AgFiMS Tanzania 2011Headline findings

Irma Grundling14 March 2012

The problem …

• Smallholder & agri-business finance perceived as risky

• There is lack of financial services suited for agriculture

• Limited penetration of financial services into agri/rural areas

Objective

Land-size or turnover-based selection criteria applied

?

AgFiMS Tanzania 2011 sample

· Representative sample of 626 EAs drawn by NBS

· Listing & screening exercise provided the sampling frame

· 4 094 face-to-face interviews were conducted with agribusiness owners

· 3 734 interviews with producers

· 104 interviews with processors

· 256 interviews with service providers

· The survey is representative at:

· National, urban-rural, and agricultural zonal levels (including Zanzibar) for producers

· National level for processors and service provide

Size & Scope of the AgFiMS Tanzania 2011

identified Agribusiness Market

AgFiMS Tanzania 2011

Agri-businesses Total AgFiMS qualifiers

Number of qualifiers

% qualifying

Producers - farmers selling more than they consume and earning an income from cash crop, food crop or livestock farming

1 932 222

492 980 earn at least $600 p.a. OR use at least

5acres

25.5%

Processors 21 017 8 199 earn at least $1500 p.a. 39.0%

Service Providers 62 502 18 793 earn at least $1500 p.a. 30.1%

TOTAL

2 015 742

519 972 25.8%

• +- 7m farming households• +- 5m households with farming as main income source• AgFiMS – 2 million agri-businesses

AgFiMS Tanzania 2011 Business Profile

Business Profile Most agribusinesses focus on crop farming as main source of income

48.5%

37.5%

8.3%1.8%3.9%

Food cropsCash cropsLivestockProcessorsService providers

Maize

Rice

Beans

33.2%

23.9%

8.8%

Main income gen-erating activity:

Food crop farmers

Tobacco

Cotton

Cashew

Coffee

Sunflower

27.3%

19.9%

19.0%

17.2%

6.8%

Main income gen-erating activity:

Cash crop farmers

Business Profile Most livestock businesses focus cattle as main source of income

Indigenous cattle

Cattle - Dairy

Indigenous chickens

Pigs

Indigenous Goats

Chicken

Chickens – Broilers

Cattle – Beef

42.3%

19.5%

8.3%

7.8%

5.7%

5.2%

3.3%

3.3%

48.5%

37.5%

8.3%1.8%3.9%

Food cropsCash cropsLivestockProcessorsService providers

Crops

By-products of animals/poultry

Fruit

Honey

Vegetables

73%

5.3%

4.2%

1.5%

.4%

Main produce processed by pro-

cessors

Business Profile Service providers are mainly retailers

Buy/get agricultural products from farmers/processers and sell it

Sell something to farmers for the purpose of farming eg. Seeds

Provide a service to farmers or processors of farming products eg. Renting ploughs

Sell something to processors of farming products for the purpose of processing eg.

Processing machinery

Rent land to farmers for farming purposes

82.9%

11.9%

2.7%

1.9%

1.4%

Main Income generating activities – Service providers

48.5%

37.5%

8.3%1.8%3.9%

Food cropsCash cropsLivestockProcessorsService providers

AgFiMS Tanzania 2011Business Owner Profile

Age & gender distribution

Male86.5%

Female13.5%

younger than 24 Years

25 - 29 Years

30 -34 Years

35 – 39 Years

40 – 44 Years

45-49 Years

50-54 Years

55-59 Years

60 or older

2.3

6.3

11.7

19.1

15.7

15.2

11.0

6.4

12.2

Business owners demonstrate entrepreneurial characteristics

Want to leave agribusiness

Do not want to grow the business

Dont have other options - will stay in business

Love farming dont want to do anything else

See activities as a business opportunity to grow

1.5

1.5

24.9

15.6

56.5

3 in 5 are involved in agriculture because they see it as a business

opportunity

Male

Female

13.6%

19.7%

9.9%

11.0%

76.0%

67.4%

Less than 2 years 2 to 5 years6 to 10 years More than 10 years

Business owners manage their money wisely and are willing to take calculated risks

On any given day knows the business' financial situation

Keep financial records

Save or put away money for bussiness

Willing to put profit back into bussiness

Believe it is neccesarry to take calculates risks in business

Would borrow money for big purchases

Would borrow money for inputs

Would borrow money to improve cash flow

Would borrow money to start a new/expand bussiness

93.2%

63.8%

77.5%

93.6%

94.5%

75.0%

84.7%

81.6%

89.2%

92.1%

54.7%

79.0%

94.1%

93.1%

69.1%

74.5%

78.4%

83.6%

Female Male

Business owners make soundfinancial decisions

Ability to meet minimum requirements

Having borrowed from them before

Easiest to use

Most convenient to get to

Quickest access to money

Best repayment terms

Best interest rates

2.6%

3.4%

14.5%

28.8%

53.8%

59.1%

62.5%

5.4%

4.3%

15.9%

29.4%

59.2%

58.5%

62.4%

Criteria for choosing lenders

Female Male

AgFiMS Tanzania 2011 Business Environment

Is the environment conducive for these entrepreneurs

to achieve business success?

