Presentation Fin4Ag S21 by Justus Mwiti

1. K-REP DEVELOPMENT AGENCY
EXPERIENCE IN VALUE CHAIN
FINANCING
Challenges, opportunities and
Lessons Learnt
Presented by: Justus Mwiti
Friday, August 8, 2014 Agri4fin Conference in Nairobi(14-18 July, 2014 1

2. Value Chain Financing Projects undertaken by
K-Rep Development Agency
• Smallholder farmer’s savings and credit project
• Micro leasing project
• Rural Enterprise Programs (Dairy Value Chain)-East
Africa Dairy Development Project
• Value chain financing for the Honey sector
• Smallholder Poultry Agribusiness Development Program
• Livestock and fish value chains in Somaliland and
Puntland
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1. Development Approach
• An integrated value chain approach has a
broader impact and benefits. Sustainability of
such programs depends on the mobilization
of target communities and also inclusion of
poor households
Success Factors for Value Chain
Financing

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• It is important to understand the structure
and dynamic nature of the value chain. This
enables the value chain designers to know
whether the primary producers can more
efficiently by organizing the value chain. It
important to know gender participation in the
value chains and also who controls productive
resources/assets in the particular chain
2. Knowledge of the Value Chain

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• The drivers of a value chain, which are often
the businesses involved in the processing and
marketing of agricultural outputs, know the
business and the other actors in the chain in a
way that financial institutions per se do not.
3. Insider knowledge of the VC

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• The success of a VCF strategy depends on the
right partners who synergistically work
together to achieve a common purpose.
• K-rep has been selected to support access to
finance components in many development
projects because of its experience in rural
finance
4.Dependable partners

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5. Define clearly partner’s roles
• Value chain development depends on a range
of value chain actors, facilitators, financial
service providers and other support. There
roles should be clearly defined, especially in
emerging value chains where their functions
are not yet institutionally separated.
• If the finance function is performed by a chain
actor, such as a farmers’ marketing
cooperative, attention should be paid to
separating them in terms of institutional
capacity, governance and accounting.

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6. Identify an effective lead partner in
value chain finance
• An active player in the chain, such as a farmers’
marketing organization or a processing company,
can take the lead in streamlining the value chain,
thus providing a degree of chain governance.
• Such a party can also play a role by providing
embedded financing to suppliers, and/or
establishing a working relationship with a
Financial Service Providers to finance producers
and input suppliers.

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7. Select enterprises with a strong
business case
• The Target industry sector must be
competitive if interventions are to be
sustainable. Within a competitive sector or
subsector, the most competitive value chains
and niches must be identified.
• Avoid interventions where the prospect of
long-term sustainability cannot be
demonstrated. The business cases includes;
dairy, poultry, honey etc. as demonstrated by
the above projects

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8. Proper regulatory framework
• It is important to understand the existing
regulatory framework in a given country if it
does exist in various aspects of VC
development. Examples are; MFI regulations,
marketing regulations. Supportive regulatory
framework is important for the development
of VC

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9. Ring fence both the connections and
distinction between financial services and
value chain development
• Actors should understand the differences
between developing the value chain which
mainly focuses on market development and
supply of financial services which targets
specific aspects of the nodes in the value
chain and not the entire chain

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Challenges in AVCF
o Subsistence Approach by most farmers, thus
making financing of such activities difficult
o Covariant risks in agriculture sector
o Post harvest losses and
o Inadequate marketing and transport systems
(Infrastructure) with little vertical integration
in the value chains and few price incentives
and sales opportunities that can trigger mass
production

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Opportunities in VCF
• ICTs play an important role in agricultural
value chains, with different types of ICT having
different strengths and weaknesses when
applied to particular interventions.
• Improvement of the infrastructure
• Opportunities with the devolved systems in
Kenya, thus offering an array of options for
building synergies in value chain development
and financing

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• THANK YOU