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OROMIA COFFEE FARMERS COOPERATIVE UNION (OCFCU)
BANKING SERVICE TO OCFCU AND ITS MEMBER COOPERATIVES
Presented By
Dessalegn Jena
July, 2014Nairobi
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Outline1. Introduction and Background
• Some facts about Ethiopia• Role of Agriculture in Ethiopia• Characteristics of the rural sector• Financial Sectors in Ethiopia• Efforts of Financing Agricultural Sector in Ethiopia
2. Structure of farming community in Ethiopia• Financial need of Farming Community• Unique problems of Farmers access to finance
3. Effort to finance cooperative sector• Establishment of Cooperative Bank(CBO)
4. The Role of OCFCU in establishment and Governance of CBO5. Establishment and Current Status of OCFCU6. Recommendations
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Some Facts about Ethiopia
Area 1,104,300 sq. KmAgriculture land 345,130 Sq.KmArable land 13,606,000 ha.Population is about 90 milRural population 85%Population growth rate 2.9%Per capita is about $500
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Role of Agriculture in Ethiopia
Agrarian country and agriculture plays vital role in national economy.
The economy policy is Agricultural Development Led Industrialization /ADLI/.
Agriculture accounts 46.3% of GDP 83.9% of export and 80%of labour force.
Small scale producers contribute more than 90% of agricultural products.
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Characteristics of the Rural Sector
Agricultural activities are the main stay Low level o productivity High level of poverty Undeveloped infrastructure Poor entrepreneurial development Natural resource degradation Poor saving habit Shortage of capital Poor credit facility
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Financial sectors in Ethiopia
• Formal Financial SectorsCommercial BanksMicro Finance Institutions (MFIs)Insurance Companies
• Semi-formal Financial SectorsCooperative FinancingSaving and Credits (SACCOs)
• Informal Financial sectorsIddirIqqub
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Effort of Financing Agricultural Sector
• Government BanksThe loan is advanced by guarantee of Regional
GovernmentsGuarantee is 100% in the case defaults
• Micro Finance Institutions (MFIs) Newly established system to mitigate risk of default The farmer is provided with voucher and receive
agricultural inputs from co-ops, The cooperatives collect their money from MFIs
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Cont’d
• Financial InclusionEthiopian Financial Inclusion Project (EFIP)Financial Inclusion Support Unit (FISU)
• Warehouse Receipt FinancingAgreement is made between ECX and
Commercial Banks to finance 60% of the value of commodity
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The Structure of Farming community• Cooperative Sector
Farmers/HouseholdPrimary Cooperative SocietiesUnionFederation
• Other service providersProcessorsTransporters Input suppliers
• StakeholdersLocal Government Regulatory BodiesValue Chain supporters
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Financial need of Farming community
To increase production and productivity For processing and packaging For infrastructure development For product marketing For social welfare, For diversification
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Unique problems of farmers access to finance
Agriculture is less attractive field of business as to financial sectors.
Agricultural sector is considered as high risk Illiquid and perishable Collateral Small transaction size, Geographically dispersed clients Poor Financial management
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Efforts to Finance Cooperative Sector
• Establishment of Cooperative Bank of Oromia (CBO) Cooperative bank of Oromia is registered in accordance with article 304 of the
commercial code of Ethiopia and licensed by NBE. CBO is mainly(70%) owned by cooperative societies.
Mission:
To Provide full-fledged and customer responsive banking service for cooperative societies, other entities, and individuals with special emphasis to agricultural and agro-based businesses financing, and to maximize shareholders’ value through use of competent and disciplined employees, visionary leaders, and modern banking technologies.
CBO’s financing Priority: Agriculture and agro-processing Cooperatives business activities Export oriented activates
• Current status of CBO• As of Dec 31,2013
Asset =7.3 billion birr Capita =901.34 billion birr Loan portfolio =3.2 billion birr Coops’ Loan = 27-30% Recovery rate =98.5% Branch network = 102
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CBO’s Financing experience.o Credit products:
Investment loans. Working capital loans.
o Types of clients Financed: Multipurpose Coops Agricultural Cooperative Unions SACCO Unions Coffee Farmers Cooperative Union Primary coffee cooperatives societies Others.
