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Banking service to Oromia Coffee Farmers Cooperative Union (OCFCU)
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Banking service to Oromia Coffee Farmers Cooperative Union (OCFCU)

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Presentation Fin4Ag S49 by Dessalegn Jena …

Presentation Fin4Ag S49 by Dessalegn Jena

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  • 1. OROMIA COFFEE FARMERS COOPERATIVE UNION (OCFCU) BANKING SERVICE TO OCFCU AND ITS MEMBER COOPERATIVES Presented By Dessalegn Jena July, 2014 Nairobi 1
  • 2. Outline 1. Introduction and Background • Some facts about Ethiopia • Role of Agriculture in Ethiopia • Characteristics of the rural sector • Financial Sectors in Ethiopia • Efforts of Financing Agricultural Sector in Ethiopia 2. Structure of farming community in Ethiopia • Financial need of Farming Community • Unique problems of Farmers access to finance 3. Effort to finance cooperative sector • Establishment of Cooperative Bank(CBO) 4. The Role of OCFCU in establishment and Governance of CBO 5. Establishment and Current Status of OCFCU 6. Recommendations 2
  • 3. Some Facts about Ethiopia Area 1,104,300 sq. Km Agriculture land 345,130 Sq.Km Arable land 13,606,000 ha. Population is about 90 mil Rural population 85% Population growth rate 2.9% Per capita is about $500 3
  • 4. Role of Agriculture in Ethiopia  Agrarian country and agriculture plays vital role in national economy.  The economy policy is Agricultural Development Led Industrialization /ADLI/.  Agriculture accounts 46.3% of GDP 83.9% of export and 80%of labour force.  Small scale producers contribute more than 90% of agricultural products. 4
  • 5. Characteristics of the Rural Sector  Agricultural activities are the main stay  Low level o productivity  High level of poverty  Undeveloped infrastructure  Poor entrepreneurial development  Natural resource degradation  Poor saving habit  Shortage of capital  Poor credit facility 5
  • 6. Financial sectors in Ethiopia • Formal Financial Sectors Commercial Banks Micro Finance Institutions (MFIs) Insurance Companies • Semi-formal Financial Sectors Cooperative Financing Saving and Credits (SACCOs) • Informal Financial sectors Iddir Iqqub 6
  • 7. Effort of Financing Agricultural Sector • Government Banks The loan is advanced by guarantee of Regional Governments Guarantee is 100% in the case defaults • Micro Finance Institutions (MFIs)  Newly established system to mitigate risk of default  The farmer is provided with voucher and receive agricultural inputs from co-ops,  The cooperatives collect their money from MFIs 7
  • 8. Cont’d • Financial Inclusion Ethiopian Financial Inclusion Project (EFIP) Financial Inclusion Support Unit (FISU) • Warehouse Receipt Financing Agreement is made between ECX and Commercial Banks to finance 60% of the value of commodity 8
  • 9. The Structure of Farming community • Cooperative Sector Farmers/Household Primary Cooperative Societies Union Federation • Other service providers Processors Transporters Input suppliers • Stakeholders Local Government Regulatory Bodies Value Chain supporters 9
  • 10. Financial need of Farming community To increase production and productivity  For processing and packaging  For infrastructure development  For product marketing  For social welfare,  For diversification 10
  • 11. Unique problems of farmers access to finance  Agriculture is less attractive field of business as to financial sectors.  Agricultural sector is considered as high risk  Illiquid and perishable Collateral  Small transaction size,  Geographically dispersed clients  Poor Financial management 11
  • 12. Efforts to Finance Cooperative Sector • Establishment of Cooperative Bank of Oromia (CBO)  Cooperative bank of Oromia is registered in accordance with article 304 of the commercial code of Ethiopia and licensed by NBE.  CBO is mainly(70%) owned by cooperative societies. Mission:  To Provide full-fledged and customer responsive banking service for cooperative societies, other entities, and individuals with special emphasis to agricultural and agro-based businesses financing, and to maximize shareholders’ value through use of competent and disciplined employees, visionary leaders, and modern banking technologies. 12
  • 13.  CBO’s financing Priority: Agriculture and agro-processing Cooperatives business activities Export oriented activates • Current status of CBO • As of Dec 31,2013  Asset =7.3 billion birr Capita =901.34 billion birr Loan portfolio =3.2 billion birr Coops’ Loan = 27-30% Recovery rate =98.5% Branch network = 102 13
