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Mindanao Microfinance Council 4th Microfinance Best Practices Forum     AGRI-BUSINESS VALUE CHAINS  AND MICROFINANCE CHALL...
OUTLINE <ul><li>The agriculture constituency </li></ul><ul><li>Supply chain examples </li></ul><ul><li>Benchmarking key pr...
AGRI-FISHERY LANDSCAPE <ul><li>Less than a fifth of GDP </li></ul><ul><li>But agribusiness chain, over 40% of GDP </li></u...
WHY IS AGRICULTURE STRATEGIC FOR SOCIAL STABILITY AND BUSINESS? <ul><li>About 70% of the all poor are in the rural areas <...
THE AGRICULTURE FISHERY CONSTITUENCY <ul><li>75% farmers and 25% fishers </li></ul><ul><li>Top three stakeholders: </li></...
THE AGRICULTURE FISHERY CONSTITUENCY Source: NSO 3.5 226,195 Aquaculture 25.1 1,614,368 TOTAL FISHERY 21.3 1,371,676 Small...
<ul><li>THE SUPPLY CHAIN </li></ul>SOURCE:  New Industrial Development Program (NIDP) – MADE IN AUSTRALIA, Number 1, Serie...
COMPETITIVENESS <ul><li>Ability to compete in the export market in terms of  cost ,  quality ,  reliability ,  innovation ...
RICE
BENCHMARKING RICE, 2010 Phil has no competitive advantage * Figure in parenthesis are imports Source:  FAO Data 2009l  USD...
PALAY CHAIN GAPS Low mill recovery (ave: 60%); old mills Cost-effective, farm-based dryers Water management Farm mechaniza...
CORN
BENCHMARKING CORN, 2009 Trailing badly… Source: FAO  *2008 670 12 4.4 4.0 Vietnam 4,231 252 163.1 5.4 China 673 nil 107 ni...
CORN CHAIN GAPS Others Infra Inputs/Production/PH Cost effective dryers Yield Mechanization Quality seed  adoption  Fertil...
COCONUT
OIL PALM:  OLD AND NEW PLANTINGS
BENCHMARKING COCONUT AND OIL PALM   Phil lags behind… CNO = crude coconut oil; CPO = crude palm oil Source:  FAO 2008  ** ...
COCONUT CHAIN GAPS Others Infra Inputs, Production, PH Low yield Limited replanting Fertilization,  seed nut supply MARKET...
BANANA flbg.org
BENCHMARKING BANANA, 2009 Phil stands tall among peers! (e) Author’s estimate Source: FAO  Author’s estimate for Phl * exp...
CAVENDISH BANANA (Globally Competitive) World class management Tissue-cultured clones Input, Prod, PH Built to specs Drip ...
RUBBER treepicturesonline.com
BENCHMARKING RUBBER Trailing…. e = Author’s estimate Notes: Concentrated latex export converted to drc at 60% recovery ** ...
RUBBER CHAIN GAPS Low capacity utilization Low quality products Low yield  Limited replanting RRIM 600 (Good clone but “ge...
CROP HARVEST CYCLE *Plant crop  ** Ratoon Every 10-14 days 3 years Oil palm 18 months** 18 months * Pineapple 5-6 years 24...
CROP HARVEST CYCLE 2 to 3 days 70 day <ul><li>Okra </li></ul>65-70 days 90 days? 75 days 48 days 75 days FROM PLANTING TO ...
LIVESTOCK AND POULTRY HARVEST CYCLE Almost every day ~20 weeks Chicken eggs 120 days 120 days Hog fattening 32-35 days 32-...
FISHERY HARVEST CYCLE 60 days Seaweeds 4 months Bangus cage culture 4 months Tilapia cage culture PERIOD TO HARVEST  PRODUCT
MICROFINANCE <ul><li>Microfinance  - financial services for poor and low-income clients.  </li></ul><ul><li>In practice:  ...
Difference of MICROFINANCE with MICROCREDIT <ul><li>Microcredit  refers to very small loans for unsalaried borrowers with ...
MICROFINANCE CLIENTS <ul><li>usually  self-employed, household-based entrepreneurs.  Their diverse  microenterprises  incl...
