- Slides: 17
Value Chain Financing
Value Chain • A value chain is a chain of activities that a company operating in a specific industry performs in order to deliver a valuable product or service for the market.
Value Chain Finance The term “value chain finance” refers to the flows of funds to and among the various links within a value chain. It refers to both internal ( conventional) and external ( emerging concept) forms of finance: • Internal value chain finance is financing that takes place within the value chain, such as when a supplier of inputs or a buyer provides credit to a farmer. • External value chain finance is financing from outside the chain made possible by value chain relationships and mechanisms; for example, when a bank issues a loan to a farmer based on a contract with a trusted buyer/ value chain partner.
Why Value Chain Financing? • In order to spur growth from relatively low-risk lending, Khushhalibank has been exploring avenues in value chain financing (VCF) which may allow the bank to not only expand its customer base and build a healthy loan portfolio but also drive growth in areas which have hitherto remained untapped. • The main idea behind value chain financing is to bridge the gap between unexplored markets and financial institutions.
Win For All Bank • Large untapped market • Growth opportunity • • • Minimum operations cost • • Lesser credit risk • Almost guaranteed repayment. Farmer VC partner • • Quality Produce at reasonable price Scaling up opportunity Consistent supplies ( Registered farmers) Addressing the needs of various high end/retail market segmentation Employment/ Entrepreneurship creation ( suppliers, collection center, Fresh Mart ( micro franchises) etc • Access to finance • Quality inputs at door step • High quality seed – Higher yield • Less input cost • Free of cost technical advisory services • Secure sales- buy back agreement. • Produce grading – for different end users –
Win For All Farmer • Access to large market/ franchises • Free packaging and Transportation • No commission to Arthi/Middleman • Alternate cropping ( Potato replaced Tobacco in Swabi and Mansehra)
Target Segment - VCF • VCF will target customers who are in relation with Value Chain Partner (VCP) organization. This relationship of the prospective borrowers with the VC partner will be in the form of registered growers / suppliers or end users. • • • Value Chain Financing will cater to the financing needs of the following: Certified/registered growers/suppliers of either public or private agribased organizations of repute. Primary/Secondary dairy milk suppliers. Artisans, craftsmen, entrepreneurs & small traders involved either in supply/manufacturing of raw material or finished goods. End users of technology & energy solutions Educational institutions (Schools, colleges, vocational training centers).
Value Chain Model
Agreement BW KBL & VCP AC Opening of VCP & Suppliers with KBL Sharing of Farmer’s data base with KBL Due Diligence & Appraisal by KBL Process Ends Transfer of remaining amount in borrowers deposit A/C Customer’s Account Opening at KBL Branch Value chain Lending Process Flow KBL Loan’s Settlement of Ind. Borrowers By VCP Loan Processing & Disbursement Payment by End Users to VCP in KBL A/C Amount transfer to VCP A/C for seed and inputs Packaging , transportation & selling of produce to End user Input Distribution to Farmers by VCP Payment to Supplier by VCP
Sarsabz Karobar Connecting Agro Value Chains ‘CAVC’
VALUE CHAIN PARTNERS CONNECTING AGRO-VALUE CHAIN PRIVATE LIMITED (CAVC) VCF for Agri Growers KBL commenced its 1 st value chain financing pilot by partnering with CAVC – a registered firm which supplied ‘Lady Rosita’ potatoes to Pepsi. Co International for the manufacture of ‘Lays’ potato chips. The pilot was kicked-off at Swabi branch was later replicated at 11 locations with CAVC for different crops.
End User ( Value Chains) Whole sale Super Stores Processors Retail • Sale points in Faisalabad, Lahore and Islamabad whole sale markets • Metro ( Lahore and Islamabad) • Green Valley • Madina Cash and Carry • JB foods ( frozen food and French fries) • PEPSI (lays) • Fresh Marts • Small hotels and Chips shops
Sarsabz Karobar ‘United Stars Kino’
Sarsabz Karobar Smart and Renewal Energy Solutions ‘SRE’
Sarsabz Karobar ‘Friends Flowers’