Effective ways to reach smallholders Value chain financing 18th October 2007 By George Odo The CARE Africa Venture Fund care australia care thailand care canada care denmark care germany care france care japan care netherlands care norway care austria care uk care usa international “We seek a world of hope, tolerance and social justice, where poverty has been overcome & people live in dignity & security”

Presentation Content  Introduction to CARE  Background  Identifying the problem  The Issues & proposed solutions  Some Examples  Key Learnings

CARE country offices - Peru, India, Kenya, Indonesia, etc (67 world-wide) CARE National Members (12) – Australia, Austria, Canada, Denmark, France, Germany, Japan, Netherlands, Norway, UK, USA & Thailand* CARE International ( secretariat in Brussels) ‘Country offices’ ‘National members’ & ‘Lead members’ ‘CI’ Introduction to CARE – The Federation

 One of the largest NGOs in the world  14,800 staff globally  About 1169 projects in 16 sectors reaching 48 million people in 67 countries & 60 Country Offices  Board of 12 ‘National’ members with secretariat in Geneva  About US $ 700 million annual budget with 43% spent in Africa, 34 in Asia, 17% in Latin America and 6% Middle East and Europe  Works in both development and emergency situations  Key Sectors - ANR (14%), SEAD (6%), WATSAN (8%), Emergency (4%), Nutrition (4%), HIV/AIDS (8%), Maternal (4%) & Child health (4%) Introduction to CARE – Vital stats

Introduction to CARE - How we spend our funds Less than 10% Administration costs!

Background - GDP in relation to Poverty

STATEMARKET NGDO GROUNDED IN 'AXIOMATIC‘ETHICS AND VALUES : CIVIL SOCIETY Source: Alan Fowler, NGO Futures – Beyond Aid Fourth Position Goals and Tasks Ensuring entitlements by: reduction and re-distribution of risk exacting compliance from duty-holders reducing costs of compliance Fourth Position NGDO Roles Negotiator/mediator Validator Watchdog Innovator/demonstrator Rights-based principles The fourth position Background- NGOs role in the ‘Fourth’ position

Identifying the Problem – CARE’s Making markets work for the poor approach  CARE’s MMWTP strategy was published in 2004 in response to UN Commission on the Private Sector and Development  The commission’s final report Unleashing Entrepreneurship: Making Business Work for the Poor (2004) recognized that:  SMEs in developing countries can drive job creation, innovation and economic growth. BUT  Entrepreneurs operating in the informal economy lacked access to the legal systems (enabling environment), financial services & BDS

Identifying the Problem – The three pillars of Enterprise development

Spectrum of Financial Service Providers National & Regional Investments & Infrastructure Large commercial enterprises & new ventures Small & Medium Enterprises Small Economic Activities Internal Savings & Loans Internal Savings & Loan schemes, Money lenders, NFP MFIs FP MFIs, Cooperatives, Revolving Input loan & guarantee funds Development Financial Institutions Commercial banks, Private Equity & Venture Capital Funds $100 loans $ 1, 000 to $ 10,000 up to $ 50,000 $ 100,000 to $ 1,000,000 $ 1,000,000 to $ 5,000,000 & above SME Funds, Social Venture Funds, MFI Banks Underserved in the BOP

Access to Financial Services

Proposed Solution ProblemSolution High Transaction costAggregation Lack of collateralGuarantees through ‘forward’ Market contracts Lack of entrepreneurial experience Entrepreneurial focused TA Weak & Informal Institutions Formalize institutions & governance training

“Start with the market….and work backwards” Market Demand Produce Aggregator Inputs Goods Aggregation of the smallholders goods Aggregation of the smallholders demand for goods or services CARE’s approach – Integrating smallholders Market ‘contracts’ as collateral Inputs/cash advances on credit pre financed By Aggregator/Exporters/buyers

Examples – Village savings and Loans Group organization Regular modest Savings Savings & Lending Savings Lending & repayments Investments into Micro enterprises like smallholder farming & consumption Savings Lending & repayments S&L Term ends & distribution to members Also known as Internal Savings & Loans, based upon ROSCAs ‘Merry go round’ model

Examples - Aggregation of production

Examples - Aggregation of livestock production

Examples - Aggregation of demand

Key Learnings  ‘Mimic’ the real world….smart subsidies...’Aid for Trade’…’Market Aid’  Avoid distortion  Sustainability  Private sector integration  Traditional grant funding and traditional development models don’t work  Blend commercial and grant mechanisms