Hans Bogaard Head AgriBusiness – Rabo Development

Netherlands

June 18, 2012 Hans Bogaard

Rabo Development

Financing Coops & SMEs in

developing markets

The Rabobank approach

Rabo Development: business model

Focus Countries of Rabo Development

RD Agribusiness Advisory Services: 2 pillars

Farmer portfolio restructuring

Agribusiness Advisory

Capacity Building (banks & coops)

Supply Chain Finance solutions

Warehouse Receipt Financing

Cooperative financing

Out grower schemes

Emerging Farmers Programs

Knowledge management & benchmarking

Agri Finance Organization

Agri Finance Training

Cooperative Capacity Building

Pre-export finance

Nr. of SME farmers reached via RD

Brazil Sicredi 1.600.000

Paraguay Banco Regional 11.459

China URCB 11.666

Mozambique Banco Terra 5.251

Zambia Zambia 4.414

Tanzania NMB 278.685

Rwanda BPR 42.307

TOTAL 1.953.782

Segmentation drives financing approach

Emerging farmers

Large

farmer/

agribusiness

Semi commercial smallholder

Commercial smallholder

Relationship approach, often USD lending

Retail approach, standardization

(+ Technical Assistance)

Value chain approach (e.g. out grower

schemes), use cooperatives for risk

management

Via SACCOs, coops, etc

Traditionally bankable

Previously unbankable

Segmentation drives financing approach

Agro dealers Farmers Cooperatives Traders &

processors

• Agro dealer

schemes

• Outgrower schemes

• Input financing

• Save-for-loan schemes

• Investment finance

• Farmer credit score cards

• WHR financing

• Collection finance

• Pre-export finance

• Investment finance

• Value chain finance

• Pre-export finance

• Pre-import finance

• WHR finance

• Investment finance

Credit

Products

Risks • Lack of collateral

• Price risk

• Skills

• Lack of scale

• Lack of skills

• Lack of collateral/title

• Drought/floods

• Cash crops: side selling

• Food crops: government

interference

• Lack of scale

• Lack of skills/management

• Lack of capitalization

• Corporate governance

• Post-harvest handling

• Lack of WHR system

• Side selling

• Price risk

• Price risk

• Lack of commodity exchange

• Logistics/storage

• Performance risk

• Skills

• Raw material supply

• Access to markets

• Government export/import bans

Key success factors cooperatives

• Stick to economic and business-like principles

• Adequate governance structure

• Consistent business discipline (zero-loss & capitalization policies)

• Do not mix up governance and management

• Communication with members

• Clear and business-like legislation

Financing and TA must go together…

1. Emerging farmers Zambia: • Enterpreneurial growth oriented farmers:

• Support provision is key – Technical:

Mechanisation & agronomic TA

Provide finance to mechanisation agents – id key farmers/business

persons in each district who can run mechanisation as a business

• Zanaco currently financing 130 emerging farmers

2. WHR finance to Cashew/coffee coops in Tanzania • Technical assistance to government/CFC to set-up the WHR system

• Technical assistance to NMB to develop WHR finance product

• NMB currently leading WHR financing in cashew and coffee

3. Value chain financing to rice unions in Rwanda • Technical assistance to the government to solve key sector bottle-necks

• Technical assistance to BPR to develop rice financing strategy

• Technical assistance to selected coops to improve management

• Currently implementing input financing scheme to Rice Unions (60,000 farmers)

to replace government input finance program

4. Restructuring emerging farmers South Africa • Technical assistance to Land Bank to restructure 400 emerging farmers

• Develop score card to rate farmers and advise restructuring approach

• Train 160 staff members (commercial and risk) to implement new approach

• Should lead to better agri finance services to South African emerging farmers

Conclusions

• Agriculture needs scale & skills at all levels (farm/coop/warehouse/etc)

• But communal land structure hampers consolidation

• This results in lack of mechanisation and irrigation

• Lack of competitiveness results in consistent imports of food crops

• Current market trends drive integration and sector professionalisation

• Agri finance is challenging due to fragmentation & weak value chains

• Sector & Segmentation based approach is key

• Tailored products/concepts for different agri-segments

• Branch network with local agri expertise is key

• Combining access to finance with technical assistance

Thank you for your kind attention