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EAST AFRICA SUB REGIONAL (EACRAT) WORKSHOP

EAST AFRICA SUB REGIONAL (EACRAT) WORKSHOP. MAY 19 – 21 2010 SPEKE RESORT - MUNYONYO KAMPALA UGANDA. Low Cost Micro-Finance in the Value Chains. Driven by Small Scale Farmer Ownership. By : Herment A. Mrema, ED Africa Rural Development Support Initiatives (ARUDESI).

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EAST AFRICA SUB REGIONAL (EACRAT) WORKSHOP

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  1. EAST AFRICA SUB REGIONAL (EACRAT) WORKSHOP MAY 19 – 21 2010 SPEKE RESORT - MUNYONYO KAMPALA UGANDA

  2. Low Cost Micro-Finance in the Value Chains Driven by Small Scale Farmer Ownership

  3. By: Herment A. Mrema, ED Africa Rural Development Support Initiatives (ARUDESI) • A specialized value chains development and management service provider to mainstream small scale farmers into the global economy • Within the agribusiness products and services value chains • In an integrated, holistic and comprehensive approach • To ensure that the value chains are robust, competitive and equitably profitable

  4. Affiliation with: • Farm Gain Tanzania – Agribusiness Value Chains Information Company • Farm Gain Uganda, Kenya, Rwanda, and Burundi • Serving East African Union, SADEC, and Comesa markets, marketing and information needs

  5. ARUDESI – Vision and Mission • To become “The Agribusiness Value Chains Development and Management Company” in East and Central Africa • To cause a change of mindset and attitude that will enable stakeholders within the agribusiness product and service value chains to embrace farming is business, get organized, access business facilitation tools, for value addition, access to competitive markets, are paid/pay on performance (value for money) and contribute to sustainable wealth creation that will eradicate abject poverty in the Region.

  6. Pillars • Sense of Ownership and being organized • Farming and livestock keeping is business • Diversification of farming and income streams risks

  7. Pillars Contd. • Access to business facilitation tools (skills, knowledge, know how, credit, appropriate inputs, technologies, markets, marketing price information and enabling environment) • Value Addition that will justify farmer and livestock keeper participating in price setting instead of being a price taker • Access to Competitive markets • Pay/Paid on Performance (value for money)

  8. Activities • Organization of stakeholders within the product and service chains • Mapping specific farming and livestock product and services value chains • Profile of resource and assets base of stakeholders within the chains • Select the best enterprise mix within the specific chains for commercialization

  9. Activities Contd. • Develop business plans for all the enterprises selected • Building the capacity of the stakeholders to manage their businesses and taking advantages of any emerging business opportunities. • Providing back-up services including continuous research of new technologies, markets and information

  10. Activities Contd. • Linking the stakeholders for specific local, regional and international service and products markets • Work with the stakeholders to develop a payment system that rewards each stakeholders according to efforts • Link the farmers to medical, crop, and pension schemes to insurance related service providers. • Monitoring and evaluation

  11. Micro – Finance Related Activities • Sensitize farmers to become aware that they are vulnerable and do not have bargain power in the markets because they lack savings to finance their basic needs (about $50 per month) hence sell the little they have under pressure (at a give away price set by the buyer) • Support groups to identify source of financing to pay for their basic needs such as sugar, salt, paraffin, soap so that they can sell value added products . • Groups mobilize saving among themselves and lend to each other • Group members may raise additional capital to finance any shortfall from SACCOS, MFI’S and village banks

  12. As a Result • The extra premium income generated through group selling will be available to save and lend the other members of the groups • There is no commodity financing since the farmers can wait OR sell on consignment basis – reduced financial risks and interest charges • To minimize mismanagement, embezzlement and theft the savings and credit schemes lend out the entire amount saved.

  13. As a Result… • We have group owned and managed thrift and credit schemes that target financing to stimulate value addition, influence price setting and increase incomes • Functional business plans and insurance policies readily available as collateral • Cost of finance reduced due to decreased risks, increased leverage and ability to pay

  14. Objective • The objective is to ensure that groups prolong ownership and are able to participate in price setting • The savings and credit schemes are a vehicle for individual members to graduate to formal banking with MFI’S and village banks • Sale proceeds are remitted directly to individual farmer cell phone or bank accounts • Group leaders who are paid for services rendered after the transaction is completed.

  15. Expected Results • Sustainable wealth is created • Income of small scale farmers and livestock keepers increased • Abject poverty is eradicated • Food security is achieved • Graduate from selling commodities which are subject to vagaries of demand and supply to selling complex products with stable prices

  16. Challenging Paradigm Shifts • That “Well organized value chains could influence markets, prices and quality” and the notion that “demand determines supply” is not necessary true • That the notion that “Value addition starts at the factory gate could be shifted and start at the into the farm gate in the agribusiness related activities”

  17. Conditions for Value Chains to Work • Change of mindset, attitude, thinking of “we” instead of “me”, “thinking outside the box” with commitment, patriotism, and determination to succeed • High level of trust, confidence, integrity, honesty, transparency, accountability, being smart greedy/selfish and in good faith • Maximum cooperation, alliance building, strong linkages and coordination • Private sector lead

  18. Conditions Contd. • Development is our responsibility as individuals • Government and development partners will never bring to us development • The Role of Government is to create an enabling environment for business growth • The development partners may complement the efforts of the government and private sector but it should be in accordance with the needs and priorities of the beneficiaries

  19. Experiences • Integrated with the Rural Wealth Creator lead initiatives in the coffee sub-sector – Arumeru Region in Tanzania • Integrated with the National Union of Coffee and Agribusiness Farm Enterprises (NUCAFE) – Uganda • Integrated with a new project sponsored by the Ministry of Industries, Trade and Marketing – Farmer Empowerment Project – Kagera Region Tanzania

  20. Contacts • Magomeni Mapipa • K.K.K. T Mviringo • P.O. Box 32830 • Dar es Salaam – Tanzania • Tel: +255 22-2170532 • Cell: +255-752-110-290/ +255-715-301494 • Email : hmrema@hotmail.com ed@arudesi.org Webesite: www.arudesi.org

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