Proposal by AgriFontier for Reducing Smallholder Supply Risk Through Access to Finance – Tanzania

Agri Fontier

Proposal

Vanilla Value Chain: Reducing Smallholder Supply Risk Through Access to Finance

This proposal was created by Agri Fontier Ltd.

SECTION 1: BACKGROUND

Project name: Vanilla Value Chain: Reducing Smallholder Supply Risk Through Access to Finance

Name of submitting organization: Agri Frontier East Africa Limited

Proposed skill contributions:

    • Legal and Institutional Due Diligence, Risk Analysis/Policy Analysis
    •  Stakeholder Mapping and Stakeholder/Community Consultation
    • Community Capacity Building
    • Social Impact Assessment and Mitigation
    • Outgrower Support and Engagement,
    • Monitoring and Evaluation
    • Negotiations and Agreements
    • Establishment of Project-Specific Grievance Mechanisms

Proposed partners: Farm Concern International (FCI) FCI brings the following value proposition for this assignment 1. Deep knowledge of local market: We have a deep and intimate knowledge of the market and upcoming market trends We have implemented strategies among various farmer groups following findings of small holder behavior trends. 2. The team expertise: FCIs multidisciplinary team has a robust experience on working with smallholder farmers and understand the challenges faced by rural households 3. State of Art tools – each validated in 5 countries with proven efficiency: All the tools from are validated and their impact on business success has been tested in various countries.

Background:

About

Agri Frontier Limited Agri Frontier Limited is an agri investment and agri-business advisory firm specialised in helping to create world class farming and integrated agribusinesses across the value chain, with a focus on frontier markets, particularly Africa. Agri Frontier works to provide innovative solutions and true value-added services to businesses operating in the Agri sector in diverse environments and situations. We provide the following key services:

    • Agricultural research and policy advisory
    • Business Development Support (BDS) and Technical Assistance (TA)
    • Development of strategy and business plans
    • Financial modelling
    • Feasibility studies
    • Valuations
    • Assisting businesses to become ‘investment ready’ (expansion capital or outright sale) in order to raise finance (grant, debt and equity), and support thereof
    • Agronomy services (offered in conjunction with our partner, Crop Nutrition Laboratory Services)

Value Proposition

Agri Frontier has offered various value-added services in the Agriculture sector and brings strong technical experience in agribusiness industry evaluation, value chain analysis, business model development, growth strategy development and investment facilitation About Farm Concern International (FCI) – Local Partner Farm Concern International, FCI, a leading Agri-Markets Development Agency undertakes market research, smallholder commercialization, private sector investment analysis, technical assistance and is a key market systems direct implementation partner. In Tanzania, FCI operations were started in 2007 and by 2019 had implemented 24 programmes and conducted 22 Market Researches & Value Chain Analysis ranging from horticulture, staples, livestock to agro-processed products.

Flagship Implementation model

FCI’s strategic direction is embedded in her flagship commercial Villages Model that envisages commercialized smallholder communities with increased incomes for improved, stabilized and sustainable livelihood in Africa and beyond. FCI team has over time developed core competences in designing business models that catalyze solutions for smallholder farmers through private sector partnerships and other value networks towards building capacity of smallholder farmers to participate in profitable commodity market segments. The solutions under the commercial villages model are designed to leverage multi-stakeholder and multi-value chain approach focusing on building robust and sustainable community trading systems. Smallholder farming systems in Sub-Saharan Africa are largely subsistence therefore commercialization and trade development is hampered by myriad of challenges including inefficiencies in the value chain as well as lack of key partnerships that deliver value to smallholder farmers. The commercial village Model is a critical pillar in village commercialization Team Structure: FCI team has effectively managed multi-donor grants including grants from Bill & Melinda Gates Foundation, The Rockefeller Foundation, USAID, FAO, EU, CIDA, IFAD, IDRC, AGRA, COMESA, Ford Foundation. To implement the Commercial Village Model, FCI has FCI’s 148 technical staff distributed in 23 offices across Africa participate as a key market systems development resource. Additionally, FCI has 2,450 Commercial Villages Trade Facilitators (CVTFs) who are the frontline last mile delivery team with 1 CVTF supervising 3-5 Commercial Villages. A Commercial Zone (CoZo) comprises of 10,000 Smallholder Farmers (SHFs) from several Commercial Villages forming a trading bloc viable for private sector investments and business partnerships. The team has proven competencies in extension services, rural economics and farming systems critical in addressing value chain-wide requirement.

