Global Young Leaders ProgrammeFebruary 20111Five-year development plan forIntegrated Farmers’ Association of Heshuiping Re...
TABLE OF CONTENTS2Contents	 Page Number	1. Executive Summary 3	2. Background 10	3. Objectives 21	4. Scope & Approach 23	5....
EXECUTIVESUMMARY3
Executive Summary – Background•  The Integrated Farmers’ Association of Heshuiping Region (IFAH) wasfounded in 2008, cover...
Executive Summary – Business Plan•  A 5-year plan is proposed, with recommendations made on the governanceand financial mo...
Executive Summary – OperationalRecommendations•  Finance–  Introduce the Finance & Investment, and Credit Functions as IFA...
Executive Summary – OperationalRecommendations•  Governance–  Review IFAH team composition; enhance management bandwidth,g...
•  The 5 year plan aims to:–  Enhance the average household income from farming in the Heshuipingregion (year 1 and 2) and...
BACKGROUND9
China – A society built upon agriculture•  For over 8000 years, Chinas smallholder farmingagricultural base has played a k...
Globalization and the growing rural-urbandivideChina’s rapid economic development andindustrialization has created a growi...
Globalisation and the growing rural-urbandivide•  To find additional income, there has been an exodus of 200-300 million r...
A new way forward for rural China•  Currently, smallholder farms have little capacity to benefit from theopportunities pre...
A new way forward for rural China•  Current efforts in China:–  Policy support is close to 1 trillion per yearof funding c...
15The Integrated Farmer’s Association of Heshuiping (IFAH)was formed in ApriI 2008 as a strategic partnership between:1.  ...
16a)  Distributionb)  productionc)  Supplya.  Educationb.  CulturalactivitiesFinancialservicesSocialservicesThe IFA Model ...
17IFAH Membership Overview• Currently, IFAH covers six villages inthe Heshuiping region of Sanli Township,which is part of...
Strengths•  Strong support from Govt: Sanli mayorkeen on agriculture development•  Existing association and buy-in of farm...
Problem Statement19Key issues identified:•  Prevalent poverty in the farming community in Heshuiping region,current estima...
OBJECTIVES20
Objectives21•  To alleviate poverty among the rural farmers in the Heshuiping area•  To create a framework and mechanism f...
SCOPE &APPROACH22
Scope•  One farmers’ association for one township•  Focus on Sanli Township in Jianshi County•  Covers estimated 37 villag...
Key Considerations for Business PlanRealisation24•  The Business Plan is a key tool for IFAH to address immediate risks an...
Approach and Methodology•  GIFT scoping & preliminary due diligence for GlobalYoung Leadership Program (YLP)•  Global YLP ...
Workshops onglobal issuesBriefings onbackgroundField visitsDebriefing &DiscussionFinal clarification withrelevant partiesO...
BUSINESSMODELIntegrated Social EnterprisePerformance IndicatorsBenefits27
A model of integrated and profitablesocial enterprise1)  Self-sufficient revenuemodel:–  New credit financingbusiness capi...
Fully Integrated Business Model AcrossRevenue and Cost DriversIntegrated FarmersAssociation (IFA)IFA CreditDepartmentFundi...
IFAH’s Main Business RevenueProjections•  Revenue from projects over 5 years:30$0$2,000,000$4,000,000$6,000,000$8,000,000$...
31• Annual Net IncomeGrowth in year 4-5: 26%• Breakeven Point: 2 year• Achieving more thanRMB 4 million in year 5IFAH’S NE...
325-Year P&L Projections of IFAHConsolidated 	  	   Yr	  1	   Yr	  2	   Yr	  3	   Yr	  4	   Yr	  5	  Revenue(membership fe...
33BenefitsFinancial:•  Increase average household income by 25%•  Increase revenue and productivity through betterutilizat...
34BenefitsSocial:•  Increase opportunities for enhance livingstandards, using local resources effectively•  Reduce migrati...
GOVERNANCE35
FrameworkSustainable RuralFarmer Livelihood& Social ImpactBoard &OrganizationalStructureRiskManagementSocialResponsibility...
.Execu8ve	  	  Director	  Product	  Group	  1	  	  Product	  Group	  2	  Product	  Group	  3	  General	  Assembly	  Execu8...
IFA Group Communication ModelIFAVillage Groups- Not all are IFA members- Not all belong to anActivity Based Group- Led by ...
Activity-Based Group (ABG)Who:Self-governance grassroots entity formed by farmerswho share the same agriculture product/ac...
Roles and Responsibility in IFAGeneral Assembly- Elected by village representatives- Elect board of directors- Review and ...
IFA Election Process41
42EXECUTIVE	  DIRECTOR	  Human	  Resources	  &	  Admin	  Finance	  &	  Investment	  Community	  Outreach	  &	  Environment...
KEY AREA/RESPONSIBILITY CENTER GA EBExecutiveDirector•  Project launch - Approve Review•  Annual Budget Approve Review Imp...
KEY AREA / RESPONSIBILITY CENTER GA EB EDInvestment/procurement *> 50,000 (amounts above)21,000 - 50,000 (amounts in range...
Process ScenarioDecision Making & ApprovalFor a typical procurementor investment decision tobe made, a scenario-based appr...
IFA Integration/Partnership withProfessional Cooperatives•  Common assumptions–  Smallholder farmers can see and benefit f...
IFA Integration with ProfessionalCooperative as a ShareholderExecutive Directorrecognizes potentialpartnership opportunity...
Rural Investment by Government:recommended improvement48Central GovernmentProvincial GovernmentPrefecture GovernmentCounty...
FINANCIALSERVICES49
FINANCIAL SERVICES - OVERVIEW•  Focus on 5 Key Financial Services toenable a sustainable and profitableBusiness Model•  Ex...
51FINANCIAL SERVICES – CAPITAL MUTUALASSISTANCE SCHEME•  Short Term (1-2 years) FinancingScheme to fund Start-Up Capital• ...
•  Micro-Finance Loan amount RMB5,000 to RMB 50,000 (withoutcollateral)•  Loans > RMB 50,000 will be securedthrough the Ru...
53FINANCIAL SERVICES – SAVINGS SCHEME•  Key integrator of Product Co-Operatives into IFA Business Model through meansof in...
54FINANCIAL SERVICES – SAVINGS SCHEMEMigrant WorkersMigrant WorkersIFA BankingAccountFUNDSFarmersFarmersGroup HeadsDeposit...
55FINANCIAL SERVICES – CENTRAL CLAIMSPROCESSING•  Tobacco industry operates as a singlemonopoly in China through theChines...
56FINANCIAL SERVICES – FINANCIALEDUCATION & AWARENESS•  Key Service Component whichunderpins the Financial ServicesModel a...
57FINANCIAL SERVICES – SUPPORTINGPROCESSFinancial Accounting•  Day-to-Day Financial Operations•  Organize Incoming Investm...
FINANCIAL SERVICES – SUPPORTINGPROCESSES•  Organization Structure provides for clearsegregation of duties to mitigate risk...
PRODUCTIONANDMARKETING59
Production and Marketing Strategy•  Heshuiping is a unique place due to thediverse products it can produce•  In considerat...
Key FocusImprove farmer’s livelihood and IFAH’s profitability through:• Investment in Fragrant Rice production and product...
Fragrant Rice: The Potential•  Current fragrant rice production is constrained by lack ofprocessing and warehousing facili...
Fragrant Rice: Enablement of Supply Chain•  Capital investment of RMB 900K for processing and storageinvestment–  Funding:...
Pig Farming: The Supply ChainIFAH owns a pig breeding farm. Formation of asupply chain would help the smallholder farmers ...
Pig Farming: The Untapped Market•  IFA to provide the new breed of pigs:–  Improve the pig’s quality to increase the lean ...
Branding Strategy for IFAS Products•  Rebranding IFA to Township levelinline with expansion plan•  Change the name from IF...
Branding Strategy for IFAS Products•  Year 3 – 4: Brand build-up period–  Building strong awareness for IFAS–  Logo will b...
Sales & Marketing: Target Markets•  IFAH Stores (supply stores and grocery stores)•  Local (supermarkets, hotel / restaura...
Prioritization of Projects and Allocationof Resources: Long Term Success69•  Focus on immediate value and business necessi...
The Production of Organic Fertiliser as a RevenueSource for IFAH: Further Review Required70•  IFAH is in the process of se...
The Production of Organic Fertiliser as a RevenueSource for IFAH: Market Development in the Future71•  The organic fertili...
The Production of Organic Fertiliser as aRevenue Source for IFAH: Next Steps72•  The project needs professional consultati...
COMMUNITYSERVICES73TrainingInfrastructureHealthcareCultural Services
Community Services:Aim•  Increase yield of production & average household income•  Fill crucial knowledge gap on product p...
Community Services:Actions•  Training on agricultural know-how in each village at least twice a year•  Training for young ...
Community Services:Resources Needed•  1 coordinator for agriculture extension and administration–  Budgeted for in overall...
IMPLEMENTATION77
Commence deposit taking & mature to final financing modelImplementation PlanSetup of creditmutual assistanceschemeYear 1 2...
Five-Year Implementation Timeline	Year 1: 1st Quarter(Month 1-3)	2nd Quarter(Month 4-6)	3rd Quarter(Month 7-9)	4th Quarter...
Five-Year Implementation Timeline	Year 2	Year 3	Year 4	Year 5§  Obtain license for and implement savingsscheme§  Establi...
RISKASSESSMENT& MITIGATION81
Risk Assessment Matrix82Lack of Alignment of Goals ofExecutive Board MembersNon-Transparent IFA AdministrationIFA Inabilit...
KEYRECOMMENDATIONS83
84Key Recommendations1) Introduce the Finance & Investment, and CreditFunctions as IFAH’s sole vehicle for provision offin...
