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Financing Organic Supply Chain: The Case of BAAC - 2012


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By Chamnong Siriwongyotha, Team Leader, Bank of Agriculture and Agricultural Cooperatives (BACC), Thailand, 25 September 2012

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Financing Organic Supply Chain: The Case of BAAC - 2012

  1. 1. FINANCING ORGANIC SUPPLY CHAINFINANCING ORGANIC SUPPLY CHAIN : THE CASE OF BAAC: THE CASE OF BAAC by Chamnong Siriwongyotha Team Leader Bank for Agriculture and Agricultural Cooperatives (BAAC) Thailand 25 September 2012
  2. 2. OUTLINEOUTLINE 1. Introduction and Current Situation 2. Certification of Organic Products 3. The role of The Royal Thai Government 4. The Role of Bank for Agriculture and Agricultural Cooperatives (BAAC) in financing Organic Supply ChainChain 5. Opportunities and Challenges
  3. 3. INTRODUCTIONINTRODUCTION •• About ThailandAbout Thailand –– Situated in Southeast Asia, borderingSituated in Southeast Asia, bordering Myanmar, Lao PDR, Cambodia andMyanmar, Lao PDR, Cambodia and MalaysiaMalaysia –– Area :Area : 513513,,115115 sq. km.sq. km.–– Area :Area : 513513,,115115 sq. km.sq. km. –– Population :Population : 6969 millionmillion –– OverOver 5050% of the country population% of the country population engaged in agricultureengaged in agriculture –– A major rice exporterA major rice exporter
  4. 4. DEVELOPMENT OF ORGANIC AGRICULTURE INDEVELOPMENT OF ORGANIC AGRICULTURE IN THAILANDTHAILAND • The declaration of the 1st National Economic and Social Development Plan in 1961 emphasizing production for export. • Increasing farmlands vs decreasing forest • Practice of monoculture : Uses of agro-chemicals• Practice of monoculture : Uses of agro-chemicals • Deteriorated natural resources and health • Establishment of Alternative Agriculture Network (AAN) in early 1980s
  5. 5. DEVELOPMENT OF ORGANICDEVELOPMENT OF ORGANIC AGRICULTURE IN THAILANDAGRICULTURE IN THAILAND • 2 main streams : Rural development oriented and Business oriented • First stream – Farmers and NGOs – Supporting farmers to adopt sustainable farming– Supporting farmers to adopt sustainable farming practice – Raising awareness on negative impacts of agro- chemicals and undue dependency on external market – Promoting indigenous knowledge of sustainable farming practice •
  6. 6. 22 STREAMS OF ORGANICSTREAMS OF ORGANIC AGRICULTUREAGRICULTURE • Business Oriented : Entrepreneurs – Large scale businessmen – Overseas linkage – Business opportunity – Engaging local researchers and government to help– Engaging local researchers and government to help them – Foreign certification is used Up and down experience due to international political and economic condition
  7. 7. KEY CONTRIBUTORS OF ORGANIC AGRICULTUREKEY CONTRIBUTORS OF ORGANIC AGRICULTURE • King Bhumibhol and the Royal Projects • Santi Asoke, a Buddhist sect that practices and transfer organic farming to farmers • Dr. Han Kew Cho, president of Farmer Association, Korea who was invited to transfer his knowledge onKorea who was invited to transfer his knowledge on organic farming techniques. • Chai Wiwat Agro -industry and Capital Rice Co. Ltd. Started organic rice project in Chiang Rai and Phayao • Man Sarmsri, a village headman and the leader of Na so organic farming group in Yasothorn province who dare to change to practice organic farming, creating business opportunity for his group and local communities
  8. 8. CERTIFICATION OF ORGANICCERTIFICATION OF ORGANIC PRODUCTSPRODUCTS • Organic Agriculture Certification Thailand (ACT) – A private non-profit foundation – Offer IFOAM accreditation scheme – Fee-based services – Categories of certification– Categories of certification • Farm certification • Operator certification • Project certification • Wild product certification • Aquaculture • Livestock • Eating establishment
  9. 9. THE ROLES OF GOVERNMENTTHE ROLES OF GOVERNMENT • Regulatory framework – National Office of Agriculture Commodity and Food Standards (ACFS) established in 1995 to set up regulatory framework compatible with the EU system, launching its accreditation program insystem, launching its accreditation program in 2004 – Organic Crop Institute, a public agency under MOAC – Thailand Institute of Technological and Scientific Research (TISTR) under Export Promotion Department drafted organic crop standard in 1999
  10. 10. ORGANIC AGRICULTURE POLICYORGANIC AGRICULTURE POLICY • Government declared and implemented organic agriculture as national agenda in 2005 • The 5 year-programme aimed at supporting 4.25 million farmers (0.85 million in 2006) in using organic inputs instead of agro-chemicalsinputs instead of agro-chemicals • Reducing total export of agro-chemicals by 50% • In 2004 Surin province set up a large scale organic project which planNed to convert 16,000 farmer households (with 37,000 ha) into organic jasmine rice farming. Of which 2,735 households would apply for organic certification from ACT.
