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K-REP development agency experience in value chain financing
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K-REP development agency experience in value chain financing

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Presentation Fin4Ag S21 by Justus Mwiti

Presentation Fin4Ag S21 by Justus Mwiti

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  • 1. K-REP DEVELOPMENT AGENCY EXPERIENCE IN VALUE CHAIN FINANCING Challenges, opportunities and Lessons Learnt Presented by: Justus Mwiti Friday, August 8, 2014 Agri4fin Conference in Nairobi(14-18 July, 2014 1
  • 2. Value Chain Financing Projects undertaken by K-Rep Development Agency • Smallholder farmer’s savings and credit project • Micro leasing project • Rural Enterprise Programs (Dairy Value Chain)-East Africa Dairy Development Project • Value chain financing for the Honey sector • Smallholder Poultry Agribusiness Development Program • Livestock and fish value chains in Somaliland and Puntland Friday, August 8, 2014 Agri4fin Conference in Nairobi(14-18 July, 2014 2
  • 3. Friday, August 8, 2014 Agri4fin Conference in Nairobi(14-18 July, 2014 3 1. Development Approach • An integrated value chain approach has a broader impact and benefits. Sustainability of such programs depends on the mobilization of target communities and also inclusion of poor households Success Factors for Value Chain Financing
  • 4. Friday, August 8, 2014 Agri4fin Conference in Nairobi(14-18 July, 2014 4 • It is important to understand the structure and dynamic nature of the value chain. This enables the value chain designers to know whether the primary producers can more efficiently by organizing the value chain. It important to know gender participation in the value chains and also who controls productive resources/assets in the particular chain 2. Knowledge of the Value Chain
  • 5. Friday, August 8, 2014 Agri4fin Conference in Nairobi(14-18 July, 2014 5 • The drivers of a value chain, which are often the businesses involved in the processing and marketing of agricultural outputs, know the business and the other actors in the chain in a way that financial institutions per se do not. 3. Insider knowledge of the VC
  • 6. Friday, August 8, 2014 Agri4fin Conference in Nairobi(14-18 July, 2014 6 • The success of a VCF strategy depends on the right partners who synergistically work together to achieve a common purpose. • K-rep has been selected to support access to finance components in many development projects because of its experience in rural finance 4.Dependable partners
  • 7. Friday, August 8, 2014 Agri4fin Conference in Nairobi(14-18 July, 2014 7 5. Define clearly partner’s roles • Value chain development depends on a range of value chain actors, facilitators, financial service providers and other support. There roles should be clearly defined, especially in emerging value chains where their functions are not yet institutionally separated. • If the finance function is performed by a chain actor, such as a farmers’ marketing cooperative, attention should be paid to separating them in terms of institutional capacity, governance and accounting.
  • 8. Friday, August 8, 2014 Agri4fin Conference in Nairobi(14-18 July, 2014 8 6. Identify an effective lead partner in value chain finance • An active player in the chain, such as a farmers’ marketing organization or a processing company, can take the lead in streamlining the value chain, thus providing a degree of chain governance. • Such a party can also play a role by providing embedded financing to suppliers, and/or establishing a working relationship with a Financial Service Providers to finance producers and input suppliers.
  • 9. Friday, August 8, 2014 Agri4fin Conference in Nairobi(14-18 July, 2014 9 7. Select enterprises with a strong business case • The Target industry sector must be competitive if interventions are to be sustainable. Within a competitive sector or subsector, the most competitive value chains and niches must be identified. • Avoid interventions where the prospect of long-term sustainability cannot be demonstrated. The business cases includes; dairy, poultry, honey etc. as demonstrated by the above projects
  • 10. Friday, August 8, 2014 Agri4fin Conference in Nairobi(14-18 July, 2014 10 8. Proper regulatory framework • It is important to understand the existing regulatory framework in a given country if it does exist in various aspects of VC development. Examples are; MFI regulations, marketing regulations. Supportive regulatory framework is important for the development of VC
  • 11. Friday, August 8, 2014 Agri4fin Conference in Nairobi(14-18 July, 2014 11 9. Ring fence both the connections and distinction between financial services and value chain development • Actors should understand the differences between developing the value chain which mainly focuses on market development and supply of financial services which targets specific aspects of the nodes in the value chain and not the entire chain
  • 12. Friday, August 8, 2014 Agri4fin Conference in Nairobi(14-18 July, 2014 12 Challenges in AVCF o Subsistence Approach by most farmers, thus making financing of such activities difficult o Covariant risks in agriculture sector o Post harvest losses and o Inadequate marketing and transport systems (Infrastructure) with little vertical integration in the value chains and few price incentives and sales opportunities that can trigger mass production
  • 13. Friday, August 8, 2014 Agri4fin Conference in Nairobi(14-18 July, 2014 13 Opportunities in VCF • ICTs play an important role in agricultural value chains, with different types of ICT having different strengths and weaknesses when applied to particular interventions. • Improvement of the infrastructure • Opportunities with the devolved systems in Kenya, thus offering an array of options for building synergies in value chain development and financing
  • 14. Friday, August 8, 2014 Agri4fin Conference in Nairobi(14-18 July, 2014 14 • THANK YOU