5. We are now studying the potential and process of building last mile
business partnerships between value chain players and FIs
• “Last mile firms” refers to agribusinesses (a.k.a. “value chain actors”), or ag-focused technology
platforms
• Business partnerships refers to mutually beneficial collaboration between independent private
sector organizations to increase breadth or depth of services to smallholders
• In particular, we are studying four last mile firms who already touch smallholders and are seeking
financial institution partners to offer financial solutions to the farmers
• This is an 18-month ongoing study (into 2018), and we have completed baseline data collection,
primarily through interviews/field visits and document review with last mile firms, potential
partners, and farmers where possible
• Most partnerships are in early/potential stages, so we’re focused on the motivation and process of
forming these partnerships; in the future we will analyze business dynamics and results
6. Four FRP winners were the focus of the study – they operate
different business models in four different countries in Africa
Who Where What
Biopartenaire (subsidiary of Barry Callebaut) is a cocoa off-taker who also
provides farmers with inputs and collects payment after harvest.
Biopartenaire is looking to partner in a pre-financing scheme for quality
agricultural inputs.
Empresa de Comercialização Agricola (ECA) is an off-taker of maize working in
Mozambique. They have been attempting to build a partnership with
Vodacom to facilitate mobile money transactions. They also provide on-
lending.
Prep-eez, runs an information delivery and communication platform. The
platform: (1) Provides information and extension support; (2) Collates data
on farmers, and (3) Provides an avenue for FIs to connect with farmers and
lend directly. Prep-eez also provides on-farm services and is an offtaker.
Kifiya has developed a transaction platform and is partnering with farmer
cooperatives, insurance companies and MFIs to provide mobile payment
solutions to farmers. Kifiya has also developed a micro-insurance product for
farmers that it is working with insurance companies to deliver.
ECA
*
*Kifiya is best described as a technology provider rather than an agribusiness. For
the purpose of this study, we have focused Kifiya’s agri-focused activities
9. Biopartenaire provides bundled productivity solution
motivated by cocoa supply; wants to outsource lending
Biopartenaire current partnership model for saving product
Savings
Advans provides
farmers with a savings
product and a mobile
channel for deposits
Farmer groups - each farmer
group has a village
coordinator who acts as a
distribution point for inputs
Biopartenaire
provides Advans with
a customer base for
their savings product
Biopartenaire
sustainability
department
Biopartenaire
provides credit,
using the savings
as collateral
Source: Biopartenaire documentation, field visit with Biopartenaire team, interviews with current and potential
Biopartenaire partners, Dalberg analysis
Model and motivation:
• Provide extension and inputs (facilitated by credit) cost-neutrally to
increase farmer productivity to secure quality cocoa supply
• Move direct farmer lending (and related risks) from balance sheet,
leverage Advans’ branchless banking system to reach farmers
Potential success factors:
• Work with MFI given motivation and reach, high-level strategic buy-in
• Flexible MOU for experimentation, start with savings product
• Support of IFC risk-sharing agreement for current lending
Unknowns:
• Can BioPartenaire KYC data and insight on the “right” farmers be
enough to enable an urban MFI to start lending directly to farmers?
• How to quantify the risks (e.g. side-selling) and benefit of outsourcing
lending
10. What is the value proposition for financial institutions? A
framework for how last mile partners reduce FI cost/risk
Product development includes advising FIs on (i) how and when a product should be delivered, (ii) what products are needed
and (iii) developing products, including provision of technical expertise
Source: Stakeholder interviews, Dalberg analysis
Last mile firms offer…
Customer acquisition
Product distribution /
collection
Product development* Credit risk management
Farmer aggregation
Group farmers together to ease
promotion/delivery of services
Provides access to large
numbers of farmers, reducing
sales and marketing costs
Agribusinesses act as channels
through which to sell products
and collect repayments
Risk is diversified and reduced
by providing to groups, rather
than individuals
Access to market/
off-taking
Provide a guaranteed market,
ensuring farmers have income
Off-taking provides knowledge
of what financial products to
offer which customers
Off-takers can make
repayments on behalf of
farmers on collection of
produce
Knowledge of farmer income
and crop cycles can influence
how products are tailored
Off-taking guarantees farmers
a market and cash flow,
thereby reducing risk of
default
Technical assistance
Provide training e.g. agronomic
practices, financial literacy etc.
