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  1. 1. Mapping of Rural Finance Products, Delivery Models and Linkages SEEP Rural Finance Pre-Event Workshop Washington D.C. – October 26, 2004 Maria Pagura, FAO Rural Finance Group
  2. 2. Presentation Overview <ul><li>Rural Finance Demand and Supply </li></ul><ul><li>Innovative Products and Services </li></ul><ul><li>Mapping of Delivery Models and Linkages </li></ul><ul><li>Moving towards Design and Choosing the Right Mix </li></ul>
  3. 3. Demand and Supply of Rural Financial Services
  4. 4. Demand for Rural Finance <ul><li>Agriculture production – medium and long-term loans, leasing arrangements, lines of credit, crop insurance </li></ul><ul><li>Agriculture based industry – investment and working capital loans, lines of credit </li></ul><ul><li>Non-farm enterprise and trade – investment loans, short-term working capital loans, </li></ul><ul><li>Household consumer finance - emergency loans, health insurance, savings, remittances, housing </li></ul>
  5. 5. Supply of Rural Finance <ul><li>Informal: Moneylenders and Traders </li></ul><ul><li>Semiformal: Village Banks, NGOs, MFIs Cooperatives, Credit Unions, Input Suppliers, Agribusiness Companies, Marketing Companies </li></ul><ul><li>Formal: Agricultural State Banks, Commercial Banks, Community and Rural Banks, Postal Banks </li></ul>
  6. 6. Innovative Rural Financial Delivery Models, Linkages and Products
  7. 7. Innovative because they...... <ul><li>expand access to new segments of the rural population not traditionally served </li></ul><ul><li>create quality increases in terms and condition of current products already being offered </li></ul><ul><li>broaden the variety to offering new products and services </li></ul>
  8. 8. Innovative Rural Finance Products
  9. 9. Loan Products <ul><li>Working capital loans </li></ul><ul><li>Lines of credit </li></ul><ul><li>Emergency loans </li></ul><ul><li>Term finance loans </li></ul><ul><li>Warehouse receipts </li></ul><ul><li>Leasing arrangements </li></ul>
  10. 10. Savings Products <ul><li>Mobile Banking – flexible savings products </li></ul><ul><li>Improved ROSCA open access savings </li></ul><ul><li>Certificate of Deposits </li></ul>
  11. 11. Insurance <ul><li>Agriculture – indexed weather based instruments </li></ul><ul><li>Health </li></ul><ul><li>Life </li></ul>
  12. 12. Other Services <ul><li>Payment services </li></ul><ul><li>Remittances </li></ul>
  13. 13. Mapping of Delivery Models
  14. 14. Traditional Delivery Channels MONEYLENDERS/TRADERS CLIENTS COMMERCIAL BANKS CLIENTS (Private and State Development) MFOs and NGOs CLIENTS MEMBERSHIP-BASED ORGANIZATIONS CLIENTS (Self Help Groups, Village Banks, Co-ops, Credit Unions)
  15. 15. Multi-Partner Delivery Channels Private Banks State Banks Postal Banks Insurance Cos. MFOs NGOs Credit Unions Village Banks Agro-processors Input Suppliers Marketing Companies Leasing Companies Warehouse Operators Supermarket Chains Clients Non-bank Financial Institutions (APEX, Investment Funds)
  16. 16. Using Agribusiness as a Delivery Channel Clients Trader Bank or FI Marketing Co. Farmer Assoc. Private Investors
  17. 17. Innovative Linkages and Delivery Channels Producer Business Models New Delivery Channels Other Business Service Models Bank - MFI Wholesale Models
  18. 18. Producer Business Models
  19. 19. Banks and Ag Processing Firms <ul><li>Land Bank of South Africa and Cotton Processing Firms - providing credit to farmers </li></ul><ul><li>Commercial Banks and Ag Processing Firms in Kenya, Zambia, Mozambique – providing credit to farmers </li></ul><ul><li>Role of mills in facilitating finance to small and medium scale farmers. </li></ul>
  20. 20. Banks and Supermarkets <ul><li>Farmers access to loans due to purchasing arrangements with supermarkets – HortiFruiti in Costa Rica </li></ul><ul><li>Banks use supermarkets as delivery channels for range of services, including deposit mobilization - Nedbank and PicknPay Chains in S. Africa </li></ul>
  21. 21. Banks and Inputs Suppliers <ul><li>Teba Bank (S. Africa) using point of sales terminals to provide banking services through rural trader shops and MFIs </li></ul><ul><li>Drumnet-Pride Africa linking farmers to financial service, primarily lines of credit through the use of smart cards with input suppliers coupled with access to market information </li></ul>
  22. 22. Bank – MFI Models
  23. 23. New Wholesale Models <ul><li>Portfolio buyouts </li></ul><ul><ul><li>One time purchase of MFI portfolio </li></ul></ul><ul><li>Partnerships </li></ul><ul><ul><li>Bank holds loans, MFIs monitor and collect payments </li></ul></ul><ul><li>On tap Securitization </li></ul><ul><ul><li>Continuous buyout of MFI portfolio </li></ul></ul><ul><li>Systems based on incentives and risk sharing arrangements – default limits and guarantees </li></ul>
  24. 24. New Wholesale Models <ul><li>Investment funds - debt and equity instruments for MFIs </li></ul>
  25. 25. Bank – MFI Linked Services <ul><li>Banks – MFI Linkage for deposit mobilization services </li></ul><ul><li>Post Office Bank in S. Africa acts as payment backbone for a range of MFIs and credit unions </li></ul>
  26. 26. Other Business Service Models
  27. 27. Linkages and Delivery Channels <ul><li>Life insurance firms using post office banks as payment facility for rural clients – S. Africa and Kenya </li></ul><ul><li>Social pensions paid out in rural areas through commercial bank mobile units – S. Africa </li></ul>
  28. 28. Moving towards Design and Choosing the Right Mix
  29. 29. The A.C.T. Principle <ul><li>A nalyze and understand the key constraints and challenges of provisioning rural finance </li></ul><ul><li>C omprehend the different products and delivery models available </li></ul><ul><li>T ake the best mix of products and delivery models to effectively deal with the constraints in your area of intervention </li></ul>
  30. 30. “ Creativity is thinking up new things. Innovation is doing new things.” Theodore Levitt Professor Emeritus, Harvard Business School