Promoting inclusive finance models for farmers in Africa: Linking farmer’s organisations to financial institutions

PAFO 2nd continental briefing

2nd African Continental Briefing Organized by the Pan African Farmer’s Organisations (PAFO) and the ACP-EU Technical Centre for Agricultural and Rural Cooperation (CTA). 13-14 July 2014, Nairobi, Kenya

The Eastern African Farmer’s Federation (EAFF), the Southern African Confederation of Agricultural Unions (SACAU), the Network of Farmers’ and Agricultural Producers’ Organisations of West Africa (ROPPA) and the Network of farmer’s agricultural producers of Central Africa (PROPAC) hold their 2nd Continental Briefing in Kenya on 13-14 July on Promoting inclusive finance models for farmers in Africa. Around 120 farmers, research, finance institutions discussed key areas highlighted below. This debate was amplified by an e-discussion held within the farmer’s platform which key points are also summarized below. An action plan was drawn up for the next 12 months.

Farmer’s discuss successful inclusive business models

The concept of agricultural value chain finance in Africa, its new developments and new opportunities for farmers in developing and strengthening new business models was discussed. A key point is that VC is about relationships and inclusiveness and therefore FOs should be involved at all stages of decision-making.

Farmer business model designed to assist farmers in adopting a business approach to farming and address the various needs in the value chain across specific value chains were shared. Different models and drivers contributing to the success of the business model were shared such as FOs taking full ownership of their agricultural value chain; FOs influencing the set up of a conducive policy and regulatory framework; FOs organizing themselves towards collective marketing. A number of business models were shared (i) contractual marketing experience: example of the tomato sector in Senegal; (ii) Experience of the joint marketing of potatoes within the Federation of Farmers of the Fouta Djallon region, Guinea; (iii) the marketing of cereals in Burkina Faso; (iv) Igara Tea Farmers Growers Factory in Uganda; (v) The National Union for Coffee Agribusinesses and Farm Enterprises (NUCAFE) in Uganda and (VI) the Oromia Coffee Farmers’ Co-operative Union (OCFCU).

It is clear, Farmers must be well organized with a clear and shared business vision. The farmer organization must know its primary and secondary customers leading to design an appropriate business model. To support finance at the bottom of the pyramid, the regional farmer organisations can facilitate the support from major FOs to smaller ones in accessing finance (group lending) and various examples show success. Farmers should work in groups to overcome the challenges of logistics but the management and governance must be clear.

Farmer organizations should continue to lobby and work on ways to increase the availability and affordability of insurances services as well. It will be important to revitalising agricultural insurance and expand the agricultural insurance market.

Government and the donor community can play different roles in supporting rural businesses for greater rural development and sustainability. The financial institutions and specifically banks need to understand the farmer business structures, their business environment and dynamics and to offer financial products well tailored for the smallholder farmers. Most importantly, the Farmer Organisations recognize that they hold the greatest responsibility for this in ensuring that they present themselves to financial institutions in a manner that shows their track record in supporting what they do and how they operate.

From knowledge brokers to knowledge drivers

The ways in which the FOs can improve and/or strengthen their capacities and involvement in data collection and management as a way to support their business models and access financial institutions was discussed. It is critical that FOS build their knowledge and organize their local information to improve business decisions, awareness on trade opportunities, increase their access to markets and finance. This knowledge building goes hand in hand with education of farmers and the FOs in the management and use of credit. The relevancy of reliable and accurate data in all areas of the value chain was stressed and FOs should be capacitated to become knowledge drivers and knowledge brokers in the agriculture sector

Seeking new alliances and strategic partnerships to attract capital

The financing landscape is changing and we need to bridge the gap between farmers and financial institutions.

Taking advantage of the momentum and opportunities offered at the VC Finance Conference and with the objective to expand smallholder farmer access to financial services, the RFOs drew up an action plan to upscale some successful business operations aimed at increasing access to finance, capacity building and innovative partnerships.

The FOs will strengthen their engagement with the policy processes, notably with CAADP (NEPAD) and the RECs.

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Sunday 13 July 2014
New impetus for value chain finance and Successes in Farmer Business Models

Welcome and introductory remarks

  • Prof. Kinandu Muragu, Executive Director, Kenya School of Monetary Studies
  • Theo de Jager, Vice-President PAFO,
  • Janet Edeme, AUC
  • Michael Hailu, Director, CTA

Objectives and Programme Isolina Boto, Manager, CTA Brussels Office

Session 1: Setting the scene: New environment for VC finance

Panel 1: Finance: a key driver for value chain development
This panel discussed the concept of agricultural value chain finance in Africa, new developments and new opportunities for farmers.

