Oxfam’s Enterprise

Development Programme

Presentation by

Hugo Sintes

November 2010

Outline

• Oxfam

• Enterprise Development Programme

• Practical lessons

• Opportunities for collaboration

• Q&A

LAC

West

Africa

Southern Africa

HECAEast Asia

South Asia

UKPP MEEECIS

Who is Oxfam?

Oxfam GB countries

Oxfam India

14Oxfam is a global

movement of people

working with others to

overcome poverty

What does Oxfam work on?

Climate change

Understanding effects on poor people

Help most vulnerable households adapt

Global campaigning

Aim 1 - Right to Basic Sustainable Livelihoods

Agriculture and rural livelihoods

Support smallholder farmers

Engage with the private sector

Influence local/international policies

Aim 2 - Right to Basic

Social Services

Education, Health,

HIV and AIDS

Aim 3 - Right to Life and

Security

Response to disasters

Water, sanitation and public

health

Aim 4 - Right to be Heard

Aid and Budget

Accountability

Coalitions and alliances

Aim 5 - Right to Equity -

Gender & Diversity

Violence against women

Women’s rights and

leadership

What does Oxfam work on? Private Sector

supporting/running companies engaging with existing companies

Oxfam’s Enterprise

Development Programme

Introduction

Why did Oxfam set up EDP?

• Oxfam set up the Enterprise Development Programme (EDP)

to identify, invest in and nurture very early-stage, rural and

agricultural SMEs in developing countries

• EDP supports SMEs as essential for

job creation and development

• Agriculture main source of livelihood

for 2 billion poor people

• SMEs are often forgotten by banks

and microcredit, and constitute

the so called ‘missing middle’

• EDP targets the ‘toughest’ SMEs

- Rural, agricultural, remote

- Limited capacity and track record

RURAL FINANCE GAP AND THE MISSING MIDDLE

What does EDP do?

• Since 2008, we have:

- Raised £3.1m towards our £6m target

- Reviewed 50 business plans emerging from Oxfam programmes

- Committed £2.5m to 16 enterprises

• Through EDP, Oxfam supports SMEs with :

- Loan finance (channelled through a local Financial Institution)

- Business support (mentoring, new staff, Investment Committee)

- Social grants (e.g. for women’s economic leadership)

• Enterprises are selected on the basis of following criteria:

- Business and market potential

- Opportunities created for women

- Management capacity of enterprise and partners

- Potential for reducing poverty in rural areas

Note: each enterprise is supplied/owned on average by 1,000 farmers

• EDP operates in a space where few private investor reach,

uses a business approach different from charity, and aims to

develop a model for early-stage enterprises with a mix of

public and private funds

Proposal

selection

Investment

Committee

Enterprise

Development

Board

Ongoing

support

and review

How are EDP investments selected?

• Proposals from

Oxfam’s

programmes

• Next Q1 2011

• Internal

Review Panel

• Internal and

external

experts

• Scrutiny,

support and

development of

each proposal

• Last Nov 2010

• Includes ‘engaged’

supporters

• Designs Strategy

• Reviews investment

decisions

• Next Dec 2010

• Business

support and

mentoring

• Monitoring,

evaluation

Michel ClancyManager, Let Agogo

Mulugeta TeferaManager, Assosa

Salum ShanteDirector, Katani

Dawood IstanboliManager, NFC

AMENU Manager & Chairman, Liberia

President & secretary of Komatha LBCS, Sri

Lanka

Tatyana YurinaDirector, Forus

Who are the key people involved?

Tim ChambersLatin America

Amit VatsyayanSouth Asia

Thalia KidderGender Equality

Jing (A. Pura)East Asia

Danilo SaucedaManager, Aproalce

Enterprise Managers

Investment Committee

David BrightOxfam

DavidPitt-Watson

Hermes

Chris WestShell

Foundation

David Irwin

Joss Saunders

Oxfam

PennyLawrence

Oxfam

EDP Board

Vincenzo Morelli

TPG

David GaitMaitri

Hugo Sintes

Manager

NicholasColloffOxfam

Sandy Arbuthnot

GitaPatel

Stargate

Oxfam Advisers

Local Mentors

Belle VueSt Lucia

(vegetables)

New Farm C, OPT(processed food)

AMENULiberia(rice)

FORUS, Russia(microfinance)

VavuniyaSri Lanka

(dairy)

Katani, Tanzania(sisal)

AlpinaColombia

(dairy)

APROALCEHonduras

(vegetables)

Let AgogoHaiti

(dairy)

EDP Investments: 2008, 2009, 2010

LIBAS, Philippines(moringa)

Investments 2010

Investments 2009

Investments 2008

Zembaba, (honey)

BN, Rwanda(mushrooms)

Pabitra, Nepal(vegetable seeds)

Pacomen Indonesia

(vanilla)

Assosa, Ethiopia (sesame)

Chenab, Pakistan(dairy)

What do these enterprises look like?