Training on financial literacy /
agribusiness promotes uptake
of financial products
TA can help increase farmer
yields and cash management,
reducing default risk
Interface with farmers
Act as “feet on the ground” and
handle farmer interactions
Interactions of field agents
with farmers can be used to
market financial products
Assist with disbursing and
collecting funds, reducing FI
admin and follow up costs
Knowledge gained from
farmers is used to influence
product specifications / terms
Can use farmer interactions
to educate on repayment
terms $ provide reminders
Know-Your-Customer (Data)
Collect farmer data, e.g.
income, farm size, expenditure
Data provided to FIs helps
target high potential/priority
customers for given product
KYC data helps FIs determine
cash flow cycles and timing for
cash disbursement
Data provided to FIs is used to
structure appropriate credit
and insurance products
Data on farmers helps select
and gain approvals for the
most creditworthy farmers
Areas of FI cost reduction Areas of FI risk reduction
Key: Does not contribute Somewhat contributes Strongly contributes
17. Supporting factors in last mile business partnership formation (1/2)
SOURCE: Discussions with FRP winners and their partners, Dalberg analysis
Category Support factor Ways in which enabling factor promotes partnerships for financial provision
FIs who have a strategy focused on agriculture or working with the bottom of the pyramid are
more likely to be interested in partnership as doing so helps to fulfil their mandate.
FIs who have a team specifically dedicated to forming / managing partnerships are more open to
innovative approaches, have experience in partnership brokering and are better able to deal with
issues that pose challenges in partnership formation.
Existing relationships between Agribusiness management and FI management can play an
important role in gaining required approvals. These could take the form of having previously worked
together, social networks etc.
Policies that push inclusive financial service provision are likely to boost partnerships. Likewise,
policies that empower rural communities or otherwise create an enabling environment.
A stable operating environment is predictable and low risk, which encourages FIs to take on new
partnerships and non-traditional avenues of providing finance.
Markets with more competitive dynamics promote partnerships; FIs are more willing to take
innovative approaches to increase their market share than when a few key players dominate, with
no incentive to serve rural populations.
External
environment
Government policies
Socio-economic stability
Private sector competition
Partner
characteristics
FI strategy
Partnership teams
Existing relationships
20. 1. Seek partners w/ aligned interests and relevant experience
• Look for financial institutions (FIs) with a stated strategy in agriculture or serving the BoP
• Look for FIs with a strong distribution footprint
• Look for FIs that have a team specifically focused on partnerships
• Look for FIs where existing relationships exist
• Consider FIs with a history and culture of innovation that is reinforced by senior management
• Look for FIs that have worked with donor agencies in the past
2. Highlight value proposition
• Create a pitch deck
• Adjust pitch documentation based on feedback
• Emphasize factors that FIs are most interested in e.g., market size, customer acquisition, cost savings, etc.
• Highlight how partnership can reduce bank risk
• Provide “real-life” demonstrations
• Talk to multiple Fis
• Be prepared to present to multiple people within the FI
3. Develop a structured process for negotiation, build linkages, and communicate openly
• Agree on communication norms and processes
• Be clear on non-negotiables
• Understand the business model and highlight incentives for each party
• Build in options for re-negotiating terms, linked to phased rollout
• Look for FIs that have worked with donor agencies in the past
• Look for FIs that have worked with donor agencies in the past
• Consider independent arbiters (e.g., donors) for coordination, honest broker support, and even risk sharing
Guide for last mile firms: Seeking and negotiating partnerships
21. Guide for last mile firms: Working together in partnerships
1. Align on vision and clarify roles and responsibilities
• Align on a vision of what everyone is trying to achieve
• Align on roles and responsibilities
• Seek to solve challenges together
2. Create systems for open communication and dynamic feedback
• Agree on communication norms and processes
• Create outlets to ensure communication is open and transparent
• Build linkages with and engage senior management
• Start with a pilot or “test phase” for the partnership
• Visit other similar partnerships, and visit each other’s operations
• Align on allocation and contribution of resources
3. Align on available capabilities and resources
4. Create accountability measures
• Proactively monitor results and outcomes and foster a “learning culture”
• Where feasible, make the partnership recognizable and autonomous
• Develop an escalation mechanism
23. Further or upcoming reading
• Learning Lab and ISF (2016) Inflection Point
• Learning Brief 01: The business case for digitally-enabled smallholder finance
• Initiative for Smallholder Finance Briefing Notes
• Lending a Hand: How direct-to-farmer finance providers reach smallholders
• Value Chain Financing: How agro-enterprises serve as alternate aggregation points for delivering
financial services to smallholder farmers
• The Rise of the Data Scientist: How big data and data science are changing smallholder finance
• IDH Sustainable Trade: Service Delivery Model research
• Opportunity International Value Chain Partnerships in Practice
• AGRA FISFAP study of hybrid data: Farm management information system (MIS) data
for use by financial institutions
• Mercy Corps Agrifin Accelerate ongoing work with partnership-based platforms
including Patient Procurement Platform in Tanzania and DigiFarm in Kenya