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European Microfinance Week 2016
November 16, 2016 Luxembourg
Trends in Rural Finance Rural Outreach and Innovation Action Group
Trend:
New technology in agriculture:
Geo data for plot location, size, linked to soil analysis et
Weather stations for weather predictions
Drowns for harvest estimates, use of farm inputs
Market and price information systems per mobile phone
How can this help in modeling loan analysis and loan products for small farmers
Rural Finance working with Corporates: the context Research 3
Geo data can spot soil types etc
Farmer Name Crop cultivar acreage Sowing date Expected harvest date Expected yield
Farmer1 Potato Bellete 0.25 25-apr-15 10-sep-15 12 ton/ha
Farmer1 Teff Red 0.25 20-apr-15 15-oct-2015 3 ton/ha
.... .... .... .... .... .... ....
Some Key Challenges
Better soil, weather data so
better input application
Better market information
Better productivity & quality
Improved marketing and
income growth
Better loan repayment?
Mobile phone payment systems
Agency banking
Hand held devises for loan
officers
Digitalized loan systems related
to storage.
New agro technology New finance systems
Mariel Mensink, Rural finance advisor
ICCO Terrafina Microfinance Hamburgerstraat 28a, 3512 NS Utrecht
The Netherlands T +31 (0)615891490 E : [email protected]
www.terrafina.nl
NpM, Platform for Inclusive Finance
Hamburgerstraat 28a, 3512 NS, Utrecht, the Netherlands
T: 0302 34 82 01
W: www.inclusivefinanceplatform.nl
Trends in Rural Finance Rural Outreach and Innovation Action Group
Inclusive Green Rural Finance, Trends in MF and Env. AG activities, opportunities for greening the agro
projects
ROI-AG meeting, Luxembourg 16th Nov, 2016
Davide Forcella, CERMi
Green Inclusive Finance is a growing sector !
Worldwide – Developing Countries Pub MIX-e-MFP 2015 Nov
MIVs that integrate environmental issues into
their investment decisions.
(Symbiotics Research & Advisory)
Unique multi-stakeholders think-tank for environmentally responsible inclusive finance
Founded in Feb. 2013, 1st mandate 2013-2015, 2nd mandate 2016-2017
o Discuss current challenges and strategies in green microfinance
o Improve knowledge and action of microfinance actors in environmental issues
o Enhance cooperation among green microfinance actors
o Increase international attention for green microfinance
o Develop dedicated tools, recognized as “standard” by the MF sector, to support green microfinance
o Publicize and disseminate its findings
o Enhance the interest and concrete commitment of all actors (MFIs, investors...) in green microfinance
Microfinance and Environment Action Group
Microfinance and Environment Action Group
55 members, representing 38 institutions:
ADA, Advision Finance, AFD, Alterfin, Antwerp University – IOB, Babyloan, BFC, CERISE, CERMi, ClairMondial, DGRV-Mexico, e-MFP, Enclude, Entrepreneurs du Monde, Envest Microfinance, EU Energy Initiative Partnership Dialogue Facility, FMO, FOSERA, Frankfurt School, Grameen Crédit Agricole MF Foundation, IADB, LMDF, MEI, Microfinanza Rating, myclimate, Oikocredit, PAMIGA, Positive Planet, remEX-AFI, SBFIC, SIDI, SOS Faim Belgium/Luxembourg, Triple Jump, ULB, Universié de Genève, Università di Bergamo
Coordinated by: o Raluca Dumitrescu, MEI
o Davide Forcella, CERMi-ULB
o Marion Allet, PAMIGA – Geert Jan Schuite, ENCLUDE
Achievements
• Green Index:
The most accepted tool to assess the environmental performance of MFIs, available online on e-MFP, available in SPI4
(CERISE).
• Catalog of clean energy products:
o To help MFIs identify relevant technologies related to renewable energy and energy efficiency
o Solar water heaters, solar home systems, small-scale mini-grids, large-scale mini-grids, energy efficient refrigerators, domestic biodigesters, community PV, solar tunnel dryer, rice husk gasifier stove, improved cooking oven, housing thermal insulation, efficient air conditioners.
• Events:
o Green seminars during EMWs 2014-2015-2016
o Scientific committee for 2014 e-MFP Award on MF and Environment
o First Green Microfinance training at the EMW 2015
• Various publications: e-MFP newsletters, joint publication with MIX on green performance in MF
Green Index 2.0 ! to keep track of the evolution of the sector and to include lessons learnt from two years of implementation of the Green Index within MFIs and projects.