Chair: PAFO
Panel:

  • New opportunities in agricultural value chain finance
    Lamon Rutten, Programme Manager, Policies, Markets & ICTs, CTA
  • Agricultural finance and trade
    Abraham Sarfo, ATVET Advisor at NEPAD Planning and Coordinating Agency, CAADP
    [Presentation]
  • Agribusiness advisory services: new context in Africa
    Saleh Usman Gashua, Secretary General, Afraca
  • Financial inclusiveness from a farmer’s perspective: challenges and opportunities
    Ousseini Ouédraogo, Programme manager, ROPPA
    [Presentation]

Session 2: Successes from farmer’s organisations

This session presented how farmers in a specific value chain can take full ownership of their agricultural value chain. It also highlighted the different roles the government and the donor community can play in creating rural businesses for greater rural development and sustainability. The transition that this business model has gone through was used to highlight the importance of approaching farmer business structures with an open mind as to how the business will adapt to the local business environment and social dynamics.

Chair: Kolyang Palebele, 1st Vice President of PROPAC

Case 1:
Contractual marketing experience: example of the tomato sector in Senegal
Ablaye Dieng, ROPPA
[Presentation]

Case 2 : 
Experience of the joint marketing of potatoes within the Federation of Farmers of the Fouta Djallon region, Guinea
Ibrahima Bah, Federation of Farmers of the Fouta Djallon region, Guinea
[Presentation]

Case 3: Cereal Value Chain production, ROPPA
Bassiaka Dao, President of Confederation Paysanne du Faso (member of ROPPA)

Case 4: 
Tea Farmers creating a multi business operation: The Igara Tea Growers Factory Limited business model and the Uganda Tea Development Agency Limited as a service provider to a farmer business
Muguzi Arthur, Chairman Board of Director, Igara Tea Factory Company Lt
[Presentation|Executive summary]

Case 5:
Farmer business model designed to assist farmers adopt a business approach to farming and address the various needs in the value chain: The National Union for Coffee Agribusinesses and Farm Enterprises (NUCAFE)
David Muwonge, Deputy Executive Director, NUCAFE
[Presentation|Executive Summary]

Building Small Farmer Organizations, 
Fadel Ndiame, Lead, Farmer Organization Support Centre (FOSCA)

Panel:

  • Muguzi Arthur, Chairman Board of Director, Igara Tea Factory Company Ltd
  • Dr Theo de Jager, President SACAU
  • Fadel Ndiame, Lead, Farmer Organization Support Centre (FOSCA), FOSCA – AGRA
  • David Ruchiu, Africa Director, Farm Concern International
  • David Muwonge, Deputy Executive Director, National Union for Coffee Agribusinesses and Farm Enterprises (NUCAFE)

Monday 14 July:
Building agricultural finance from the farmers needs and role of Farmer Organisations

Session 3: Finance at the bottom of the pyramid

This session started with presentations on what women self-help groups are doing to increase their access to financial services, and Banks presented and discussed what they look for in a client. This was followed by a panel discussion on what Farmer Organisations can do to increase their access to finance with the resources currently at their disposal before planning to expand.

Chair: Theo de Jager, President of SACAU

Panel:

  • Increasing access to finance and strengthening financial services
    Wiligis Mbogoro, Executive Director of Tanzania Federation of Co-operatives (TFC)
    [Presentation|Executive Summary]
  • Banking agriculture in the Eastern African region
    Esther Muiruri, General Manager, Marketing and Communications, Equity Bank
  • The banking service to its 190 member cooperatives.
    Dessalegn Jena, Deputy Manager Accounts & Finance, Oromia Coffee Farmers’ Co-operative Union (OCFCU) and EAFF 2nd Vice President
    [Presentation]

Questions and Discussion

Session 4: Building Data Collection as a Farmer Organisation Service

This session discussed the ways in which the FOs can improve and/or strengthen their capacities and involvement in data collection and management. This is to support the financial institutions, FOs and government policy processes. Relevant banks, traders, insurance presented their perspectives.

Chair: Philip Kiriro, President of EAFF

Panel:

  • Experience of ROPPA in data collection: the case of the regional observatory of family farms in West Africa
    Mahamadou Ouedraogo, Coordinator, Regional Observatory of Family Farms, ROPPA
    [Presentation]
  • Importance of local information to international business decisions/trade
    Enock Chikava, Bunge Senwes International (BSI)
    [Presentation]
  • One Step Program for Smallholder Farmers
    William K. Ngeno, Industrial Partnerships Manager. Yara Tanzania Limited
    [Presentation]
  • Relevancy in expanding access to insurance and reducing cost
    Agrotosh Mookerjee Principal Actuary, MicroEnsure
    [Presentation]

Questions and Discussion

Session 5: Doing Business with Farmers and FOs

This session focused on the FOs drawing up a common action plan with regard to starting some business initiatives, leading local finance initiatives, with a plan to present these to local large businesses and Banks as business opportunities. This session also contributed to the declaration and policy recommendations.

However, it began with 2 presentations on how financial institutions and agribusinesses are working with farmers and FOs to increase access to finance.

  • Sharing a Value Chain Finance Experience in Ghana
    Stephen Mwinkaara, Agricultural Lead Guinness Ghana Breweries Ltd (Diageo)
    [Presentation|Executive Summary]
  • Commodity exchange development
    Adam Gross, Investments and Capital Markets Advisor, Nepad Business Foundation
    [Presentation]

Session 6: Action Plan for increased access to finance

Drawing up Action Plan for increased access to finance
[Action Plan]

Conclusions and Closure