CHALLENGES  OF SMALL FARM CREDIT <ul><li>High transaction costs for  both borrowers and lender </li></ul><ul><li>High risk...
AGRICULTURE  CREDIT  AND MICROCREDIT  <ul><li>Mismatch   between harvest cycle and traditional micro credit tenor – short ...
CHALLENGES  FOR SMALL ORGS High rate of  non-performing loans? Risks Leader uses his own resources, or…. Leadership Diffic...
<ul><li>THE SUPPLY CHAIN </li></ul>SOURCE:  New Industrial Development Program (NIDP) – MADE IN AUSTRALIA, Number 1, Serie...
IS THERE A WINDOW  IN THE CHAIN? <ul><li>Short cycle activities after harvest: </li></ul><ul><li>Trading farm products  </...
IS THERE A WINDOW  IN THE CHAIN? <ul><li>Short cycle post harvest activities: </li></ul><ul><li>Open sea fishing (short cy...
FOOD FOR THOUGHT <ul><li>Innovation  has become a  primary force  in  determining industry growth and performance. </li></...
REFERENCES <ul><li>CGAP Publications (http://www.cgap.org) </li></ul><ul><li>FARM Foundation (2007). Conference on Microfi...
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Supply Chain and Microfinance by Dr. Rolando Dy

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Transcript of "Supply Chain and Microfinance by Dr. Rolando Dy"

  1. 1. Mindanao Microfinance Council 4th Microfinance Best Practices Forum AGRI-BUSINESS VALUE CHAINS AND MICROFINANCE CHALLENGES AND OPPORTUNITIES Rolando T. Dy, Ph. D. Executive Director, Center for Food and Agri Business ( Former Dean, School of Management) Fellow, Filipino Integritas Development Institute UNIVERSITY OF ASIA AND THE PACIFIC June 9, 2011 Cebu City
  2. 2. OUTLINE <ul><li>The agriculture constituency </li></ul><ul><li>Supply chain examples </li></ul><ul><li>Benchmarking key products </li></ul><ul><li>Current supply chain gaps </li></ul><ul><li>Agri-fish harvest cycles </li></ul><ul><li>Entry points for microfinance </li></ul>
  3. 3. AGRI-FISHERY LANDSCAPE <ul><li>Less than a fifth of GDP </li></ul><ul><li>But agribusiness chain, over 40% of GDP </li></ul><ul><li>12 million workers, more than a third of labor force </li></ul><ul><li>Main occupation in rural areas </li></ul><ul><li>Rural infra constraints </li></ul>
  4. 4. WHY IS AGRICULTURE STRATEGIC FOR SOCIAL STABILITY AND BUSINESS? <ul><li>About 70% of the all poor are in the rural areas </li></ul><ul><li>Half of these rural folks (about 17 million) are poor </li></ul><ul><li>Rural poor are heavily dependent on agri and fishery </li></ul><ul><li>Better Agri-fishery, Better Business </li></ul>
  5. 5. THE AGRICULTURE FISHERY CONSTITUENCY <ul><li>75% farmers and 25% fishers </li></ul><ul><li>Top three stakeholders: </li></ul><ul><li>1. Coconut 21.7% </li></ul><ul><li>2. Small fishers 21.3% </li></ul><ul><li>3. Rice 21.0% </li></ul><ul><li>Ignored in the numbers are the faceless, landless farmworkers (Over two million?) </li></ul>
  6. 6. THE AGRICULTURE FISHERY CONSTITUENCY Source: NSO 3.5 226,195 Aquaculture 25.1 1,614,368 TOTAL FISHERY 21.3 1,371,676 Small Fishers 0.3 16,497 Commercial fishers 20.6 2,160,875 1,323,994 Others 74.9 9,670,793 4,822,739 TOTAL AGRI 1.0 362,877 67,490 Sugarcane 10.6 1,364.438 679,183 Corn 21.0 2,467,164 1,351,678 Rice 21.7 3,325,449 1,400,394 Coconut Share to Total Farmers and Fishers, % Physical Area (ha) No of Farmers and Fishers Commodity
  7. 7. <ul><li>THE SUPPLY CHAIN </li></ul>SOURCE: New Industrial Development Program (NIDP) – MADE IN AUSTRALIA, Number 1, Series 3, AFFA (2003). PROCESSORS INPUT SUPPLIERS GROWERS/ PRODUCERS CONSUMERS DISTRIBUTORS RETAILERS Seed supplier Breeder Researcher Propagator, etc . Abbatoir Cannery Mill, etc. Farmer Grower Grazier Pastoralist Wholesaler Importer Exporter Transport company, etc . You and me Restaurant Supermarket Hotel, etc.
