SECURED PRODUCTIVE CHAINS: Innovation in

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SECURED PRODUCTIVE CHAINS Innovation in Credit
Syndication and Productive Chain Management

• Linda M. Jones
• SEEP AGM
• October 24, 2003

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Goals of Agricultural Productive Chain Management

• Manage entire value chain from farm to market
• Ensure appropriate products reach effective
  markets
• Monitor process to mitigate risks

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Common Risks along the Productive Chain

• Inappropriate inputs
• Crop failure
• Buyers not
• available
• Price fluctuations
• Lack of credit to farmers
• Farmers default on loans

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Mitigating Risks in Agricultural Productive Chains

• Management from production to final markets
• Appropriate crop selection
• Inputs suitable for crop and market
• Crop monitoring throughout
• Advance identification of buyer
• Guaranteed prices
• Financing to farmers

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Typical Syndicated Loans

• Lending institutions collaborate to finance
  borrowers
• Enlarge volume of financing
• Reduce administrative overheads
• Diversification of funding risk to borrower
• Diversification of risks of loan portfolio
• Often huge loans in 10s - 100s million

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Downmarket Syndicated Credit

• Syndication of microcredit loans to high-risk
  poor farmers
• Share risk among stakeholders in productive chain

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Combining Productive Chain Management /
Syndicated Credit

• Key stakeholders in chain contribute to financial
  risk
• Lending institution
• Input suppliers
• Millers
• Buyers
• Farmers

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Secured Productive Chains

• Managed by lead agency
• Each agent is able to finance and take risks
  (finance seeds, machine hours, processing, etc)
  but the loan will be managed only by the lead
• The lead will recover the loan, and pay each
  agent
• All sources will be managed together as a trust

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Monitoring Key to Success

• Technological package designed
• Monitoring schedule agreed upon
• Monitoring agency contracted
• Risks mitigated as crop develops
• Real time information available

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Peru Pilot of Secured Productive Chains in
Bagua Rice Growing Area
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Who Pays for Monitoring?

• Farmer
• MFI
• Each stakeholder contributes a pro rated share
• Loan guarantor / Donor

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Agromonitor Monitoring System

• A tool to monitor and develop controls for
  agricultual productive chains
• Real time information available to different
  agents
• Utilizes state-of-the-art technologies digital
  cameras, palm pilots, database apps, web access

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Sample Views TA Visit
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Benefits to the Target Beneficiaries Poor Farmers

• Higher risk farmers can access loans
• Loans are offered at lower interest rates (from
  3.5 to 2.7 in Bagua pilot)
• Risks are reduced through timely TA and
  appropriate inputs
• Yields and quality have potential to be improved
  higher profits
• Guaranteed buyer may be identified
• Group buying and equipment rental

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