AgFiMS Tanzania 2011 Ministry of Finance Irma Grundling , 15 February 2012

1. AgFiMSTanzania 2011Ministry of FinanceIrma Grundling, 15 February 2012

2. 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

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

4. 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

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

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

7. AgFiMS Tanzania 2011 Business Profile

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

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

10. Business Profile Service providers are mainly retailers

11. AgFiMS Tanzania 2011Business Owner Profile

12. Business owners demonstrate entrepreneurial characteristics

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

14. Business owners make soundfinancial decisions

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

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

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

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

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

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

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

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

23. AgFiMS Tanzania 2011 Financial Business Operations

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

25. 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%)

26. Landscape of access…

27. 147 000 banked …What do they use banks for?

28. 45 000 use non- bank formal products/services …What are they using?

29. 145 000 use the informal sector …What do they use it for? Customers Money lenders VICOBAVSLA Savings groups

30. Financial behaviour … 408 303 143 782 2 600

31. 78.5% business owners save but most prefer to save at home rather than putting their money in a bank

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

33. 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

34. AgFiMS Tanzania 2011 Identifying Development Needs

35. Perceived obstacles to growth

36. 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

37. AgFiMS Tanzania 2011 Evidence-led Intervention Approach?

38. Key capacities … • 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 Infrastructure & access to market

39. Establishing info hubs 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 Info Hub • 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

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

41. More than an info hub .... • STRONGER VALUE CHAIN LINKAGES INFORMATION HUB • SUSTAINABILITY • RESPONSIBILITY • INFO SHARING RULES • TECHNOLOGY-BASED • FACE-TO-FACE • SEMINAR/CONFERENCE OPPORTUNITY • TECHNOLOGY EXPOSURE FOR AGRIBUSINESSES • INTEREST GROUP MEMBERSHIP/NETWORKING • MICRO CREDIT SYSTEM / CREDIT BUREAU

42. Thank you