TBN MDC '10 - Hugo Sintes - Oxfam EDP (Enterprise Development Programme)

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Hugo Sintes' update on Oxfam's Enterprise Development Programme
TBN Members Day 2010

For more info. and accompanying videos see https://www.oxfam.org.uk/donate/edp/index.html

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TBN MDC '10 - Hugo Sintes - Oxfam EDP (Enterprise Development Programme)

  1. 1. Oxfam’s Enterprise Development Programme Presentation by Hugo Sintes November 2010
  2. 2. Outline • Oxfam • Enterprise Development Programme • Practical lessons • Opportunities for collaboration • Q&A
  3. 3. LAC West Africa Southern Africa HECA East Asia South Asia UKPP MEEECIS Who is Oxfam? Oxfam GB countries Oxfam India 14 Oxfam is a global movement of people working with others to overcome poverty
  4. 4. What does Oxfam work on? Climate change  Understanding effects on poor people  Help most vulnerable households adapt  Global campaigning Aim 1 - Right to Basic Sustainable Livelihoods Agriculture and rural livelihoods  Support smallholder farmers  Engage with the private sector  Influence local/international policies Aim 2 - Right to Basic Social Services Education, Health, HIV and AIDS Aim 3 - Right to Life and Security Response to disasters Water, sanitation and public health Aim 4 - Right to be Heard Aid and Budget Accountability Coalitions and alliances Aim 5 - Right to Equity - Gender & Diversity Violence against women Women’s rights and leadership
  5. 5. What does Oxfam work on? Private Sector supporting/running companies engaging with existing companies
  6. 6. Oxfam’s Enterprise Development Programme Introduction
  7. 7. Why did Oxfam set up EDP? • Oxfam set up the Enterprise Development Programme (EDP) to identify, invest in and nurture very early-stage, rural and agricultural SMEs in developing countries • EDP supports SMEs as essential for job creation and development • Agriculture main source of livelihood for 2 billion poor people • SMEs are often forgotten by banks and microcredit, and constitute the so called ‘missing middle’ • EDP targets the ‘toughest’ SMEs - Rural, agricultural, remote - Limited capacity and track record RURAL FINANCE GAP AND THE MISSING MIDDLE
  8. 8. What does EDP do? • Since 2008, we have: - Raised £3.1m towards our £6m target - Reviewed 50 business plans emerging from Oxfam programmes - Committed £2.5m to 16 enterprises • Through EDP, Oxfam supports SMEs with : - Loan finance (channelled through a local Financial Institution) - Business support (mentoring, new staff, Investment Committee) - Social grants (e.g. for women’s economic leadership) • Enterprises are selected on the basis of following criteria: - Business and market potential - Opportunities created for women - Management capacity of enterprise and partners - Potential for reducing poverty in rural areas Note: each enterprise is supplied/owned on average by 1,000 farmers • EDP operates in a space where few private investor reach, uses a business approach different from charity, and aims to develop a model for early-stage enterprises with a mix of public and private funds
  9. 9. Proposal selection Investment Committee Enterprise Development Board Ongoing support and review How are EDP investments selected? • Proposals from Oxfam’s programmes • Next Q1 2011 • Internal Review Panel • Internal and external experts • Scrutiny, support and development of each proposal • Last Nov 2010 • Includes ‘engaged’ supporters • Designs Strategy • Reviews investment decisions • Next Dec 2010 • Business support and mentoring • Monitoring, evaluation
  10. 10. Michel Clancy Manager, Let Agogo Mulugeta Tefera Manager, Assosa Salum Shante Director, Katani Dawood Istanboli Manager, NFC AMENU Manager & Chairman, Liberia President & secretary of Komatha LBCS, Sri Lanka Tatyana Yurina Director, Forus Who are the key people involved? Tim Chambers Latin America Amit Vatsyayan South Asia Thalia Kidder Gender Equality Jing (A. Pura) East Asia Danilo Sauceda Manager, Aproalce Enterprise Managers Investment Committee David Bright Oxfam David Pitt-Watson Hermes Chris West Shell Foundation David Irwin Joss Saunders Oxfam Penny Lawrence Oxfam EDP Board Vincenzo Morelli TPG David Gait Maitri Hugo Sintes Manager Nicholas Colloff Oxfam Sandy Arbuthnot Gita Patel Stargate Oxfam Advisers Local Mentors
  11. 11. Belle Vue St Lucia (vegetables) New Farm C, OPT (processed food) AMENU Liberia (rice) FORUS, Russia (microfinance) Vavuniya Sri Lanka (dairy) Katani, Tanzania (sisal) Alpina Colombia (dairy) APROALCE Honduras (vegetables) Let Agogo Haiti (dairy) EDP Investments: 2008, 2009, 2010 LIBAS, Philippines (moringa) Investments 2010 Investments 2009 Investments 2008 Zembaba, (honey) BN, Rwanda (mushrooms) Pabitra, Nepal (vegetable seeds) Pacomen Indonesia (vanilla) Assosa, Ethiopia (sesame) Chenab, Pakistan (dairy)
