supply chain finance: the role of hub agrodealers...value chain drivers agricultural input &...
TRANSCRIPT
www.afap-partnership.org
Supply Chain Finance: The Role of Hub Agrodealers
Joseph [email protected]
October 2018
www.afap-partnership.org
The Presentation: Outline
1. Introducing AFAP
2. Inputs (Fertilizer) Supply Chain
3. The Hub-Agrodealer Model
4. The Hub-Agrodealer Role
5. Hub-Agrodealer Financing Challenge
6. AFAP’s Model for financing Hubs
7. AFAP’s Supplier Credit Guarantee Program
8. The Hub Advantage to Rural Agrodealers.
www.afap-partnership.org
The African Fertilizer Agribusinesses Partnership: www.afap-partnership.org
WHO WE ARE
• A Non-Profit Organization
• A Partnership of African Institutions
• Focus: Building the capacity of fertilizer and agribusiness SMEs to increase smallholder agricultural productivity in Africa
WHAT WE DO
• HUB Agro-dealer SME Capacity Development;
• Technical Advisory / Support Services
• Business Enabling Environment through policy design and implementation
• Annual Fertilizer and Agribusiness Platform Management;
• Financial Services support through Credit Guarantee facilitation
www.afap-partnership.org
Inputs (Fertilizer) Supply Chain
The AFAP Program – October 2018
Manufacturers
Importers
The Hub Agrodealer Model
HUB AGRODEALER GENERAL BUSINESS MODEL
VALUE CHAIN DRIVERS Agricultural Input & Technology Suppliers, Large Buyers of
Outputs, Financial Institutions, Government Agencies
HUB
AGRODEALER
INPUTS VALUE CHAIN
Availing agricultural inputs, Transportation, Storage, Supporting Demand Creations Activities and
Extension Services,
OUTPUTS VALUE CHAIN
Market intelligence, Aggregation, Quality
Assurance, Warehousing, Transportation,
Forward Contracting, Training
aggregators,
Rural Retail Agrodealers
Agrodealers, Agrodealer Agents, Agricultural Output
traders, Coop. Businesses
Smallholder Farmers, Farmer Groups, rural
communities
OUTPUTS INPUTS
Hub Agro-dealer Role:
1. Wholesaling Function;
2. Financing Role through Trade Credit
3. Educational / Extension Messaging
4. Output Marketing
The Hub Agrodealer Financing Role: Challenges and Limitations
HUB AGRODEALER GENERAL BUSINESS MODEL
VALUE CHAIN DRIVERS Agricultural Input & Technology Suppliers, Large Buyers of
Outputs, Financial Institutions, Government Agencies
HUB
AGRODEALER
INPUTS VALUE CHAIN
Availing agricultural inputs, Transportation, Storage, Supporting Demand Creations Activities and
Extension Services,
OUTPUTS VALUE CHAIN
Market intelligence, Aggregation, Quality
Assurance, Warehousing, Transportation,
Forward Contracting, Training
aggregators,
Rural Retail Agrodealers
Agrodealers, Agrodealer Agents, Agricultural Output
traders, Coop. Businesses
Smallholder Farmers, Farmer Groups, rural
communities
OUTPUTS INPUTS
Hub Agro-dealer Financing Role /
Limitations:
1. Financial MgtCapacity limitation;
2. Risk Exposure3. Working
Capital Limitation
4. Technical Knowledge
Supply Credit Guarantee to Hubs for Enhanced Fertilizer Value Chain Financing
• Supplier-Hub Relationship building Phase;
• AFAP undertakes HUB strengthening to minimize risks
Incubation Credit Guarantee
• Supplier – Hub- Bank relationship developed/strengthened
• AFAP CG transitioning to bank trade financing;
Semi Commercial Credit Guarantee
• Supplier –Hub – Bank relationship matured
• HUB secures a standing credit line with bank;
• AFAP CG withdrawn for new areas.
Mature Commercial
Credit
Phase 3: Desired End Result: A Self Sustaining Commercial Trade Credit Arrangement
Mature Commercial Credit Arrangement
Supplier
HUB
Bank Credit Line to Hub
Hub Collateral @ 100%BANK
Matured Commercial Credit Arrangement
1. AFAP Credit Guarantee support diminishes and is withdrawn all together;
2. Hub has developed a business relationship with the bank and supplier;
3. AFAP strengthening role changes to that of monitoring key indicators
The Hub Agrodealer Advantage to Rural Agrodealers
Rural agro-dealer revenues generally increase by 20 – 40% when working with hub agro-dealers (as opposed to buying from suppliers)
Growth in Quantity Sold per Rural Agro-Dealer
Crop Protection Products Certified Seed
Fertilizer +25 – 43%
Upper
3.0 MT Bound
0.8 MT
Estimate
1.9 MT 0.6 MT
1.8 MT
15.3 MT 12.5 MT
Pre-Intervention Post-Intervention • By linking with hubs, this could drive volume increase of
approximately 3 MT of fertilizer, 0.1 MT of seed, and 0.2 MT of CPP on average, per rural agro-dealer (based on average increases across rural agro-dealers assessed)
Revenue Growth per Rural Agro-Dealer
Crop Protection Products +20 – 40%
Certified Seed
Fertilizer $18.4K – $19.8K Upper
$2,823 Bound
Estimate $14K $3,726
$3,105
$4,235 $3,529
$7,481 $8,977
Pre-Intervention Post-Intervention Average increase in sales revenue of ~$4K per rural agro-dealer, represents a ~31% increase in the business of each rural agro-dealer (using the midpoint estimate)
Interventions to strengthen hub agro-dealers not only improve revenues for hub agro-dealers and rural agro-dealers, but also drive increased volumes of agricultural inputs sold in the market
Sources: IFPRI, 2012; Interviews with Input Stakeholders and Agro-dealers in Tanzania; Monitor Deloitte Analysis
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Thank You.
AFAP ContactJason Scarpone : [email protected];Joseph Mwangangi: [email protected]