Two components: Qualitative
Quantitative NEW!
Four dimensions
Clearer, more balanced, backed by MFIs’ use, ability and willingness to track
environmental management
Already introduced into new SPI4 version CERISE (only qualitative)
MF and Environment AG activities for this year
Two activities to be accomplished by end of second mandate (2017)
Defined by the AG members as priorities and defined in participatory way
Training module on green microfinance for investors / donors
Guidelines on how to track the effects of GMF on clients
What is about ?
Smallholder farmers are affected by a myriad of factors:
poverty, food insecurity, economic-financial exclusion,
environmental degradation, and climate change.
Agriculture can have a negative impact on the environment and climate:
deforestation, use of certain chemicals, air and water pollution, adverse effects on local wildlife, and consumption of resources
What is our aim ?
Environment, climate, and agriculture are evidently strongly interlinked;
creating a potential for green orientated rural microfinance to
improve the productivity and quality of production
Improve resiliency of agricultural smallholders,
protecting the environment.
Synergies
there are plentiful opportunities for establishing synergies. Areas of collaboration could include:
Developing environmentally sustainable agricultural value chains
Agroforestry
Implementation of Silvopastoral methods
Organic farming investments
Climate smart agriculture and adaption
Access to clean-efficient energy for agriculture production and transformation (e.g. solar water-pumps, solar dryers, smart storage solutions).
The development of environmental or climatic risk management strategies within MFIs with rural portfolio
….
Trends in Rural Finance Rural Outreach and Innovation Action Group
FinTech and AgroLoans BFC experience: Lessons learnt and way forward
Etienne Mottet
Head of Innovation
BFC
Copy paste
Manual transfer
FinTech and Agro Loans Yesterday tools
Key weaknesses: No automation, too decentralized and no capitalization on data
Master APS Agro Loan Origination
Agro Resume Excel Scoring
Agro Tech Card Excel Data base
Agro Tech Card Excel Data base
Copy paste
Manual transfer
FinTech and Agro Loans Ongoing Upgrades
Key Learning: Don’t throw away simple tools too fast and focus on the value to the client
Master APS Agro Loan Origination
Agro Resume Excel Scoring
Agro Tech Cards Online Data Web Service
+ Online Ecommerce
+ Tablet Data collection
Integration
Auto update
Trends in Rural Finance Rural Outreach and Innovation Action Group
Social and Environmental Risks and Impacts in VCF
e-MFP Rural Outreach and Innovation Working Group session
16 Nov 2016
Patricia Richter
ILO Social Finance Programme
Overview
Typical social issues in rural areas
Self- / Employment issues
Community issues
Land issues
Relevance of rural social issues for finance
Why should an MFI consider social issues?
Two entry points for MFIs
Social (and environmental) management systems
Intentional product design
(Se
lf)e
mp
loym
en
t is
su
es
• Un-/under-employment
• Income
• Working conditions
• Informality
• Child labour
• Forced labour
• Lack of association
• ...
Co
mm
un
ity issu
es
• Health, safety and security
• Indigenous peoples
• Cultural heritage
• …
Lan
d issu
es
• Ownership
• Gender
• Resettlement
• …
Typical social issues in rural areas
Relevance of social issues for VCF
Why would an MFI consider social issues?
=> Financing agricultural VC invites social issues enter financing decisions
Risks (-/+)
Impacts (-/+)
Opportunities
=> Considering social issues is thus as much a business case as a «moral» responsibility…
• Enhances social performance of MFI, e.g.:
– Achieve social mission (create more and better jobs)
– Treat clients responsibly and understand their needs
• Improves the MFI’s business
– Demand for services (loan for work improvements)
– Client retention
• Reduces credit risk
– Formalization
– Safety at work and productivity
• Avoids negative publicity e.g. child labour
• Attracts social investors
Relevance of social issues for VCF
A SEMS is a management system that allows a financial institution to…
Identify and assess social and environment impacts, both adverse and beneficial,
Avoid, or where avoidance is not possible, minimize, mitigate, or compensate for adverse impacts on workers, affected communities, and the environment, and
Ensure that affected communities are appropriately engaged on issues that could potentially affect them
It typically contains a S&E policy, S&E standards, S&E procedures, S&E tools, S&E responsibilities, S&E training, S&E reporting.
What is a SEMS?