Key Success Factor – GovernmentSupport•  Government may consider working with IFA as its strategicoutsourcing partner to e...
APPENDIX86A.  IFAH Stakeholder ChartB.  Key AssumptionsC.  GovernanceD.  FinanceE.  Production & MarketingF.  Community Se...
IFAH STAKEHOLDER CHARTAppendix A87
88Stakeholder Map CurrentNew	Key:1) Board/General Assembly2) Pilot Programme Office (County)3) Consulting Centre for Farme...
KEY ASSUMPTIONSAppendix B89
Key Assumptions90•  The scale to achieved within the 5 Year Timeframe is SanliTownship (37 Villages)•  The 5 Year Plan wil...
Key Assumptions… Cont’d91Assumptions over 5 year timeframe MeasurementsLand Measurement 0.093 Hectares is equivalent to 1m...
GOVERNANCEAppendix C92
General Assembly*•  Elected by village representatives•  2/3 of the members should be farmers•  Term: 4 years•  Members ar...
Executive Board*•  Number: 9 farmers•  Term: 4 years and two terms is the max.•  Requirement:•  -All agri-products and vil...
Supervisory Board*•  Number: 1 farmer & 2 independent directors•  Term: 4 years and two terms is the max.•  Requirement:• ...
Group Head*•  Profile: farmer with crop-specific technologies and in-group trust andrespect•  Responsibilities:–  training...
Executive Director•  Requirements:–  full time paid position–  either recruited openly or a government secondee (paid for ...
Compensation Guidelines•  Current average monthly per capita income in the area is RMB1500•  Migrant workers have mentione...
Funding Sources of the County GovernmentArea Funding ProjectDevelopment and investmentof rural China40 million RMB • Commu...
FINANCIAL SERVICESAppendix D100
Finance Services•  Excel reference 1: credit department modelcredit department financial model_zl_222.xlsx•  Excel sheet 2...
Finance and Credit Department -Savings Scheme Awareness Plan•  Objective: to raise awareness amongst farmers and migrantwo...
COMMUNITY SERVICESAppendix E103
1) Training -- Agricultural Extension•  Contents for knowledge enhancement:–  Better selection & use of fertilisers, pesti...
•  How to achieve knowledge enhancement:(a) Conduct “Train-the-trainer” programs for each village:–  Agricultural speciali...
•  Resources:–  1 coordinator for agricultural extension and administration–  3 contract trainers as specialists from CCFA...
•  Goal:–  Expose school children to farming as a profession in a fun way startingfrom youth•  About:–  Farming as an impo...
•  Reference:–  Taiwan IFA model to carry outsimilar programs in schools•  Resources:–  1-2 advisors with honorariumfrom C...
3) Infrastructure:a)  Surveillance and healthcare servicesProblems: Current personal and public healthawareness is very li...
110Member farmers &their familiesIFAHealth awarenessworkshops & home visitsActions:• IFA takes the initiative to organize ...
3) Infrastructureb)  Collection of non-organic waste (plastic, cans, glass)–  How:•  Provision of waste bins for non-organ...
4) Cultural Activities•  Goals:–  Preserve culture of each village, Heshuiping region & Sanli township–  Provide a platfor...
RISK ASSESSMENT ANDMITIGATIONAppendix F113
Risk Assessment & Mitigation114No. Risk FunctionalAreaLikelihood Impact Risk Mitigation1. Lack of alignment of goals ofIFA...
Risk Assessment & Mitigation115No. Risk FunctionalAreaLikelihood Impact Potential Risk Mitigation4. Poor quality of traini...
Risk Assessment & Mitigation116No. Risk FunctionalAreaLikelihood Impact Potential Risk Mitigation7. High rate of loan defa...
Risk Assessment & Mitigation117No. Risk FunctionalAreaLikelihood Impact Potential Risk Mitigation10. Disease and poor sani...
118AcknowledgementsThis Business Plan has been put together by 21 members of the GlobalInstitute For Tomorrow (GIFT) Young...
119
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Developing a social business model in rural Hubei

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n February 2011, as part of the 18th Global Young Leaders Programme (YLP) a team of 21 international executives spent 9 days in Jianshi county, Hubei province, working to provide the county government with strategic recommendations for the five-year development plan of an integrated farmers association. Coming from Japan, China, Hong Kong, Singapore, India, Malaysia, Ghana and Colombia the group worked in partnership with the Consulting Centre for Farmers’ Associations (CCFA) and the Integrated Farmers’ Association of Heshuiping Region (IFAH). The latter association was established under the Integrated Rural Development and Governance Pilot Programme Office of the county government.

After three decades of unprecedented economic expansion, this next phase of China’s development is as much a concern for the rest of the world as it is for the country itself. The challenge for China is to promote sustained economic development among its rural population and accelerate the reduction of poverty to incentivise productive workers to remain or return to a newly vibrant countryside.

The business model articulated by the group and the associated rural governance principles contain elements that can be applied in other parts of China. The hope is that the pilot programme in Heshuiping, which was written initially to cover the production of fragrant rice and pig rearing, will be able to guide farmers into other areas of agricultural production, but more importantly give them the confidence to leverage the rich diversity of resources in the Jianshi area.

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Developing a social business model in rural Hubei

  1. 1. Global Young Leaders ProgrammeFebruary 20111Five-year development plan forIntegrated Farmers’ Association of Heshuiping Region,Jianshi County, Hubei Province, China
  2. 2. TABLE OF CONTENTS2Contents Page Number 1. Executive Summary 3 2. Background 10 3. Objectives 21 4. Scope & Approach 23 5. Business Model 28 6. Financial Services 36 7. Governance 46 8. Production & Marketing 60 9. Community Services 72 10. Implementation Plan 76 11. Risk Assessment and Mitigation 80 12. Recommendations 82 13. Appendices 85
  3. 3. EXECUTIVESUMMARY3
  4. 4. Executive Summary – Background•  The Integrated Farmers’ Association of Heshuiping Region (IFAH) wasfounded in 2008, covering six villages, namely Nongke, Fengxiangshu,Yangliu, heping, Chunfang and Cacapo, in Sanli Township, JianshiCounty.•  IFAH aims to protect the interests of farmers, enhance the knowledgeand skills of farmers, advance agriculture modernization, increasefarming revenues and improve the livelihood of farmers, develop ruraleconomy and social business, advance rural community developmentand bring forth a new rural governance structure.•  IFAH’s mission is aligned both to the Chinese Government’s efforts, andthe Sanli Township’s 5 year development plan to enhance livingstandards and income of the community•  YLP participants were tasked to create a business model that includesrural governance to aid sustainable development in Sanli township.
  5. 5. Executive Summary – Business Plan•  A 5-year plan is proposed, with recommendations made on the governanceand financial model for IFAH, changes to crop aggregation and communityoutreach programmes•  A starting capital of RMB 1,000,000 is needed in the first year for the creditdepartment, and in five years, the cumulative capital will be RMB$169,000,000•  Breakeven is expected in the second year•  Gross Profit of RMB 4,300,000 is expected in the third year eventuallyextrapolating to RMB 7,100,000 in the fifth year•  Average household income from farming is expected to increase by 25%within 2 years of implementation•  Overall migration from rural to urban areas is expected to decline, based onasset building and enhanced farming incomeDemonstrating business viability for future extensionof the proposed IFA model
  6. 6. Executive Summary – OperationalRecommendations•  Finance–  Introduce the Finance & Investment, and Credit Functions as IFAH’ssole vehicle for provision of financial services–  Utilize money remitted by migrant workers to enhance IFAH’s capitalbase•  Production and Supply Chain–  Review supply chain for pig farming, so as to aggregate and increaserevenue for farmers and IFAH–  Review crop/land allocation and expand fragrant rice productionMulti pronged approach to enhance income tofarmers
  7. 7. Executive Summary – OperationalRecommendations•  Governance–  Review IFAH team composition; enhance management bandwidth,governance, risk management and transparency–  Review member leadership structure, from geography based leadershipto functional/crop based groups–  Enhance internal checks to ensure benefits to farmers•  Community Services–  Set up mechanism to train farmers on more effective farming, with a viewto enhancing the overall average household income–  Enhance healthcare awareness and cultural & educational activities–  Provide framework for creating positive environmental impact, e.g. wastecollectionEnhance IFA governance and community services
  8. 8. •  The 5 year plan aims to:–  Enhance the average household income from farming in the Heshuipingregion (year 1 and 2) and eventually to the Sanli township (years 3onwards) by 25% within 2 years of implementation–  Empower smallholder farmers by building confidence to join theprofessional groups and support IFA–  Demonstrate that the model can be replicated across townships andeventually at the county level–  Make rural vocation/farming attractive thus reducing the migration ofworkers to urban areas–  Improve environmental awareness, and have a positive impact on thelocal environmentExecutive Summary
  9. 9. BACKGROUND9
  10. 10. China – A society built upon agriculture•  For over 8000 years, Chinas smallholder farmingagricultural base has played a key role in supporting thegrowth of what is now the largest population of the world•  Since 1978 and its open market reforms, China hasbecome the world’s largest producer and consumer ofagricultural products; Currently, it produces 30% of theworld’s corn, 25% of the world’s cotton, 37% of the world’sfruit and vegetables and half of the world’s pork•  Structural changes to the economy - despite the healthyexpansion of the agricultural sector, the even faster growthof the industrial and service sector during the reform era hasbegun to transform the rural economy from agriculture toindustry and from rural to urban10Source: http://www.iiasa.ac.at/Research/SRD/pdf/IR-03-007.pdf 1978 –Decollectivization(free marketreforms) 1953 –CommuneSystem 7500 BC –Domestication ofrice/ rise offarmingcommunities andaccumulation ofwealth
