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Value Chain Finance

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Powerpoint at the occasion of Terrafina heidagen April 5-6, 2011

Powerpoint at the occasion of Terrafina heidagen April 5-6, 2011

Published in Business , Economy & Finance
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Transcript

  • 1.  
  • 2. Value Chain Finance workshop April 2011
  • 3. A joint initiative
  • 4. Questions for VCF discussion
    • What role do MFIs play in VCF? In relation to this In what way should TMF be concerned with VCF? Should it be concerned at all?
    • How should the link be with value chain development (VCD)? How can non-financial services (NFS) best be facilitated and by whom??
    • What is the role of banks and other financial institutions to finance in the Chain??
    • How can synergy be achieved between donors of VCD and funders of VCF?
    • What are the implications for TMF policy and action for the TMF consortium?
  • 5. CHAIN ACTORS CHAIN SUPPORTERS (SERVICE PROVIDERS - FACILITATORS) CHAIN CONTEXT Source: SNV-LA 05/17/11 The Value Chain concept
  • 6. Value chain finance
  • 7. The challenging VCD-VCF link
    • How to help create more value added for primary producers (link to attractive markets) ?
    • Chain organisation: How to ensure sufficiently strong horizontal linkages (producer organisation) and vertical linkages (farmer-processor-trader etc) ?
    • How to mitigate risks in the chain ?
    • How to ensure the necessary non-financial services in the chain without threatening the viability of the operation?
  • 8. Donor – Investor dilemma's
    • Mismatch in the past between FS and NFS
    • Lenders often faced with relatively high PAR on agricultural portfolios: risk mitigation is crucial
    • New VCF approach for agricultural lending:
      • Joint Action Agendas donor & investor
      • Thorough VC analysis & CB needs assessment
      • Plan for both NFS and FS to ensure profitable business ready for appropriate finance
  • 9. Good practice in VCF (1)
    • Chain & partner identification
    • Select partners with VCD/VCF point of view
    • Safeguard both the connection and the distinction with value chain development
    • Identify an effective lead partner in the chain
    • Facilitate the ‘orchestration’ of a promising VCF strategy
    • Create conditions for synergy between grant and debt finance
    • Core issues:
    • VCD: How to turn a supply chain into a value chain?
    • How to ensure proper role division?
    • Need to coordinate / harmonise interventions of donors and DFIs
    • VCF: How to create synergy between grant aid and debt finance
  • 10. Good practice in VCF (2)
    • Design & Assessment
    • Support a chain actor driven design
    • Acquire knowledge on the value chain
    • Work towards clear separation of roles (PO, marketing, NFS, FS)
    • Exploit chain opportunities for risk mitigating measures.
    • Base interventions on a solid assessment of needs for capacity building / NFS.
    • Maintain the perspective for growth towards maturity in the value chain ( graduation ).
    • Core issues:
    • Facilitator driven chain development  Chain actor driven.
    • Who should do the coordination?
    • How to ensure “Return on Investment” for donors
    • Graduation perspective
  • 11. Good practice in VCF (3)
    • Engaging Financial Service Providers
    • Establish links with financial institutions right from the start of VCD
    • Focus VCD and VCF on the full array of risk mitigating measures
        • Production risks
        • Supply risks
        • Finance risk
        • Marketing risk
        • Price risks
    • Issues:
    • What role have MFIs to play in VCF?
    • What is the scope of risk mitigation measures in VCF?
    Good practice in VCF
  • 12. Good practice in VCF (4)
    • Choice of aid instruments - implementation
      • Avoid crowding out with grants
      • Before considering financial interventions, consider non-financial alternatives
      • Facilitate the use of appropriate financial instruments
    • Core issues:
    • What to subsidize on VCD? How long?
    • What to subsidize in VCF?
  • 13.
    • Smart aid? Monitoring and evaluation
    • Consider the parallel with ‘good donor practice’ in microfinance
    • Agree on key performance indicators and targets.
    • Expect (target) and monitor return on investment
    • Plan your own exit
  • 14. Questions for discussion on groups
    • How can Value Chain Finance contribute to risk mitigation in rural lending?
    • How to separate VCD from VCF while at the same time ensuring synergy??
    • How to ensure sustainable access to finance in a Value Chain context, especially grant and debt financing considerations?
  • 15. Questions for plenary discussions
    • What role do MFIs play in VCF? In relation to this In what way should TMF be concerned with VCF? Should it be concerned at all?
    • How should the link be with value chain development (VCD)? How can non-financial services (NFS) best be facilitated and by whom??
    • What is the role of banks and other financial institutions to finance in the Chain??
    • How can synergy be achieved between donors of VCD and funders of VCF?
    • What are the implications for TMF policy and action for the TMF consortium?
  • 16. CONTACT P.O. Box 8190 3503 RD Utrecht The Netherlands T +31 (0)30 880 18 96 [email_address] www.terrafina.nl