SECTION 2: PROJECT APPROACH

To achieve the engagement objectives, Agri Frontier will adopt the following four-phased approach discussed in detail below

    1. Project Design and SHF financing products study
    2. Deep Dive Assessment
    3. Analysis and Report Writing.
    4. Pilot Study

SECTION 3: ACTIVITIES AND DELIVERIES

Activity 1: Project Planning and Kick-Off
Description: At this stage we will:

    • Review and finalize the terms of reference and scope of the assignment; detail out and refine the project methodology, milestones, work plan
    • Present a project plan that will include the suggested tools to be employed in carrying out the assignment and sources of data either through secondary or primary research.
    • We will also establish project management and communication protocols

Duration: 0 – <2 weeks

Deliverable: Implementation Plan, Workshop or meeting

Activity 2: Conducting Secondary Research
Description: The second activity of this phase includes conducting extensive secondary research to:

    • Map vanilla value chain and key stakeholders involved in the vanilla value chain
    • Develop an understanding of other value chains that can be paired with the vanilla value chain
    • Develop a deeper understanding types of products and services offered by key financing stakeholders for small holder farmers. This will be achieved through:
      • Desk based assessment of key barriers to financial inclusion at the smallholder farmer level including details of product features
      • Desk based research to understand key barriers faced by financial service providers in serving the smallholder farmers
      • Desk based research to assess overall financial inclusion landscape for rural households in Tanzania including trends & overall growth, key stakeholder categories and types of financial institutions focused on driving financial inclusion at the smallholder farmer level
      • Overall assessment of the regulatory environment across in financial service sector with a keen focus on regulations, policies and financial infrastructure that impact the key stakeholders in the agriculture value chain finance

Duration: 0 – <2 weeks

Deliverable: Presentation

Activity 3: Prepare for Primary Research
Description: 

    • Shortlist farmers, farmer groups financial service providers and smallholder farmer capacity-building institutions for primary research
    • Create multiple data collection templates for different stakeholders

Duration: 0 – <2 weeks

Deliverable:  Presentation, interview tools

Activity 4: Conduct Primary Research
Description:

    1. Small Holder Farmer Interviews – Agri Frontier will sample 50 farmers to carry out in-person interviews with on financial products and services being used, challenges in the use of these, barriers in use of others within their knowledge and gaps.
    2. Focus Group Discussions – Agri Frontier will shortlist 3 farmer groups for in person group discussions on financing products and services
    3. Expert Survey – We will speak to implementers and researchers who have either worked in, done research on or are implementing small holder financing programmes
    4. Interview with financing institutions – The aim will be to understand products and services available to SHFs, procedures and processes in accessing such funding, marketing mechanisms for such products and limiting factors in provision of such products and services.

The key objectives of these interviews are listed below:

    • Validate findings and key learning’s from secondary research
    • Identify Existing sources of finance for farmers and farming communities [formal and informal as well as traditional and non-traditional e.g. commercial banks, microfinance institutions (MFIs), co-operatives, family members, informal loan and savings schemes) and details about the terms and conditions thereof.
    • Assess SHF participation in formal financial sector: deposits and types of products used
    • Identify financial products/ services required by SHFs but not currently available;
    • Understand Farmers perception of bankers (e.g. reasons for not approaching a commercial bank for a loan; positive and negative aspects of the experience obtaining a loan from a commercial bank) and other nonbanking providers of financial services;
    • Understand SHF perception and experiences of the lending application process (including application requirements, processes, turnaround times, pricing, approval/decline communication), late payments, defaults, loan restructuring, etc
    • Map Current level of financial education and gaps / requirements in this area / type of knowledge or expertise required for financial education
    • Identify key challenges/barriers and limiting factors faced by each of the financial “institutions” across the multiple categories in serving smallholder farmers
    • Detailed discussion on additional areas of financing including potential, and key value proposition for financing “institutions”
    • Understand limitations across access to collateral, including amount and type