  11. 11. Globalization and the growing rural-urbandivideChina’s rapid economic development andindustrialization has created a growing gapbetween rural and urban areas–  China’s urban population has increased from18.96 per cent in 197 to 46.60 per cent in 2009–  Per capita disposable income for urban residentswas RMB 17,175 compared to RMB 5,153 forrural residents–  Decrease of rural labor force – 80% to 50 % inless than thirty years•  The reported urban: rural income ratio is currently3.35:1 but in reality, the disparity could potentiallybe as high as 6:1 11Source: Consulting Center for Farmers’ Associations (CCFA)
  12. 12. Globalisation and the growing rural-urbandivide•  To find additional income, there has been an exodus of 200-300 million ruralmigrants into developed coastal provinces and industrial cities as migrantworkers–  The migrants are mostly male and represent over a quarter of the rural farmingpopulation; an average of 1 per household•  Rural-urban migration together with the expansion of industry has resulted inthea)  Breakdown of traditional village social structures (elderly andchildren being left behind),b)  Continual decline of economic sustenance (local farming activitiesplummet because of lack of labor, knowledge, leadership), andc)  Deterioration of the environment (urban sprawl and industrydevelopment impacts)•  Families, crops, and land are abandoned for the seemingly more viableoption of urban life12
  13. 13. A new way forward for rural China•  Currently, smallholder farms have little capacity to benefit from theopportunities presented by the growth in the agricultural sector becauseeach farmer is allocated only 1.826 mu of farmland (less than 0.1 ha percapita)•  However, if rural communities can successfully scale the collective efforts ofthese farmers, the economic potential is over 100M mu of land (1/18 ofChina’s arable land) and can provide a solution to the widening gapbetween urban and rural areas13
  14. 14. A new way forward for rural China•  Current efforts in China:–  Policy support is close to 1 trillion per yearof funding coming from central government toimprove infrastructure, living condition,production capacity, social services–  Microfinance schemes to address bottom ofthe pyramid funding for smallholder farmers–  Structural change both in the form of pilotgrassroots farming programs and research-led technological innovationYet there is still a need for a modernizationmodel that addresses rural sustainability ina holistic manner, and serves thesmallholder farmers. 14
  15. 15. 15The Integrated Farmer’s Association of Heshuiping (IFAH)was formed in ApriI 2008 as a strategic partnership between:1.  Chinese Academy of Social Sciences PolicyResearch Center, Consulting Center for Farmer’sAssociation (CCFA) led by Professor Yang Tuan2.  China Youth Development Foundation3.  Bright China Group4.  China Social Entrepreneur FoundationWith the support of the Integrated Rural Development andGovernance Pilot Programme Office, IFAH aims to be the firstmodel of rural governance that:i.  integrates the experience of farmers’ associations inEast Asia with the local best practices of asset-based developmentii.  acts as an intermediary between governmentbodies and the farming community that serves thewellbeing of smallholder farmer economies in ruralChina Integrated Farmer’s Association ofHeshuiping (IFAH)
  16. 16. 16a)  Distributionb)  productionc)  Supplya.  Educationb.  CulturalactivitiesFinancialservicesSocialservicesThe IFA Model from East Asia and its Potential for ChinaSource: http://www.iiasa.ac.at/Research/SRD/pdf/IR-03-007.pdf The Heshuiping model is based upon over 5 years of CCFA researchon existing IFA’s in Taiwan, Japan and Korea. Current East AsianIFA’s have several core functions including:•  Needs provision – Farmers centered•  Social enterprise function – Asset building, separationof authority and function, internal wealth allocation•  Collective operation – High efficiency•  Agriculture extension and educationThe success and adaptation of the IFA pilot program inChina can push forward social structural change in Chinato ensure• The sustainable development of society• Protect the ecology and environment• Protect people’s health• Curb corruption and ensure the effectiveness of policies• To promote civil society and realize democracy CoreFunctions
  17. 17. 17IFAH Membership Overview• Currently, IFAH covers six villages inthe Heshuiping region of Sanli Township,which is part of the 37 townships whichmake up Jianshi County.• It has 5000 members from 1320households which make upapproximately 60% of the regionalresident population Heshuiping region Community IFAH Members PercentageNo. of villages 6 - -No. of member groups - 64 -No. of households 2050 1320 64.3%No. of people 8180 5000 61.1%
  18. 18. Strengths•  Strong support from Govt: Sanli mayorkeen on agriculture development•  Existing association and buy-in of farmers•  Support from Consulting Centre forFarmers Association (CCFA)Weaknesses•  Limited management bandwidth•  Limited financial resources•  Farmers not aware of potentialbenefitsOpportunities•  Aggregation of products and services,e.g. pig farming produce, to improvelivelihoods•  Introduction of additional services likehealthcare, insurance•  Expanding beyond 6 villagesThreats•  Scattered progress beyond the initial6 villages covered•  Lack of demonstrable achievementof IFAH in the immediate future•  Inability to attract and retain talent•  Funding difficultySWOT Analysis
  19. 19. Problem Statement19Key issues identified:•  Prevalent poverty in the farming community in Heshuiping region,current estimates of average household farming income (excludingremittances) at around RMB 3,000 annually•  Lack of economic progress, accentuated by lack of access tocapital, resources and technology•  Limited effective governance framework, management expertise,and weak institutions•  Limited economic opportunities locally leading to an exodus ofworkers to urban areas and resultant social issues•  Poor environmental awareness, and adverse impact on localenvironment, leading to long term issuesNeed for effective rural governance to helpenhance farming income
  20. 20. OBJECTIVES20
  21. 21. Objectives21•  To alleviate poverty among the rural farmers in the Heshuiping area•  To create a framework and mechanism for effective rural governance andsustainable growth•  To create a sustainable rural credit model for smallholder farmers•  To increase local household income from farming by utilizing betterpractices and by aggregating local produce•  To stem the emigration of workers to urban areas, and to enhanceopportunities for asset based growth locally•  To empower smallholder farmers•  Create a framework that can be replicated in other townships and counties•  To enhance overall societal and environmental developmentCreating a sustainable rural economy…
  22. 22. SCOPE &APPROACH22
  23. 23. Scope•  One farmers’ association for one township•  Focus on Sanli Township in Jianshi County•  Covers estimated 37 villages1 Township,1 IFA•  Four key areas:•  1) Governance 2) Production & Marketing•  3) Finance 4) Community Services & Benefits•  Adapted from the East Asian models of Farmer’sAssociations (FA) from across Taiwan, Japan and Korea5-Year DevelopmentPlan for IFAH•  Two main stakeholders:•  The government of Jianshi County and the IntegratedRural Development and Governance pilot programmeoffice•  Consulting Center for Farmers’ Associations (CCFA)Implementation Plan forIFAH and Stakeholders23Scope of the business plan includes the following three essentialelements:
  24. 24. Key Considerations for Business PlanRealisation24•  The Business Plan is a key tool for IFAH to address immediate risks andopportunities and implement the core building blocks to achieve itsobjectives•  The Business Plan is NOT immediately intended to attract externalinvestors as IFAH do not have the requisite governance structures andresources to move to immediate implementation•  The 5-year plan is focused on incubating the notion of self reliancethrough existing available financial services by piloting businessoperations expansion to the 37 Villages within the Sanli Township•  Upon successful realisation of the benefits of the pilot, the model canpotentially be tailored to be scaled to Jianshi County as part of the nextstage of business expansion
  25. 25. Approach and Methodology•  GIFT scoping & preliminary due diligence for GlobalYoung Leadership Program (YLP)•  Global YLP participants reviewed the background and thecurrent approach of IFAH•  Interviews, meetings and field visits with key stakeholders:–  Government Officials (county and township)–  Village Heads–  Member Group Leaders–  Farmers–  IFAH Management–  CCFA Members–  Bank Representatives7-9 Dec 2010 19-21 Feb 2011 19-23 Feb 2011 •  Briefings and brainstorming•  Calibration and clarification with key stakeholders•  Project planning and mapping•  Business plan development22-23 Feb 2011 22-23 Feb 2011 23 Feb 2011 23-24 Feb 2011
  26. 26. Workshops onglobal issuesBriefings onbackgroundField visitsDebriefing &DiscussionFinal clarification withrelevant partiesOrganizing &MappingAgreeing onContentContinuinginputs fromstakeholdersBusinessplanInspiring  speakers   YLP  &  IFAH     Farmers  &  IFAH  YLP  team     Various  par8es   YLP  team    YLP  team     YLP  team    Approach and MethodologyYLP  team    
  27. 27. BUSINESSMODELIntegrated Social EnterprisePerformance IndicatorsBenefits27
  28. 28. A model of integrated and profitablesocial enterprise1)  Self-sufficient revenuemodel:–  New credit financingbusiness capitalizing onremittance and depositsfrom migrant workers–  Collection and distributionof key agricultural output–  Fragrant rice growinginvestment2) Supporting governancemodel to ensure managementtransparency and farmersinterests are protected3) Delivery of communityservice for improvement ofrural livelihoodSustainable Livelihood &Social ImpactIFAAgriculturalSupply ChainSupported by Overarching GovernanceFinanceServices
  29. 29. Fully Integrated Business Model AcrossRevenue and Cost DriversIntegrated FarmersAssociation (IFA)IFA CreditDepartmentFundingSources1) Current Sources (Shih Wah Ching Foundation andMatching Government Grant2) Consolidated Village Government Grants3) Urban Migrant Income Contribution4) Credit Lending Interest on Re-Payments5) IFAH & Co-Operative Membership Fees6) Project Income7) Other Sources (Rural Credit Union/HSBC/Rabobank etc.)ManageFund PoolProductCo-Operatives /Product GroupsIFA ManagementFUNDSDecision Making,Governance &Government SupportSocial/CommunityServicesSocial/CommunityServicesFarmersFarmersX% AllocationForLendingX% AllocationFor ProjectsInterest onRe-PaymentsX% AllocationFor Social/CommunityServicesAgricultural ExtensionProjectsAgricultural ExtensionProjectsProjectIncomeAgriculturalActivitiesAgriculturalActivities AgriculturalProductsAgriculturalProductsBuyersBuyersSell ProductsAt MarginPayments60% Re-invested into IFA Funds20% Cover off Administration Costs20% Farmer Benefit based on ShareholdingsUndertake supervisedAgriculture ProductionTechologyKnow-HowProjectsSupportAgriculturalActivitiesProductsConsolidatedat Co-Ops…enables positive return in the long term
