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How Can CAADP Aligned Initiatives Help to Foster Private Sector Financing in Support of Country Plans:
Harnessing Private Sector Financing to Generate Effective Agricultural Investment
Hosted by: CAADP Joint Action Group for Private Sector Initiatives
Moderator: Michael Sudarkasa, UNDP AFIM
CAADP aligned Private Sector Initiatives
AGRICULTURE FASTTRACK FACILITY
Agvance Africa
Inclusive investment in food security and growth
Calvin MillerSenior Officer Agribusiness and Finance, FAO
CAADP Partnership Platform Meeting,Addis Ababa,March 25, 2013
De-risking finance and investment
Production
Price
Operational
Financial
Institutional
Infrastructure
Quality control
Technology
Logistics
Seasonal glut
Infrastructure
Storage
Price
Product loss
Govt. policy
Technology
Supply of RM
Human resource
Product quality
Govt. policies
Producing Storing Processing MarketingInput Supply
Quality
Availability
Infrastructure
Knowledge
Financial
Challenges and opportunities to address risks all along the value chain
How can we structure finance and investment to address client and country needs and risks”
Finance
– Loan guarantees
– Insurance products
– Value chain financing
– Savings and asset capitalization
– Contracting and out grower schemes
– Warehouse receipt systems
– Organizational and institutional development
– Training -- financial literacy, management, marketing
De-risking finance and investment
De-risking Finance and Investment(2)
Investment
▫ Regulatory frameworks conducive to investment
▫ Private-public co-investment
▫ Investment funds
▫ Political and catastrophic guarantees
▫ Political and economic stability
▫ Ministerial capacity development on investment promotion
▫ strategic investment approaches and incentives
Tomas Sales, Program Manager, UNDP AFIM – Southern Africa Regional Service Centre, Johannesburg, South Africa, CAADP Partnership Platform , Addis Ababa, March 25, 2013
Input Supplies Growing Crop Harvested ProduceFood & Energy
Store Produce Store ProcessTransport Plant HarvestInternational/Local marketManufacture Transport
Flow of Money
VALUE
Financial Solutions
Banking Relationship
Flow of money most important in financing agriculture …
Figure 1: Flow of Money Along the Value Chain
Hans Baryamujura, Head, Agriculture Finance, Barclays AfricaCAADP Partnership Platform, Addis Ababa, March 2013
Challenges: Agricultural Value Chains in Africa
Small Scale Farmers(Majority of the African Farmers)
Agro Dealers
Input Supplies
Growing Crop Harvested Produce
Food & Energy
Store
Produce Store
ProcessTransport
Plant Harvest
ConsumerManufacture
TransportBa
rcla
ys/A
bsa
Bank
Barc
lays
/Abs
a Ba
nk
12
Figure 2: Disconnect in the African Agricultural Value Chain
Characteristics (Right)• Less risk and target for all financial institutions• Most multi banked
Size of the banks Local presence of the bank
• Bank loses client’s turnover (Client diverts bulk of transactions)• Limited local supply (size of operations)• Limited local demand (purchasing power)
Characteristics (Left)• Less risk and target for all financial institutions• Most multi banked
Size of the banks Local presence of the bank
• Growth not as quick/aggressive as expected• Limited repeat business (Most are new
farmers)
VITAL ACTIVITIES MISSING• Technical support• Services i.e. Mechanical services, inputs, storage,
etc.• Poor Profitability of the smallholder farmers• Lack of crop insurance• Lack of collateral