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Private Sector Development in Agriculture: How does M&E support Smallholder Farmers?
December 3, 2008
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How does IFC support the agri sector including small holder farmers?
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IFC Investment in Agribusiness Value Chain Exceeded US$1.3 Bil in FY08
FinancialInstitutions
Market Infrastructure
Farm
ProductionInputs Agri.
Marketing
Processing Marketing
Distribution
Risk Sharing Facilities
Pre-Harvest Finance Trade Finance
Fertilizers and other Chemicals
Land
Project/Corporate Finance
Retail
Infrastructure/Logistics
CIT – Access to Markets
Farm production is just one part of the agri value chain in which IFC invests…
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IFC achieves greater reach through financial & non financial intermediaries
FarmersIFC
Finance On-Lending
BANKFarmers/AgribusIFC
Finance/Risk Sharing
On-Lending
AGRI TRADER/ PROCESSOR
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IFC has a number of current advisory projects to increase farmer financing
Ukraine Leasing Program
Ukraine Agrifinance Ukraine Agri Insurance
Development Program
Sth Tajikistan Cotton Lending Program
Farmer Ownership Model – Nth Tajikistan
Indonesia Warehouse Receipt Program
Agri Business Finance Projects – 7 Active Projects - $8.8 Agri Business Finance Projects – 7 Active Projects - $8.8 millionmillion
Tanzania Leasing Program Malawi - AMSME
Program NBS Bank FMB
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IFC has also worked on improving farmer productivity and market access…
Seaweed Farmers- Indonesia
Maize Farmers- Indonesia
Cocoa Farmers- Indonesia
Apple & Tomato Farmers- Ukraine
Bamboo Growers- Vietnam
Apple Farmers- China
Dairy Farmers- Russia & Ukraine
Shrimp Farmers- Aceh
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How does IFC measure and evaluate its work in the agri sector?
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Every IFC project includes results measures, E.g. Agribusiness Finance Advisory…
Product Outcome ImpactAgribusiness Finance
Core indicators • # of all outstanding loans in Agribusiness• Value of all outstanding loans in
Agribusiness (US$)• # of all loans disbursed in Agribusiness• Value of all loans disbursed in Agribusiness
(US$)• Value of loans>90 days overdue in
Agribusiness (US$)• Number of new products for
Agribusiness Finance
Core indicators:• Value of
investment / financing facilitated by advisory services (US$)
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IFC agri advisory projects are beginning to undertake cost/benefit analysis…COST/BENEFIT PROCESS STEPS1. IDENTIFY and QUANTIFY the project’s
DIRECT and INDIRECT BENEFICIARIES.2. ESTIMATE quantity of OUTPUT PRODUCED. 3. ESTIMATE total UNITS of CULTIVATION.4. ESTIMATE COSTS of INPUTS with & without
project.5. ESTIMATE PRICES of OUTPUTS with & without
project. 6. ESTIMATE NUMBER of BUYERS and their MARKET
SHARES, with & without project.7. IDENTIFY (a) PROJECT-RELEVANT FACTORS, and
(b) EXTERNAL FACTORS that may affect productivity, costs, prices, and other considerations, with & without project.
8. COLLECT these DATA at the BASELINE (at project-start), and THROUGHOUT program IMPLEMENTATION. Cost/Benefit analysis gives a better sense of who benefits
and whether farmer incentives are likely to align…
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IFC has also undertaken a number of detailed evaluations of its agri work
China: New Hope for Dairy Farmers. July ‘08Ukraine: Vinnytsya Dairy Supply Chain Project. July ‘07
India: Farm Forestry program. December ‘06Indonesia: Seaweed Program Survey. July ‘06
Findings have beendistilled into easy to read “Monitor” notes
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IFC is developing an M&E “Toolkit” for agri supply chain projects with farmers
Terms of Reference for M&E Toolkit• Work with IFC and its external partners to
produce an M&E framework covering keyareas of IFC agri supply chain project work - productivity, standards and access to finance
• Develop an approach to “baseline” survey instruments
• Be consistent with IFC M&E structures• Develop clear performance measures to help
clearly gauge project success• Articulate a process for measuring impact on key
project stakeholders/beneficiaries at the farmer level
Partners to IFC project work see M&E as a key value added
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IFC is using peer & specialist review of new projects to share lessons learnt…
Selected Lessons Learnt• Farmer access to finance is often a constraint
(…and requires specialist input/support…) • During design identify specific market failures
(…gain detailed market knowledge…)• Costly to scale up and expand projects that
deliver farmer specific information (…plan for expansion in advance…)
• Net farmer incentives to join supply chainproject are not always clear and need to align (…otherwise redesign or kill the project…)
IFC now more systematically draws together local needs with global knowledge and lessons learnt…
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So, how does M&E help small farmers?
• Better target overall sector support (not just farmers)• Track and so help increase finance to sector (inc.
farmers)• Better assess whether projects provide net farmer
benefits• Learn from and improve ag advisory (inc. to farmers)• Stop “weak” agri projects so funds might be re-
applied• ID projects with “strong” results to drive partner
uptake
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Agribusiness Committed Portfolio
By Sector
$2.2 Billion Committed Portfolio As Of June 30, 2008
By Region
Beverages10.2%
Sugar15.8%
Other8.6%
Other Food14.2%
Fruits & Vegetables
6.1%
Dairy Products
4.3%
Grains & Milling7.4%
Veg Fats & Oils
13.1%
Animal Processing
20.4%
S.Europe/ Cent. Asia
9.6%
Africa5.9%
South Asia6.5%
Mid. East/ N. Africa
1.9%
South America37.7%
Cent. America
6.7%
East Asia16.4%
Cent. & East.
Europe15.6%
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Why banks do not finance Agri Business
Cost to serveSeasonality and loan term structureClimate change riskHeterogeneity of FarmingProduction and Yield RisksMarket and Price Risk Risk of Loan Collateral LimitationsMoral Hazard Risks
Source: Adapted from Better Practices in Agricultural Lending, FAO/GTZ, 1999, pp. 11-17.
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Product Range
• US$1 B Program• Bank Guarantees• 62 Issuing Banks• 740 Guarantees
Issued• US$ 780 million
Global Trade Finance
• Agribusiness, Agricultural SMEs & farms
• Agri-Insurance• Ag Leasing• Corporate
Governance
Advisory Services
• Convertible Debt
• Sub Debt
Mezzanine Finance
• Partial Credit Guarantees
• Risk Participation Facilities
• Securitization
Structured Finance
• Common Shares
• Preferred Shares
Straight Equity
Sustainable Finance
• Cleaner Production
• Energy Efficiency
• Renewable Energy
• Sustainable Supply Chain
Senior Debt
• Term Loans• Acquisition
Financing• Warehousing
Facilities• Syndicated
Loans