  30. 30. IFAH’s Main Business RevenueProjections•  Revenue from projects over 5 years:30$0$2,000,000$4,000,000$6,000,000$8,000,000$10,000,000$12,000,000$14,000,000$16,000,000$18,000,000$20,000,0001 2 3 4 5 6Revenue(other)Revenue(production)Revenue(credit dept)Revenue(membership fee)
  31. 31. 31• Annual Net IncomeGrowth in year 4-5: 26%• Breakeven Point: 2 year• Achieving more thanRMB 4 million in year 5IFAH’S NET INCOME GROWTH FOR 5YEARSGrowth potential is very high (1,000,000)01,000,0002,000,0003,000,0004,000,0005,000,000Yr 1 Yr 2 Yr 3 Yr 4 Yr 5Net Income
  32. 32. 325-Year P&L Projections of IFAHConsolidated     Yr  1   Yr  2   Yr  3   Yr  4   Yr  5  Revenue(membership fee) 31,540 37,540 100,107 162,673 231,497Revenue(credit dept) 110,000 513,805 2,068,157 5,316,377 10,631,862Revenue(production) 250,000 1,475,000 5,020,000 5,900,000 6,520,000Revenue(other) 39,600 105,600 171,600 237,600Total revenues 391,540 2,065,945 7,293,864 11,550,650 17,620,958Costs (credit dept) 100,000 622,842 2,235,780 5,167,480 9,711,154Capex (production) 600,000 750,000 750,000 750,000 750,000Total costs 700,000 1,372,842 2,985,780 5,917,480 10,461,154Gross Margin (308,460) 693,104 4,308,084 5,633,170 7,159,804-79% 34% 59% 49% 41%Expensesexpense(credit dept) 91,600 117,960 272,473 352,491 460,910expense(community) 2,000 76,000 119,000 241,000 329,000expense(production) 54,000 258,000 516,000 774,000 1,032,000expense(HR) 50,000 146,000 146,000 146,000Total expenses 147,600 501,960 1,053,473 1,513,491 1,967,910Operating Profit (456,060) 191,144 3,254,610 4,119,679 5,191,894Other gains or losses 0 0 0 0 0Income Before Taxes (456,060) 191,144 3,254,610 4,119,679 5,191,894Dividend (20% of IBT) 0 38,229 650,922 823,936 1,038,379Net Income (456,060) 152,915 2,603,688 3,295,744 4,153,515
  33. 33. 33BenefitsFinancial:•  Increase average household income by 25%•  Increase revenue and productivity through betterutilization of resources and aggregation ofproducts & IFAH Financial ServicesCommunity:•  Enhanced and more effective ruralgovernance•  Train farmers to enhance knowledge onagriculture products and techniques•  Improve public health awareness•  Greater engagement and social interaction
  34. 34. 34BenefitsSocial:•  Increase opportunities for enhance livingstandards, using local resources effectively•  Reduce migration of workers to urban areasEnvironment:•  Enhance sanitation•  Improve river water quality•  Enhance soil quality bypromoting use of organicfertilizer
  35. 35. GOVERNANCE35
  36. 36. FrameworkSustainable RuralFarmer Livelihood& Social ImpactBoard &OrganizationalStructureRiskManagementSocialResponsibilityTransparency& Decision Flow36
  37. 37. .Execu8ve    Director  Product  Group  1    Product  Group  2  Product  Group  3  General  Assembly  Execu8ve  Board  External  Auditors    Village  1    Village  2    Village  6    Village  X  …  37  …  Same  structure    per  village  Product  Group  4  Key:    []  –  1-­‐2  yr  8meline    []  –  5  yrs  8meline    Headcount  IFA Governance & CommunicationsStructureSupervisory  Board  93Ac8vity  Group  1  Ac8vity  Group  2  Ac8vity  Group  3  Ac8vity  Group  4  Ac8vity  Based  Groups  AuditGovernance &Decision MakingImplementation81  
  38. 38. IFA Group Communication ModelIFAVillage Groups- Not all are IFA members- Not all belong to anActivity Based Group- Led by a village headActivityBasedGroups- All are IFAmembers- Bonded togetherby common goals- Led by a grouphead38
  39. 39. Activity-Based Group (ABG)Who:Self-governance grassroots entity formed by farmerswho share the same agriculture product/activity andvolunteer to lead in the ABGWhat:Facilitating two-way communication between IFA andfarmers, between EB and farmersHow:-Financial and community services are delivered tofarmers through ABG and EB’s decisions are actedupon through ABG.-Farmers’ opinions and concerns are pushed up to IFAor EB by ABG.Why:smaller group size + shared interests = stronger bondamong farmers§  Decision flow§ Opinion /product flow§ Service flowFARMERSABGEB IFAKey:
  40. 40. Roles and Responsibility in IFAGeneral Assembly- Elected by village representatives- Elect board of directors- Review and approve annual budget- Vote on direction and major projects of IFAExecutive Board- 9 farmers elected by the GeneralAssembly (GA)- Not more than half can hold village leveladministrative role- Call general assembly- Reviews the annual budgetExecutive Director- Evaluated by Government, CCFAand one nominated EB member on anannual basis- Government secondee/ Non-IFA member- Leads all IFA projects and initiatives- Review and develop annual planSupervisory Board- 1 farmer and 2 independent directors- Ensure decisions are executed and capitalallocated as planned
  41. 41. IFA Election Process41
  42. 42. 42EXECUTIVE  DIRECTOR  Human  Resources  &  Admin  Finance  &  Investment  Community  Outreach  &  Environment    Produc8on  /  Supply  Chain  Public    Affairs  Credit  IFAH Management Team Structure  []  –  1-­‐2  yr  8meline    []  –  5  yrs  8meline    Staff  Headcount  Critical to the success of implementation for the5-year plan, effective utilization of humanresources needs to be made.Key:  
  43. 43. KEY AREA/RESPONSIBILITY CENTER GA EBExecutiveDirector•  Project launch - Approve Review•  Annual Budget Approve Review Implement•  Capital/Asset allocation - Approve Review•  Partnership agreement (withCooperatives etc)Approve Review Implement•  Dividend payout Approve Review Implement•  Social/community investment - Approve Review•  Lending rate - Approve Review•  IFA Borrowing - Approve ReviewDecision Flow•  Designed to ensure clear and transparent decision making•  Ensure Farmers’ welfare is considered in all decisions (General Assembly as the main voice of farmers)•  Provides measures to mitigate risk and fraudIncreased executive board empowerment
  44. 44. KEY AREA / RESPONSIBILITY CENTER GA EB EDInvestment/procurement *> 50,000 (amounts above)21,000 - 50,000 (amounts in range)< 20,000 (amounts below)√√√Loan Amount> 40,000> 20,000> 10,000 (* NB: Range to the start of superior’s)√√√Audit report √IFA staff recruitment and layoff √ED recruitment and layoff √Authority Flow•  NB: (*) Amounts will increase on an upward adjustable scale and approved by the general assembly withthe growth and expansion of IFA•  Highlights key decision makers’ level of authority in specific key areas usually prone to fraud & lack oftransparencyIFA to take equity stake inthe coorperatives
  45. 45. Process ScenarioDecision Making & ApprovalFor a typical procurementor investment decision tobe made, a scenario-based approach ispresented to exemplifydecision and authorityflow.Aim:- To ensure implementationof best managementpractice- Keep approval conditionsset and properlydocumented- Remain mindful of timerequired for processing andrelease of fundsNB: (*) Amounts subject toincrease as organizationgrows.FOR REFLECTION: THE ORGANIC FERTILIZER PLANT CASE
  46. 46. IFA Integration/Partnership withProfessional Cooperatives•  Common assumptions–  Smallholder farmers can see and benefit from the integration/partnership of IFAand cooperatives–  Both IFA & the cooperatives see value in integration/partnership–  Main driver for partnership/integration is financial•  What IFA brings to the table–  Access to investment and lending funds–  Strong government relationships and support–  Robust governance and management structure–  Provide economies of scale in production capability (by enabling consolidation ofsmall holder assets) and access to potentially larger markets•  How IFA can benefit from the Cooperatives–  Transfer of technology and know how–  Access to current established distribution channels–  Access to established brand/marketing–  Provide economic benefits for small holder & revenue stream for IFA
  47. 47. IFA Integration with ProfessionalCooperative as a ShareholderExecutive Directorrecognizes potentialpartnership opportunityPotential investment/partnership opportunitypresented to ExecutiveBoard & General AssemblyGeneralAssemblyto decidewhether toparticipateYesNoIFA injects capitalinvestment into cooperative& becomes a shareholder inthe cooperativeIFA appoints a representativeto the cooperative board/management team, approvedby Executive BoardIFA mobilizes smallholderfarmers & enablescommunication betweenpartiesFarmer benefits byselling produceback to cooperativeIFA benefits in profitsharing GateStageBeginningResultsCooperative sharestechnology/know-how toappropriate smallholderfarmers
  48. 48. Rural Investment by Government:recommended improvement48Central GovernmentProvincial GovernmentPrefecture GovernmentCounty GovernmentTownship GovernmentVillage CommitteeIFAFarmersGovernment Project FundingCurrent funding route forsocial security projects:Distribution of project fundingthrough township government andvillage committeeKey areas:- Health care- Social security- Pension- Infrastructure development- EducationProposed funding route for newcommunity related projects:contract based outsourcing of governmentprojects to IFAKey areas:- Environmental management, includingwaste collection, land regeneration- supplies shop- Elderly care- Rural community integrated service center- Health education- Women organisation- Cultural activitiesKey benefits:- Improved efficiency- Community ownership- Self-governance :payment by farmers tocover part of the cost-Reduced corruption
  49. 49. FINANCIALSERVICES49
  50. 50. FINANCIAL SERVICES - OVERVIEW•  Focus on 5 Key Financial Services toenable a sustainable and profitableBusiness Model•  Existing Mutual Assistance Schemes inVillages (eg. Ca Ca Bo and Yang Liu)will eventually be absorbed into the IFAFinancial Services Model•  Undertake Central Claims Processingfor Tobacco Farmers•  Supported by sound supportingprocesses for Financial Accounting,Financial Controls and overall IFAGovernance Model•  Enables effective collection, analysisand management of key demographicinformation to support the Public AffairsFunction50FinancialServicesMicro-FinanceSavingsSchemeCapital MutualAssistanceSchemeFinancialEducation &AwarenessCentral ClaimsProcessingShort Term Services (1 to 2 Years)Services provided progressivelyover 5 yearsCreating Value-Add and Streamlining Current Financial Services
