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Workshop ii millet trade finance - usaid-lead

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Workshop ii   millet trade finance - usaid-lead Workshop ii millet trade finance - usaid-lead Presentation Transcript

  • Livelihoods and Enterprises for Agricultural Development (LEAD) USAID LEAD Project Facilitating Smallholder Farmers’ Access to International Markets 4 October 2010 1
  • Livelihoods and Enterprises for Agricultural Development (LEAD) •USAID LEAD Project is a $35 million / 5 year project that targets 600,000 households and is structured to improve livelihoods of smallholder farmers in rural sectors. •LEAD is a VC structured project, with five key targeted VCs •Besides working in agricultural VCs, LEAD also encompasses x-cutting components, including a Financial Services component •LEAD aims to 1) ensure food security and 2) incorporate smallholder farmers into highest value markets. •Constraints to penetrating higher value markets include low quality standards, lack of finance, insufficient identified buyers, and/or slowness of payment by commercial buyers. •LEAD partners with other stakeholders to facilitate smallholder farmers’ access to higher value markets. 2
  • Livelihoods and Enterprises for Agricultural Development (LEAD) STRUCTURED EXPORT TRADE FINANCE FACILITY – SEQUENCE OF EVENTS 1b Issues Floor Price for Millet 2 LEAD Farmer Groups Mobilization •Mobilization and sensitization UNGA Ltd, Kenya 9 Transfer of WR to •Production support UNGA •Quality Assurance •Millet aggregation and delivery 11 Release of •Training on Fund Management Millet to UNGA 10 Presentation of 1a UNGA and 7 Full UNGA WR Bank sign Payments for 5b 3 Delivery of agreement on WR received Issuance of 6b Advance on Millet terms of Unga’s WR and WH purchase of the WR invoices millet 8b Net payments direct to PO accounts 8a Payment of warehouse Fees 4 WFP Warehouse – Gulu (UCE 8c Caveat removed on WR by Equity Bank licensed) 6a Caveat place on WR by Equity •Cleaning and drying Equity Bank-Uganda Bank •Issuance of electronic Warehouse Receipts 5a Issuance of Copy of Warehouse •Storage and Collateral Management receipts and warehousing invoice Physical Millet Delivery Title Document/WR Money Transfer Payments
  • Livelihoods and Enterprises for Agricultural Development (LEAD) Financing Mechanism • Need reliable partners: Buyer, Seller, Bank, Licensed Warehouse • Basic Steps to fix costs/income: - Buyer and Seller agree quantities, price, quality standards, delivery schedule - Buyer, Seller, and Bank agree financing/payment terms - Determine costs of warehousing (off loading, cleaning, drying, bagging, issuance of warehouse receipts, storage charge, on loading) 4
  • Livelihoods and Enterprises for Agricultural Development (LEAD) Financing Mechanism Document Transaction Flow: • Memorandum of Understanding between Buyer, Seller, Bank, USAID LEAD – defines role of each entity • Letter of support from World Food Program re warehousing • USAID LEAD – set of procedures established for farmers/Producer Organizations (growers) supported by LEAD 5
  • Livelihoods and Enterprises for Agricultural Development (LEAD) Financing Mechanism Main Elements: • Unga sets guaranteed floor price, buys at higher of floor price or market price at time of purchase • Equity Bank advances 60% of floor price to POs at point when warehouse issues warehouse receipt assigned to Equity Bank – no additional collateral required • Farmers free to sell to Unga or a third party at all times • Unga pays for millet at time of purchase • Equity Bank deducts advance amount, its fees and interest, and warehouse fees from Unga payment, and pays balance to POs • POs distribute advance and net payments pro rata to their members 6
  • Livelihoods and Enterprises for Agricultural Development (LEAD) Millet Production Economics Current Market Price = 840UGX/Kg = USD$0.37/Kg Unga Floor Price Offer = 485UGX/Kg = USD$0.22/Kg Traditional Production • Yield Range 350 – 600 Kg/Ac, Avg. = 500 Kg/Ac • UCOP about 500 UGX/Kg = USD$0.22/Kg • Farm Gate Gross Margin = 170,000 UGX/Ac = USD$75.55/Ac Production using Modern Agronomic Practices • Yield Range 900 – 1,600 Kg/Ac, Avg. = 1,000 Kg/Ac • UCOP about 430 UGX/Kg = USD$0.19/Kg • Farm Gate Gross Margin = 410,000 UGX/Ac = USD$182.22/Ac 7
  • Livelihoods and Enterprises for Agricultural Development (LEAD) Immediate Actions by USAID LEAD Sensitizing Farmers in Acholi-Longo Sub-Regions • Radio Announcements in Local Languages • Outreach in 11 Districts through 11 USAID LEAD Field Officers and 132 Field Facilitators working with Producer Organizations encompassing 31,000 Farmers • Outreach through four Grantees of USAID LEAD and their extension staffs to 56,000 Farmers • Coordination with the WFP warehouse in Gulu, UCE, Unga Millers and Equity Bank to make sure the physical handling aspects and warehouse receipt system can function properly 8
  • Livelihoods and Enterprises for Agricultural Development (LEAD) Actions “To Do” by USAID LEAD for 2011 Seasons Sensitizing Farmers in Teso Sub-Region, the real “home” of millet production in Uganda • Radio Announcements in Local Languages • Outreach in 7 Districts through 7 USAID LEAD Field Officers and 70 Field Facilitators working with Producer Organizations encompassing 17,000 Farmers • Outreach through 5 Grantees of USAID LEAD and their extension staffs to 39,000 Farmers • Preparing to use the WFP warehouses in Soroti and Tororo based on lessons learned in Gulu • Reaching out to other buyers, especially in South Sudan 9
  • Livelihoods and Enterprises for Agricultural Development (LEAD) Contact details: USAID LEAD Project Plot 58 Lumumbe Avenue, Nakasero PO Box 1709, Kampala, Uganda Telephone: +256-(0)312-216700 Susan Corning, Chief of Party – scorning@leadug.com Paul Forrest, Agriculture Unit Director – pforrest@leadug.com John Fitzgerald, Financial Services Director: - jfitzgerald@leadug.com 10