Social and Environmental Management
system (SEMS)
Policy
Safeguards/ standards
Procedures
Responsibilities
Training
Reporting
What is a SEMS?
Study results across 13 African DFIs
0
20
40
60
80
100
Overall
S&E Policy
S&E Standards
S&E ProceduresS&E Responsibility
S&E Training
S&E Reporting
Advanced SEMS
Early stage SEMS
S&E Policy only
No SEMS
Average Score in %
Common challenges: Capacity gaps, clients‘ S&E financing needs, weak regulation
Snapshot of the results of a S&E baseline study of the agricultural portfolio of an SME
bank:
• Avg. loan amount: 17’681 USD
• Avg. repayment period: 2.5 years
• Many clients implemented some S&E measures - most frequently related to wage
increases, workplace safety, energy efficiency, organic farming
• High awareness of benefits from managing S&E risk – most frequently cited benefit is
‘reduced operating costs’ + ‘profitability’
• Firms that score high on social risk also tend to score high on environment risk
Agricultural S&E risks are real
Formalization •Awareness raising and client sensitisation to benefits
•Business development services
Occupational Safety
and Health
•Client training on good working conditions and agreement on improvement plan
•Specific loan product for work improvements
Job Creation/ Women
Empowerment
•Organisational restructuring: new SME lending window
•Client training on women‘s empowerment
Risk Management/
Overindebted-ness
•Insurance products: multi-risk for business loan clients, health, credit life
•Leasing product
•Financial education
•Client risk management training
•Entrepreneurship training
Child Labour •Modification of existing microinsurance product
•Awareness campaign
•Client training to increase production productivity
*Microfinance for Decent Work website: http://www.ilo.org/empent/areas/social-finance/WCMS_168033/lang--en/index.htm
Examples from MF4DW research*
Results: Employment / Income
Innovation: Entrepreneurship training
Results:
Attitude towards entrepreneurship improved through 13% decrease in perception of barriers
Business profit increased by PHP 2’000 (approx. USD 50) which was almost
double the baseline profit
Ownership of motorized vehicles increased by 3.5% (positive impact on asset
building)
Incidents of late repayment decreased by 4%, taking out a loan to repay another
loan decreased by 10% (positive impact on overindebtedness)
5% increase in use of microinsurance to cover unforeseen expenses (positive
impact on risk management)
Innovation: Sensitization to benefits of formalization, combined with training on enterprise management and incentives to formalize
Results:
Increased registration of professional activities of clients;
Increased number of clients separating their business accounts from their personal accounts; and
Increased awareness on the importance of social protection.
=> Interventions increased the awareness about formalisation by 93% and formalisation itself by roughly 70%.
Results: Formalization
Innovation: Extended micro-insurance coverage to HH members
Upgrade of health and accident insurance product available to all non-nuclear family members between 18 and 65 in the client HH
Increased awareness of loan officers on microinsurance product and informal coaching of clients on its use.
Results:
Increased coverage at individual level and increase usage
7% decrease in child labour
5-6% lower risk of children involved in hazardous occupations
Average hours worked reduced 2.5 to 3.5 hours per week
No effect on child schooling
Results: Child Labour
Innovation: Introduction of Participatory Safety Education to increase productivity and workplace safety of clients and community
Results:
Decreased work place illnesses and injuries by 11%
Increased safe work place habits
New technologies and practices adopted
More clients are able to save
Enhanced productivity lead to an increase in monthly net income of USD 37
Results: Occupational Safety and Health
Trends in Rural Finance Rural Outreach and Innovation Action Group
A brief broad overview of IFAD’s experience in Agricultural Value Chain Finance (AgVCF)
Agricultural Value Chain Finance and Agroinsurance Panel
November 16, 2016; 1330-1520
Luxembourg
Jonathan N. Agwe (PhD)
Senior Technical Specialist
Inclusive Rural Financial services
Special Interventions Boosting Niche Smallholder Agricultural Production: Fruits and Veggies in the Seychelles
Agricultural produce market organization Unstructured – excess ungraded produce/loose VCs/no contractual arrangements in open daily markets
Structured/tight VC/Contract farming but sometimes side-selling!!