  51. 51. 51FINANCIAL SERVICES – CAPITAL MUTUALASSISTANCE SCHEME•  Short Term (1-2 years) FinancingScheme to fund Start-Up Capital•  Pooling together smaller amounts fromfarmers (approximately RMB500 toRMB2000) with matching funds (up toRMB500) from the government•  Funds used for Micro-Finance withoutcollateral at an annual interest rate of 7to 10%•  Loan Term up to 12 monthsCritical Step To Achieve Economic Self Reliance
  52. 52. •  Micro-Finance Loan amount RMB5,000 to RMB 50,000 (withoutcollateral)•  Loans > RMB 50,000 will be securedthrough the Rural Credit Union under astrategic partnership with IFA (withcollateral)•  Adjustable Interest Rates based onCredit & Income Profile of Farmers•  Term Loan of approximately 1 year to 5years structured through short termrepayment•  Providing convenience throughempowerment of the IFA Group Heads52FINANCIAL SERVICES – MICRO-FINANCECredit FunctionFarmersFarmersGroup HeadsCredit Processing CreditDisbursementsCredit ControlCredit ManagerSubmit ApplicationsFor ApprovalAfter Credit ChecksCompleted ApprovedApplicationsOffer andSigning of OfferLetter & AgreementFundsDisbursement(Cash/Remittance)*Submit ApplicationForms for ProcessingProvide andCollectApplication Formsand Provide Education& AwarenessProvide andCollectApplication Formsand Provide Education& AwarenessCredit Monitoringand ControlFUNDS* Cash/Remittance to be used for Short Term. Once IFA obtains licence to receivedeposits the amount will be remitted directly to the farmers IFA Savings Account
  53. 53. 53FINANCIAL SERVICES – SAVINGS SCHEME•  Key integrator of Product Co-Operatives into IFA Business Model through meansof investment and shareholdings•  Facilitates establishment of strategic relationships with Commercial Banks/CreditUnions•  Receive Deposits from farmers and migrant workers paying out an annual interestrate of approximately 2.6%•  Providing convenience through aggregation of savings accounts maintained withmultiple financial institution•  Pooled Deposits to contribute to micro-financing and investment opportunities•  Providing farmers visibility and transparency of summary financial status and otheractivities through technology enablement (e-Farmer Kiosk)•  Longer Term (> 5 years) scale to promote IFA as Integrated Service Centre i.e.provide services to farmers such as direct debit facilities for bill paymentsIFA as an Integrated Financial Service Provider
  54. 54. 54FINANCIAL SERVICES – SAVINGS SCHEMEMigrant WorkersMigrant WorkersIFA BankingAccountFUNDSFarmersFarmersGroup HeadsDepositsutilised for microfinanceand otherinvestmentsIFA Invests inCo-OperativeProduct Co-OperativeProduct Co-OperativeCo-OperativeMaintains IFA BankingAccountObtain and ReceiveDeposit Instructions & MoniesFrom FarmersDepositFarmers MoniesObtainDepositReceiptProvideDepositReceiptsTo FarmersWithdrawalsPartnerCommercialBankMigrants transact moniesthrough IFA PartnerPublic AffairsDepartmente-Farmer KioskAgricultural SuppliesStoreAgricultural SuppliesStoreCheck Financial Status(Savings, Credit)& Update DemographicInformationMaintainDemographicInformationMicro-FinanceAgricultureExtensionProjectsFarmer Sales/InvestmentReturnsCommunityOutreachProgrammesThe Savings Scheme is a Key Service Enabler for IFA as it represents the heart of IFA’sbusiness operations in effectively linking farmers, migrant workers, financial partners and co-operatives in order to achieve supply chain and capital efficiencies and gains
  55. 55. 55FINANCIAL SERVICES – CENTRAL CLAIMSPROCESSING•  Tobacco industry operates as a singlemonopoly in China through theChinese National TobaccoCorporation (中国国家烟草公司)•  Central Claims Processing Servicesprovided only to Tobacco Farmers•  Provides scale efficiencies in-line withconsolidation of mutual assistanceschemes into the IFA structure•  Farmers receive monies faster than ifdirectly interacting with the TobaccoCollection CentresFinance & InvestmentsFunctionFinancial AccountingFinance ManagerIFA BankingAccountFarmersFarmersDeliver tobacco cropsand obtain receiptsDeposits moniesdue to farmersinto IFABanking AccountSubmitClaims on behalf of farmersGroup HeadsReimbursement(Cash/Remittance)** Cash/Remittance to be used for Short Term. Once IFA obtains licence to receivedeposits the amount will be remitted directly to the farmers IFA Savings AccountProcess Claimsand SubmitFor ApprovalApprovedClaimsWithdrawReimbursementAmountsfor FarmersTobacco Collection CentreTobacco Collection CentreHand over claimsto Group Heads
  56. 56. 56FINANCIAL SERVICES – FINANCIALEDUCATION & AWARENESS•  Key Service Component whichunderpins the Financial ServicesModel and is a key input in the RiskManagement Process•  Integral part of Community OutreachProgramme by:–  Providing Financial & DebtManagement Awareness–  Assisting Farmers tosafeguard and take control ofownership over their financialsecurity–  Promote and ProvideEducation on the Benefits ofIFA’s Financial Services
  57. 57. 57FINANCIAL SERVICES – SUPPORTINGPROCESSFinancial Accounting•  Day-to-Day Financial Operations•  Organize Incoming Investments(Grants etc) and IFA Investment•  Manage Disbursement of Funds toFarmers, Projects, CommunityServices or other initiatives basedon the direction and approval ofthe IFA Executive Board•  Budgeting & Forecasting Activities•  Periodic Financial Reporting
  58. 58. FINANCIAL SERVICES – SUPPORTINGPROCESSES•  Organization Structure provides for clearsegregation of duties to mitigate risks offraudulent activities•  Establishment of a Delegation ofAuthorities Framework•  Supervisory Board and External Auditorsprovide “check and balance” 58•  Undertaking Stringent Credit Checks(Financial Needs, Family Members, Sizeof Land, Monthly Income etc.)•  Short Term Repayment of Loans andCredit Profiling•  Monitoring Controls over LoanrepaymentsRisk Management & Financial ControlsFinance ManagerFinance & Investments FunctionFinancial AccountingFunds Disbursements & ManagementCentral Claims Processing (Tobacco)Financial ReportingOperations Finance ManagementSavings & DepositManagementPersonal DepositsInvestor/IFA DepositsCredit FunctionCredit ControlCredit DisbursementsTo ApplicantsCredit DisbursementCredit ProcessingCredit ApplicationProcessingDemographic InformationManagement- Maintains Relationship with Financial Institutions- Financial Reporting to IFA Executive Director, Supervisory andExecutive Boards- Preparation of IFA Annual & QuarterlyReports- Central Claims ApprovalsCredit Monitoring(Loan Defaults,NPL etc)Credit Manager- Credit Application Approvals- Maintains Relationship with Credit Union- Credit Reporting to IFA Executive Director, Supervisory andExecutive Boards
  59. 59. PRODUCTIONANDMARKETING59
  60. 60. Production and Marketing Strategy•  Heshuiping is a unique place due to thediverse products it can produce•  In consideration of building communityconfidence and building up IFAH’smanagement experience, the five yearplan will initially focus on providing supportand strengthening the capabilities offarmers going (or already) into breedingpigs and farming rice•  As IFAH’s operational capacities arestrengthened and it gains know-how, theorganization can refine the model in orderto focus on other products60Pigs Rice Vegetables RapeseedKiwi Fruit Green Tea Chestnuts KonjacPotato TobaccoMandarinOrangesDevelop successfulexamples of farmersand breeders in highmargin products
  61. 61. Key FocusImprove farmer’s livelihood and IFAH’s profitability through:• Investment in Fragrant Rice production and production volumeincrease• Set up of pig farming supply chain collection and sales networkSupply ChainImprovementDevelop IFA brand as quality agricultural produce• Develop Township level branding for Sanli agri produce• Branding transition and inclusion of key commercial produce undersingle umbrellaBrandingDevelopmentandMarketingEffective supply chain and brand awareness to providenew revenue stream for IFAH and farmers
  62. 62. Fragrant Rice: The Potential•  Current fragrant rice production is constrained by lack ofprocessing and warehousing facility•  Limited funding and investment impeding further expansion ofProfessional Fragrant Rice Cooperative•  Untapped potential of smallholder farmers (3570muuncultivated land and 1500mu regenerated riverbank area)*•  Positive market condition and return (RMB480/mu for normalfragrant rice, and up to 5-8 times for organic fragrant rice)* Suitability of rice growing subject to detailed land utilisation studyFragrant Rice – A key starting pointfor IFAH demonstration
  63. 63. Fragrant Rice: Enablement of Supply Chain•  Capital investment of RMB 900K for processing and storageinvestment–  Funding: Profession Rice Coop RMB300K + IFAH RMB600K•  Smallholder farmers to venture into fragrant rice growing•  Seeding, agriculture technical services assistance, and salesand distribution through Professional Cooperative•  Expected return:–  Breakeven by Year 4–  Profit of RMB 912,000 over 5 years63
  64. 64. Pig Farming: The Supply ChainIFAH owns a pig breeding farm. Formation of asupply chain would help the smallholder farmers tostrengthen their capacity in pig farming:•  To provide quality piglets for farmers to raise•  To provide the logistic services to collect thepigs from the farmers and sell to the market•  Can afford to buy the pigs from the farmer ata higher price because it is able to get betterpricing from consolidating the volume•  This will help to increase the revenue ofsmallholder farmers64Improved revenue of IFAH and smallholder farmersthrough the scale of economyPig Breeding FarmPig FarmersCollection andDistributionMarket
  65. 65. Pig Farming: The Untapped Market•  IFA to provide the new breed of pigs:–  Improve the pig’s quality to increase the lean meat and reduce fat–  To provide branding and awareness to the consumers on thebenefits of the new pig•  Brand the New Breed Pig as Lean from Year 2:–  Able to price the pig 10% above market rate•  Brand the Pig as Traditionally-grown from Year 5:–  Able to price the pig 30% above market rate–  Requires quality checks to ensure thatthe pigs are grown traditionally•  Expected return:–  Profit from Year 2–  Profit of RMB 4m over 5 years65
  66. 66. Branding Strategy for IFAS Products•  Rebranding IFA to Township levelinline with expansion plan•  Change the name from IFAH(Heshuiping) to IFAS (SanliTownship)•  Year 1 and 2: transition period–  Relying on the existing well known brand,like 三里香 rice, to promote IFAS. IFASjust appear as an endorsement–  Building a new brand for the Pig farmingbusiness–  Introducing IFAS and their products toGovernment, market and famers throughdifferent channels–  Building name awareness gradually66Option 1 Option 2 Remark: Logo just for reference only.
