MABS APPROACH TO AGRICULTURAL MICROFINANCE Module 1, Session 2 The Value Chain Framework: Making it Work for Small Farmers

Challenges of small farmers Poor productivity Infrastructure gaps Poor logistical capabilities Lack of market know-how Fragmented location and farming activities Lack of access to credit & other financial services These problems hinder farmers’ active participation in the value chain

What is Value Chain? Is a sequence of steps involved in the process of production to market delivery of a product. Value Chain approaches are a vehicle for linking small businesses to markets. Full range of activities required to bring a product (or service) from its conception to its end use.

The Value Chain Framework* “Value chains encompass the full range of activities and services required to bring a product or service from its conception to sale in its final markets – whether local, national, regional, or global. Players in a value chain: input suppliers, producers, processors, and buyers. They are supported by a range of technical, business and financial service providers” * Taken from the Value Chain Framework: USAID briefing Paper * taken from: The Value Chain Framework:USAID Briefing Paper

VALUE CHAIN FRAMEWORK AND FINANCE Producers Exporters National Retailers Processors/Traders Global Retailers Input Suppliers Overdrafts/ lines of credit Investments, loans or savings to fund upgrading Working capital to purchase inputs or products Seasonal production loans Financial Services Wholesalers

VALUE CHAIN CONCEPT End Users/ Consumers Marketing Production Inputs Market Information Training & Technical Services Infrastructure Equipment Technology Organizing CAPITAL

Working with Value Chain : The Case of DNVIDA (Davao del Norte Vegetable Industry Development Association)  Experience with product value chain for small farmers  Why value chain approach is risk mitigating for farmers and lenders

Key enabling support for DNVIDA farmer- members Key enabling support for DNVIDA farmer- members  Organizational strengthening  Technology development in production and post- harvest improvements  Establishment of consolidation center  Formulation of product quality assurance protocols  Conduct vegetable pilot farms and field training  Attend fruit and vegetable congress, trade fairs

Benefits derived by the DNVIDA farmers in the value chain Enabled the small farmers to invest in new technologies, access formal credit; access to warehousing and cold storage services that are critical in cutting product losses and increasing competitiveness. Allowed entry into the modern markets (fastfood chains, supermarkets, food processors, consolidators, hotels and restaurants) which require quality and volume.

SAMPLE GOAT PRODUCTION VALUE CHAIN

ASSESS MARKETS WITH VCA Demand: Focuses on most relevant financial services demanded because they help targeted enterprises to take advantage of opportunities for growth Supply: Identifies range of service providers, building on their records, perspectives and relationships

Focus on a product or sub-sector Look at the value chain in a product in a specific locality (such as a town; a province) Get information on the different players Determine the strengths of the product value chain Analyze the gaps or what are lacking Analyze the opportunities for financing WHEN EXAMINING A PRODUCT VALUE CHAIN, LOOK FOR FINANCING OPPORTUNITIES ALONG THE VALUE CHAIN. DOING SO CAN HELP EXPAND BANK PORTFOLIO, WHILE STRENGTHENING THE CHAIN’S SUPPORT FOR THE PRIMARY PRODUCERS – THE FARMERS

Thank you