Mandated local content by GoS (Ministry of Tourism) Revised hotel classification
5 Star Hotel - 20% local content of their culinary and premium priced competitively
Subsidies schemes in favor of farmers but: No appropriate collaterals/securitization by FSP (all 7 commercial banks, despite managing public subsidy schemes)
No famer groups; no coops; only individuals; so, group lending possibility
Clustering for aggregation/bulking/market power Efficiency gains
Economies of scale
Innovations in inclusive rural finance Smart Collateral - Crop-in-the-field now used as collateral to access financing from off-takers (hotels, supper markets, etc)
Niche agricultural intra-VCF
Market-driven demand for crop insurance/non financial services (business skills; extension services -GAPs, post-harvest handling, grading, access to better remunerative markets, etc.)
Trends in Rural Finance Rural Outreach and Innovation Action Group
WAREHOUSE RECEIPT LENDING
(CRÉDIT WARRANTAGE)
Warehouse receipt lending is a loan where
the collateral is a securely stored harvest
of non-perishable agricultural products
with foreseeable price fluctuations.
(Also inventory credit)
TOOL BOX WAREHOUSE RECEIPT LENDING
All formats and tools, used in Mali,
Burkina Faso, Rwanda and Burundi
1. Preparation
• Product card
• Procedures
• Conservation
committee trained
• Etc.
2. Analysis
• Cooperative Assessment
Matrix WRL
• Costing calculations
• Producer
• MFI
• Warehouse inspection
3. Implementation
Formats and documents:
Receipts → Inventory →
Contract → Ledgers
4. Evaluation
Advantages for producers Advantages for MFIs
Access to credit for small holders
Informed sales decisions, instead of farm-gate
prices
Multiple income moments from harvest sales
Food security – harvest remains within villages
Easy to commercialize collateral
Good repayment rates
Rural penetration without climate risk exposure
CLASSIC WAREHOUSE
RECEIPT LENDING INSIGHTS
FO capacity assessment?
Insurance?
Credit as % of stock value
Calendar limitations
Visits through superiors and audit
Transactions on farmers accounts
Credit line / contract before storage
Link to payment services through MFI
accounts.
CONSERVATION
MARKET
GOVERNANCE
FRAUD
CASH MANAGEMENT
QUICK DISBURSEMENT
RISK MANAGEMENT
MFI roles in multi-actor setting?
• Loan assessment
• Warehouse inspection + conservator capacity
analysis
• Financial transaction facilitation
• Warehouse oversight and management (opening
moments)
• Financial education
• Warehouse repair – management – conservation
training
• Searching markets
• Etc.
SUSTAINABILITY: in loan officer days
SOCIAL PERFORMANCE ISSUES
WRL with farmers, their cooperatives or
traders?
• Farmers prefer immediate payments because
of lack of trust in FO
• Who gets speculation benefits?
• When managed through FO: tendency to
increase storage and marketing costs?
• Advantages of multiple income moments?
• Loan use?
Key points for reflection
1. Joint warehouse management (2 locks) or a professional warehouse operator?
2. How to assure complementary conditions beyond MFI role? What can donors do? How about warehouse maintenance?
How about training conservation committees and conservation quality?
How about market monitoring?
3. Social aspects: impact considerations Producer involvement in speculation?
Profit calculation and reflections on profit distribution?
Loan for which needs?
Trends in Rural Finance Rural Outreach and Innovation Action Group
Rural Outreach and Innovation AG: Year in Review and Vision for 2017
Marina Kortenbusch
Evgeni Siachin
BFC
60 ROI’s Business Climate: Challenges 2016
It is a small exclusive community 19 out of 60 members responded to the survey
Everybody is very busy 9 out of 19 offered support (in average 10 hours a year for each)
Very broad range of expertise, specific to different regions
Only one group meeting a year at the e-MFP conference
61 Trends in Rural Finance
http://roi.bfconsulting.com/
62 ROI’s Learning and Communication Platform 2016
Provide who’s who and increase visibility of members’ work
Encourages knowledge exchange, networking, and collaboration
http://roi.bfconsulting.com/
63 ROI Webinars in Numbers
17 webinars 15 live + 2 pre-recorded
248 attendances ~15 per each webinar
5.4 webinar-hours ~18 minutes per webinar
12.3 recorded hours ~45 min per webinar
64 BFC’s Vision 2017
BFC will continue ROI AG leadership Establish synergy with Microfinance and Environment AG and DIFE AG
BFC is launching HUB Georgia Connect stakeholders from the Georgian agricultural community
Identify synergies in development projects
Promote Ecological Value Chain Finance
Expand Agri-Finance Hubs to other countries Moldova, Kyrgyzstan, Armenia, and more…
Trends in Rural Finance Rural Outreach and Innovation Action Group
