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AgFiMS Tanzania 2011 Headline findings Irma Grundling 14 March 2012

AgFiMS Tanzania 2011 Headline findings Irma Grundling 14 March 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. Objective.

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AgFiMS Tanzania 2011 Headline findings Irma Grundling 14 March 2012

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  1. AgFiMSTanzania 2011Headline findingsIrma Grundling14 March 2012

  2. 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

  3. Objective Land-size or turnover-based selection criteria applied ?

  4. 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

  5. Size & Scope of the AgFiMS Tanzania 2011 identified Agribusiness Market

  6. AgFiMS Tanzania 2011 • +- 7m farming households • +- 5m households with farming as main income source • AgFiMS – 2 million agri-businesses

  7. AgFiMS Tanzania 2011 Business Profile

  8. Business Profile Most agribusinesses focus on crop farming as main source of income

  9. Business Profile Most livestock businesses focus cattle as main source of income

  10. Business Profile Service providers are mainly retailers

  11. AgFiMS Tanzania 2011Business Owner Profile

  12. Business owners demonstrate entrepreneurial characteristics

  13. Business owners manage their money wisely and are willing to take calculated risks

  14. Business owners make soundfinancial decisions

  15. AgFiMS Tanzania 2011 Business EnvironmentIs the environment conducive for these entrepreneurs to achieve business success?

  16. ‘Ownership’ of land is a perception • for most producers More than 90% producers claim land ownership although less than 10% have title deeds

  17. Lack of access to irrigation systems and reliance on natural water resources further inhibits productivity

  18. Although the level of access to infrastructure is not conducive for business activities, mobile phone access provides connectivity

  19. Limitations in the business environment seems to result in distressed sales Distressed sales? 12% sell on contract 10% sell all products on contract

  20. Agribusinesses have virtually no coping mechanisms to rely on when faced with business risks

  21. Income diversification offering protection?86.1% diversify their income sources

  22. Lack of access to networks and information support increases vulnerability

  23. AgFiMS Tanzania 2011 Financial Business Operations

  24. Sound financial decision-making does not result in high levels of financial inclusion for agribusinesses

  25. 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%)

  26. Landscape of access…

  27. 147 000 banked …What do they use banks for?

  28. 45 000 use non- bank formal products/services …What are they using?

  29. 145 000 use the informal sector …What do they use it for?

  30. Financial behaviour … 408 303 143 782 2 600

  31. Financial needs ....‘Capex’, ‘operational expenditure’, ‘business assurance’

  32. 78.5% business owners save but most prefer to save at home rather than putting their money in a bank

  33. Accessibility the key barrier to banking …. ? • “Banks are too far away” – 37% of the unbanked • “The business does not meet the requirements of the bank” – 26% of the unbanked • “Banks do not want to lend money to a business like mine”/ • “banks are not interested in a business like mine” - • 16% of the unbanked

  34. Status quo : Credit 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

  35. AgFiMS Tanzania 2011 Identifying Development Needs

  36. Perceived obstacles to growth

  37. Relationship between obstacles to growth & financial status Access to market Access to market Access to market Access to finance Access to finance Access to finance Lack of growth capital; regulations become prohibiting Lack of operational capital

  38. Key capacities for Agri-businesses Formal inclusion 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

  39. Financial inclusion development clusters

  40. AgFiMS Tanzania 2011 Evidence-led Intervention Approach?

  41. 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 Weaknesses CONNECTIVITY Strength

  42. Establishing info sharing platform … • 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

  43. ACADEMIC INS NGOS FINANCIAL INST RESEARCH INST BUSINESS INST GOVERN-MENT OPPORTUNITY DEVELOPMENT PRICING AUTHORITY VALUE CHAIN PLAYERS DONORS/ INVESTORS INFORMATION HUB Benefits for all role-players OPPORTUNITY DEVELOPMENT AGRI BUSINESSES

  44. More than an info platform ... INFORMATION PLATFORM CONNECTIVITY OPPORTUNITY • Payment solution • Save storage of money • Micro credit/credit bureau • Micro insurance

  45. Thank youwww.agfims.org

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