Presentation Fin4Ag S16 by George R. Osure

1. The Role of Technical Assistance in
Lending Products for Smallholder
Agriculture
George R. Osure
June 2014

2. Agenda
1. About SFSA
2. How to make use of Technical
Assistance (TA) as a risk mitigation
tool plus other benefits to both
lenders and farmers.
3. Conveying technical assistance to
lenders and farmers as an sharing
information service for efficiency.
4. Structure of a Special Purpose
Vehicle for Technical Assistance.
5. Conclusion
INPUT
MGT
PLAN
OUTPUT
MGT PLAN
SERVICES
MGT PLAN

3. 3
GOAL: Reach millions of small farmers
through scalable, sustainable solutions,
raise farmers’ productivity, activate supply
chains, increase incomes.
About the SFSA : Where we work

4. About SFSA: support systems and assets
4
R & D Market-led Extension
Risk Management
Policy Development
Seed Systems Outreach
1. A non-profit organization established by Syngenta under
Swiss law.
2. Can access Company expertise but it is legally
independent and has its own board.

5. We will now consider how technical
assistance (TA) can support the lending
process by reducing cost of transaction,
improving accuracy, and mitigating risk.

6. As an enabler;
An agribusiness
environment
developer;
It is a virtual
trusted broker
who selects and
bundles services
to facilitate
expansion and
efficiency.
The “go to office”
on how to utilize
& leverage on
public resource
capacity (PPP)
4 benefits from a TA service for agricultural lending

7. Technical Assistance as an enabler
• Introducing traceability of input-throughput – output
linkages
• Improves ease of monitoring QC standards of farmer-
lender interaction.
Develops opportunities
for both farmer and
lender by efficiently
aggregating services
required at all levels of
the value chain.
• Access to credit as complex due to the tools required e.g.
BP
• Lenders as being only Interested in markets, not
production with preference for “town based” operations
• Institutions who work supported by a very harsh legal
regime.
Enables farmers by
changing mindset (as it
is participatory).
• Uses transparency, accuracy, and timeliness of availability
of data as a risk mitigation tool due to availability of
predictive nature.
• Relates with suppliers on technology development trends
Integrates information
acquisition with risk
management:

8. TA in the lending business environment
Demonstrates
requirements
(services support,
products, sales,
procure products,
reduced risk,
improve efficiency,
through puts) to
access credit
High operation costs
relate to distribution
incurred by lenders
can be minimized
through use of data
availed in a timely
manner. This also
becomes a basic
risk mitigation tool.
The recommended
business model for
the TA – Farmer-
lender is a mix of
production & market
led systems
anchored on joint
liability collateral,
crop& trade
insurance, working
thro bundled
services for planned
aggregated
production.

9. TA and trust between buyer-lender - farmer
Knowledge
and personal
experience of
the farmer e.g.
weather.
Soil health and
water quality at
the beginning.
Relevant laws
related to:
seeds,
research,
regulatory
institutions,
policies,
packaging, and
standards.
Annual crop
calendars,
physical &
geographical
location.
The
contribution of
gross margins
and crop
rotation
towards loan
repayment.
9
High Quality technical assistance is the virtual trusted broker
or glue at the center of the buyer – lender – farmer.

10. Reports & data TA prepares for an agric. lender
The report should be easy to
understand and relate to the
conditions that borrowers
(farmers) relate to such as:
Number of farmer groups
suitable and available
Labour market available &
created to sustain agric prodn
Area cultivated (ha or acres):
Revenue/profit/yield generated
and available for loan
repayment per unit area.
10

11. Technical Assistance requires a vehicle to
convey the information in a forma,
regulated, legally sound in a cost effective
manner.
This requires a Special purpose vehicle
(SPV) designed for this specific purpose
and business environment.

12. An SPV to provide TA a single or group of lenders
Recommended that for TA to
benefit lenders to agriculture
we requires a Special Purpose
Vehicle (SPV) that can link
credit, input suppliers farmers,
and buyers.
The SPV is designed to be
primarily used as a trusted,
legally sound information
brokering and exchange
platform”.

13. SPV structure as TA for lender- farmer- buyer
13
A not for profit company whose KPI can be: addditional sales
generated for suppliers, work created and incomes
generated, additional value of business for the area.
Structured to cover work done between lender
and input & services suppliers, buyer, regulator
etc.
1. The SPV can be financed from transaction costs (loan)
reducing insurance/risk costs and hence becomes an virtual
risk mitigation tool.
2. Triple bottom line (profit, poverty alleviation,
environmental sustainability) becomes an inclusion tool as it
will facilitate partnerships with the development community.

14. 14
Board of
management
Metrics Support
Process/ Farmer financial
management / P&L
Location 1 Location 2 Location 3
Public Enterprise
support / Network
• Labs
• Plant protection services
• Agronomy Training
Marketing Support
Registration of members to SPV
Private Enterprise
support / Network
• Fertilizer companies
• Irrigation firms
• Machinery suppliers, etc
External partners & lender
loans officers
Production Support
• Strong technical focus
• Coordination of plans
Private Enterprise
support / Network
• Loans officers from Lenders
• Implement training
• Stewardship (safety)
• Tech support
• Agro systems
• Market analysis
• Market
development
• links
• Profitability,
• cost analysis,
• impact assessment
KPI for the SPV
Location 4
Special purpose vehicle to
organize & manage services
Loans officers access
information required.
SPV organogram to provide TA & support networks

15. Conclusion: the SPV as a technical assistant to lenders
and farmers
Create a facility
which will reduce
transaction costs for
lenders by
differentiating
individual
smallholders and
producer groups.
Share data &
knowledge in timely
manner thro’
integration of
different approaches
to exploit new
opportunities for
lenders and farmers.
This improves
efficiency and
reduces risk.
Bundle specialized
services, technology,
and tools for the
smallholder farmers
and hence facilitating
access to credit in a
scalable manner.
15

16. The Role of Technical Assistance in
Lending Products for Smallholder
Agriculture:
THANK YOU FOR YOUR ATTENTION
George R. Osure
June 2014

17. The business model: activities for the pilot year
17
Jan Feb March April May July Aug Sept Oct Nov Dec
RegisterFarmerforloan,financial&TA
education,
ContractsSignedwithlenderinclSPV&loan
issued.
StartProdn&Planting
Harvest&Sales=loanrepayment
Harvest&Sales=loanrepayment
ReviewofProdnSeason
Farmerorg+SPV.Review
BusinessPlanforSPV
+Lender+farmerorg.
Certifyfarmers&their
scheme