Private Sector Development in Agriculture: How does M&E support Smallholder Farmers?

1. Private Sector Development in Agriculture: How does M&E support Smallholder Farmers? December 3, 2008

2. How does IFC support the agri sector including small holder farmers?

3. IFC Investment in Agribusiness Value Chain Exceeded US$1.3 Bil in FY08 Fertilizers and other Chemicals Project/CorporateFinance Land CIT – Access to Markets Inputs Farm Production Agri. Marketing Processing Marketing Distribution Retail Market Infrastructure Infrastructure/Logistics Financial Institutions Pre-HarvestFinance TradeFinance Risk Sharing Facilities Farm production is just one part of the agri value chain in which IFC invests…

4. IFC achieves greater reach through financial & non financial intermediaries AGRI TRADER/ PROCESSOR Farmers IFC On-Lending Finance BANK Farmers/Agribus IFC On-Lending Finance/Risk Sharing

5. IFC has a number of current advisory projects to increase farmer financing • Sth Tajikistan Cotton Lending Program • Farmer Ownership Model – Nth Tajikistan • Ukraine Leasing Program • Ukraine Agrifinance • Ukraine Agri Insurance Development Program • Indonesia Warehouse Receipt Program • Tanzania Leasing Program • Malawi - AMSME Program • NBS Bank • FMB Agri Business Finance Projects – 7 Active Projects - $8.8 million

6. IFC has also worked on improving farmer productivity and market access… Seaweed Farmers - Indonesia Maize Farmers - Indonesia Cocoa Farmers - Indonesia Bamboo Growers - Vietnam Apple Farmers - China Shrimp Farmers - Aceh Apple & Tomato Farmers - Ukraine Dairy Farmers - Russia & Ukraine

7. How does IFC measure and evaluate its work in the agri sector?

8. Every IFC project includes results measures, E.g. Agribusiness Finance Advisory…

9. IFC agri advisory projects are beginning to undertake cost/benefit analysis… COST/BENEFIT PROCESS STEPS 1. IDENTIFY and QUANTIFY the project’s DIRECT and INDIRECT BENEFICIARIES. 2. ESTIMATE quantity of OUTPUT PRODUCED. 3. ESTIMATE total UNITS of CULTIVATION. 4. ESTIMATE COSTS of INPUTS with&withoutproject. 5. ESTIMATE PRICES of OUTPUTS with&withoutproject. 6. ESTIMATE NUMBER of BUYERS and their MARKET SHARES, with&withoutproject. 7. IDENTIFY (a) PROJECT-RELEVANT FACTORS, and (b) EXTERNAL FACTORS that may affect productivity, costs, prices, and other considerations, with&withoutproject. 8. COLLECT these DATA at the BASELINE (at project-start), and THROUGHOUT program IMPLEMENTATION. Cost/Benefit analysis gives a better sense of who benefits and whether farmer incentives are likely to align…

10. IFC has also undertaken a number of detailed evaluations of its agri work China: New Hope for Dairy Farmers. July ‘08 Ukraine: Vinnytsya Dairy Supply Chain Project. July ‘07 India: Farm Forestry program. December ‘06 Indonesia: Seaweed Program Survey. July ‘06 Findings have beendistilled into easy to read “Monitor” notes

11. IFC is developing an M&E “Toolkit” for agri supply chain projects with farmers • Terms of Reference for M&E Toolkit • Work with IFC and its external partners to produce an M&E framework covering keyareas of IFC agri supply chain project work • - productivity, standards and access to finance • Develop an approach to “baseline” survey instruments • Be consistent with IFC M&E structures • Develop clear performance measures to help clearly gauge project success • Articulate a process for measuring impact on key project stakeholders/beneficiaries at the farmer level Partners to IFC project work see M&E as a key value added

12. IFC is using peer & specialist review of new projects to share lessons learnt… • Selected Lessons Learnt • Farmer access to finance is often a constraint (…and requires specialist input/support…) • During design identify specific market failures (…gain detailed market knowledge…) • Costly to scale up and expand projects that deliver farmer specific information (…plan for expansion in advance…) • Net farmer incentives to join supply chainproject are not always clear and need to align (…otherwise redesign or kill the project…) IFC now more systematically draws together local needs with global knowledge and lessons learnt…

13. So, how does M&E help small farmers? • Better target overall sector support (not just farmers) • Track and so help increase finance to sector (inc. farmers) • Better assess whether projects provide net farmer benefits • Learn from and improve ag advisory (inc. to farmers) • Stop “weak” agri projects so funds might be re-applied • ID projects with “strong” results to drive partner uptake

14. Chris RichardsAdviserIFC Agribusiness Departmente: crichards@ifc.orgp: +1-202-473-6230

15. Agribusiness Committed Portfolio $2.2 Billion Committed Portfolio As Of June 30, 2008 By Region By Sector

16. Why banks do not finance Agri Business • Cost to serve • Seasonality and loan term structure • Climate change risk • Heterogeneity of Farming • Production and Yield Risks • Market and Price Risk • Risk of Loan Collateral Limitations • Moral Hazard Risks Source: Adapted from Better Practices in Agricultural Lending, FAO/GTZ, 1999, pp. 11-17.

17. Mezzanine Finance • Convertible Debt • Sub Debt Product Range Structured Finance Straight Equity Senior Debt • Term Loans • Acquisition Financing • Warehousing Facilities • Syndicated Loans • Partial Credit Guarantees • Risk Participation Facilities • Securitization • Common Shares • Preferred Shares Global Trade Finance Advisory Services Sustainable Finance • US$1 B Program • Bank Guarantees • 62 Issuing Banks • 740 Guarantees Issued • US$ 780 million • Agribusiness, Agricultural SMEs & farms • Agri-Insurance • Ag Leasing • Corporate Governance • Cleaner Production • Energy Efficiency • Renewable Energy • Sustainable Supply Chain