ANALYZING AND FINANCING VALUE CHAINS

IN AGRICULTURE

MAY 21, 2010 CENTURY PARK HOTEL Manila

What is Value Chain?
SEQUENCE OF STEPS IN THE PROCESS OF PRODUCTION TO MARKET DELIVERY OF A PRODUCT.
.INPUT SUPPLY > AGRI PRODUCTION > FIRST LEVEL HANDLING >– PROCESSORS > WHOLESALERS/DISTRIBUTORS > RETAILERS >– CONSUMERS.

VALUE CHAIN APPROACHES ARE A VEHICLE FOR LINKING SMALL BUSINESSES TO MARKETS

VALUE CHAIN CONCEPT
End Users/ Consumers
Human Resources Infrastructure

Marketing

Production
Services CAPITAL
Equipment

Inputs

 Tri-Partite Agreement between Farmer, Bank and Processor/Exporter
 Farmer is assured of a fixed farm-gate price for his produce Integrator/Exporter is assured of steady raw material supply Bank is assured of loan collection

BANANA CHIPS CARDABA SUBSECTOR MAP
Local Retail Outlets
Price makers

Importers

Banana Chips Exporters ( about 15% of cardaba production) MANILA EXPORTERS Micro Processors Less than 5% of Cardaba production
Price takers; high risk; medium proximity to markets; few suppliers Price Makers, med risk

First Fry Processors Processing their own production
Source of info; quality control at community level; has low degree of influence at the community chain Price Makers, med risk; with some options on channels

TRADERS/ DISTRIBUTORS
Price makers but shifts to price takers when supply is very limited; low risk; med proximity to markets

Barangay Agent

Assembler

CARDABA GROWERS/ TRADERS
Unripe banana Good quality for processing

BANANA CHIPS PROCESSING ON-FARM: 1ST FRY

NEW PROCESSED PRODUCT FOR EXPORT

What , therefore, are the opportunities for Microfinance?
A. Where are the opportunities for microfinance institutions for financing within the value chain? * Input Distribution > MFIs can finance small traders of fertilizer/chemical requirements of farmers * Production level > MFIs can finance labor, fertilizers, and other inputs needed in production with amounts determined through cash flow analysis * Processing > MFIs can finance salary loan to employees, etc * Trader/Wholesaler/Assembler/Consolidator > MFIs can finance working capital * Retail > MFIs can finance micro business loan, etc). B. Value chain analysis can expand opportunities for financing within a specific crop or sector (e.g. First Fry of Banana Chips)