  12. 12. What do these enterprises look like? AMENU Liberia (rice) Vavuniya Sri Lanka (dairy) Ascamp Colombia (dairy) APROALCE Honduras (vegetables) Let Agogo Haiti (dairy) LIBAS, Philippines (moringa) Zembaba, Ethiopia (honey) BN Rwanda mushrooms Pabitra, Nepal (seeds) Assosa, Ethiopia (sesame) Chenab, Pakistan (dairy) Pacomen Indonesia (vanilla) Sales GBP (000) - last year 0 0 6 7 13 17 30 35 90 99 127 137 151 Enterprise Assosa, Ethiopia. Set up in 2006. Federation 20 POs. 6,000 members (6% women). Product / Market Sesame seeds, expanding into sesame oil for local markets. Setting up edible oil plant Investment - £70k loan (equipment, working capital) - £20k business grant (staff, mentoring) Staff / Skills Manager in place. Recruited finance officer & cashier. Recruiting factory manager. Enterprise New Farm Company, Palestine. Processor of foods from 13 cooperatives (40%* women) Product / Market Palestinian-sytle foods sold in Palestine, Jordan, Saudi Arabia. Sales up 20% last year. Investment - 2008: £10k loan (working capital) + £110k - 2010: £90k loan (WC, loan) + £110 k Staff / Skills Total 6 staff. Manager, plus Finance, Marketing and Quality officers (2). Enterprise Pabitra. Founded 2001. Product Seeds sold to two major companies and local markets Investment - 75k loan (WC) - £70k grants. Staff / Skills President with 20 y of experience in vegetables. Received training on various matters. Social Mobiliser, Secretary + Recruiting Enterprise, technical & Quality Officers (3) Ymegnushal Chairwoman Mergia Bekele Mentor Mulugeta Tefera Manager, Assosa Hear them on: https://www.oxfam.org.uk/donate/edp/ethiopia.html NFC, Palestine (food)
  13. 13. EDP Investments: Philippines
  14. 14. EDP Investments: Ethiopia - Sesame
  15. 15. Oxfam’s Enterprise Development Programme Lessons
  16. 16. Performance of the portfolio • It’s early days – most companies in portfolio 0 – 18 months • We measure performance on various indicators - Business viability (profits, stable markets, and access to finance) - Social issues: - opportunities created for women - resilience to climate changes - poverty reduction (income, jobs) • Next some of the key lessons 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Business Performance Social Impact -women -climate -poverty Progress on activities Assessment June 2010
  17. 17. 1. Need to start with good analysis of markets, and community & gender issues Support to women is a key focus of our investment decisions • Run 50% of the Micro & SMEs and produce 60-80% of the food • Despite owning 1% of the land & accessing 5-10% of the credit • … They are often marginalised to low-return activities • If provided the same assistance, are as or more productive • If they control the income, more goes to health, education and other household expenditures
  18. 18. Product/market ‘Attractiveness Matrix’ Sweetcorn Dried mango Cattle and sheep fattening Henna Kaolin (Bogonii in local langage) Peanuts Sesame Fonio (local cereal) Dried vegetables (Okra, pepper, onion) Vegetable gardening Shea butter Nere (sumbala) Cotton textile crafts 1. Good analysis of market and gender (b) Traditional beer Pepper, Cotton Marmelade Women’s participation Marketdemand HighMediumLow HighMediumLow Example from Mali
  19. 19. Community FinanceExtension Financial Management Business Development Market Information MARKET SERVICES Natural environment & resources Social norms & informal networks Infrastructure Trade rules & competition policy ... (DIS)ENABLING ENVIRONMENT MARKET CHAIN Alternative livelihood strategies Primary Producers Consumer: •International •National •Local Exporters / Importers Processors Inputs Channel1 Traders Enterprise 1. Good analysis of market and gender (c) ... Channel2
  20. 20. 1. Good analysis of market and gender (d) Community FinanceExtension Financial Management Business Development Market Information Natural environment & resources Social norms & informal networks Infrastructure Trade rules & competition policy ... Alternative livelihood strategies Primary Producers Consumer: •International •National •Local Exporters / Importers Processors Inputs RetailersTraders Enterprise ... Can women access safe transport At a good price when they need it? Do women have property That they can use as Collateral for loans? Do gender roles, attitudes and beliefs affect women’s involvement in different parts of the chain? What happens in the household economy to make this possible?
  21. 21. 1. Good analysis of market and gender (e) • As a result of this analysis, we have - In Rwanda, we support a mushroom enterprise because market is good, and because barriers for women are low - In Philippines, all tree nursering will be carried out by women - We support another enterprise in Ethiopia, which producers lighter Beehives and veils so that women can join production • We also seek to establish partnerships with buyers and financial services providers • Oxfam interventions include policy engagement with local authorities, and with stakeholders
