geron exp challenges_and_opps_in_vcf

Experiences, Challenges and Opportunities in Value-Chain Financing :

LIDUVINO S. GERONFirst Vice PresidentPrograms Management Group

A synergy program of the DA, DOF and LANDBANK aimed at: Supporting the Government’s thrust

towards food security and self-sufficiency by increasing production and improving the food distribution system; and

Increasing small farmers’ and fisherfolk’s income.

Value Chain Financing Multi-Stakeholder ConferenceLBP Diosdado Macapagal HallApril 12, 2011

Financial assistance to support the requirement for production, working capital and acquisition of fixed assets;-LANDBANK initially allocated P50 Billion for the Program

Market linkage among cooperative producers and anchor firms;

Technical assistance to cooperatives to ensure meeting market requirement for volume and product quality.


Rice Production and Trading

Anchor Firm s: 2

Coops : 23

Integrated Corn and Hog Production

Anchor Firm : 16

Coops : 52

Oil Palm Production

Anchor Firm : AGUMIL

Coops : 44

Vegetable Production

Anchor Firm: :ANI

Coops : 18

Cardava Banana Production

Anchor Firm : SAGREX

Coops : 2

Fish Production and Processing

Anchor Firm : GEN TUNA

Coop : 1

Seaweeds, Fish Canning and Coconut Production

Anchor Firm : Seacost TCFCI

Coops : 14

Pineapple Production

Anchor Firm :

L abo Progressive MPC

Coops : 9

GEOGRAPHIC LOCATION OF FOOD SUPPLY CHAIN PROJECTS

What are the risks and how can these be addressed; How can the loan be paid given the risks; How to bring individual farmers (those who are not

members of organized farmers groups) in the value chain.

In financing value chain, a financial institution needs to have a good handle and understanding of the issues related to the different blocks in the chain; and come up with mitigating measures to address the risks.


Issues on VCF : A GFI perspective

Technical capability of farmers to produce commodities at the standard required by the buyer. Issue on ensuring the use of quality seeds and good production practices come into play.

Commitment to volume and production schedule requirement of the buyers/processors. Producers need to calendar farm production (if commodity production cycle allows) in order to meet the requirements of the buyer.

Capability of farmers to negotiate. Farmers need to have access to market and other information (e.g. costing) which will allow them to negotiate with potential buyers.


Issues and Challenges in VCF - Producer Side

Capability of farmers to negotiate. Farmers need to have access to market information, and other information (e.g. costing) which will allow them to negotiate with potential buyers.

In the FSCP of LBP, anchor firms are asked to sign a production, technical and marketing agreement (PTMA) with the agricultural producers. In the PTMA, all the identified concerns are addressed. In many cases, anchor firms are tapped to be part in coming up with solutions on the concerns of financial institution.



Financing individual farmers who are not members of organized farmers groups. New lending modalities need to be introduced to accommodate individual farmers (micro agri, household cash flow lending, tapping new conduits etc).

Credit evaluation. Financing agri production projects will require a good understanding of the production cycle of a particular commodity.

Collateral. In the absence of collateral, financial institutions need to consider credit enhancements such as guarantees and market contracts as risk mitigants.



Project evaluation. Need to match operational capacities with sources of raw materials. To ensure optimal use of project assets, there is a need to be assured of the sources of raw materials.

Local infrastructure support. Many processors are constrained to expand sources of production because of poor infrastructure support (e.g farm to market roads).

Incentives for participation. Capacity to expand and increase level of operation should be incentive enough. Whatever additional incentive that can be given should be a bonus.

Market- need to ensure that there is a market for the products of the processors.


Issues and Challenges in VCF–Processor Side

OPPORTUNITIES

Improved financial assistance and SFF reach (through co-ops and other conduits)

•Marketing contract as credit enhancing and risk-mitigating instrument

Particulars

No. of Projects 8

No. of Anchor Firms 30

No. of Co-op/SME Producers

164

Estimated Financing Requirement for 2011 P2.8 Billion


OPPORTUNITIES

Greater and more focused collaboration with partner agencies DOF for conducive policy environment for VCFDA and SUCs for technical assistancePrivate sector investments

Increasing agricultural productivity and farmers income


Thank you

geron exp challenges_and_opps_in_vcf

Business

valuechain financing

financing value chain

sources of production

fish production

farm production

coconut production anchor

hog production anchor

production schedulerequirement