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Embedding finance in the sesame value chain – Humera APF- Value chain W/shop 24 th June 2010

Embedding finance in the sesame value chain – Humera APF- Value chain W/shop 24 th June 2010. Current Situation. Selet Hulling PLC. Setit Union. Shewit Cooperative Fana Cooperative certified Organic Sesame. 12 other Cooperatives. 6400 Households. 2600 Households.

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Embedding finance in the sesame value chain – Humera APF- Value chain W/shop 24 th June 2010

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  1. Embedding finance in the sesame value chain – HumeraAPF- Value chain W/shop 24th June 2010

  2. Current Situation Selet Hulling PLC Setit Union Shewit Cooperative Fana Cooperative certified Organic Sesame 12 other Cooperatives 6400 Households 2600 Households

  3. Current Situation – Pre-finance • Commercial Bank Ethiopia • (Tigray Regional State Government collateral) • Selet Hulling PLC • (Own collateral) • Setit Union • 90,000 Ha’s • Input finance required- Birr 290 million 6 million 1,5 million Other coop’s Shewit & Fana

  4. Farmer pre -finance requirements • Average land holding – 10 hectares • Input requirements – Birr 3200 per Ha • Total requirement – Birr 32,000 per farmer • Fana & Shewit receive on average – Birr 58/Ha • Other coop’s receive on average – Birr 94/Ha • Pre-finance from banking sector – 3%

  5. Where does other finance come from? • Personal savings – unknown, but very little • Loan Traders – Large proportion +- 80% Finance cost • Interest rate from bank – 8,5% per annum • Interest rate Selet Hulling – 0% • Interest rate Loan traders – up to 40% per month (negotiable) • Farmer pays the cost – reduced income

  6. Way forward How to increase the bank finance? • Increased government collateral - CBE - unlikely • Buyers input more finance – Personal collateral - limited • Pre-purchase contracts - Private sector – contract farming – sesame as collateral

  7. Pre- purchase contracts Trust Europe International bank International buyer Collateral Payment Collateral Pre purchase contract Sesame sales Local bank Setit Union Loan Ethiopia Payment

  8. Thankyou

  9. What does the triangle look like?

  10. What is the benefit and risks for farmers? Access to finance Export through connectivity Cash for inputs Increase in productivity High price as a result of certification The demand for humera variety is growing

  11. Risk • Farmers default • Crop failure • Crop insurance payments • Low price (depending on the nature of the contract)

  12. Is there potential for upscaling? • Yes. Only two unions are covered in this scheme and there are 12 others .( in humera) • It can be upscaled to other export agricultural commodities

  13. What are the role of NGOs,BDS providers, govt organizations etc? • Government: research • NGOS like cordaid: finance & BDS service • SNV: BDS service , support local research institutes • WUR : Research on local seed varieties • F & S : BDS service

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