2. VALUE CHAIN FINANCING IN AFRICA, ASIA PACIFIC AND THE CARIBBEAN Facilitating African MSMEs into Regional and Global Markets ITC’s Experience 13 -16 November 2012 – South Africa International Trade Centre (ITC)

3. MSME as an Engine for Economic Development MSMEs play a major role in economic development, particularly in developing countries. Studies by the World Bank indicate that formal MSMEs contribute up to 45% of employment and up to 33% of GDP; If MSMEs are to play any meaningful role in regional and global markets, they have to be put on a footing similar to their competitors; Yet to put them on such a footing requires nurturing them and providing support in strategic areas.

4. Business and Trade Policy Trade Support Institution Strengthening Exporter Competitiveness Export Strategy Trade Intelligence Trade Policy Build capacity for trade negotiations Establish an adequate institutional framework Develop and implement strategies Enterprises Conclude commercial transactions Prepare for exports Formulate strategies for exports Trade Support Institutions Advise policymakers Strengthen SME capacities following ITC criteria Improve networks ITC Builds SME capacities on three levels

5. From July 2010 to May 2012, ITC implemented a project that was aimed to help organise the pineapple value chain and assist MSMEs and cooperatives export to neighbouring countries (such as Burkina Faso and Niger), Maghreb and Turkey through: improved appropriate financing and access to market information using mobile phones and a website. MSMEs in Benin have increased Sales of Pineapples to West African countries and Maghreb

6. More than 150 MSMEs and cooperatives, involving more than 50% of women, benefited from the trade related technical assistance and many of them are now exporting to Burkina Faso, Niger, Senegal, Morocco, Algeria and Turkey, An umbrella Cooperative was created as a result of the value chain mapping, The national trade promotion organisation (ABEPEC) could build its capacity to better support exporting and export-ready MSMEs in the pineapple sector. MSMEs in Benin have increased Sales of Pineapples to West African countries and Maghreb

7. The NTF II, the joint ITC - CBI initiative supports sector development, primarily in agro-produce, by strengthening institutions and enhancing effectiveness of the sector value chain in Senegal and Uganda. Since 2011, the National Union of Coffee Agribusinesses and Farm Enterprises (NUCAFE) and 100 of its member farmer associations (FAs) in Uganda are benefitting from technical assistance (TA) in quality, business management and access to finance. This TA improve the quantity and quality of their exports to Europe. ITC joins forces with CBI to help create competitive and sustainable value chains for Ugandan coffee exports to Europe

8. Since 2011, more than 50 MSMEs and cooperatives in Mango value chain through the horticulture association (CFAHS) in Senegal are receiving technical backstopping on quality, contractual negotiations and access to finance; This assistance aims to boost their exports to European markets. ITC joins forces with CBI to help create competitive and sustainable value chains for Senegalese mango exports to Europe

9. Access to Finance for MSMEs Triangular Approach Regional & International Financial Organizations Commercial Banks & Micro Financial Institutions Trade-Related Technical Assistance Services & Finance Credit & Guarantee Lines MSMEs ITC MSME Financing Private Sector Development LOANCOM & other tools MSME Competence Building

10. ITC’s A2F in Asia and the Pacific ASIA-PACIFIC REGIONAL FINANCE CENTRE A proposed ITC-ADFIAP partnership

11. Delivery Modalities The Regional Centre will rely on a hub-and- spokes model (see figure on the right) with an e-platform to deliver training, coaching and technical assistance in the four pilot countries. Project Cost Budget to be mobilized: US$ 2.3 million (covers capacity-building activities, networking events, training materials and publications, software, communications and the e-platform) Duration: 3 years (2013-2016). ITC’s A2F in Asia and the Pacific ASIA-PACIFIC REGIONAL FINANCE CENTRE

12. Next Steps ITC, with the support of ADFIAP, is looking for interested donors to partner with to take this initiative forward, implement planned activities and achieve key results. Expected Results Over 700 exporting SMEs improve financial management skills with bankable business plans At least 12 TSIs are equipped to train and coach SMEs and other TSIs in financial management ITC’s A2F in Asia and the Pacific ASIA-PACIFIC REGIONAL FINANCE CENTRE (APRFC)

13. For a better access to finance for MSMEs, information on the various regional institutions providing financial assistance to MSMEs needs to be more widely disseminated to the MSME community and needs to be made more user friendly; In order to ease the financing problems of MSMEs, a new structure should be set up at the national development banks of African countries, which would regroup all credit lines from donor agencies, and lend on conditions acceptable to MSMEs; Recipient governments of grants from donor agencies targeted at the development of MSMEs, need to properly negotiate the conditions of the grant agreement. Better Management of Lines of Credit, Grants and Guarantee Funds From DFIs

14. Financial institutions dedicated to serving MSMEs should be set up and government should subsidize some of the loans to support MSMEs with potential for growth. The funds could be mobilized from domestic as well as international NGOs, governments and possibly some banks ; Efforts should be made to set up a stock market for MSMEs provided the macro-economic conditions permit; Governments should assist in strengthening institutions engaged in credit delivery; Governments to Put in Place a Better Financial System

15. Governments should assist in strengthening institutions engaged in credit delivery; Possibilities for linking formal and informal financing institutions should be explored in order to enlarge the resource base which MSMEs can access; The feasibility of tapping into long term deposits such as pension funds, social security, insurance funds, etc. as a way of augmenting the resources that MSMEs can access should be explored; Governments to Put in Place a Better Financial System

16. Guarantee facilities should be put in place to encourage banks to lend money to MSMEs. Particularly such guarantee can facilitate the smooth involvement of exporting and export-ready MSMEs by removing trade risks; Governments should encourage the private sector to be involved in the creation of venture capital for use by MSMEs; Strengthen the judiciary capacity to enforce commercial contracts expeditiously. Governments to Put in Place a Better Financial System

17. Thank you!! Angela Strachan strachan@intracen.org Torek Farhadi farhadi@intracen.org Yaya Ouattara ouattara@intracen.org