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Hans Bogaard Head AgriBusiness – Rabo Development
Netherlands
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June 18, 2012 Hans Bogaard
Rabo Development
Financing Coops & SMEs in
developing markets
The Rabobank approach
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Rabo Development: business model
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Focus Countries of Rabo Development
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RD Agribusiness Advisory Services: 2 pillars
Farmer portfolio restructuring
Agribusiness Advisory
Capacity Building (banks & coops)
Supply Chain Finance solutions
Warehouse Receipt Financing
Cooperative financing
Out grower schemes
Emerging Farmers Programs
Knowledge management & benchmarking
Agri Finance Organization
Agri Finance Training
Cooperative Capacity Building
Pre-export finance
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Nr. of SME farmers reached via RD
Brazil Sicredi 1.600.000
Paraguay Banco Regional 11.459
China URCB 11.666
Mozambique Banco Terra 5.251
Zambia Zambia 4.414
Tanzania NMB 278.685
Rwanda BPR 42.307
TOTAL 1.953.782
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Segmentation drives financing approach
Emerging farmers
Large
farmer/
agribusiness
Semi commercial smallholder
Commercial smallholder
Relationship approach, often USD lending
Retail approach, standardization
(+ Technical Assistance)
Value chain approach (e.g. out grower
schemes), use cooperatives for risk
management
Via SACCOs, coops, etc
Traditionally bankable
Previously unbankable
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Segmentation drives financing approach
Agro dealers Farmers Cooperatives Traders &
processors
• Agro dealer
schemes
• Outgrower schemes
• Input financing
• Save-for-loan schemes
• Investment finance
• Farmer credit score cards
• WHR financing
• Collection finance
• Pre-export finance
• Investment finance
• Value chain finance
• Pre-export finance
• Pre-import finance
• WHR finance
• Investment finance
Credit
Products
Risks • Lack of collateral
• Price risk
• Skills
• Lack of scale
• Lack of skills
• Lack of collateral/title
• Drought/floods
• Cash crops: side selling
• Food crops: government
interference
• Lack of scale
• Lack of skills/management
• Lack of capitalization
• Corporate governance
• Post-harvest handling
• Lack of WHR system
• Side selling
• Price risk
• Price risk
• Lack of commodity exchange
• Logistics/storage
• Performance risk
• Skills
• Raw material supply
• Access to markets
• Government export/import bans
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Key success factors cooperatives
• Stick to economic and business-like principles
• Adequate governance structure
• Consistent business discipline (zero-loss & capitalization policies)
• Do not mix up governance and management
• Communication with members
• Clear and business-like legislation
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Financing and TA must go together…
1. Emerging farmers Zambia: • Enterpreneurial growth oriented farmers:
• Support provision is key – Technical:
Mechanisation & agronomic TA
Provide finance to mechanisation agents – id key farmers/business
persons in each district who can run mechanisation as a business
• Zanaco currently financing 130 emerging farmers
2. WHR finance to Cashew/coffee coops in Tanzania • Technical assistance to government/CFC to set-up the WHR system
• Technical assistance to NMB to develop WHR finance product
• NMB currently leading WHR financing in cashew and coffee
3. Value chain financing to rice unions in Rwanda • Technical assistance to the government to solve key sector bottle-necks
• Technical assistance to BPR to develop rice financing strategy
• Technical assistance to selected coops to improve management
• Currently implementing input financing scheme to Rice Unions (60,000 farmers)
to replace government input finance program
4. Restructuring emerging farmers South Africa • Technical assistance to Land Bank to restructure 400 emerging farmers
• Develop score card to rate farmers and advise restructuring approach
• Train 160 staff members (commercial and risk) to implement new approach
• Should lead to better agri finance services to South African emerging farmers
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Conclusions
• Agriculture needs scale & skills at all levels (farm/coop/warehouse/etc)
• But communal land structure hampers consolidation
• This results in lack of mechanisation and irrigation
• Lack of competitiveness results in consistent imports of food crops
• Current market trends drive integration and sector professionalisation
• Agri finance is challenging due to fragmentation & weak value chains
• Sector & Segmentation based approach is key
• Tailored products/concepts for different agri-segments
• Branch network with local agri expertise is key
• Combining access to finance with technical assistance
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Thank you for your kind attention