  • 14.  CBO’s Financing experience. o Credit products:  Investment loans.  Working capital loans. o Types of clients Financed:  Multipurpose Coops  Agricultural Cooperative Unions  SACCO Unions  Coffee Farmers Cooperative Union  Primary coffee cooperatives societies  Others. o Activities financed:  Production activities:  Agricultural produce marketing activities  Mechanization.  Manufacturing activities  Domestic trade and services  Export and import activities. 14
  • 15. `Role of Oromia Coffee Farmers Cooperative Union (OCFCU) to establish CBO  Initiation of idea for the establishment of the Cooperative Bank of Oromia to access rural credit,  Pioneer and major Share holder,  Major creditor,  Corporate Governance, 15
  • 16. Establishment and current status of OCFCU Regional State Oromia, Ethiopa Above 5000ha – 55 districts lakes Between 2000-5000 ha- 15 districts Less than 2000 ha- 2 districts Other districts 16
  • 17. INITIAL CURRENT Memb ers Capital • 34 Cooperatives • 22,503 House Hold • 311 cooperatives • 288,201 House Hold • USD 90,000 • USD 15,500,000 Date of Establishment 01 June, 1999 17
  • 18. Objective  To Provide market information to Co-op societies about coffee price at local and international market  To sell their coffee product at better price at local and international market,  To improve and maintain the quality, productivity and sustainability of coffee production  To provide coffee farmers with social services  To facilitate and provide cooperatives with credit,  To represent the coffee farmers at national and International forums, 18
  • 19. Deputy General Manager Board Of Directors General Assembly Commercial Department Finance Department Human resource Department Coffee Processing Factory General Manager Supervisory Committee Legal service Audit Services Quality control Secretary Planning & Programming Department Extension Department Organizational Structure Of Oromia Coffee Farmers Cooperatives Union 19
  • 20. Different Certifications  Organic  Fair trade  Rainforest Alliance  UTZ  Tracibility 20
  • 21. Farmer Collector Supplier ECX Exporter Buyer Roaster Farmer Cooperative Union Buyer Roaster Retailer consumer Retailer Profit Profit Fair Trade Premium CooperativeAuction The Coffee value Chain consumer 21
  • 22. OCFCU’s performance in the last decade  Membership increment from 34—311 cooperatives  Household increment from 22500—288,201,  Coffee sales from 126 tons –-9000 tons  Profit generated from USD 24,000—USD 6.7 million  Dividend paid from USD22,000—USD 3.4 million  Fair Trade premium USD 74,000---USD 1.6 million  Capital increment USD 90,000---USD15.5 million 22
  • 23. No Sectors Name of Project Number of project Accomplished Number of beneficiaries 1 Education schools 70 28260 Kinder garden 3 884 Library & laboratory 3 586 Teachers’ residence 2 22 Staff office 3 47 2 Health Health Post 13 93,000 Dry latrine 7 4250 3 Water Development Potable water development 89 41,112 4 Transport secter road 5 27,000 Bridge 9 21,000 5 Coffee Processing Coffee processing mills 34 2580 6 Agro-industry Flour mills 5 5,000 7 Warehouse Office and Store 46 4600 8 Museum Coffee museum 1 Total 291 228,341 Projects Undertaken by the Fair trade Premium 23
  • 24. Farmers Support  Capacity building  Supply of small farm tools  Supply of quality control accessories  Supply of Beehives  Establishing and supporting of Saving and Credit,  Advisory service 24
  • 25. Value chain supporting facilities  127 wet mills  26 dry coffee hullers  2 coffee Processing and Grading Machines  11 Trucks  9 vehicles  5 Buses (services ) 25
  • 26. Carbon neutral coffee project Gimbi Energy Efficient Cook stove Programme  Distribute 30,000 Fuel saving stoves  To produce Carbon Neutral Fair trade Coffee  Reduce Green House Gas emission (36,633(tCO2e)  Each HH is expected to have both stoves (full package)  50% reduction in fuel wood.  Pre-finance – obtained from ICCO, HoAREC – model CDM. 26
  • 27. Job Creation • Union Permanent 137 seasonal 1200 • Primary cooperatives permanent 1302 seasonal 12000 27
  • 28. Future plan  Coffee roasting industry establishment  Honey processing industry,  Expansion of processing plant  Coffee complex construction  Expansion of income generating projects 28
  • 29. Recommendations to enhance FCUS access to finance! Improve the governance and management practices of cooperative societies. Improve the financial management and information system of cooperative societies. Strengthen the relationship of cooperative movement, Government cooperatives promotion structures, financial institutions and other relevant stakeholders. Formulating and implementing effective risk mitigating strategies with regard to agricultural lending. Design and implement credit relief outreach program. Enhance the agricultural lending skill of bankers to improve their agricultural loan judgments. Arrangement of refinance facilities provided for banks committed to agricultural lending. 29
  • 30. Thank You! 30