Value Chain Financing

Value Chain

• A value chain is a chain of activities that a company operating in a specific industry performs in order to deliver a valuable product or service for the market.

Value Chain Finance

The term “value chain finance” refers to the flows of funds to and among the various links within a value chain.

It refers to both internal ( conventional) and external ( emerging concept) forms of finance:

• Internal value chain finance is financing that takes place within the value chain, such as when a supplier of inputs or a buyer provides credit to a farmer.

• External value chain finance is financing from outside the chain made possible by value chain relationships and mechanisms; for example, when a bank issues a loan to a farmer based on a contract with a trusted buyer/ value chain partner.

Why Value Chain Financing?

• In order to spur growth from relatively low-risk lending,

Khushhalibank has been exploring avenues in value chain financing

(VCF) which may allow the bank to not only expand its customer base

and build a healthy loan portfolio but also drive growth in areas which

have hitherto remained untapped.

• The main idea behind value chain financing is to bridge the gap

between unexplored markets and financial institutions .

Win Win For All Bank

•Large untapped market

•Growth opportunity

•Minimum operations cost

•Lesser credit risk

•Almost guaranteed

repayment .

VC partner•Quality Produce at reasonable price •Scaling up opportunity •Consistent supplies ( Registered farmers) •Addressing the needs of various high end/retail market segmentation•Employment/ Entrepreneurship creation ( suppliers, collection center, Fresh Mart ( micro franchises) etc

–

Farmer

•Access to finance

•Quality inputs at door step

•High quality seed – Higher

yield

•Less input cost

•Free of cost technical advisory

services

•Secure sales- buy back

agreement.

•Produce grading – for

different end users

Win Win For All Farmer

•Access to large market/

franchises

•Free packaging and

Transportation

•No commission to

Arthi/Middleman

•Alternate cropping ( Potato

replaced Tobacco in Swabi and

Mansehra)

Target Segment - VCF• VCF will target customers who are in relation with Value Chain Partner

(VCP) organization. This relationship of the prospective borrowers with the VC partner will be in the form of registered growers / suppliers or end users.

Value Chain Financing will cater to the financing needs of the following: • Certified/registered growers/suppliers of either public or private agri-

based organizations of repute.• Primary/Secondary dairy milk suppliers.• Artisans, craftsmen, entrepreneurs & small traders involved either in

supply/manufacturing of raw material or finished goods.• End users of technology & energy solutions• Educational institutions (Schools, colleges, vocational training centers).

Value Chain Model

Value Chain Partner

End user

KBL

Input Supplier

Growers

List of registered potato growers

Pesticides, seeds, Fertilizer supplied.

Loan facility

Payment made from loan amount

Produce sold to VCP

Loan settlement

Produce supplied to End user

Payment made

Supplier account

Settlement of credit line of growers via standing instructions

Value chain Lending Process

Flow

Sarsabz Karobar

Connecting Agro Value Chains ‘CAVC’

VALUE CHAIN PARTNERS

CONNECTING AGRO-VALUE CHAIN PRIVATE LIMITED (CAVC)

VCF for Agri GrowersKBL commenced its 1st value chain financing pilot by partnering with CAVC – a registered firm which supplied ‘Lady Rosita’ potatoes to PepsiCo International for the manufacture of ‘Lays’ potato chips. The pilot was kicked-off at Swabi branch was later replicated at 11 locations with CAVC for different crops.

End User ( Value Chains)

Sarsabz Karobar

‘United Stars Kino’

Sarsabz Karobar

Smart and Renewal

Energy Solutions ‘SRE’

Sarsabz Karobar

‘Friends Flowers’

Thank You