LAND BANK OF THE PHILIPPINES: AGRICULTURAL VALUE CHAIN ... · land bank of the philippines: agricultural value chain financing ... involved in producing goods ... land bank of the

LAND BANK OF THE PHILIPPINES: AGRICULTURAL VALUE CHAIN FINANCING

2015 MPCI Annual Conference Microfinance Annual Membership Meeting 23-24 July 2015 Century Park Hotel, Manila

The Agricultural Value Chain Concept

It covers a full range of activities and participants involved in moving the agricultural product from the farmers’ field to the consumers table. Eva Galvez Nogales (2007)

At an industry level, it consists of various processes that are involved in producing goods (and services), starting with raw materials and ending with the delivered products (also known as supply chain)

The Agricultural Value Chain Concept

Farm Input

Supplier

Farmer/

Producer Processor Institutional

Buyer End

Customer

Service Providers

The flow of funds or provision of financial

services to and through the value chain to

address the needs of those involved in the

chain

Value Chain Finance

LBP Food Supply Chain Program

LANDBANK

Coops

Ass’n

ABEs

CFIs

Farmers and

Fisherfolk

Sales Proceeds Sales Proceeds Credit Conduits

Raw Materials Agri Produce

MILLER

PROCESSOR

MANUFACTURER

Repayment

Agri Produce

Market Outlet for

local/foreign buyers

Loan

Repayment Working Capital

Production Loan

Working Capital

Fixed Asset Loan

Working Capital

Fixed Asset Loan Repayment Repayment

Legend:

Commodity Flow

Funds Flow

Relending

Production, Technical and Marketing Agreement

Salient Provision: Product specification/quality

standard, volume Delivery schedules Pricing and payment scheme. Auto-debit arrangement

LBP OIL PALM PRODUCTION, PROCESSING AND MARKETING

CHAIN FINANCING

(Commodity and Funds Flow)

Co-op

Consolidator /

Conduits

Oil Palm

Growers

Oil Mill

(Palm Oil

Milling Co.

Oil Refinery

(Palm Oil

Milling

/Refining Co.)

Market

(local/international) - Refined oil

- Other processed

products

Fresh Fruit

Bunches

Crude

palm

oil

Fresh Fruit Bunches

Funds Flow

(loans/repayment)

LEGEND

Commodity Flow

Repayment Working Capital/

Production loan

Fixed asset

Loan/Working

Capital Repayment

•Sales

(Net of Loan

Repayment)

•TA

Repayment/

Sales

Relending

Fixed asset loan/

Working capital

Sales

Sales

Repayment

ADDED FEATURES:

• Set up Debt Service Reserve Account

• Hierarchy of payment (from net sales

proceeds):

Maintenance of DSRA

Loan amortization to LANDBANK

Coop share (5-7% of net FFB

sales proceeds)

Loan amortization to Anchor Firm

Payment of management fee of

Anchor Firm

LANDBANK

FSCP as a Business Model Addressing Constraints…

Demand-driven production

Matching production capacities to market demand production scheduling consolidation

Adoption of “win-win” pricing scheme

based on current market price, in some bases with guaranteed floor price

improving productivity

FSCP as a Business Model Addressing Constraints…

Building long-term business relationship

Towards Sustainability…

Strengthen the producers’ cooperative as

intermediary

Business management competency

Support services to its members

Foster technology support

Tie-up with States Colleges and

Universities for mature technologies

Improve technical assistance

Link with the Department of Agriculture

Innovative financial products and services

LAND BANK OF THE PHILIPPINES LANDBANK Plaza, 1598 M. H. del Pilar corner Dr. J. Quintos Streets, Malate, Manila 1004 Philippine

www.landbank.com