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Workshop 19 November

Value Chain Finance

Emerging lessons and policy implications

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Developing policies based on realities of our partners

North SouthWhat different roles do we have? How is VCF done?

Do we have a joint vision of VCF? Who are the main actors?Do we have a common interest? What are the financial instruments?

Can we identify a common niche? What are the lessons learned so far?Can we collaborate, coordinate? Do 'good practice' standards emerge?

Future purpose taskforce?

Taskforceprocess

* Knowledge centre(s)* Common 'niche'* Synergy between (Dutch) actors

* Subsector(s)* Certain 'niches' of VCD/VCF* Collaboration of (Dutch) actors in VCD/VCF interventions

Joint focusof VCD/VCF policy (north)

VCD/VCF interventions (South)

AB

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Lesson: Value Chain Finance needs to and effective Value Chain

Needed for effective chains:• A puller or lead actor. • Effective vertical linkages between primary producers

and subsequent value chain operators e.g. traders, processors, exporters

• A certain ‘chain intelligence’ to serve the requirements of chain actors and financiers (value chain analysis, feasibility studies etc.);

• Strong horizontal linkages among primary producers (producer organisations) and other chain actors and related service providers such as financial service providers.

• Management and control functions in the chain to meet the requirements of end-markets and financiers (especially geared to risk mitigation).

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The landscape of Value Chain Finance

Commercial banks

Banks, MFI’s, Companies, Unions

Commercial bank,Companies

MFI’s, Sacco’sCompanies, Associations

Long term loans, Guarantees or equity

Medium term loan, Leasing,

Short and medium termLoans, leasing

Short term loans, Savings, group loans

Industrial processorsexporters

Local processors,wholesalers

Local traders,Producer associations

Small producers and Micro entrepreneurs

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Potential products for different levels in the chain

1. Producers: Short term loans for farm inputs and small equipment, special collateral arrangements e.g. Warehouse inventory or embedded finance: contract farming.

2. Traders and processors: Flexible loans and overdrafts, trade loans, leasing

3. Exporters, industrial processors: investments loans and equity finance

Need for vertical linkages in the financial chain!

Some samples

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How to bring these together??

Strategic clarity

Appropriate instruments Staff capacity

Knowledge

managementAccountability

Value chain

Strategic

clarity

Appropriate instruments Staff capacity

Knowledge management

Accountability

Financial Institution

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Issues for donors and investors

• Strategic clarity: Policy should draw on financial services policies and Value Chain development policies.

• Staff capacity and development• Accountability: Monitoring and evaluation criteria• Knowledge management: learning and

networking• Appropriate instruments: Financial instruments

and Capacity building instruments• Brokering and networking

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Questions for discussion

1. Comment on the observations for smart aid in Value Chain finance. How to smarten the aid in your organisation ?

2. Is there is enough common ground to produce a joint framework on VCF that will enhance collaboration and synergy between organisations ? What would be next steps to develop this?

3. What are niches for your organisation and for other organisations in Value Chain Finance? Space for complementarities and what are areas for collaboration?

4. Do you have suggestions to get the local and international banking sector more involved?

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Mariel Mensink

P.O. Box 8190

3503 RD Utrecht

The Netherlands

T +31 (0)30 880 18 96

Mariel.mensink@terrafina.nl

www.terrafina.nl