  67. 67. Branding Strategy for IFAS Products•  Year 3 – 4: Brand build-up period–  Building strong awareness for IFAS–  Logo will be used on all products,Supply stores and other area–  Build IFAS website to promote IFAand all productions–  Beginning to establish an affinity andloyalty to IFAS brand and theproducts under its umbrella amongstthose customers•  Year 5 and onwards–  Brand maintenance67IFA Logo IFA + Rice Logo
  68. 68. Sales & Marketing: Target Markets•  IFAH Stores (supply stores and grocery stores)•  Local (supermarkets, hotel / restaurant, deeply process factory, anddirect delivery to consumers)•  National markets (supermarket / organic food chain outlets inWuhan/Shanghai and other cities via strategic partners, such asCarrefour & Wal-Mart)68
  69. 69. Prioritization of Projects and Allocationof Resources: Long Term Success69•  Focus on immediate value and business necessities.•  Keep the implementation simple, focused on value, and structuredwith a plan•  Review the existing initiatives•  Governance structure must be in place to review the project viabilityand business case prior to each investment.IFAH needs to show results now and any project that could be takingaway resources and focus from the organization in delivering value,should either be put on hold or terminated
  70. 70. The Production of Organic Fertiliser as a RevenueSource for IFAH: Further Review Required70•  IFAH is in the process of setting up a pilot organic fertiliser productionfacility that converts local organic agriculture waste into organicfertiliser through a fermentation process•  Full-lead Bio Tech in Taiwan is the project partner providing thetechnology, however they do not have prior experience in China andhave not obtained organic fertiliser certification in China•  The technology and design of the production facility needs to bereviewed in accordance with the organic fertiliser certificationstandard in China to meet all the quality, health and safetyrequirements. At present, the setup and management of the pilotproduction facility have not addressed all the requirements. Uponinitial assessment, the plant does not appear to be appropriate for thevillages.
  71. 71. The Production of Organic Fertiliser as a RevenueSource for IFAH: Market Development in the Future71•  The organic fertiliser produced by the current technology needs to besold as a high-end organic fertiliser at RMB 1500-2000 per tonne tojustify its cost of production with high-energy demand•  The target market for high-end for organic fertilisers are organic fruitsand vegetables producers•  However, the development of a high-end market in Heshuiping regionis still in its infancy. Sales channel needs to be developed to marketthe fertiliser to other places in the county where the fruits andvegetable industry are more mature, but this is not practical or apriority at this stage•  IFAH can play a role in developing the local fruits and vegetablesindustry through organising production and marketing groups andproviding the needed technical assistance and practical know-how inorganic farming and supporting farmers to obtain governmentsubsidies for using organic fertiliser.
  72. 72. The Production of Organic Fertiliser as aRevenue Source for IFAH: Next Steps72•  The project needs professional consultation, and IFAH needs toconsider alternatives, including seeking other technology providers inChina, and consider other more affordable technologies such asbiogas reactor and composting. Field testing needs to be done withprofessional design and implementation, funded by the technologyprovider, with third party certification•  Key questions to be answered:- What type of organic waste can be used as raw material?- Are dead animals permitted?- What is the energy needs?- What are the emissions?- Is the fertilizer in solid, liquid or semi-liquid state?
  73. 73. COMMUNITYSERVICES73TrainingInfrastructureHealthcareCultural Services
  74. 74. Community Services:Aim•  Increase yield of production & average household income•  Fill crucial knowledge gap on product pricing, technology,machinery, financial management and business opportunities•  Attract migrant workers back to and retain youth in the villages•  Improve healthcare awareness and health status•  Initiate cultural activities to help engage villagers and improvelivelihood•  Enhance environmental awareness and overall living conditions inthe villages•  Support innovation in agriculture production and natural farming74Create better living conditions through economic andenvironmental enhancement
  75. 75. Community Services:Actions•  Training on agricultural know-how in each village at least twice a year•  Training for young generation: highlight the value and opportunity oflivelihood in farming, and learning Chinese and English terms at thesame time•  Cultural extension: identify 4-5 volunteers from each village as well asAction-based groups to coordinate activities•  Free healthcare sessions and home visits for members•  Waste management initiative: to collect garbage and clean the river75
  76. 76. Community Services:Resources Needed•  1 coordinator for agriculture extension and administration–  Budgeted for in overall IFAH structure•  Budget for agricultural training by specialists/consultants:–  Allocation of 20% of IFAH revenue for community services, membershipfees and potentially training grants from banks•  Logistics for rubbish collection (e.g. vehicle maintenance & delivery)–  Suggest government to provide funding as part of public service delivery•  Nominal amount as incentive for cultural activity volunteers–  ~RMB 2500 per year•  Budget for healthcare, waste collection and miscellaneous training(e.g. healthy aging, farm health tips, cooking a healthier meal, etc.):–  Government funding support to be discussed76Details available in appendix
  77. 77. IMPLEMENTATION77
  78. 78. Commence deposit taking & mature to final financing modelImplementation PlanSetup of creditmutual assistanceschemeYear 1 2 3 4 5 6StrengthenGovernance andOrganizationPreparation forCommunityServices launchGeneralAssemblyGradually extend to the whole Sanli TownshipPig Farming Supply ChainFragrant Rice Production ExpansionLaunch of CommunityServices continued andenhancedCommunity Services continued and enhanced
  79. 79. Five-Year Implementation Timeline Year 1: 1st Quarter(Month 1-3) 2nd Quarter(Month 4-6) 3rd Quarter(Month 7-9) 4th Quarter(Months10-12)•  Establish Finance Awareness & Education Program•  Prepare for agricultural training sessions in the 6 villages•  Liaise with primary schools to set out training for young generation•  Setup of waste collection stations•  Rollout Finance Awareness & EducationProgram•  Communicate and promote training plans tomembers•  Source for seed capital•  Setup governance and functionalorganization structure•  Executive Board to review newgovernance, board & managementstructure•  Establish mutual assistance schemefor farmers with matching funds fromgovernment•  Apply for training grant•  Collect data on demographics andcrop production•  Appoint cultural extension volunteers•  Establish financial, credit andcontrol policies and procedures•  Fill immediate vacancies forFinance, HR & Creditdepartments•  Train new IFAH staff•  Set up facility for Fragrant Rice•  Plan for communications onthe new IFAH model•  Source independent supervisor•  Initiate implementation ofwaste management•  Launch training sessionson agricultural extension•  Submit application forlicense to accept farmers’deposits•  Launch PR project formembership cultivation &new IFAH model•  Set up activity-basedgroups•  Seek approval of newstructure & IFAH businessmodel by GA•  Recruitadditional IFAHstaffs•  Finalizeproduction andmarketinginvestmentdecision79
  80. 80. Five-Year Implementation Timeline Year 2 Year 3 Year 4 Year 5§  Obtain license for and implement savingsscheme§  Establish and implement savingsscheme policies & procedures andoperations§  Ramp down Capital Mutual AssistanceScheme§  Launch of agricultural and healthcaretraining sessions in 6 villages§  Launch of cultural extension initiatives•  Purchase of waste collection trucks§  Launch of waste collection services§  Conduct annual audit of IFAH business§  Recruit additional IFAH management (tosupport expansion)§  Integrate professional cooperatives§  Extend fragrant riceproduction§  Start cross-bred pigfarming & distribution§  Conduct annual audit ofIFA business§  Introduce wastemanagement program forother villages§  Review the progress of IFA§  Extend IFA for another 10villages§  Expand agricultural andhealthcare trainingsessions to more villages§  Elect IFAH executive &supervisory board§  Seek new sources of funds§  Conduct training &create promotionmaterials for othertownships§  Conduct annualaudit of IFAbusiness§  Extend IFA foranother 10 villages§  Evaluate othercrops for IFAcoverage§  Seek new sourcesof funds§  Review results§  Conduct annual auditof IFA business§  Extend IFA to othervillages in the Sanlitownship§  Seek new sources offunding§  Implement e-farmerkiosk in agriculturalsupplies store80
  81. 81. RISKASSESSMENT& MITIGATION81
  82. 82. Risk Assessment Matrix82Lack of Alignment of Goals ofExecutive Board MembersNon-Transparent IFA AdministrationIFA Inability to Attract & Retain TalentPoor Quality of TrainingInability to Attract Farmers toCommunity ProgrammesPoor Financial Controls and RiskManagement PracticesCapital Reduction Due to High Rateof Loan DefaultsInability to Secure FundingPoor Quality Agricultural RawMaterials123456789Pig Livestock Depletion10Fragrant Rice Crop Failure1158237LikelihoodImpact9Low Medium HighLowMediumHigh14610 11HIGH RiskMEDIUM RiskLOW RiskThe Risk Assessment will enable IFA in prioritising activities as part of theimplementation of the 5 Year Plan in order to effectively and efficiently mitigate risks,in a timely manner, which could threaten the viability and sustainability of the socialbusiness venture