Deliverables at the end of this phase will be:

    • Interview & Survey Responses
    • Updated vanilla value chain report covering key financing challenges and opportunities in financing SHFs
    • Updated Financial Services report covering –key players, current state of financing and financial inclusion (for SHFs), and financial innovations relevant to SHFs

Duration: 2 – <4 weeks

Deliverable: Presentation, Interview & Survey responses

Activity 5: Analysis
Description: Agri Frontier will first collate findings from the primary research and carry out an analysis with a focus on: 

    • Assessing how appropriate different financial services and products are to financing and serving SHFs, overview of the initiatives (including digital) that are currently being undertaken by financial institutions for SHFs, the key challenges faced in serving SHFs, any key barriers in serving SHFs
    • Understanding the financing requirements of vanilla SHFs, conducting a detailed assessment of the financial transactions in the value chain and identifying the key challenges that currently exist.

Duration: 0 – <2 weeks

Deliverable: Summary of Key Findings

Activity 6: Develop Recommendations
Description: The team will develop a set of comprehensive recommendations on the basis of observations from primary interviews as well as detailed Financial Services and Vanilla SHF Assessments. In this activity identify key opportunities for financing SHFs building on challenge areas identified. Further, we will also identify the facilitating environment required to achieve recommendations including designing an operating model

    • Identifying transactions that necessitate financing and identifying/creating products/services that focus on business cycles and financial needs of target SHFs
    • Identifying enabling factors – technology, change agents e.g rural retailers, NGOs, field level influencers etc.

Duration: 0 – <2 weeks

Deliverable: Presentation

Activity 7: Report Writing (A2F Programme Design)
Description: Agri Frontier will compile their analysis and recommendations to prepare the project report outlining the way forward. The report will cover an Access to Finance (A2F) programme design which will be used in the piloting phase. Deliverables at the end of this phase will include:

    • Report on Access to Financing for Vanilla SHFs in Tanzania
    • Short Presentation to summarize key findings and recommendations

Duration: 2 – <4 weeks

Deliverable: Report, Presentation

Activity 8: Piloting
Description: The A2F programme will be piloted for 3 months with 2 farmer groups. The focus will be on risk management measures, long term benefits and sustainability. A key condition for successful implementation of the pilot is developing and strengthening financial literacy among SHFs. Agri Frontier will carry out a 1-day financial literacy training for the sampled SHFs. Further, Agri Frontier will bring in two relevant MFIs and credit unions, village savings and loans associations for purposes of match-making.

Duration: 3 – <6 months

Deliverable: Workshop or meeting

Activity 9:  Evaluation & Final Reporting for Up-Scaling
Description: Agri Frontier will evaluate the pilot phase of the programme for purposes of identifying areas of improvement which will be used in the upscaling phase of the programme. A risk-benefit assessment will be carried out to determine what areas of the programme need to be pivoted to ensure sustainable results. Deliverables at the end of this phase will include:

    • Final Report on upscaling the Access to Financing programme for Vanilla SHFs in Tanzania

Duration: 3 – <6 months 

Deliverable:  Report, Implementation Plan, Workshop or meeting

Project measurables:

    1. Uptake of financial products and/or services
    2. Income utilization
    3. Literacy levels among SHFs
    4. Yield levels

The expected outcomes will be increased financial literacy levels among NEI farmers, increased uptake of financial products and services and increased yield levels

Methods of data collection: Interviews, Focus Group Discussions, Written Surveys

Risks in project:

    1. Reluctance of SHFs in participating in research activities
    2. Lack of financial services/products suitable to SHFs
    3. Reluctance of FSPs in participating in Piloting
    4. Hesitance of SHFs to participate in Pilot

Risk management strategies: 

– SHF sensitization of importance access to financing products and the results thereof –

Sensitization of financial service providers of the emergence of SHF agriculture financing as a de-risked asset class

SECTION 4: SKILLS AND TEAM

Relevant past experience:
1. Enhancing competitiveness for smallholder value chains in informal markets through an integrated Business Model ( Seed_Farmer_Market_Consumer (SeFaMaCo Business Model)