Food crops Cash crops Livestock

8.7%

4.2%

21.2%

‘Ownership’ of land is a perception for most producers

More than 90% producers claim land ownership although less than 10% have title deeds

Lack of access to irrigation systems and reliance on natural water resources further inhibits productivity

Not enough water

Intermittent water supply but enough for farming needs

Always enough water for use but if more water business can grow

Always enough for business needs

26.5

10.8

44.8

17.9

80.8

8.1

10.9

Rely on nature only

Drip irrigation

Own irrigation system

Water Systems

Although the level of access to infrastructure is not conducive for business activities, mobile phone access provides connectivity

Electricity

Tarmac roads

Rail

Mobile

Internet

Landline

14.4

13.7

3.7

67.4

1.8

.7

Limitations in the business environment seems to result in distressed sales

Sell mainly in village or to pub-

lic32.1%

Sell mainly to middle-

men19.5%

Sell to a co-op, whole-

saler, trad-ing com-pany or govern-

ment48.3%

Distressed sales?

12% sell on contract

10% sell all products on

contract

Other

Insurance/job

Borrow/sell an asset

Savings

Nothing in place

3.9

.9

4.9

5.4

84.9

Agribusinesses have virtually no coping mechanisms to rely on when faced with business risks

Income diversification offering protection?86.1% diversify their income sources

No diversification

Additional income from family & friends

Diversify within main agri income line

Diversify within agri but other lines

Has external regular income apart from agri

13.9

.2

17.1

58.7

4.4

Lack of access to networks and information support increases vulnerability

Network wth other agribusiness owners

Belong to groups that benefit the buiness

Get financial advice from credible financial sources

Dont get financial advice/dont have access

Business advice from credible sources

Dont get business advice/dont have access

Get appropriate extension services

Dont get extension services

30.1%

22.8%

15.0%

78.0%

45.3%

48.9%

41.9%

45.3%

GROUPS: Females even less likely 16% vs 28% males

AgFiMS Tanzania 2011 Financial Business Operations

Sound financial decision-making does not result in high levels of financial inclusion for agribusinesses

Fi-nanciall

y served; 45.7%

Financially unserved;

54.3%

Formally served

Informally served

32.4%

27.9%

Banked

Served by formal non-bank/semi-formal institutions

28.2%

8.6%

Female business owners morelikely to use formal services/products

Formal

Banked

Non-bank formal

Informal mechanisms

Excluded

30.4%

26.3%

7.9%

27.0%

56.4%

37.3%

33.4%

10.2%

28.5%

50.5%

Female Male

Multiple financial strategies – A matter of choice or no options?

Banked Served by non-bank formaland/or semi-formal institutions

Unserved (55.6%)

Informally served

43.5%

% businesses with transactional products

% businesses with savings products

% businesses with credit products

% businesses with insurance products .0

10.0

20.0

30.0

40.0

50.0

26.1

31.3

30.0

.5

Landscape of access…

Landscape of access…Gender

Transactional products

Savings products

Credit products

Insurance products 0%

10%

20%

30%

40%

Male Female

147 000 banked …What do they use banks for?

Transactional products

Savings products

Credit products

Insurance .0

20.0

40.0

60.0

80.0

100.0

92.4

97.8

13.8

45 000 use non- bank formal products/services …What are they using?

Transactions

Savings

Credit

Insurance .0

20.0

40.0

60.0

80.0

100.00.0

22.5

82.3

5.8

145 000 use the informal sector …What do they use it for?

