Embedding finance in the sesame value chain – Humera APF- Value chain W/shop 24 th June 2010
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Embedding finance in the sesame value chain – Humera
APF- Value chain W/shop 24th June 2010
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Current Situation
Setit Union
Shewit CooperativeFana Cooperative
certified Organic Sesame12 other Cooperatives
2600 Households 6400 Households
Selet Hulling PLC
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Current Situation – Pre-finance
•Setit Union•90,000 Ha’s
Input finance required- Birr 290 million
•Commercial Bank Ethiopia
o(Tigray Regional State Government
collateral)
•Commercial Bank Ethiopia
o(Tigray Regional State Government
collateral)
6 million
•Selet Hulling PLCo(Own collateral)
1,5 million
Shewit & Fana Other coop’s
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Farmer pre -finance requirements
Average land holding – 10 hectaresInput requirements – Birr 3200 per HaTotal requirement – Birr 32,000 per farmer
Fana & Shewit receive on average – Birr 58/HaOther coop’s receive on average – Birr 94/Ha
Pre-finance from banking sector – 3%
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Where does other finance come from?
Personal savings – unknown, but very littleLoan Traders – Large proportion +- 80%
Finance costInterest rate from bank – 8,5% per annumInterest rate Selet Hulling – 0%Interest rate Loan traders – up to 40% per month (negotiable)
Farmer pays the cost – reduced income
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Way forward
How to increase the bank finance?Increased government collateral - CBE - unlikelyBuyers input more finance – Personal collateral - limitedPre-purchase contracts - Private sector – contract farming – sesame as collateral
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Pre- purchase contracts
Europe
Ethiopia
International bank
International bank
Setit UnionSetit Union
International buyerInternational buyer
Local bankLocal bank
Pre purchase contract
Collateral
Collateral
Trust
Sesame sales
Sesame sales
Loan
Payment
Payment
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Thank you
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What does the triangle look like?
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What is the benefit and risks for farmers?
Access to financeExport through connectivityCash for inputsIncrease in productivityHigh price as a result of certificationThe demand for humera variety is growing
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Risk
• Farmers default• Crop failure• Crop insurance payments• Low price (depending on the nature of the
contract)
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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
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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