  8. 8. COMPETITIVENESS <ul><li>Ability to compete in the export market in terms of cost , quality , reliability , innovation and customer service </li></ul><ul><li>Ability to compete with imported products in the domestic market. </li></ul>
  9. 9. RICE
  10. 10. BENCHMARKING RICE, 2010 Phil has no competitive advantage * Figure in parenthesis are imports Source: FAO Data 2009l USDA Data 2010/11 Estimates Mekong 6.0 25.0 7.44 5.23 Vietnam 10.0 1.2 (1.0) (1.8) (1.9) Export* M tons 2010/11 Chao Phraya 20.4 10.96 2.87 Thailand 5.02 1.6 37.5 10.4 Milled rice production M tons 2010/11 Mekong 2.68 2.84 Cambodia Various 0.67 3.73 Malaysia Various 12.88 5.00 Indonesia Various 4.53 3.59 Philippines Key Water Source Harvest area (M ha)* Ave yield palay ton/ha* Country
  11. 11. PALAY CHAIN GAPS Low mill recovery (ave: 60%); old mills Cost-effective, farm-based dryers Water management Farm mechanization Quality seeds use Fertilizer use Inputs, Production, PH FMR quality Irrigation O&M FMR quality Irrigation maintenance Infra Others POST HARVEST LOGISTICS LOGISTICS Preference for well-milled rice vs. brown rice leads to low recovery (10%) and poor nutrition MARKET MILLING Extension services PRODUCTION Credit INPUT GAPS CHAIN
  12. 12. CORN
  13. 13. BENCHMARKING CORN, 2009 Trailing badly… Source: FAO *2008 670 12 4.4 4.0 Vietnam 4,231 252 163.1 5.4 China 673 nil 107 nil Export* (‘000 tons) 2,100 nil 5.6 Malaysia 434 286 100 Import* (‘000 tons) 4.6 4.2 Thailand 17.6 7.0 Production ( M tons) 4.2 Indonesia 2.6 Philippines Ave Yield (ton/ha) Country
  14. 14. CORN CHAIN GAPS Others Infra Inputs/Production/PH Cost effective dryers Yield Mechanization Quality seed adoption Fertilizer use FMR quality FMR quality POST HARVEST MARKET LOGISTICS High share of low yield white corn, extension PRODUCTION LOGISTICS Credit INPUT GAPS CHAIN
  15. 15. COCONUT
  16. 16. OIL PALM: OLD AND NEW PLANTINGS
  17. 17. BENCHMARKING COCONUT AND OIL PALM Phil lags behind… CNO = crude coconut oil; CPO = crude palm oil Source: FAO 2008 ** at 20% recovery from Fruit bunches nil nil 10.9 1.9 5.6 India nil 0.4 1.9 0.5 20.0 Thailand Nil 0.65 19.5 3.0 6.6 Indonesia nil nil 2.2 0.4 5.6 Sri Lanka (0.3) nil 0.06 0.022 13.0 Philippines Nil 14.3 17.0 5.0 17.0 Indonesia (0.7) 14.1 16.6 3.9 21.2 Malaysia Coconut: 0.84 Export (M tons)* CNO/CPO Oil Palm: Nil Import (M tons)* CNO/CPO 15.3 Production (M tons)** CNO/CPO 3.4 4.5 Philippines Harvested Area (M ha) Average Yield (ton/ha) Country
  18. 18. COCONUT CHAIN GAPS Others Infra Inputs, Production, PH Low yield Limited replanting Fertilization, seed nut supply MARKET MILLING LOGISTICS PRODUCTION LOGISTICS INPUT CHAIN FMR quality FMR quality Losing market share 60% capacity utilization due to low production Unorganized producers Senile trees Lack of strategic focus (coco levy recovery syndrome) Poor genetics in 95% of 300 million trees GAP
  19. 19. BANANA flbg.org
  20. 20. BENCHMARKING BANANA, 2009 Phil stands tall among peers! (e) Author’s estimate Source: FAO Author’s estimate for Phl * export in 2008 1,696 2,020 74 27 Colombia 2,052 5,271 1,907 Export (‘000 tons) * 2,127 7,637 2,600 Production (‘000 tons) 43 50 Costa Rica 216 35 Ecuador 65 40 Philippines (e) Harvested Area (‘000 ha) Ave. Yield (ton/ha) Country
