AgFiMSTanzania 2011Headline FindingsIrma Grundling, Annette Altvater, Linda HelgessonSekei15 February 2012
The problem … • Smallholder & agri-business finance perceived as risky • There is lack of financial services suited for agriculture • Limited penetration of financial services into agri/rural areas
AgFiMS objectives • The overall aim - A survey to: • Assess the need for financial services and support • Assess factors prohibiting access to financial services • Facilitate interventions to address the need • AgFiMS has two complementary components: • Demand side component • Supply side component • To quantify the degree and type of finance provision
Objective Land-size or turnover-based selection criteria applied ?
AgFiMS Tanzania 2011 sample • Representative sample of 626 EAs drawn by NBS • Listing & screening exercise provided the sampling frame • 4 094 face-to-face interviews were conducted with agribusiness owners • 3 734 interviews with producers • 104 interviews with processors • 256 interviews with service providers • The survey is representative at: • National, urban-rural, and agricultural zonal levels (including Zanzibar) for producers • National level for processors and service provide
Size & Scope of the AgFiMS Tanzania 2011 identified Agribusiness Market
AgFiMS Tanzania 2011 • +- 7m farming households • +- 5m households with farming as main income source • AgFiMS – 2 million agri-businesses
Food crop producers • 50 farmers Geographical Distribution demonstrates zonal differentiation Livestock farmers Cash crop producers • 50 farmers • 50 farmers
Geographical Distribution Processors Service Providers • 20 Businesses
Business Profile Most agribusinesses focus on crop farming as main source of income
Business Profile Most livestock businesses focus cattle as main source of income
Business owners manage their money wisely and are willing to take calculated risks
Research Issues • What makes this group of business owners so different? • What will incentivise them to be more productive?
AgFiMS Tanzania 2011 Business EnvironmentIs the environment conducive for these entrepreneurs to achieve business success?
‘Ownership’ of land is a perception • for most producers More than 90% producers claim land ownership although less than 10% have title deeds
Most producers use more land than they ‘own’; Lack of capital affects productivity for 1 in 5
Lack of access to irrigation systems and reliance on natural water resources further inhibits productivity
Although the level of access to infrastructure is not conducive for business activities, mobile phone access provides connectivity
Limitations in the business environment seems to result in distressed sales Distressed sales? 12% sell on contract 10% sell all products on contract
Agribusinesses have virtually no coping mechanisms to rely on when faced with business risks
Income diversification offering protection?86.1% diversify their income sources
Research Issues • Better understanding of risk and risk mitigation • Tanzania’s history – the impact of nationalisation of co-ops on groups and networking. How was social capital affected? • Comparing Tanzania and Kenya – what makes Kenyan agri-businesses different?
Sound financial decision-making does not result in high levels of financial inclusion for agribusinesses
Multiple financial strategies – A matter of choice or no options? Banked Served by non-bank formal and/or semi-formal institutions 43.5% Informally served Unserved (55.6%)
Financial behaviour … 408 303 143 782 2 600
78.5% business owners save but most prefer to save at home rather than putting their money in a bank
Credit status Bank SACCOs MFIs Informal Friends/ family 4% business owners 7% business owners 27% business owners 14% business owners 68.9% of credit 11.7% of borrowers 12.2% of credit 21.3% of borrowers 15.1% of credit 79.3% of borrowers 3.8% of credit 40.2% of borrowers
Financial needs ....‘Capex’, ‘operational expenditure’, ‘business assurance’
Key capacities for Agri-businesses Top income category Formal inclusion • Usage of financial services & products • Accessing credit • Access to/usage of credible financial advisory resources • Access to/usage of credible business advisory resources • Access to/exposure to appropriate agricultural advice/support • Access to networks &support structures; coping mechanisms Access to infrastructure Access to markets Access to/usage of credible financial advisory resources Access to/usage of credible business advisory resources Access to/exposure to appropriate agricultural advice/support Social capital – Access to networks &support structures; coping mechanisms
Capacities needed for formalfinancial services usage • Access to/usage of credible financial advisory resources • Access to/usage of credible business advisory resources • Access to/exposure to appropriate agricultural advice/support Information • Access to networks &support structures; coping mechanisms Structure/organisation Infrastructure & access to market
Establishing info hubs as a first step • BUSINESS ADVICE • Financial management principles • Record keeping; Debt management; Income diversification; Cash flow management • Strategic business decisions • Competitive edge; Pricing; Marketing; Contracting; Group/networking • Risk management • Price; Weather; etc. • FINANCIAL ADVICE • Products, services & requirements • Financial education • Financial advice • Investments; debt; insurance • Long-term; short-term planning Info Hub • STRUCTURING/FORMING GROUPS • How • Requirements; Obligations; Responsibilities • Management • Structure • AGRI RELEVANT INFO • Inputs • Sources, pricing, credit/advance, security., risks • Process • Preparation, prevention, remedial, labour, best practices • Yield • Storage, transportation, timing, surplus/demand & price