MABS APPROACH TO AGRICULTURAL MICROFINANCE

Module 1, Session 2

The Value Chain Framework: Making it Work for Small Farmers

Challenges of small farmersChallenges of small farmers

• Poor productivity• Infrastructure gaps• Poor logistical capabilities• Lack of market know-how• Fragmented location and farming activities• Lack of access to credit & other financial services These problems hinder farmers’ active

participation in the value chain

What is Value Chain?What is Value Chain?

• Is a sequence of steps involved in the process of production to market delivery of a product.

• Value Chain approaches are a vehicle for linking small businesses to markets.

• Full range of activities required to bring a product (or service) from its conception to its end use.

The Value Chain Framework*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.

• Players in a value chain: 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

• *taken from: The Value Chain Framework:USAID Briefing Paper

VALUE CHAIN FRAMEWORK AND FINANCE

ProducersProducers

ExportersExporters

National RetailersNational Retailers

Processors/TradersProcessors/Traders

Global RetailersGlobal

Retailers

Input SuppliersInput Suppliers

• Overdrafts/ lines of credit

• Investments, loans or savings to fund upgrading

• Working capital to purchase inputs or products

• Seasonal production loans

Financial Services

WholesalersWholesalers

VALUE CHAIN CONCEPTVALUE CHAIN CONCEPT

End Users/ Consumers

Marketing

Production

Inputs

Market Information

Training & Technical Services

Infrastructure

Equipment

Technology

Organizing CAPITAL

Working Working withwith Value Chain : Value Chain : The The Case of DNVIDA Case of DNVIDA (Davao del Norte (Davao del Norte

Vegetable Industry Development Association)Vegetable Industry Development Association)

Experience with product value chain for small farmers

Why value chain approach is risk mitigating for farmers and lenders

Key enabling support for DNVIDA farmer-Key enabling support for DNVIDA farmer-membersmembers

Organizational strengthening Technology development in production and post-

harvest improvements Establishment of consolidation center Formulation of product quality assurance protocols Conduct vegetable pilot farms and field training Attend fruit and vegetable congress, trade fairs

Benefits derived by the DNVIDA farmers in Benefits derived by the DNVIDA farmers in the value chainthe value chain

• Enabled the small farmers to invest in new technologies, access formal credit; access to warehousing and cold storage services that are critical in cutting product losses and increasing competitiveness.

• Allowed entry into the modern markets (fastfood chains, supermarkets, food processors, consolidators, hotels and restaurants) which require quality and volume.

SAMPLE GOAT PRODUCTION VALUE CHAIN

ASSESS MARKETS WITH VCAASSESS MARKETS WITH VCA

• Demand: Focuses on most relevant financial services demanded because they help targeted enterprises to take advantage of opportunities for growth

• Supply: Identifies range of service providers, building on their records, perspectives and relationships

Focus on a product or sub-sectorFocus on a product or sub-sector

• Look at the value chain in a product in a specific locality (such as a town; a province)

• Get information on the different players• Determine the strengths of the product value chain• Analyze the gaps or what are lacking• Analyze the opportunities for financing

WHEN EXAMINING A PRODUCT VALUE CHAIN, LOOK FOR FINANCING OPPORTUNITIES ALONG THE VALUE CHAIN. DOING SO CAN HELP EXPAND BANK PORTFOLIO, WHILE STRENGTHENING THE CHAIN’S SUPPORT FOR THE PRIMARY PRODUCERS – THE FARMERS

Thank you