  21. 21. CAVENDISH BANANA (Globally Competitive) World class management Tissue-cultured clones Input, Prod, PH Built to specs Drip and micro-sprinkler irrigation Infra Others Refrigerated ships, or containers MARKET Cold chain; pier-side cold storage LOGISTICS PACKING HOUSE Cableways LOGISTICS PRODUCTION LOGISTICS INPUT STRENGTHS (NOT GAPS) CHAIN
  22. 22. RUBBER treepicturesonline.com
  23. 23. BENCHMARKING RUBBER Trailing…. e = Author’s estimate Notes: Concentrated latex export converted to drc at 60% recovery ** Large areas under senile trees for future conversion into oil palm. Source: FAO * 2008 195 660 632 1,044 Vietnam* 898 2,292 2,498 34 Export 2008 drc ‘ 000 tons 857 2,922 3,090 70 Production (000 tons) 1,237 693 Malaysia** 2,898 1,008 Indonesia* 1,856 1,665 Thailand 100 700 Philippines (e) Harvested Area (‘000 ha) Average Yield (kg drc/ha) Country
  24. 24. RUBBER CHAIN GAPS Low capacity utilization Low quality products Low yield Limited replanting RRIM 600 (Good clone but “getting old”) Input, Prod,PH FMR quality Infra Others Large global market, low export MARKET LOGISTICS PROCESSING LOGISTICS Lack of long-term financing PRODUCTION LOGISTICS Supply of root stocks INPUT GAPS CHAIN
  25. 25. CROP HARVEST CYCLE *Plant crop ** Ratoon Every 10-14 days 3 years Oil palm 18 months** 18 months * Pineapple 5-6 years 24 months 12 months 6 years –tall 3 years - dwarf 4 months 4 months FROM PLANTING TO FIRST HARVEST 12 months Coffee Every two days Rubber 12 months Sugarcane 2 to 3 months Coconut - Corn - Rice REGULAR HARVEST PRODUCT
  26. 26. CROP HARVEST CYCLE 2 to 3 days 70 day <ul><li>Okra </li></ul>65-70 days 90 days? 75 days 48 days 75 days FROM PLANTING TO FIRST HARVEST CHOPSUEY TYPE PINAKBET TYPE 45 days Tomato - <ul><li>Cabbage </li></ul>- <ul><li>Carrots </li></ul>- <ul><li>Ampalaya </li></ul>- <ul><li>Eggplant </li></ul>HARVEST PERIOD after PRODUCT
  27. 27. LIVESTOCK AND POULTRY HARVEST CYCLE Almost every day ~20 weeks Chicken eggs 120 days 120 days Hog fattening 32-35 days 32-35 days Chicken broiler REGULAR HARVEST DAYS TO FIRST HARVEST PRODUCT
  28. 28. FISHERY HARVEST CYCLE 60 days Seaweeds 4 months Bangus cage culture 4 months Tilapia cage culture PERIOD TO HARVEST PRODUCT
  29. 29. MICROFINANCE <ul><li>Microfinance - financial services for poor and low-income clients. </li></ul><ul><li>In practice: loans and other services from providers that identify themselves as microfinance institutions </li></ul><ul><li>- http://www.microfinancegateway.org/p/site/m/template.rc/1.26.9183/ </li></ul>
  30. 30. Difference of MICROFINANCE with MICROCREDIT <ul><li>Microcredit refers to very small loans for unsalaried borrowers with little or no collateral, provided by legally registered institutions. </li></ul><ul><li>- http://www.microfinancegateway.org/p/site/m/template.rc/1.26.9183/ </li></ul>
  31. 31. MICROFINANCE CLIENTS <ul><li>usually self-employed, household-based entrepreneurs. Their diverse microenterprises include small retail shops, street vending, artisanal manufacture, and service provision. </li></ul><ul><li>In rural areas, micro-entrepreneurs often have small income-generating activities such as food processing and trade; some but far from all are farmers. </li></ul><ul><li>- http://www.microfinancegateway.org/p/site/m/template.rc/1.26.9183 / </li></ul>