Project Funder: Bill and Melinda Gates Foundation Project Location: Kagera, Mwanza, Kilimanjaro, Dodoma, Morogoro, Arusha and Zanzibar Project Period: 2014-2018

Objective 1: To strengthen partnerships in the traditional informal markets and create market linkages with processors, open market traders and export companies for sweetpotato and banana

Objective 2: Seed Systems Strengthening through decentralization of the multiplication services

Objective 3: Consumer Awareness and nutrition marketing

Objective 4: Design farmer Level Interventions that increase productivity, skills development. Access to inputs and linkages to service providers including financial services 

• Farmer capacity development through the cluster formation for commercial villages 

• Training and material development for enhanced skills in production and marketing of sweet potato and banana

• Demonstration facilities within the villages for showcasing best practice in banana and sweet potato production

2. Establishment of Limuru Archdiocese Farm

Client: Caritas Nairobi Project Location: Kiambu, Kenya

Project Period: 2019

The assignment required the completion of a feasibility exercise which included the preparation of a concise business plan clearly outlining the overall development strategy of a Dairy Processing Unit at the Limuru Archdiocese Farm. The assignment infrastructure, products and services, management, stakeholders and customers/marketing with a great focus on capacity building for the small holder supply chain network. Part of the assignment included identifying financial inclusion interventions relevant for smallholder farmers.

3. Commercial Villages for Sustainable Communities in Kahama District, Tanzania

Project Funder: Barrick Buzwagi Gold Mine

Project Location: Kahama, Tanzania Project Period: 2018-2020

Objective: Developing private sector partnerships and enhancing access to reliable markets

Main activities: 

• Conduct Value Chain Analysis, Market Information, monitoring & dissemination 

• Conduct viability assessment of viable Agri-Enterprise opportunities for Youth Employment and Women incomes 

• Facilitate Match Making/Networking forums and Linkages with Business Services Providers – Financial institutions, equipment fabricators, skills development

Key staff experience:
AgriFrontier’s team comprises of Andrew Ritchie as the deputy team lead on the entire assignment with support from Ann, George and Anu, all with Agri Frontier. In addition, we have collaborated with Farm Concern International on the assignment, and they bring in vast experience in extension services, rural economics and farming systems critical in addressing value chain-wide requirement. The combination of the consultancy team brings in a variety of experience in training and capacity building, stakeholder mapping and consultation, socio-economic assessments, monitoring and evaluation as well as an understanding of the agribusiness sector and its needs.

Winston Mwombeki, working with Farm Concern International will be the team lead for the entire assignment. FCI team has effectively managed multi-donor grants including grants from Bill & Melinda Gates Foundation, The Rockefeller Foundation, USAID, FAO, EU, CIDA, IFAD, IDRC, AGRA, COMESA, Ford Foundation. To implement the Commercial Village Model, FCI has FCI’s 148 technical staff distributed in 23 offices across Africa participate as a key market systems development resource.

Additionally, FCI has 2,450 Commercial Villages Trade Facilitators (CVTFs) who are the frontline last mile delivery team with 1 CVTF supervising 3-5 Commercial Villages. A Commercial Zone (CoZo) comprises of 10,000 Smallholder Farmers (SHFs) from several Commercial Villages forming a trading bloc viable for private sector investments and business partnerships.

The team has proven competencies in extension services, rural economics and farming systems critical in addressing value chain-wide requirement.

SECTION 5: FEES, REPORTING AND FOLLOW ON

Currency Selection: USD

Upper fee limit: $45,850

Payment structure: Milestone/deliverable based

Reporting processes: N/A

Desired frequency of reporting: Quarterly

Interest in follow on work: Yes. Agri business feasibility assessments, Due diligence assignments

SECTION 6: ADDITIONAL FILES

CVs
1. CV_Wiston Mwombeki

2. CV_Andrew Ritchie

3. CV – Haika Jan 2020

4. CV_Antony Kaunga Kirigia

5. CV_John Riungu

6. George Kanyeki CV

Workplan and budget
1. Workplan – TOR 2

2. Budget – TOR 2