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Brussels Briefing n. 57: Marco Dekker "Successes in funding mechanisms to support smallholders farming"

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The Brussels Development Briefing n. 57 on “Investing in smallholder agriculture for food security and nutrition” organised by CTA, the European Commission/EuropeAid and the ACP Secretariat was held on Wednesday 11th September 2019, 9h00-13h00 at the ACP Secretariat, Avenue Georges Henri 451, 1200 Brussels, Room C. The Briefing discussed smallholder agriculture and its key role in delivering food security/nutrition, and sustainable food systems, as recognised in SDG 2.

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Brussels Briefing n. 57: Marco Dekker "Successes in funding mechanisms to support smallholders farming"

  1. 1. STRENGTHENING AFRICAN RURAL SMALLHOLDERS (STARS) Blending financial and market solutions Dr. Marco Dekker MERL Manager STARS program E-mail: m.dekker@icco.nl
  2. 2. Supporting 210,000 smallholder farmers through: • Access to Finance • Value Chain Development The solutions we bring are based in the local market system Smallholder farmers are actors in that market system, but existing products are not always aligned to their needs 5 years, $17 mln
  3. 3. Standard micro-loan Agricultural micro-loan Planting season Harvesting season An micro-credit example: • Agricultural cycle • Inputs needed • Required loan size • Crop-specific repayment capacity • Repayment scheme Regular repayment Repayment after crop sale Disbursement Disbursement
  4. 4. Smallholder farmers already accessed credit before STARS
  5. 5. But smallholder farmers need targeted financial products STARS develops a mix of loan products to address the actual needs of farmers: • Value Chain Finance (producer organizations + banks + big buyers) • Leasing products (equipment) • Crop-specific individual loans • Warehouse receipt lending • Group solidarity lending
  6. 6. STARS goes beyond just developing credit, we look at the agricultural value chain as a whole Without access to quality farm inputs or a market to sell his crops, the farmer still does not benefit We strengthen services like input supply, fee- based training, market information services, agronomic extension services We build the capacity of Producer Organizations on management, financial skills, quality control We link POs to big buyers, commercial banks, organize B2B sessions, we help develop business models
  7. 7. And the combination is key to raise yields, sell to markets, increase crop revenue, and improve food security Processors, big buyers Traders Producer organizations (CB) Smallholder farmer Input supplier, BDS provider, FFS State and commercial banks Microfinance institutions (CB) Crowdsourcing Refinancers Savings mobilization 1) Access to finance 2) Value Chain Development
  8. 8. Our results so far across four countries (Y4) Solidarity group clients Individual clients (loose VCs) VC Clients (tight VCs) Warehouse lending (in Senegal only) Leasing Total 63,022 10,262 74,758 1,981 Under development 150,023 Training Farm inputs Market access Agri-info access Total 31,674 34,791 88,673 23,241 178,379 Access to Finance Value Chain Development
  9. 9. Our results so far across four countries Some examples from studies: BF - Sesame farmers after improving farming techniques and accessing credit increased yields from 80 to 300 kg/ha and farmers went from 2 to 3 meals a day SG – Farmers accessing warehouse receipt loans received higher prices, had less PHL, and increased their food security in the lean season RW – After credit risk assessment was improved in one branch, agri-loan sizes increased and non-performing loans dropped to almost zero ET – A group of potato farmers that were linked to a big buyer (a Dutch potato chip manufacturer) sold 244 MT in the first year, generating interest of MFIs to offer credit
  10. 10. Drivers of success: • It starts with a good understanding of market constraints and client needs, incl learning loops • Flexibility to adapt to changing (market) conditions, no linear blueprint implementation • An approach that goes beyond a single solution, blending multiple solutions • Focus on systemic change (scale up) Systemic change (early signs): MFIs internally scale up and expand developed products to other crops and other branches. POs become more service and market oriented, and receive credit from banks. Farmers have shown a willingness to pay for services like training. Value chain coordination improves. New MFIs and POs join STARS, and the STARS approach is replicated in other value chains. Challenges: • Government control of input supply systems, market prices, and producer organizations • Market distortion by donors providing subsidized products and free services • Collaboration with big market actors as a relatively small program (no co-investment) Emphasis in last year: Climate-resilient agriculture, youth and gender, digital innovation (loan assessment, product flow), fair and transparent pricing
  11. 11. We help Farmers and Small Businesses Grow.

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