsbenefit more marginalized participants Takes on a systems perspective (the value chain) Takes on a systems perspective (the value chain) Analytical Perspectives Analytical Perspectives

5. The Value Chain Framework* “Value chains encompass the full range of activities and services required to bring a product or service from its conception to sale in its final markets – whether local, national, regional, or global. Value chains include input suppliers, producers, processors, and buyers. They are supported by a range of technical, business and financial service providers” “Value chains encompass the full range of activities and services required to bring a product or service from its conception to sale in its final markets – whether local, national, regional, or global. Value chains include input suppliers, producers, processors, and buyers. They are supported by a range of technical, business and financial service providers” *Taken from: The Value Chain Framework: USAID Briefing Paper

8. Value Chain Structure Elements End Markets End Markets Business and Enabling Environment Business and Enabling Environment Vertical Linkages Vertical Linkages Horizontal Linkages Horizontal Linkages Supporting Markets Supporting Markets 8 *Taken from: The Value Chain Framework: USAID Briefing Paper

9. Value Chain Dynamics Upgrading Upgrading Value-Chain Governance Value-Chain Governance Power exercised by firms in their relationships with each other Power exercised by firms in their relationships with each other Inter-firm cooperation and competition Inter-firm cooperation and competition Transfer of information and learning between firms Transfer of information and learning between firms *Taken from: The Value Chain Framework: USAID Briefing Paper

10. Value Chain Outcomes Value Chain competitiveness Value Chain competitiveness Micro and Small Enterprise Benefits Micro and Small Enterprise Benefits *Taken from: The Value Chain Framework: USAID Briefing Paper

11. Value Chain Approach Main objectives – increased competitiveness and benefits to marginal participants/poor Main objectives – increased competitiveness and benefits to marginal participants/poor Define/Understand Value Chain Define/Understand Value Chain Change Structure Change Structure Change Dynamics/Relationships Change Dynamics/Relationships

12. Value Chain Financing “financing provided to or by a value chain actor in order to increase value-chain growth and competitiveness” “financing provided to or by a value chain actor in order to increase value-chain growth and competitiveness” Source: Finance in the Value Chain Framework. USAID Briefing Paper

13. Source: Value Chain Finance: Understanding and Increasing Access. USAID Concept Paper

14. Value Chain Financing Identify areas in value chain where financing may be a constraint Identify areas in value chain where financing may be a constraint Understand the nature of the financing needed Understand the nature of the financing needed Identify opportunities and constraints in increasing value chain financing Identify opportunities and constraints in increasing value chain financing Policy issuesPolicy issues OtherOther Matching financier profile to nature of financing needed Matching financier profile to nature of financing needed

15. Matching Financier to Projects Financiers Donors Donors Governments Governments Multilaterals/Bilaterals Multilaterals/Bilaterals Equity Investors Equity Investors Value-chain participants (traders, manufacturers) Value-chain participants (traders, manufacturers) Informal Lenders Informal Lenders Financial Institutions Financial Institutions Project Types Infrastructure (roads, bridges) Farm production Processing Plants TransportationWarehousing Cooperative Formation Trading Research and Development

16. Financier Attribute Risk Appetite LowHigh Return Expectations FinancialSocial Payback Period Expectation ShortLong Financing Capacity Limited Deep Pockets

17. Project Characteristics RiskLowHigh Return Expectations FinancialSocial Payback Period Expectation ShortLong Financing Capacity Limited Deep Pockets

18. Project Farm Level Production (small holder cash crops) ProcessingTrading RiskHighMediumLow Return Expectations Financial,Low Financial,M edium Financial, High Payback Period Expectation Short Term MediumShort Financing Required SmallMediumLarge

19. ProjectRoads/Infrastructure Social Mobilization Technology Research and Development RiskMediumHighHigh Return Expectations Financial and Social LowSocialLowFinancialHigh Payback Period Expectation Long Term Social Financial, Long Term Financing Required LargeMediumLarge

20. Value Chain Financing Identify areas in value chain where financing may be a constraint Identify areas in value chain where financing may be a constraint Understand the nature of the financing needed Understand the nature of the financing needed Identify opportunities and constraints in increasing value chain financing Identify opportunities and constraints in increasing value chain financing RisksRisks Policies that affect risksPolicies that affect risks OtherOther Matching financier profile to nature of financing needed Matching financier profile to nature of financing needed

21. THANK YOU! Email: rontchua@gmail.com