  22. 22. 2. Need to understand climatic issues better • In the last 18 months, companies we invest suffered: - Earthquakes in Haiti and Indonesia - Flooding in Pakistan, hurricanes in Honduras and Caribbean - Longer summers/droughts, erratic rains • Not all of these are climate-change related, but some are and are getting worse • We need to understand better where to invest & how to adapt
  23. 23. Finance Type Example Loans Business related Warehousing Vanilla, Indonesia Equipment Assosa, Ethiopia Working capital Belle Vue, Caribbean Grants Business related Capacity building New Farm Company Salaries (declining %) Honduras Non-business related Advocacy Lèt Agogo Project management All Women leadership All The size and type of investment depends on each company’s cash flow, but in general we favour the following... Average investment • £50k business loan • £50k business grant • £50k social/market 3. Both grants and investments are key All our loans are channelled through local Microfinance Intermediaries or banks, in order to: • Build a track record for the company (and bank/MFI) • Create a new relationship • Manage Oxfam’s money
  24. 24. 4. Capacity building is key … but challenging • Business skills are scarce - Enterprises with sales £0 - £100k can’t afford experienced managers - Skilled staff, or specialised services are often also not available in rural, remote areas - Financial Management is a gap we feel the most, followed by marketing and production • What we are doing about it... Pre-investment - Hire local consultants to help enterprise develop business plan - Support from EDP Manager, Investment Committee Post-investment - Train in-country Oxfam staff as they provide general coordination/advice - Recruit new enterprise staff, i.e. production experts, accounting staff - One local mentor per company - Link up with Business Development Services, Agricultural experts - Deployment of UK Business Volunteers with Challenges Worldwide - LOTS OF TOOLS ... Financial reporting, Enterprise Diagnostic...
  25. 25. 5. A number of organizations in this space http://www.aspeninstitute.org/policy-work/aspen- network-development-entrepreneurs
  26. 26. Summary 1a Sound market analysis 1b Sound gender analysis and explicit effort to involve women (if seeking developmental outcome) 2 Affected by climate change? 3 Various types of money 4 Multiple approach to capacity building 5 Keep an eye on the sector
  27. 27. Oxfam’s Enterprise Development Programme Getting involved
  28. 28. How to get involved (1) Financial Support • Associate Investors £10,000pa x 3 years – with programme visit and mentoring opportunities • Partner Investors £50,000pa x 3 years – join as observers to Board and Investment Committee meetings • Board Investors £200,000pa x 3 years - join the EDP Board, advise on strategy and decide which proposals enter the portfolio and on what conditions • Option to join a syndicate (group of ‘investors’) • All of them are today philanthropic, but loan money is re-invested
  29. 29. How to get involved (2) Other ways • In the UK - Volunteer with SME experience to support us with review & monitor investments. Examples : – Rural, agricultural enterprises, for example dairy – Knowledge of particular region – Capacity on financial analysis • In Country – Particularly interested in 3-month placements – ... but interested to discuss if specific experience in theme/country – (costs except salary covered)
  30. 30. Oxfam’s Enterprise Development Programme Annex
  31. 31. How EDP is managed? General Assembly Board of Directors Executive Manager Finance Officer Marketing Officer Oxfam local staff Business Mentor Local technical partner EDP Manager Investment Committee EDP Board Global Country Local Financial Intermediary loan - Partners - Oxfam - Enterprise Production / Quality Control Officer - Supporters ‘Investors’ - Famers Oxfam Advisers
  32. 32. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Agriculture and weather risks Year 1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Market related risks Country & currency risks Low liquidity Management capacity 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Technical Assistance Crop/Weather insurance Suitable seeds, irrigation Fostering trading links Formal contract farming Currency hedging Loans instead of equity Training and mentoring High-value crops only To get higher returns Use of guarantees Strategies Lower cost of capital Portfolio diversification Avoid SMEs & Agriculture Technical Assistance Crop/Weather insurance Suitable seeds, irrigation Fostering trading links Formal contract farming Currency hedging Loans instead of equity Training and mentoring Mobile (only in Russia) Farmer organisation Use of guarantees Lower cost of capital Portfolio diversification Avoid SMEs & Agriculture The risks, costs and strategies in this space Fig 6: Risk and costs investment in Missing Middle - Agriculture Costs from lower amounts, and remoteness are also higher (while returns not always highest) To beat the costs Source: Missing Middle Agricultural Finance

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