Context

CIDR has been promoting Value Chain Financing [1] (VCF) under its East Africa Programme since 2003. First experience took place in Tanzania, with paprika and onions. In the case of Paprika, CIDR has tested a microfinance group loan which is partially guaranteed by a triparty agreement signed between a MFI, rural smallholders and a TMSP (Technical and Marketing Service Provider). Repayment rates proved very high and have generated better returns for the MFIs since the guarantee provided by the contract allowed farmers to receive larger loan amounts.

Therefore, after the successful implementation of such financial product, CIDR has engaged a full time expert, Mark Owusuansah, to identify new opportunities and support our partners in the region to roll out the concept to other crops in Tanzania, Kenya and Ethiopia. In 2008 a survey was conducted in 5 Regions in Tanzania, and in 2009, Mark has conducted studies in both Kenya and Ethiopia. At this point on time, we are fine-tuning the products that are to be launched in Kenya (dairy and banana), where our local partner has just hired a person to start this new business line and in Ethiopia for Black cumin. In both countries we are negotiating triparty contracts with TMSP.

This document is a summary of the contribution of the Regional Value Chain Coordinator for East Africa programme to the Value Chain Finance workshop conducted by CIDR’s MECE department in full (Head Office and Field Experts) in September 2009.

Contribution

This document can be of interest to anyone that wants to have a rapid overview of what Value Chain Finance is and have a glance at the VCF products that CIDR is promoting in Kenya and Ethiopia during the second phase of the programme.

It can also help Microfinance experts that want to conduct studies to implement Value Chain Finance Products because it explains the processes followed by the East Africa team, the kind of information that has been collected and analysed and the tools used to analyse the profitability of the value chains. It sets the pattern for conducting a VCF study and how the subsequent report could be designed.

The tools in the spreadsheets attached require only direct input of data into the parameter tables and the various analyses will be run for them. However, these tools shall need fine-tuning for different other types of crops.

Executive summary

The paper presents a summary of the analytical results of the studies performed in Kenya for dairy and banana and in Ethiopia for black cumin. It includes highlights of the VCF products designed and the kind of economical analysis performed. It finally outlines the processes, and methodologies followed and the excel tools developed to perform profitability analysis of the value chains.