1. AgFiMS Tanzania 2011 Headline Findings Irma Grundling, Annette Altvater, Linda Helgesson Sekei 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. AgFiMS objectives The overall aim - A survey to: Assess the need for financial services and support Assess factors prohibiting access to financial services Facilitate interventions to address the need AgFiMS has two complementary components: Demand side component Supply side component To quantify the degree and type of finance provision

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

5. 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

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

7. AgFiMS Tanzania 2011 Agri-businessesTotal AgFiMS qualifiers Number of qualifiers % qualifying Producers - farmers selling more than they consume and earning an income from cash crop, food crop or livestock farming 1 932 222 492 980 earn at least $600 p.a. OR use at least 5acres 25.5% Processors21 017 8 199 earn at least $1500 p.a. 39.0% Service Providers62 502 18 793 earn at least $1500 p.a. 30.1% TOTAL 2 015 742 519 97225.8% +- 7m farming households +- 5m households with farming as main income source AgFiMS – 2 million agri-businesses

8. AgFiMS Tanzania 2011

9. Geographical Distribution demonstrates zonal differentiation Food crop producers Cash crop producers Livestock farmers 50 farmers

10. Geographical Distribution ProcessorsService Providers 20 Businesses

11. AgFiMS Tanzania 2011 Business Profile

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

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

14. Business Profile Service providers are mainly retailers

15. AgFiMS Tanzania 2011 Business Owner Profile

16. Business owners demonstrate entrepreneurial characteristics

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

18. Business owners make sound financial decisions

19. Research Issues What makes this group of business owners so different? What will incentivise them to be more productive?

20. AgFiMS Tanzania 2011 Business Environment Is the environment conducive for these entrepreneurs to achieve business success?

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

22. Most producers use more land than they ‘own’; Lack of capital affects productivity for 1 in 5

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

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

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

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

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

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

29. Research Issues Better understanding of risk and risk mitigation Tanzania’s history – the impact of nationalisation of co-ops on groups and networking. How was social capital affected? Comparing Tanzania and Kenya – what makes Kenyan agri- businesses different?

30. AgFiMS Tanzania 2011 Financial Business Operations

31. Financial management BankedBusiness owners who have or use any product or service from any commercial bank for the purpose of the agribusiness Served by formal non- bank and/or semi-formal non-bank financial institutions Business owners who have or use any product or service from any regulated or registered financial institution which is not a commercial bank (e.g. SACCOS, MFIs) for the purpose of the agribusiness Formally servedBusiness owners who are banked AND/OR who are served by formal non-bank and/or semi-formal non-bank financial institutions for the purpose of the agribusiness Informally servedBusiness owners who use informal mechanisms to manage the financial matters of the agribusiness. This would include services offered by agricultural associations or groups, input providers, VICOBAs, VSLAs, ROSCAs etc. Financially servedBusiness owners who are either formally AND/OR informally served for the purpose of the agribusiness Financially unserved/excluded Business owners who are neither formally OR informally served for the purpose of the agribusiness

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

33. Multiple financial strategies – A matter of choice or no options? BankedServed by non-bank formal and/or semi-formal institutions Unserved (55.6%) Informally served 43.5%

34. Landscape of access…

35. 147 000 banked … What do they use banks for?

36. 45 000 use non- bank formal products/services … What are they using?

37. 145 000 use the informal sector … What do they use it for?

38. Financial behaviour … 143 782 2 600 408 303

39. 78.5% business owners save but most prefer to save at home rather than putting their money in a bank

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

41. What keeps agri-businesses from borrowing?

42. Credit status Bank SACCOs MFIs 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

43. Financial needs.... ‘Capex’, ‘operational expenditure’, ‘business assurance’

44. Collateral... What do agri-businesses have to offer?

45. AgFiMS Tanzania 2011 Identifying Development Needs

46. Perceived obstacles to growth

47. Key capacities for Agri-businesses 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 Social capital – Access to networks &support structures; coping mechanisms Formal inclusionTop income category

48. AgFiMS Tanzania 2011 Evidence-led Intervention Approach?

49. Capacities needed for formal financial services usage 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/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 Information Structure/organisation Infrastructure & access to market

50. Info Hub 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. 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. AGRI RELEVANT INFO Inputs Sources, pricing, credit/advance, security., risks Process Preparation, prevention, remedial, labour, best practices Yield Storage, transportation, timing, surplus/demand & price AGRI RELEVANT INFO Inputs Sources, pricing, credit/advance, security., risks Process Preparation, prevention, remedial, labour, best practices Yield Storage, transportation, timing, surplus/demand & price FINANCIAL ADVICE Products, services & requirements Financial education Financial advice Investments; debt; insurance Long-term; short-term planning FINANCIAL ADVICE Products, services & requirements Financial education Financial advice Investments; debt; insurance Long-term; short-term planning STRUCTURING/FORMING GROUPS How Requirements; Obligations; Responsibilities Management Structure STRUCTURING/FORMING GROUPS How Requirements; Obligations; Responsibilities Management Structure Establishing info hubs as a first step

51. INFORMATION HUB VALUE CHAIN PLAYERS GOVERN- MENT RESEARCH INST RESEARCH INST ACADEMIC INS NGOS FINANCIAL INST FINANCIAL INST BUSINESS INST BUSINESS INST PRICING AUTHORITY PRICING AUTHORITY DONORS/ INVESTORS DONORS/ INVESTORS AGRI BUSINESSES AGRI BUSINESSES 2-way Information sharing 2-way Information sharing

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

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

54. Towards change … Effective dissemination of the AgFiMS findings Facilitating debate/dialogue between different stakeholders with regard to a holistic approach to agricultural development basic on a common understanding of the status quo Specific focused discussions to guide interventions Policy makers – what do we need to change in the business environment? Financial institutions – what kind of services and/or products do agri- business need? Telco’s – how can we develop products/services for agri-businesses? Can our platforms be used broader than currently? Development agents – what should the focus/priorities be? Where do we allocate resources? Getting buy-in from all role-players for the information-hub approach Agri-business buy-in crucial

55. Towards change … Determining which activities are being undertaken by various players in the agricultural sector Collaborative effort aligned with multiple objectives Avoid duplication Share resources and align activities Initiate discussions with potential technical partners for the development of the information hub platform

56. Thank you