Agri Value Chain Finance – BASIX experience

Fin4ag Conference

Nairobi, 16th. July 2014

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The BASIX Mission…..

To promote a large number of sustainable livelihoods, including for the rural poor and women, through the provision of financial services and technical assistance in an integrated manner BASIX will strive to yield a competitive rate of return to its investors so as to be able to access mainstream capital and human resources on a continuous basis.

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Evolution of Financial Structure

Soft Loans from Donors & Development Banks

(GTB, CIDA-DID, CordAid, SIDBI, ICICI, HDFC)

1996-98 Grants and Soft Loans from Donors (Sir Ratan Tata Trust, Ford Foundation, Swiss Agency for Development Cooperation)

1998-2000

2001

2001 onwards

2007-08

Equity Investment

(IFC, Shore Bank, Hivos Triodos, ICICI and HDFC)

Loans from Commercial Banks

(ICICI Bank, HDFC Bank, ABN Amro, ING Vysya)

Mainstream Equity

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• IMRB study – Impact of micro-credit

Results Increase in income - 52% No change in income -25 % Decline in income - 23%

Findings

• Unmanaged Risks

• Low Productivity

• Low Price Realisation

Credit is necessary but not

a sufficient condition for

livelihood promotion

Review of BASIX Work

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BASIX framework

BASIX utilizes financial, human and intellectual capital to work towards brining equality of opportunity and social justice 5

Collaborative Polygon We propose collaborating with players having domain expertise to provide ………

Financial Services

Linkages with Banks & MFI’s Training & Extension

Agril Universities, Ag. Research

Stations, Agril Departments,

Digital Green, Agriwatch,

Institutions

NGO’s, village govt. & other

village level community

Institutions Service Providers

Artificial Insemination, Vaccination, Soil testing,

Insurance

Output Market

Linkages to organised buyers, processors etc..

Input Supply

Agri Input companies, wholesalers', dealers,

Enhance competencies,

Reduce transaction costs

and Reduce risk for farmers

by integrating all services

FARMERS

The task is too complex for any single actor. Hence there is a need for multilateral partnerships or “Collaborative Polygon”. However, it is useful for one actor to be the anchor, who understands both development & finance markets for the Collaborative Polygon to work.

BASIX tries to play that role. 6

BASIX Outreach – Agri Value Chain Finance

•No. of customers: 1.05 million •Amt. disbursed (million USD): 230 •Repayment: 97%

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Livelihood Financial Services

Cotton crop technical Services

Institutional Development

Services

Farmers

Ginning

BASIX – Cotton Value Chain Finance

Lint Pressing unit- Conversion to

Bales

Farmers

Farmers

National Commodity Derivatives Exchange (NCDEX )

Trading Platform

Formed into cotton Producer Group

BASIX Warehouse

Receipt

BANK

Loan

Assured Price Seeds,

Fertilizers, Pesticides

NCMSL Godowns

Supper Spinning Mill

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Dairy Value Chain: BASIX - Reliance Dairy Company Collaboration

DAIRY FARMERS

INP

UT

SU

PP

LY

BASIX OU

TP

UT

MA

RK

ET

RELIANCE

Milk supplied to Bulk Milk Coolers

Financial & Dairy Extn

Services

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Potato Value Chain Financing

Frito Lays India Limited

Potato Growers

BASIX

Credit Ext. services Gr.

formation

Potato Seed

Buy back arrangement

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BASIX learning's on value chain finance

• Agricultural value chain financing requires a credit plus approach • Within financial services it needs to span insurance and commodity derivatives • Organising farmers into groups/coops and a well designed institutional development support service • Finance for development of value chain has to be invariably a collaborative approach to bring in all the players

The Downsides

• Procurement & default • Input supply & crop failure • Flaws in agreement / Contract • Biased contract • Sustainability implications

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Head Office 3rd Floor, Surabhi Arcade, Bank Street, Koti, Hyderabad 500 001 Telengana Phone: + 91-40-3917-2500 Fax: + 91-40-3917-2502 Website : www.basixindia.com

Registered Office D 9, First Floor, Greater Kailash Enclave - I, New Delhi 110 0 48. Ph: 011 4173 0252 , 011 4173 0454 Website : www.basixindia.com