  11. 11. THE ROLES OF BANK FOR AGRICULTURE ANDTHE ROLES OF BANK FOR AGRICULTURE AND AGRICULTURAL COOPERATIVES (AGRICULTURAL COOPERATIVES (BAACBAAC)) • BAAC, a state owned bank under the Ministry of Finance, was established in 1966. • Providing financial services directly and indirectly to farmers through its extensive branch network • Total loan outstanding USD 24.25 billion (as of march• Total loan outstanding USD 24.25 billion (as of march 2012) • Total deposits USD 27.25 billion • Number of clients 6.7 million households • Number of branches 1,082
  12. 12. BAACBAAC Established in 1966 as a state enterprise under MOF Mandate : to provide financial assistance to farmers As of 31 March 2012, In FY 2011 $ 14 billion of loan disbursement, 3.4 % for non farm loans As of 31 March 2012, 1,082 branches and 979 field units, loan outstanding $ 24.25 billion In addition to its role in Roles in agricultural financing, BAAC plays active roles in enhancing quality and productivity, marketing support, capacity building of farmers and strengthening rural community 96.6% for farm loans
  13. 13. THE ROLE IN ENHANCING QUALITY ANDTHE ROLE IN ENHANCING QUALITY AND PRODUCTIVITYPRODUCTIVITY • BAAC-KU product development project • Fluid manure project in collaboration withDepartment of Livestock Development • 1 Rai 100,000 Baht in collaboration with Chamber of Commerce University
  14. 14. MARKETING SUPPORTMARKETING SUPPORT • To ensure good quality and reasonable prices of farm inputs and fair market crop prices for farmers • Support the establishment and management of AMCs • In 2008, 75 AMCs across the nation supplied farm input worth $ 600 million and marketed farm product worth $ 300 million • BAAC runs 2 farm central markets to facilitate marketing farm produce of its clients
  15. 15. StepStep 33 creating community business networkcreating community business network THE ROLE IN COMMUNITY DEVELOPMENTTHE ROLE IN COMMUNITY DEVELOPMENT •• Sufficiency Economy Philosophy has been applied as aSufficiency Economy Philosophy has been applied as a guideline for farmers to improve their quality of lifeguideline for farmers to improve their quality of life StepStep 22 collecting andcollecting and analysinganalysing data, formulatingdata, formulating community plan, conducting joint business venturecommunity plan, conducting joint business venture StepStep 11 cutting down household expenses, building saving habit,cutting down household expenses, building saving habit, abandoning sinful habitsabandoning sinful habits
  16. 16. THE ROLE IN FINANCING ORGANIC SUPPLYTHE ROLE IN FINANCING ORGANIC SUPPLY CHAINCHAIN • In 2003, BAAC established Farmer Field School for farmers to learn and practice organic rice farming • Sufficiency Economy Learning Centres were set up in order to spearhead in shifting farmers’ paradigm and educate them how to practice organic farming byeducate them how to practice organic farming by maximizing the use of locally natural inputs instead of relying those from external sources. • BAAC supported the establishment of Organic Agriculture Federation in 2005
  17. 17. Financing Organic Supply Chain Technical services Financial Services DOAE/NGOs Farmers BAAC BAAC's SELCs DOCP/DOCA AMCs/Agri-Coops BAAC DOIS/DOA/MOH Processors CBs DOEP Wholesalers/Exporters EXIM Bank CBs DOI Retailers/Super stores CBs/GSB Consumers
  18. 18. Community Rice Center Hom Mali Aromatic Rice Grain RICE WAY OFRICE WAY OF TALUNGTALUNG LEKLEK COMMUNITYCOMMUNITY A MODEL OF SELFA MODEL OF SELF--SUFFICIENT VILLAGESUFFICIENT VILLAGE Middle Stream Community Council as a Center Down Stream Consumers Knowledge Organic Rice 40,000/T. Brown rice 50,000/T. Germinated brown riceWholesale Local Wisdom Culture Technology Value Creation Finance Wholesale/Retail Up stream Farmer Producers Marketing Community Rice Seed Center Community Rice Center Brown rice Germinated brown rice GABA rice Grain Total Production 200 Tonnes @ 14,000 /T. Hom Mali Aromatic Rice Grain Total Production 50 Tonnes @ 18,000 /T. AMCs Germinated brown rice 70,000/T. Rice Seeds 22,000/T. Retail Retail 17th Rice Seed Center Wholesale Wholesale 200 T. 50 T. 50 T. Retail
  19. 19. Thai GABA Rice
  20. 20. OPPORTUNITIES AND CHALLENGESOPPORTUNITIES AND CHALLENGES • Opportunities – Growing demand on safe food – Rising agro-chemicals’ prices – Threat of poor health affected by contaminated food – Better cooperation among concerned agencies such– Better cooperation among concerned agencies such as FAO, IFOAM, RACAs etc. • Challenges – Farmers and consumers’ awareness – Government intervention – Infrastructure – Certification
  21. 21. AFRIS. AsianFoodRegulationInformationService. We have the largest database of Asian food regulations in the world and it’s FREE to use. We publish a range of communication services, list a very large number of food events and online educational webinars and continue to grow our Digital Library. We look forward to hearing from you soon!