How Can CAADP Aligned Initiatives Help to Foster Private Sector Financing in Support of Country Plans:

Harnessing Private Sector Financing to Generate Effective Agricultural Investment

Hosted by: CAADP Joint Action Group for Private Sector Initiatives

Moderator: Michael Sudarkasa, UNDP AFIM

CAADP aligned Private Sector Initiatives

AGRICULTURE FASTTRACK FACILITY

Agvance Africa

Inclusive investment in food security and growth

Calvin MillerSenior Officer Agribusiness and Finance, FAO

CAADP Partnership Platform Meeting,Addis Ababa,March 25, 2013

De-risking finance and investment

Production

Price

Operational

Financial

Institutional

Infrastructure

Quality control

Technology

Logistics

Seasonal glut

Infrastructure

Storage

Price

Product loss

Govt. policy

Technology

Supply of RM

Human resource

Product quality

Govt. policies

Producing Storing Processing MarketingInput Supply

Quality

Availability

Infrastructure

Knowledge

Financial

Challenges and opportunities to address risks all along the value chain

How can we structure finance and investment to address client and country needs and risks”

Finance

– Loan guarantees

– Insurance products

– Value chain financing

– Savings and asset capitalization

– Contracting and out grower schemes

– Warehouse receipt systems

– Organizational and institutional development

– Training -- financial literacy, management, marketing

De-risking finance and investment

De-risking Finance and Investment(2)

Investment

▫ Regulatory frameworks conducive to investment

▫ Private-public co-investment

▫ Investment funds

▫ Political and catastrophic guarantees

▫ Political and economic stability

▫ Ministerial capacity development on investment promotion

▫ strategic investment approaches and incentives

Tomas Sales, Program Manager, UNDP AFIM – Southern Africa Regional Service Centre, Johannesburg, South Africa, CAADP Partnership Platform , Addis Ababa, March 25, 2013

Input Supplies Growing Crop Harvested ProduceFood & Energy

Store Produce Store ProcessTransport Plant HarvestInternational/Local marketManufacture Transport

Flow of Money

VALUE

Financial Solutions

Banking Relationship

Flow of money most important in financing agriculture …

Figure 1: Flow of Money Along the Value Chain

Hans Baryamujura, Head, Agriculture Finance, Barclays AfricaCAADP Partnership Platform, Addis Ababa, March 2013

Challenges: Agricultural Value Chains in Africa

Small Scale Farmers(Majority of the African Farmers)

Agro Dealers

Input Supplies

Growing Crop Harvested Produce

Food & Energy

Store

Produce Store

ProcessTransport

Plant Harvest

ConsumerManufacture

TransportBa

rcla

ys/A

bsa

Bank

Barc

lays

/Abs

a Ba

nk

12

Figure 2: Disconnect in the African Agricultural Value Chain

Characteristics (Right)• Less risk and target for all financial institutions• Most multi banked

Size of the banks Local presence of the bank

• Bank loses client’s turnover (Client diverts bulk of transactions)• Limited local supply (size of operations)• Limited local demand (purchasing power)

Characteristics (Left)• Less risk and target for all financial institutions• Most multi banked

Size of the banks Local presence of the bank

• Growth not as quick/aggressive as expected• Limited repeat business (Most are new

farmers)

VITAL ACTIVITIES MISSING• Technical support• Services i.e. Mechanical services, inputs, storage,

etc.• Poor Profitability of the smallholder farmers• Lack of crop insurance• Lack of collateral