Agri09 day iii - session v - part i - pierre van hedel - rabobank

Rabobank Groep 2204058

15 June 2009

Rabobank Groep 2204058 2

Rabobank is a cooperative bank

• Rabobank does not have shareholders; the capital of the bank is in a „dead hand‟. Not maximizing profitability is being pursued, but the delivery of „customer value‟.

• Members of the 153 local banks appoint their board and are represented in CKV („Rabobank parliament‟), which meets quarterly with the executive board to decide on major issues.

• Rabobank is now a large, international bank with EUR 612 billion of assets and the only privately owned AAA rated bank.


Rabobank InternationalWorld wide leading food and agri bank

• Rabobank‟s international market niche is food- & agri business

• Customer Network: many of the global food companies

• Expertise: dedicated agri-research team (80 professionals)

• Agri products: weather derivatives, price hedging instruments

• Rural retail banks in various countries


Rabo DevelopmentDevelop network of partner banks in Africa

• Equity participation (minority position) in a bank that remains local

• Board will be strengthened by Rabobank professionals

• Rabobank will provide managers for Executive Board to complement local managers

• A comprehensive technical assistance program will be executed through the deployment of Rabobank banking specialist

• Aiming to expand lending to agriculture by combining Rabo agri finance expertise with local expertise

For Rabobank this is a long term commitment, in which the development

into a leading rural bank prevails over short term profitability


Rabobank was

founded 110 years

ago by small

farmers who did

not have access to

financial services

Today, more than

4 billion people

world-wide do not

have access to

financial services

It is our mission

to support

financial sector

development in

developing

economies

Mission Rabo Development

Rabobank Groep 22040586Rabobank Group

Partner Banks Rabo Development in Africa

Rwanda

BPRTanzania

NMB

Mozambique

Banco Terra

Zambia

Zanaco


Rabobank Foundation

• 35 years history

• Funding from profit of Rabobank Group

• 25 focus countries

• Member based producer organisations and

savings / credit cooperatives


African Agri Sector: mission of

Rabobank Foundation

• Use experience and network of Rabobank to

improve income of rural population

• Focus points:– Cooperatives more than 100 years experience

– Food & Agri

– Banking / business experience

– Banking networks

– Client networks


Approach:

– „Business approach‟ to clients in developing countries (financial projections, annual targets, organisation structure etc.) in line with banking methodology

– Ensure long term impact through economic viability

Instruments:

– Loans– Guarantees (funded / unfunded)– Grants for capacity building– Technical assistance


Four models of supporting agricultural sector in

developing countries

1.Traditional cooperative development

2.Linking with (Rabobank) partner banks

3.Linking with Rabobank International clients

4.Combination 1,2 and/or 3


1. Traditional approach

–Assisting starting or growing marketing

cooperatives with grants and TA

–Emphasis on capitalisation and bankability

–RF provides loan when cooperative is ready

to absorb this

–Often cooperation with local implementing

party

Bottlenecks:

– Follow up in local banking system


Succesful example: Dairy Sector

Promotion in Tanzania

• Supporting farmers cooperative (3300 members) to

purchase shares in dairy processing

• Investing in cattle breeding company to ensure supply of

crossbred cows


2. Linking with Partner banks of Rabobank

–More effective monitoring and

implementation through local presence

–Contact with local bank from beginning

–Early adaptation to local banking standards

and requirements

– (funded) Risk participation between RF and

Bank

Bottlenecks:

– In some countries lack of viable economic activity and

related technical and market knowledge

– Local support structure needs further development


Succesful example Rice Mozambique

(proposal)

• RF: risk sharing for loans to start-up cooperative

• Banco Terra: lending and monitoring

• Other donors: donated equity, supporting local

organisations


- There is a growing class of mid-sized farmers in Africa (“emergingfarmers”)

- They have the potential to develop into “commercial” farmers

- Growth of agri-production should especially come from this farmersegment

- They form an interesting target to our partner banks as they areopen to innovation, growth oriented and need various financialservices

- One of the main bottlenecks to develop into a “commercial” farmeris lack of WC and technical expertise/management skills

- Rabo & IFC believe that a combination of advisory & direct financingis the best approach to bridge the gap

Succesful example: Emergent Farmers

Project Zambia


COMMERCIAL

EMERGENT

SMALL SCALE

SUBSISTENCE

Considerable support

both financial and

technical

Where does the Emergent Farmer Fit in

the Farmer Profile

Considerable

support both

financial and

technical by

NGOs and

Government

No financial

opportunities and not

recognized by support

providers


Current status + lessons learned

- Program is partnership between Rabobank, Zanaco, ZNFU and IFC

- Pilot launched in Zambia this season, now comprises 14 farmers

- Yield improvement (maize) was significant especially at the higher end of the farmer group

- Decision taken to expand to >50 farmers for 2009/2010 season

- Target 300 farmers in +/- 5 years

- Tight monitoring is key to success

- Control is only feasible through branch network of Zanaco

- Average loan is some USD 40k but growing

- Discussions started with Banco Terra (Mozambique) for program roll-out


3. Involve private sector

– Introduce viable economic activity to group

of farmers

–Formation of cooperatives / associations

around this activity

–Private sector provides technical know-how

and marketing / processing outlet

–Careful selection of private sector parties,

often well-known clients of Rabobank


Role of Rabobank Foundation

–Support for capacity building of farmers

groups to become independent member-

based organisations

–Reduced transaction costs for private sector

as cooperative takes over technical tasks

–Loan to farmers through private sector

and/or cooperative

–Linking with local banks (model 2)


Example: Cameroon Cacao and

Paraguay Cotton

• Technical and marketing knowledge provided by

Rabobank International clients.

• RF provides funding for support of farmers

(Paraguay)

• RF facilitates finance

• Cameroon: additional key role for Rabobank

Agribusiness consultancy RIAS


• Combination of these models is a new concept within

Rabobank Foundation

• Required is a committed private party, clear economic

benefit for farmers and presence of local bank with the

right attitude

• Aim for triangle relationship between processor/off-taker,

the outgrower/coop and the local partner bank

• Shifting repayment risk from outgrower/coop to the higher

rated off-taker/processor (tri-partite agreement)


Example Mozambique Sugarcane

• RF: support cooperatives, rehabilitation of land,

risk sharing for loans

• Banco Terra: financial infrastructure, lending,

monitoring

• RI Client (international sugar co): technical,

marketing and processing support

• RIAS: agribusiness knowledge

Documents

Agri09 day iii - session v - part i - pierre van hedel - rabobank