  83. 83. KEYRECOMMENDATIONS83
  84. 84. 84Key Recommendations1) Introduce the Finance & Investment, and CreditFunctions as IFAH’s sole vehicle for provision offinancial services2) Establish Savings Scheme and utilize moneyremitted by migrant workers to enhance IFAH’scapital base3) Provide outreach programmes to promote IFAH’sfinancial services and assist farmers to safeguardtheir financial security1) Review supply chain for pig farming, and developbusiness in pig collection and distribution to increaserevenue for farmers and IFAH2) Review crop/land allocation and expand fragrant riceproduction3) Seek professional consultation for Organic fertilizerproject, and alternatives, including seeking othertechnology providers needs to be considered4) Review the business model of agriculture suppliesstore to ensure long-term business sustainability1) Set up mechanism to train farmers on moreeffective farming, with a view to enhancing theoverall average household income2) Enhance healthcare awareness and cultural &educational activities.3) Provide framework for creating positiveenvironmental impact, e.g; waste collection,organic fertiliser.1) Review IFAH team composition; enhancemanagement bandwidth, governance, riskmanagement and transparency2) Review member leadership structure, fromgeography based leadership to functional/crop basedgroups3) Enhance internal checks to ensure benefits tofarmersFINANCE PRODUCTION AND MARKETINGCOMMUNITY SERVICES GOVERNANCE
  85. 85. Key Success Factor – GovernmentSupport•  Government may consider working with IFA as its strategicoutsourcing partner to execute government-funded policies/projectsbecause IFA is owned by farmers and acts on behalf of farmers.•  Government outsourcing is on the rise. IFA may considerestablishing a company (eg. JV) to undertake some governmentprojects.•  The Central Government just issued the policy of supportingagriculture professional cooperatives last year. IFA may considerhow to leverage government support in this area.•  Responsibilities of township and county pilot program office must beclearly defined. Township office works closely with IFA to addressIFA’s concerns. Meanwhile county office focuses on seeking moregovernment funding and projects for IFA and refrains from directinvolvement in township IFA operation unless requested.
  86. 86. APPENDIX86A.  IFAH Stakeholder ChartB.  Key AssumptionsC.  GovernanceD.  FinanceE.  Production & MarketingF.  Community ServicesG.  Risk assessment and Mitigation
  87. 87. IFAH STAKEHOLDER CHARTAppendix A87
  88. 88. 88Stakeholder Map CurrentNew Key:1) Board/General Assembly2) Pilot Programme Office (County)3) Consulting Centre for Farmers’Association4) Local Banks/ Credit Union5) Bureau of Agriculture6) Ministry of Education1) Credit Cooperatives2) Local Banks/Credit Union3) Private InvestorsAdvisory & Governance FinancePartnersIFAH1) Smallholder Farmers2) Rice Cooperatives3) Member Group Head/Village Head4) Mutual Assistance Cooperatives5) Employees6) Other Cooperatives7) Other IFA8) Media
  89. 89. KEY ASSUMPTIONSAppendix B89
  90. 90. Key Assumptions90•  The scale to achieved within the 5 Year Timeframe is SanliTownship (37 Villages)•  The 5 Year Plan will become an integral component of the SanliTownship 5 Year Plan•  1 IFA for 1 Township Model will be adopted•  Group Heads will be empowered with some administrative andadvocacy/awareness activities•  Resource support will be provided by the various partneringFinancial Organisations in the form of secondments and awareness& education•  Farmers will be willing to pay for specialist training for re-skillingand skills enhancement•  Healthcare and Insurance Programmes will be funded solelythrough IFA Profits
  91. 91. Key Assumptions… Cont’d91Assumptions over 5 year timeframe MeasurementsLand Measurement 0.093 Hectares is equivalent to 1muAverage Inflation Rate 4.25%Average Salary Increment 6%Average Personal Taxation Rate 5-10%Average % of Asset Costs allocated for Maintenance Costs 5-15%Capital Mutual Assistance Loan Interest Rate 7-10%Deposit Interest Rate 0.5%Loan Default Rate Per Year 1.5% of disbursementsAverage Increase in Household Income 17%Approximate Fee for Skills Enhancement Classes Per Year RMB100Cost Per Household Per Year for Waste Collection RMB 60IFA Profit Allocation for Healthcare & Insurance Programme 4% (2% each)Average Agricultural Taxation Rate 0%91
  92. 92. GOVERNANCEAppendix C92
  93. 93. General Assembly*•  Elected by village representatives•  2/3 of the members should be farmers•  Term: 4 years•  Members are not allowed to be hired/recruited by IFA•  Responsibilities–  having the ultimate authority–  making and changing IFAH chapter–  electing & dismissing executive board members–  reviewing business report and financial report–  defining and changing membership fees and capital allocated forsocial services–  reviewing & approving the annual budget•  Held once every year, ad hoc meetings can be initiated by 1/3 ofrepresentatives or by Executive Board93*Unpaid positions
  94. 94. Executive Board*•  Number: 9 farmers•  Term: 4 years and two terms is the max.•  Requirement:•  -All agri-products and villages must be represented.•  Responsibilities:–  calling general assembly and acting upon GA’s decision–  electing and dismissing Chair–  approving & reviewing performance of Executive Director–  reporting to the General Assembly on IFA–  hiring external auditors to do annual IFA auditing–  reviewing the annual budget–  setting the strategic direction for IFAH (social & economic growth)–  making investment decisions,–  making loan decision on loan amount above 40k RMB•  EB members must meet at least every quarter.94*Unpaid positions
  95. 95. Supervisory Board*•  Number: 1 farmer & 2 independent directors•  Term: 4 years and two terms is the max.•  Requirement:•  - at least one independent director is a businessman with no conflict ofinterest. The other one can be a NGO representative (eg. CCFA ).•  Responsibilities:–  making sure all decisions are executed and capital allocated asplanned.–  SB must hire external accountant to do auditing, hiring externalauditors to do annual IFA auditing–  act as check and balance for all EB activities and decisions•  SB members must meet at twice a year.95*Unpaid positions
  96. 96. Group Head*•  Profile: farmer with crop-specific technologies and in-group trust andrespect•  Responsibilities:–  training group members in agricultural extension–  representing the interests of group members–  advocating finance and credit awareness (with a key focus on thesaving scheme)–  undertaking basic finance and credit administration tasks–  coordinating social services delivery on behalf of IFA–  passing on key decisions of GA/EB to group members96*Unpaid positions
  97. 97. Executive Director•  Requirements:–  full time paid position–  either recruited openly or a government secondee (paid for by thegovernment)–  non-IFA member•  Term: 4 years & maximum of two terms•  Responsibilities:–  acting upon EB decisions–  leading IFA work–  developing annual plan–  recruiting, laying off and training IFA staff–  performance evaluation of IFA staff–  held accountable to EB•  Performance Management:–  Evaluated by Government, CCFA & one nominated Executive Boardmember97
  98. 98. Compensation Guidelines•  Current average monthly per capita income in the area is RMB1500•  Migrant workers have mentioned that they will consider staying if they canearn at least RMB1500 monthly in their village/home town•  Recommended salary guidelines as follows98Basic Monthly Variable Bonus~Entry (egaccountant)1500RMB 0.5-1 months*Mid level (egmanager)2000-2500RMB 1-1.5 months^Senior (egExecutiveDirector)3000RMB –4000RMB1-2 months#~dependent upon IFA’s financial performance*Based on individual performance^Based on department performance#Based on overall performance
  99. 99. Funding Sources of the County GovernmentArea Funding ProjectDevelopment and investmentof rural China40 million RMB • Community infrastructure• Community serviceWater utilities 20 million RMB • Potable water• Water irrigationSoil revitalization 5 million RMB • Riverbank regenerationLivestock 3 million RMB • Pigs, sheep, cattleInfrastructure 12 million RMB • RoadFood security 1 million RMBSpecial industry 2 million RMB5 million RMB• Vegetable• Fruit99
  100. 100. FINANCIAL SERVICESAppendix D100
  101. 101. Finance Services•  Excel reference 1: credit department modelcredit department financial model_zl_222.xlsx•  Excel sheet 2: combined financial modelcombined financial model.xlsx101
  102. 102. Finance and Credit Department -Savings Scheme Awareness Plan•  Objective: to raise awareness amongst farmers and migrantworkers of the benefits of making deposits into IFAH•  Team: Village Heads and migrant workers will be the ones tomobilize the Awareness Plan–  Village Heads have the connections within the villages i.e. they are on-the-ground–  Migrant workers have the money and will understand how other migrant workersthink to encourage them to make deposits•  Incentive: Team is motivated through a commission basedcompensation plan to attain as much deposit as possible•  Training: IFAH will train the team to promote the Savings SchemeAwareness Plan•  Timeline: IFAH will cover 6 villages for the first 2 years and add 10villages each year* Larger resources are needed during Chinese New Year when allmigrant workers return to their home.102
