Presented By: Manoj K. Sharma November, 2012

1. Comparative analysisofprospects for delivering sustainable agricultural finance, expanding agricultural market opportunties&promotion of disadvantaged small farmers and MSMEs Presented By: Manoj K. Sharma November, 2012

2. Sustainable agriculture development – Key for economic development Indicates that Sustainable agriculture will be key for economic development The sector needs more financing – GRANTS and CAPITAL INVESTMENT to meet the requirement of the population with higher purchasing power than ever Technological intervention to ensure that small farmers are viable and contributes significantly 65% of total population directly dependent on agriculture

3. What ails small-holder agriculture? Aggregation is a solution which can provide a better bargaining power and access to credit and quality input • Skewed market linkages and the consequent poor price realisation • Lack of access to credit by smallholders leads to sub-optimal inputs and methods, and to lower productivity

4. Agriculture finance – The transformative potential Structural changes in Agriculture from subsistence to commercial requires supportive market enabling greater role of financial services

5. Actors Actors Value Chain – Agricultural Finance Linkage Consumer Consumer Without external finance With external finance Retailer Retailer Wholesaler Wholesaler Short term working capital loans for inventory Bank/FI Short term credit financing Working capital loans Bank guarantee Letter of credit Bank/FI Processor Processor Purchase in credit and repayment after sales to retailers Equipment financing Working capital loans Bank/FI Aggregator Aggregator Working capital loans Equipment financing Short term working capital loan Bank/FI Short term working capital loans Savings Insurance Producer/farmer Producer/farmer Bank/FI Input financing (on kind payment or in-cash) Working capital loans for inventory Bank/FI Input supplier Input supplier

6. Four key drivers of sustainable value chain finance model 1 Sustainability of small farm holders through diversification 2 Availability of support services- farm extension, finance, market information Multi-activity chain actor Market linked chain actors Agri production support Agri food industry support Activity Simple chain actors Specialised chain actors Value Chain players Agri-logistics and processing support Management 3 Contractual Agreement between value chain players 4 Participatory Business Model engaging small farm holders Value Chain players Spot market based relationship Contracts based relationship Informal trust based relationship

7. Agribusiness MSME financing, constraints and way forward Less than 20% of commercial lending in Asia is financing agriculture

8. Integrating Mobile Money in Agriculture Value Chains – Value chain payments through mobile banking Low cost of transaction High security of the transactions Solving the “last mile” problem Seamless integration of buyers and sellers Reduced leakages Enhanced immediacy and increased frequency of the transactions Improved economics for value chain players Accountability One of the commercial banks in India, through its Rural Finance Division is focussing on increasing its presence in rural markets by structured interventions in agriculture value chains.

9. Kisan Credit Card: Most affordable and accesible agricultural finance product in India High uptake by farmers. About 100 million KCC distributed since inception • Product feature in sync with the requirement of Small Farmers • Revolving cash credit facility • Card valid for 3 to 5 years subject to annual review. Credit limits could be enhanced annually • Conversion/re-scheduling of loans Initiative: Started by the Government of India, Reserve Bank of India (RBI), and National Bank for Agricultural and Rural Development (NABARD) in 1998-99 with an objective to help farmers access timely and adequate credit

10. Information (e.g., Price Discovery) Knowledge (Customized) Extension services Input FMCG good Financial services Farmer ChoupalSaagar Samyojak Sanchalak PAN-INDIAN VILLAGE TOWN ITC e-choupal – ICT initiative of ITC to provide a market access to small and marginal farmers (1/2) A USD 900 Million Venture The Model Transactions Collaboration with 160 partners

11. ITC e-choupal – ICT initiative of ITC to provide a market access to small and marginal farmers (2/2) A hub and spoke model for procurement of various commodities Growth

12. HariyaliKisaan Bazaar: Corporate initiative to provide 24x7 support services to farmers Typically operates in the catchment area of 25-30 kms A typical Hariyali Bazaar Caters to agriculture holdings of about 60,000 to 80,000 acres Covering 15,000 to 20,000 households Retailing Farming Products Household Products Insurance services Farm Fuels Farm Output buy-back Simple Procurement- At harvest time a farmer can directly sell to Hariyali depending on the storage facilities of the Hariyali outlets • Agri-Services • 24X7 technical support • Critical last-mile delivery • Subsistence farming to technology led commercial farming

13. Potato Value Chain Finance – Innovative model for financing through front end integration Operational Standalone Value Chain Finance Model (Most Prevalent) Stakeholder Mapping and Stakeholder Risk Analysis • The outcomes: • Risk sharing and insulation to market fluctuations • Streamlining of operations and discipline in arrangement • Increased creditworthiness of the system • Better follow up and speedy recovery of loans • Better Management Information System (MIS) • Integrated Finance Model

14. Key Lessons for Africa • Integrate supply of adequate and timely finance with value chains: Government, Donors and investors will have to support nascent value chains till such that that they grow and are able to attract commercial banks and entities • Design of financial products:Financial products that are poorly designed are of limited use to the value chain players and severely limit the growth of the sector. • Technical assistance and financial literacy for smallholders and SMEs: Extension services for smallholders and management support for SMEs will strengthen individual players as also the overall value chain.

15. Key Lessons for Africa • Backward and Forward linkages and Market Access: Markets are key to value realisation for all the players in the chain. The linkage of the chain to the market will determine the price realisation and hence the revenue that will flow to different players down the chain • Preventing Information Asymmetry: African countries can try and address the problem of information asymmetry by utilising information technology to enable value chain players to get access to real time information on markets. • Integrating Mobile Money with Value Chains: Mobile money has immense potential to smoothen the flow of value across the chain, in real time and at a lower cost than conventional banking and/or cash transactions. Coupled with ICT based information dissemination, such a model can address some of the challenges of flow of value across the chain.