AMENULiberia(rice)

VavuniyaSri Lanka

(dairy)

AscampColombia

(dairy)

APROALCEHonduras

(vegetables)

Let AgogoHaiti

(dairy)

LIBAS, Philippines(moringa)

Zembaba, Ethiopia(honey)

BNRwanda

mushrooms

Pabitra, Nepal(seeds)

Assosa, Ethiopia (sesame)

Chenab, Pakistan(dairy)

PacomenIndonesia(vanilla)

Sales GBP (000) - last year

0 0 6 7 13 17 30 35 90 99 127 137 151

Enterprise Assosa, Ethiopia. Set up in 2006. Federation

20 POs. 6,000 members (6% women).

Product /

Market

Sesame seeds, expanding into sesame oil for

local markets. Setting up edible oil plant

Investment - £70k loan (equipment, working capital)

- £20k business grant (staff, mentoring)

Staff / Skills Manager in place. Recruited finance officer &

cashier. Recruiting factory manager.

Enterprise New Farm Company, Palestine. Processor of

foods from 13 cooperatives (40%* women)

Product /

Market

Palestinian-sytle foods sold in Palestine,

Jordan, Saudi Arabia. Sales up 20% last year.

Investment - 2008: £10k loan (working capital) + £110k

- 2010: £90k loan (WC, loan) + £110 k

Staff / Skills Total 6 staff. Manager, plus Finance,

Marketing and Quality officers (2).

Enterprise Pabitra. Founded 2001.

Product Seeds sold to two major companies and local markets

Investment - 75k loan (WC) - £70k grants.

Staff / Skills President with 20 y of experience in vegetables. Received

training on various matters. Social Mobiliser, Secretary +

Recruiting Enterprise, technical & Quality Officers (3)

Ymegnushal Chairwoman

Mergia BekeleMentor

Mulugeta TeferaManager, Assosa

Hear them on:

https://www.oxfam.org.uk/donate/edp/ethiopia.html

NFC, Palestine

(food)

EDP Investments: Philippines

EDP Investments: Ethiopia - Sesame

Oxfam’s Enterprise

Development Programme

Lessons

Performance of the portfolio

• It’s early days – most companies in portfolio 0 – 18 months

• We measure performance on various indicators

- Business viability (profits, stable markets, and access to finance)

- Social issues:

- opportunities created for women

- resilience to climate changes

- poverty reduction (income, jobs)

• Next some of the key lessons

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Business Performance

Social Impact-women-climate-poverty

Progress on activities

Assessment June 2010

1. Need to start with good analysis of

markets, and community & gender issues

Support to women is a key focus of our investment decisions• Run 50% of the Micro & SMEs and produce 60-80% of the food• Despite owning 1% of the land & accessing 5-10% of the credit• … They are often marginalised to low-return activities

• If provided the same assistance, are as or more productive• If they control the income, more goes to health, education and

other household expenditures

Product/market ‘Attractiveness Matrix’

Sweetcorn

Dried mango

Cattle and sheep fattening

Henna

Kaolin (Bogonii in

local langage)

Peanuts

Sesame

Fonio (local cereal)

Dried vegetables

(Okra, pepper, onion)

Vegetable gardening

Shea butter

Nere (sumbala)

Cotton textile crafts

1. Good analysis of market and gender (b)

Traditional beer

Pepper, Cotton

Marmelade

Women’s participation

Ma

rke

t d

em

an

d

HighMediumLow

Hig

hM

ediu

mL

ow

Example from Mali

Community

FinanceExtensionFinancial

Management

Business

Development

Market

Information

MARKET

SERVICES

Natural environment

& resources

Social norms &

informal networksInfrastructure

Trade rules &

competition policy...

(DIS)ENABLING ENVIRONMENT

MARKET CHAIN

Alternative

livelihood

strategies

Primary

Producers

Consumer:

•International

•National

•Local

Exporters /

ImportersProcessors

Inputs

Channel1

TradersEnterprise

1. Good analysis of market and gender (c)

...

Channel2

1. Good analysis of market and gender (d)

Community

FinanceExtensionFinancial

Management

Business

Development

Market

Information

Natural environment

& resources

Social norms &

informal networksInfrastructure

Trade rules &

competition policy...

Alternative

livelihood

strategies

Primary

Producers

Consumer:

•International

•National

•Local

Exporters /

ImportersProcessors

Inputs

RetailersTradersEnterprise

...

Can women access safe transport At a good price when they need it?

Do women have property That they can use as Collateral for loans?

Do gender roles, attitudes

and beliefs affect women’s involvement

in different parts of the chain?

What happens in the household economy

to make this possible?