  32. 32. CHALLENGES OF SMALL FARM CREDIT <ul><li>High transaction costs for both borrowers and lender </li></ul><ul><li>High risks faced by both borrowers and lender </li></ul><ul><li>Lack of reliable financial information </li></ul><ul><li>About rural households </li></ul><ul><li>Financial products ill suited t the financial flows of borrowers and lenders </li></ul>- Jansen, Anicca (USAID)
  33. 33. AGRICULTURE CREDIT AND MICROCREDIT <ul><li>Mismatch between harvest cycle and traditional micro credit tenor – short collection period (weekly or daily) </li></ul><ul><li>Risks are greater in agriculture </li></ul><ul><li>Loans are bigger </li></ul><ul><li>Farmers, already poor, are indebted </li></ul>
  34. 34. CHALLENGES FOR SMALL ORGS High rate of non-performing loans? Risks Leader uses his own resources, or…. Leadership Difficulty in collecting dues Organization Small, fragmented, dispersed farms Scale Why? Challenge
  35. 35. <ul><li>THE SUPPLY CHAIN </li></ul>SOURCE: New Industrial Development Program (NIDP) – MADE IN AUSTRALIA, Number 1, Series 3, AFFA (2003). PROCESSORS INPUT SUPPLIERS GROWERS/ PRODUCERS CONSUMERS DISTRIBUTORS RETAILERS Seed supplier Breeder Researcher Propagator, etc . Abbatoir Cannery Mill, etc. Farmer Grower Grazier Pastoralist Wholesaler Importer Exporter Transport company, etc . You and me Restaurant Supermarket Hotel, etc.
  36. 36. IS THERE A WINDOW IN THE CHAIN? <ul><li>Short cycle activities after harvest: </li></ul><ul><li>Trading farm products </li></ul><ul><li>Threshing services (payment in kind) </li></ul><ul><li>Tractor plowing for next crop (funded from proceeds of past last harvest) </li></ul>
  37. 37. IS THERE A WINDOW IN THE CHAIN? <ul><li>Short cycle post harvest activities: </li></ul><ul><li>Open sea fishing (short cycle) </li></ul><ul><li>Food processing </li></ul><ul><li>(e.g. native snacks, chichacorn, VCO, etc.) </li></ul><ul><li>Fertilizer from farm wastes? </li></ul><ul><li>By-products processing? </li></ul><ul><li>(coconut husk to coir?) </li></ul>
  38. 38. FOOD FOR THOUGHT <ul><li>Innovation has become a primary force in determining industry growth and performance. </li></ul><ul><li>Unfortunately, a wide gap exists between aspirations to innovate, and the ability to execute. </li></ul>- Paraphrasing The McKinsey Quarterly 2007
  39. 39. REFERENCES <ul><li>CGAP Publications (http://www.cgap.org) </li></ul><ul><li>FARM Foundation (2007). Conference on Microfinance for Agriculture. (http://www.fondation-farm.org/article.php3?id_article=230&lang=en) </li></ul><ul><li>Jansen, Anicca (2006). Value Chain Finance: Financing to and within Value Chains (http://www.cgap.org/gm/document-1.9.2312/africaday_Theme6.pdf) </li></ul><ul><li>Lapenu, Cecile (coordinator) (2007). Recent Advances in Agriculture Finance: Supply and Strategies. A Review of Literature and Experience. French Microfinance Network </li></ul><ul><li>Pagura, Maria and Ake Olofsson (2007). Microfinance and Agriculture Development. FAO </li></ul><ul><li>Pearce, Douglas (c.2006). Agricultural Microfinance: What is Missing (http://www.cgap.org/gm/document-1.9.2311/africaday_Theme5.pdf) </li></ul><ul><li>www.jjcicsi.org Making Microfinance work for Agriculture. </li></ul>

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