AgFiMS Tanzania 2011 Headline Findings Irma Grundling 17 February 2012

1. AgFiMSTanzania 2011Headline FindingsIrma Grundling17 February 2012

2. Workshop objectives … • Share the headline findings of AgFiMS Tanzania 2011 • Sounding board in terms of the interpretation, understand the findings better • Way forward??

3. The problem … • Smallholder & agri-business finance perceived as risky • There is lack of financial services suited for agriculture • Limited penetration of financial services into agri/rural areas

4. AgFiMS objectives • The overall aim - A survey to: • Assess the need for financial services and support • Assess factors prohibiting access to financial services • Facilitate interventions to address the need • AgFiMS has two complementary components: • Demand side component • Supply side component • To quantify the degree and type of finance provision

5. Objective Land-size or turnover-based selection criteria applied ?

6. AgFiMS Tanzania 2011 sample • Representative sample of 626 EAs drawn by NBS • Listing & screening exercise provided the sampling frame • 4 094 face-to-face interviews were conducted with agribusiness owners • 3 734 interviews with producers • 104 interviews with processors • 256 interviews with service providers • The survey is representative at: • National, urban-rural, and agricultural zonal levels (including Zanzibar) for producers • National level for processors and service provide

7. Size & Scope of the AgFiMS Tanzania 2011 identified Agribusiness Market

8. AgFiMS Tanzania 2011 • +- 7m farming households • +- 5m households with farming as main income source • AgFiMS – 2 million agri-businesses

9. AgFiMS Tanzania 2011

10. AgFiMS Tanzania 2011 Business Profile

11. Business Profile Most agribusinesses focus on crop farming as main source of income

12. Business Profile Most livestock businesses focus cattle as main source of income

13. Business Profile Service providers are mainly retailers

14. AgFiMS Tanzania 2011Business Owner Profile

15. Business owners demonstrate entrepreneurial characteristics

16. Business owners manage their money wisely and are willing to take calculated risks

17. Business owners make soundfinancial decisions

18. Agribusinesses have virtually no coping mechanisms to rely on when faced with business risks

19. Income diversification offering protection?86.1% diversify their income sources

20. AgFiMS Tanzania 2011 Business EnvironmentIs the environment conducive for these entrepreneurs to achieve business success?

21. ‘Ownership’ of land is a perception • for most producers More than 90% producers claim land ownership although less than 10% have title deeds

22. Most producers use more land than they ‘own’; Lack of capital affects productivity for 1 in 5

23. Lack of access to irrigation systems and reliance on natural water resources further inhibits productivity

24. Although the level of access to infrastructure is not conducive for business activities, mobile phone access provides connectivity

25. Limitations in the business environment seems to result in distressed sales Distressed sales? 12% sell on contract 10% sell all products on contract

26. Lack of access to networks and information support increases vulnerability

27. AgFiMS Tanzania 2011 Financial Business Operations

28. Sound financial decision-making does not result in high levels of financial inclusion for agribusinesses

29. Multiple financial strategies – A matter of choice or no options? Banked Served by non-bank formal and/or semi-formal institutions 43.5% Informally served Unserved (55.6%)

30. Landscape of access…

31. 147 000 banked …What do they use banks for?

32. 45 000 use non- bank formal products/services …What are they using?

33. 145 000 use the informal sector …What do they use it for?

34. Financial behaviour … 408 303 143 782 2 600

35. 78.5% business owners save but most prefer to save at home rather than putting their money in a bank

36. Accessibility the key barrier to banking …. ? • “Banks are too far away” – 37% of the unbanked • “The business does not meet the requirements of the bank” – 26% of the unbanked • “Banks do not want to lend money to a business like mine”/ • “banks are not interested in a business like mine” - • 16% of the unbanked

37. Status quo: Credit Bank SACCOs MFIs Informal Friends/ family 4% business owners 7% business owners 27% business owners 14% business owners 68.9% of credit 11.7% of borrowers 12.2% of credit 21.3% of borrowers 15.1% of credit 79.3% of borrowers 3.8% of credit 40.2% of borrowers

38. Financial needs ....‘Capex’, ‘operational expenditure’, ‘business assurance’

39. Agri-businesses finance inputs themselves…

40. AgFiMS Tanzania 2011 Identifying Development Needs

41. Perceived obstacles to growth

42. Key capacities for Agri-businesses Top income category Formal inclusion • Usage of financial services & products • Accessing credit • Access to/usage of credible financial advisory resources • Access to/usage of credible business advisory resources • Access to/exposure to appropriate agricultural advice/support • Access to networks &support structures; coping mechanisms Access to infrastructure Access to markets Access to/usage of credible financial advisory resources Access to/usage of credible business advisory resources Access to/exposure to appropriate agricultural advice/support Access to networks &support structures; coping mechanisms

43. AgFiMS Tanzania 2011 Evidence-led Intervention Strategy • AgFiMS dissemination • Facilitate dialogue amongst role-players • A holistic approach to building capacities to overcome limitations • FI intervention • Opportunity • Product innovation • Delivery channels • Policy interventions

44. Towards a capacity focused longer term intervention … Key capacities … Infrastructure & access to market Financial inclusion • Access to/usage of credible financial advisory resources • Access to/usage of credible business advisory resources • Access to/exposure to appropriate agricultural advice/support Information • Access to networks &support structures; coping mechanisms Structure/organisation Connectivity

45. Establishing info sharing platform as a first step • BUSINESS ADVICE • Financial management principles • Record keeping; Debt management; Income diversification; Cash flow management • Strategic business decisions • Competitive edge; Pricing; Marketing; Contracting; Group/networking • Risk management • Price; Weather; etc. • FINANCIAL ADVICE • Products, services & requirements • Financial education • Financial advice • Investments; debt; insurance • Long-term; short-term planning Platform • STRUCTURING/FORMING GROUPS • How • Requirements; Obligations; Responsibilities • Management • Structure • AGRI RELEVANT INFO • Inputs • Sources, pricing, credit/advance, security., risks • Process • Preparation, prevention, remedial, labour, best practices • Yield • Storage, transportation, timing, surplus/demand & price

46. ACADEMIC INS NGOS FINANCIAL INST RESEARCH INST BUSINESS INST GOVERN-MENT OPPORTUNITY DEVELOPMENT PRICING AUTHORITY VALUE CHAIN PLAYERS DONORS/ INVESTORS PLATFORM Benefits for all role-players OPPORTUNITY DEVELOPMENT AGRI BUSINESSES

47. More than an info sharing platform PLATFORM • INFORMED • EXPOSURE TO TECHNOLOGY • VALUE CHAIN LINKAGES • NETWORKING • SUSTAINABILITY • RESPONSIBILITY OPPORTUNITY • MONEY PLATFORM • PAYMENT SYSTEM • MONEY STORAGE • MICRO-CREDIT & INSURANCE

48. Thank you