o Activities financed: Production activities: Agricultural produce marketing activities Mechanization. Manufacturing activities Domestic trade and services Export and import activities. 14
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`Role of Oromia Coffee Farmers Cooperative Union (OCFCU) to establish CBO
Initiation of idea for the establishment of the Cooperative Bank of Oromia to access rural credit,
Pioneer and major Share holder, Major creditor, Corporate Governance,
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Establishment and current status of OCFCU
Regional State Oromia,Ethiopa
Above 5000ha – 55 districts
lakes
Between 2000-5000 ha- 15 districts
Less than 2000 ha- 2 districts
Other districts
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INITIAL CURRENTM e m b e r s
C a p i t a l
• 34 Cooperatives• 22,503 House Hold
• 311 cooperatives • 288,201 House Hold
• USD 90,000• USD 15,500,000
Date of Establishment01 June, 1999
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Objective To Provide market information to Co-op societies
about coffee price at local and international market To sell their coffee product at better price at local and
international market, To improve and maintain the quality, productivity and
sustainability of coffee production To provide coffee farmers with social services To facilitate and provide cooperatives with credit, To represent the coffee farmers at national and
International forums,
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Deputy General Manager
Board Of Directors
General Assembly
CommercialDepartment Finance
DepartmentHuman resource
Department
Coffee Processing
Factory
General Manager
Supervisory Committee
Legal service
Audit Services
Quality control Secretary
Planning & Programming Department
Extension Department
Organizational Structure OfOromia Coffee Farmers Cooperatives Union
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Different Certifications
Organic Fair trade Rainforest Alliance UTZ Tracibility
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Farmer
Collector
Supplier
ECX
Exporter
Buyer
Roaster
Farmer
Cooperative
Union
Buyer
Roaster
Retailer
consumer
Retailer
Profit
Profit
Fair TradePremium
Cooperative Auction
The Coffee value Chain
consumer
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OCFCU’s performance in the last decade
Membership increment from 34—311 cooperatives Household increment from 22500—288,201, Coffee sales from 126 tons –-9000 tons Profit generated from USD 24,000—USD 6.7 million Dividend paid from USD22,000—USD 3.4 million Fair Trade premium USD 74,000---USD 1.6 million Capital increment USD 90,000---USD15.5
million
No Sectors Name of Project Number of project Accomplished
Number of beneficiaries
1 Education schools 70 28260
Kinder garden 3 884
Library & laboratory 3 586
Teachers’ residence 2 22
Staff office 3 47
2Health Health Post 13 93,000
Dry latrine 7 4250
3 Water Development Potable water development 89 41,112
4 Transport secter road 5 27,000
Bridge 9 21,000
5 Coffee Processing Coffee processing mills 34 2580
6 Agro-industry Flour mills 5 5,000
7 Warehouse Office and Store 464600
8 Museum Coffee museum 1
Total 291 228,341
Projects Undertaken by the Fair trade Premium
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Farmers Support
Capacity building Supply of small farm tools Supply of quality control accessories Supply of Beehives Establishing and supporting of Saving and Credit, Advisory service
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Value chain supporting facilities
127 wet mills 26 dry coffee hullers 2 coffee Processing and Grading Machines 11 Trucks 9 vehicles 5 Buses (services )
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Carbon neutral coffee projectGimbi Energy Efficient Cook stove Programme
Distribute 30,000 Fuel saving stoves To produce Carbon Neutral Fair trade Coffee Reduce Green House Gas emission (36,633(tCO2e) Each HH is expected to have both stoves (full package) 50% reduction in fuel wood. Pre-finance – obtained from ICCO, HoAREC – model CDM.
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Job Creation
• Union Permanent 137seasonal 1200
• Primary cooperativespermanent 1302seasonal 12000
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Future plan
Coffee roasting industry establishment Honey processing industry, Expansion of processing plant Coffee complex construction Expansion of income generating projects
Recommendations to enhance FCUS access to finance!Improve the governance and management practices of cooperative
societies.Improve the financial management and information system of
cooperative societies.Strengthen the relationship of cooperative movement, Government
cooperatives promotion structures, financial institutions and other relevant stakeholders.
Formulating and implementing effective risk mitigating strategies with regard to agricultural lending.
Design and implement credit relief outreach program.Enhance the agricultural lending skill of bankers to improve their
agricultural loan judgments.Arrangement of refinance facilities provided for banks committed to
agricultural lending.
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Thank You!