ANALYZING AND FINANCING

VALUE CHAINS

MAY 21, 2010

CENTURY PARK HOTEL

Manila

IN AGRICULTURE

What is Value Chain?

SEQUENCE OF STEPS IN THE PROCESS OF PRODUCTION TO MARKET DELIVERY OF A PRODUCT.

.INPUT SUPPLY > AGRI PRODUCTION > FIRST LEVEL

HANDLING >– PROCESSORS > WHOLESALERS/DISTRIBUTORS > RETAILERS >– CONSUMERS.

VALUE CHAIN APPROACHES ARE A VEHICLE FOR LINKING

SMALL BUSINESSES TO MARKETS

VALUE CHAIN CONCEPT

End Users/

Consumers

Marketing

Production

Inputs

Human

Resources

Services

Infrastructure

CAPITAL

Equipment

Tri-Partite Agreement between Farmer, Bank

and Processor/Exporter Farmer is assured of a fixed farm-gate price for his produce

Integrator/Exporter is assured of steady raw material supply

Bank is assured of loan collection

BANANA CHIPS CARDABA SUBSECTOR MAP

Local Retail Outlets Importers

Banana Chips Exporters

( about 15% of cardaba production)

MANILA

EXPORTERS

Micro Processors

Less than 5% of

Cardaba production

TRADERS/

DISTRIBUTORS

First Fry Processors

Processing their own

production

AssemblerBarangay

Agent

CARDABA GROWERS/ TRADERS

Price

makers

Unripe banana

Good quality for processing

Price makers but

shifts to price

takers when supply

is very limited; low

risk; med proximity

to markets

Price takers; high

risk; medium

proximity to

markets; few

suppliers

Source of info;

quality control at

community level;

has low degree of

influence at the

community chain

Price

Makers,

med risk

Price

Makers,

med risk;

with some

options on

channels

BANANA CHIPS PROCESSING ON-FARM: 1ST FRY

NEW

PROCESSED

PRODUCT

FOR EXPORT

What , therefore, are the opportunities for Microfinance?

A. Where are the opportunities for microfinance institutions for financing within the value chain?

* Input Distribution > MFIs can finance small traders of fertilizer/chemical requirements of farmers

* Production level > MFIs can finance labor, fertilizers, and other inputs needed in production with amounts determined through cash flow analysis

* Processing > MFIs can finance salary loan to employees, etc

* Trader/Wholesaler/Assembler/Consolidator > MFIs can finance working capital

* Retail > MFIs can finance micro business loan, etc).

B. Value chain analysis can expand opportunities for financing within a specific crop or sector (e.g. First Fry of Banana Chips)