  103. 103. COMMUNITY SERVICESAppendix E103
  104. 104. 1) Training -- Agricultural Extension•  Contents for knowledge enhancement:–  Better selection & use of fertilisers, pesticides, machinery/equipments,soil, water–  Improving quality of land, and current crops/animals by technology–  More productive land use and environmental management–  Raising other crop/animals, off-season planting•  Infrastructure required tostart, maintain, harvest &sell to market•  Cost concern–  Product pricing, understanding ofmarket, & avenues to reach market–  Work safety (e.g. posture)–  Business & job opportunities104
  105. 105. •  How to achieve knowledge enhancement:(a) Conduct “Train-the-trainer” programs for each village:–  Agricultural specialists or local successful farmersàà train village heads & some farmers àà train all farmers–  Quality, effective & affordable (low-cost) program–  Approx. frequency of training (depends on type of produce):•  Busy farming season:1 class every 2 months x 6 villages = 36 classes/year•  Off-season: 1 class every month x 6 villages = 72 classes/year(b) Sharing of latest best practices & technology among villages:–  Regular sharing by all 37 village heads–  Sharing sessions to be led by IFA–  Non-hostile & non-over-competitive environment is key for sharing1051) Training -- Agricultural Extension
  106. 106. •  Resources:–  1 coordinator for agricultural extension and administration–  3 contract trainers as specialists from CCFA & Bureau of Agriculture–  Training materials from CCFA & Bureau of Agriculture, with input fromlocal village heads & cooperatives–  Training grant from Bureau of Agriculture & Agricultural Bank–  Note: the China Social Entrepreneur Foundation is no longer providingany resource to IFAH•  Timeline:–  Year 1: preparation, Year 2: start training at 6 villages,Year 3-5: expand to cover all 37 villages1061) Training -- Agricultural Extension
  107. 107. •  Goal:–  Expose school children to farming as a profession in a fun way startingfrom youth•  About:–  Farming as an important profession in society and for the country–  Take ownership and respect your land–  Science & new technology in farming–  Learn simple Chinese & English names of farming products•  How:–  Mini-farming time as part of the regular curriculum in Labor TechnologyTraining course or Chemistry course–  Year 1 - 2: Liaison with primary schools for the villages & curriculumpreparationYear 3 - 5: Implementation in schools that serve the villages1072) Training – Young Generation
  108. 108. •  Reference:–  Taiwan IFA model to carry outsimilar programs in schools•  Resources:–  1-2 advisors with honorariumfrom CCFA & Ministry ofEducation–  Training materials from IFA &CCFA–  Free for children to attend, aspart of regular school class1082) Training – Young Generation
  109. 109. 3) Infrastructure:a)  Surveillance and healthcare servicesProblems: Current personal and public healthawareness is very limitedHow:–  Surveillance•  Continue current efforts of annualhealth checks•  Survey of the health andsocioeconomic status of all villagers(via e-farmer kiosk in IFAHAgricultural Supplies Stores)à  Help in data collection & record forfuture planning with Sanli Township–  Healthcare Training (see next slide)109
  110. 110. 110Member farmers &their familiesIFAHealth awarenessworkshops & home visitsActions:• IFA takes the initiative to organize free sessionson:ü Health promotion & disease preventionü Waste managementü Farm health tipsü Child-rearing health tipsü Healthy aging• Mobilize participation via announcements ofupcoming sessions at IFA General Assembly,agricultural training sessions and supplies storesTo help members & their families develop a healthierlifestyle, and therefore healthier villages3) Infrastructure: Healthcare trainingTimeline:• Year 1: Preparation & promotion• Aim by Year 2: 6 villages• Aim by Year 5: 37 villages
  111. 111. 3) Infrastructureb)  Collection of non-organic waste (plastic, cans, glass)–  How:•  Provision of waste bins for non-organic waste•  Designated day, each week, at each household•  Trucks to bring waste to new garbage station in each village•  Utilize the 6 small trucks & 2 big trucks already in IFA planning•  New village regulations (e.g. no rubbish throwing to river)•  Year 1: preparation & station setup; Year 2: start collection–  Resources:•  Training housewives & restaurant chiefs to take initiative•  Activity-based groups & member group leaders to encourage &monitor behavior•  Cost for trucks & drivers/collectors, garbage bins & buildingwaste stations•  Apply to township as public service program & for funding111
  112. 112. 4) Cultural Activities•  Goals:–  Preserve culture of each village, Heshuiping region & Sanli township–  Provide a platform in each village for all members to gather &communicate–  Mobilize and encourage participation in village activities•  How:–  Organizer: Identify 4-5 women in each village to take the lead inorganizing and promoting cultural activities–  Access: Identify 1-3 locations in each village that are convenient to allvillage members to go to and participate in the activities–  Contents: Regular and fun activities for children, adults and the elderly–  Resources: Utilize existing cultural assets (e.g. dresses) in the village112
  113. 113. RISK ASSESSMENT ANDMITIGATIONAppendix F113
  114. 114. Risk Assessment & Mitigation114No. Risk FunctionalAreaLikelihood Impact Risk Mitigation1. Lack of alignment of goals ofIFA, the Government andIndependent DirectorsGovernance MEDIUM HIGH 1.  Define clear roles andresponsibilities of each role inthe IFA Governance Structure2.  Rotation through election of keyroles in Executive Board andSupervisory Board3.  CCFA to play an intermediaryrole in any disputes or alignmentissues2. Lack of transparency of theadministration of IFAGovernance MEDIUM MEDIUM 1.  Establishment of a strongcorporate governance model,transparency in systems,processes, decision making withclear roles and responsibilitiesand segregation of dutiesembedded in the organisation3. Inability to attract and retaintalent within the IFAManagement Structure andmaintain a healthy attritionrateGovernance HIGH HIGH 1.  Implementation of competitivestaff remuneration packages &welfare schemes and training
  115. 115. Risk Assessment & Mitigation115No. Risk FunctionalAreaLikelihood Impact Potential Risk Mitigation4. Poor quality of training Community MEDIUM MEDIUM 1.  Recruitment of skilled trainersthrough secondments fromagricultural institutions,institutions of higher learning2.  Collaborate with Government toestablish measurement toolsand techniques 5. Inability to attract smallholderfarmers to attend training,healthcare, insurance andagricultural extensionprogrammesCommunity LOW MEDIUM 1.  IFA to promote awareness ofbenefits through Group Heads2.  Implementation of periodicawareness and training sessions6. Lack of confidence ofinvestors in profitability ofventure and supporting riskmanagement and controlprocessesFinance &CreditMEDIUM HIGH 1.  Establishment of robust financialand risk management policiesand procedures with clearsegregation of duties anddelegation of authoritiesframework embedded in theFinance & Investments andCredit Functions
  116. 116. Risk Assessment & Mitigation116No. Risk FunctionalAreaLikelihood Impact Potential Risk Mitigation7. High rate of loan defaultsresulting in progressivereduction of capitalFinance &CreditLOW HIGH 1.  Implementation of credit ratingsystem, robust credit collection& monitoring processes and ashort term re-payment model8. Inability to secure funding tocommence implementation ofIFA’s business objectives Finance &CreditMEDIUM HIGH 1.  Secure strong investors withrural financing experience andlong term social view2.  Aggressively educate farmers onbenefits of contributing to theshort term Capital MutualAssistance Scheme9. Lack of supply of quality rawmaterials (e.g.. seeds,agriculture supplies etc.)Production &MarketingLOW MEDIUM 1.  IFA to source from alternativesuppliers and implement qualitycontrol over raw materialsselection process
  117. 117. Risk Assessment & Mitigation117No. Risk FunctionalAreaLikelihood Impact Potential Risk Mitigation10. Disease and poor sanitationconditions leading to piglivestock depletionProduction &MarketingLOW HIGH 1.  Implement stringentsanitation and hygienepractices in the pig farmsincluding quality controlchecks on operationalpractices2.  Promote awareness tofarmers on the need of highlevels of sanitation andhygiene11. Crop failure impactingprofitability of fragrant ricebusiness operationsProduction &MarketingLOW HIGH 1.  Explore opportunities forinsuring against crop failureas pilot programs arecurrently being implementedin China where suchinsurance is characterized bymaterial cost-based coverageand government-subsidizedpremiums2.  Implement robust process forawareness, education andclimate/terrain evaluationprior to land utilization forfragrant rice production
  118. 118. 118AcknowledgementsThis Business Plan has been put together by 21 members of the GlobalInstitute For Tomorrow (GIFT) Young Leaders Program - Hubei 2011.The GIFT YLP team would like to thank the government representativesfrom Jianshi County and Sanli Township, the farmers fromHeshuiping region, IFAH, as well as Professor Yang Tuan and herresearch team at CCFA for their dedication and support.We hope that in drawing collectively upon our expertise and passion asa team, we have been able to contribute to the successfulimplementation of this important and valuable project.TOMORROW MATTERS.
  119. 119. 119
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