Transactions

Saving

Credit

Protection/insurace 0

20

40

60

80

100

.0

11.0

95.7

.0

Saving

Borrowing

Insurance

78.5%

27.7%

0.5%

Financial behaviour …

143 782

2 600

408 303

Financial needs ....‘Capex’, ‘operational expenditure’, ‘business assurance’

To expand the bussiness

Day to day bussiness expenses

To tide the bussiness over against a shock

54.3%

56.2%

23.2%

Drivers of credit

To expand the bussiness, starting a new business

Day to day bussiness expenses

To protect the bussiness from a shock

42.5%

40.0%

26.8%

Drivers of savings

78.5% business owners save but most prefer to save at home rather than putting their money in a bank

Savings group

Savings in livestock, assets, inputs, crops, business

Bank

Secret place at home, piggy bank, with family

2.8%

23.0%

32.0%

84.9%

Savings mechanisms used by savers

Accessibility the key barrier to banking …. ?

• “Banks are too far away” – 37% of the unbanked

• “The business does not meet the requirements of the bank” – 26% of the unbanked

• “Banks do not want to lend money to a business like mine”/ “banks are not interested in a business like mine” - 16% of the unbanked

Status quo : Credit

BankSACCOs

MFIsInformal

Friends/ family

4% business owners

7% business owners

27% business owners

14% business owners

68.9% of credit11.7% of

borrowers

12.2% of credit21.3% of

borrowers

15.1% of credit79.3% of

borrowers

3.8% of credit40.2% of

borrowers

AgFiMS Tanzania 2011 Identifying Development Needs

Perceived obstacles to growth

Getting premises to operate from/Access to land

Lack of labour

Access to business advice and financial information

Access to water

Access to credit; loans and financial support; dont qualify

Access to markets; toll fees; transport

37.2%

16.4%

28.6%

7.7%

58.3%

84.2%

30.9%

18.0%

29.1%

13.0%

44.1%

55.6%

13.3%

24.6%

26.1%

48.3%

58.8%

75.3%

Producers Processors Service providers

Relationship between obstacles to growth & financial status

 INCOME Less than 10 000 000

10 000 000 –30 000 000

More than 30 000 000

Banked 27.5% 55.4% 70.70%Bank credit 3.8% 6.2% 15.60%Insurance 0.4% 2.5% 15.7%

MFI/SACCO credit 7.2% 6.4% 6.40%

Informal 26.7% 30.1% 26.60%

Access to market

Access to finance

Access to market

Access to finance

Access to market

Access to finance

Lack of operational

capital

Lack of growth capital;

regulations become prohibiting

Key capacities for Agri-businesses

• Access to infrastructure

• Access to markets

• Access to/usage of credible financial advisory resources

• Access to/usage of credible business advisory resources

• Access to/exposure to appropriate agricultural advice/support

• Social capital – Access to networks &support structures; coping mechanisms

Formal inclusion

Financial inclusion development clusters

Cluster SizeAccess to infra-

structureAccess to markets

Financial advice

Business advice

Networks

Intensive care (ICU)

133000          

Development 110000      

Opportunity 95000      

AgFiMS Tanzania 2011 Evidence-led Intervention

Approach?

Capacities needed for formalfinancial services usage

•Access to/usage of credible financial advisory resources•Access to/usage of credible business advisory resources•Access to/exposure to appropriate agricultural advice/support

•Access to networks &support structures; coping mechanisms

Information

Structure/organisation

Infrastructure & access to market

CONNECTIVITY

Weaknesses

Strength

Info Hub

BUSINESS ADVICE•Financial management principles

Record keeping; Debt management; Income diversification; Cash flow management

•Strategic business decisionsCompetitive edge; Pricing; Marketing; Contracting; Group/networking

•Risk management• Price; Weather; etc.

AGRI RELEVANT INFO•Inputs

Sources, pricing, credit/advance, security., risks

•ProcessPreparation, prevention, remedial, labour, best practices

•YieldStorage, transportation, timing, surplus/demand & price

FINANCIAL ADVICE•Products, services & requirements•Financial education•Financial advice

Investments; debt; insuranceLong-term; short-term planning

STRUCTURING/FORMING GROUPS•How•Requirements; Obligations; Responsibilities•Management•Structure

Establishing info sharing platform …

INFORMATION HUB

VALUE CHAIN PLAYER

S

GOVERN-MENT

RESEARCH

INST

ACADEMIC INS

NGOS

FINANCIAL

INSTBUSINES

SINST

PRICINGAUTHORITY

DONORS/INVESTORS

AGRIBUSINESSE

S

OP

PO

RTU

NIT

Y

DEV

ELO

PM

EN

T

OP

PO

RTU

NIT

Y

DEV

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PM

EN

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Benefits for all role-players

INFORMATION PLATFORM

- Payment solution- Save storage of money

- Micro credit/credit bureau- Micro insurance

OP

PO

RTU

NIT

Y

More than an info platform ...

CONNECTIVITY

Thank you!!

www.agfims.org