1. Good analysis of market and gender (e)

• As a result of this analysis, we have

- In Rwanda, we support a mushroom enterprise because market is good,

and because barriers for women are low

- In Philippines, all tree nursering will be carried out by women

- We support another enterprise in Ethiopia, which producers lighter

Beehives and veils so that women can join production

• We also seek to establish partnerships with buyers and

financial services providers

• Oxfam interventions include policy engagement with local

authorities, and with stakeholders

2. Need to understand climatic issues better

• In the last 18 months, companies we invest suffered:

- Earthquakes in Haiti and Indonesia

- Flooding in Pakistan, hurricanes in Honduras and Caribbean

- Longer summers/droughts, erratic rains

• Not all of these are climate-change related, but some are and

are getting worse

• We need to understand better where to invest &

how to adapt

Finance Type Example

Loans

Business related Warehousing Vanilla, Indonesia

Equipment Assosa, Ethiopia

Working capital Belle Vue, Caribbean

Grants

Business related Capacity building New Farm Company

Salaries (declining %) Honduras

Non-business related Advocacy Lèt Agogo

Project management All

Women leadership All

The size and type of investment depends on each company’s cash flow, but

in general we favour the following...

Average

investment

• £50k business loan

• £50k business grant

• £50k social/market

3. Both grants and investments are key

All our loans are channelled through local Microfinance Intermediaries or

banks, in order to:

• Build a track record for the company (and bank/MFI)

• Create a new relationship

• Manage Oxfam’s money

4. Capacity building is key … but challenging

• Business skills are scarce

- Enterprises with sales £0 - £100k can’t afford experienced managers

- Skilled staff, or specialised services are often also not available in rural,

remote areas

- Financial Management is a gap we feel the most, followed by marketing

and production

• What we are doing about it...

Pre-investment

- Hire local consultants to help enterprise develop business plan

- Support from EDP Manager, Investment Committee

Post-investment

- Train in-country Oxfam staff as they provide general coordination/advice

- Recruit new enterprise staff, i.e. production experts, accounting staff

- One local mentor per company

- Link up with Business Development Services, Agricultural experts

- Deployment of UK Business Volunteers with Challenges Worldwide

- LOTS OF TOOLS ... Financial reporting, Enterprise Diagnostic...

5. A number of organizations in this space

http://www.aspeninstitute.org/policy-work/aspen-

network-development-entrepreneurs

Summary

1a Sound market analysis

1b Sound gender analysis and explicit effort to involve women

(if seeking developmental outcome)

2 Affected by climate change?

3 Various types of money

4 Multiple approach to capacity building

5 Keep an eye on the sector

Oxfam’s Enterprise

Development Programme

Getting involved

How to get involved (1)

Financial Support

• Associate Investors £10,000pa x 3 years – with programme visit

and mentoring opportunities

• Partner Investors £50,000pa x 3 years – join as observers to

Board and Investment Committee meetings

• Board Investors £200,000pa x 3 years - join the EDP Board,

advise on strategy and decide which proposals enter the

portfolio and on what conditions

• Option to join a syndicate (group of ‘investors’)

• All of them are today philanthropic, but loan money is re-invested

How to get involved (2)

Other ways

• In the UK - Volunteer with SME experience to support us with

review & monitor investments. Examples :

– Rural, agricultural enterprises, for example dairy

– Knowledge of particular region

– Capacity on financial analysis

• In Country

– Particularly interested in 3-month placements

– ... but interested to discuss if specific experience in theme/country

– (costs except salary covered)

Oxfam’s Enterprise

Development Programme

Annex

How EDP is managed?

GeneralAssembly

Board ofDirectors

Executive Manager

FinanceOfficer

Marketing Officer

Oxfam local staff

BusinessMentor

Local technicalpartner

EDP Manager

Investment Committee

EDP Board

Global

Country

Local FinancialIntermediary

loan

- Partners

- Oxfam

- Enterprise

Production / Quality Control Officer

- Supporters‘Investors’

- Famers

Oxfam Advisers

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%Agriculture and weather risks

Year 1 Y2 Y3 Y4 Y5 Y6 Y7 Y8

Market related risks

Country & currency risks

Low liquidity

Management capacity

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

Technical Assistance

Crop/Weather insurance

Suitable seeds, irrigation

Fostering trading links

Formal contract farming

Currency hedging

Loans instead of equity

Training and mentoring

High-value crops only

To get higher returns

Use of guarantees

Strategies

Lower cost of capital

Portfolio diversification

Avoid SMEs & Agriculture

Technical Assistance

Crop/Weather insurance

Suitable seeds, irrigation

Fostering trading links

Formal contract farming

Currency hedging

Loans instead of equity

Training and mentoring

Mobile (only in Russia)

Farmer organisation

Use of guarantees

Lower cost of capital

Portfolio diversification

Avoid SMEs & Agriculture

The risks, costs and strategies in this space

Fig 6: Risk and costs investment in Missing Middle - Agriculture

Costs from lower amounts, and remoteness are also higher (while returns not always highest)

To beat the costs

Source: Missing Middle Agricultural Finance