AgFiMS Tanzania 2011 Agri-business Workshop Irma Grundling, Trevor Kaseke 7 December 2011

1. AgFiMSTanzania 2011Agri-businessWorkshopIrma Grundling, Trevor Kaseke7 December 2011

2. Workshop objectives … • Share the headline findings of AgFiMS Tanzania 2011 • Sounding board in terms of the interpretation • 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

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

9. AgFiMS Tanzania 2011

10. Food crop producers • 50 farmers Geographical Distribution demonstrates zonal differentiation Livestock farmers Cash crop producers • 50 farmers • 50 farmers

11. Geographical Distribution Processors Service Providers • 20 Businesses

12. AgFiMS Tanzania 2011 Business Profile

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

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

15. Business Profile Service providers are mainly retailers

16. AgFiMS Tanzania 2011Business Owner Profile

17. Business owners demonstrate entrepreneurial characteristics

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

19. Business owners make soundfinancial decisions

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 Preferred Market? Distressed sales? 12% sell on contract 10% sell all products on contract

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

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

28. Business risks have to be consciously managed for agri-businesses to be perceived as a viable potential market for financial institutions

29. AgFiMS Tanzania 2011 Support Services

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

31. Group membership is limited Cash crop farmers most likely to form groups for farming activities (44%)

32. AgFiMS Tanzania 2011 Financial Business Operations

33. Levels of income....... 83%

34. Financial management

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

36. 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%)

37. Landscape of access…

38. 147 000 banked …What do they use banks for?

39. 45 000 use MFIs, SACCOs & Insurance…What do they use it for?

40. 145 000 use the informal sector …What do they use it for?

41. Financial behaviour … 408 303 143 782 2 600

42. 78.5% business owners save but most prefer to save at home rather than putting their money in a bank

43. 1 in 3 business owners borrowed money/took credit for the business during 2010/2011 Formal/semi-formal Sources Informal Sources

44. Quantifying the amount of credit in the AgFiMS market Bank SACCOs MFIs Informal Friends/ family • ASSUMPTIONS • Once-off per source • Ts 3,1m Bank • Ts300k SACCO/MFI • Ts100k Informal • Ts50k Friends/family 4% business owners 7% business owners 27% business owners 14% business owners USD 36m 68.9% of credit 11.7% of borrowers USD 6m 12.2% of credit 21.3% of borrowers USD 8m 15.1% of credit 79.3% of borrowers USD 2m 3.8% of credit 40.2% of borrowers USD 52m

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

46. Agri-businesses finance inputs themselves…

47. What is keeping agri-businesses out of banking?

48. What keeps agri-businesses from borrowing?

49. Collateral ... What do agri-businesses have to offer?

50. AgFiMS Tanzania 2011 Identifying Development Needs