Agricultural Value Chain Financing
By
Chavarin Saila
Bank for Agricultural and Agricultural Cooperatives
(BAAC)
BAAC Historical Background
- Established in 1966
- As a Specialized Financial Institution
- State Enterprise under the Jurisdiction of the Ministry of
Finance
Objectives
To promote the improved social and economic well-being
of Thailand’s farming population through the provision of
financial assistance for agricultural production, investment and
marketing purposes.
BAAC Vision
“To be a secured rural development bank with
modern managerial technology focusing on the
uplift of small-scale farmer’s quality of life.”
Value
“Standing side by side and Recognizing the Value of People”
Mission
•
To render integrated credit services to enhance farmers’
opportunity for effectively improved productivity
•
To streamline social development regarding agriculturebased learning for the improved quality of life of farmers so
that they will be valuable human resource assets and
worthy members of society
•
To administer funds in such a manner that the cost is kept
at the appropriate level reflecting the banks key mission
with emphasis on liquidity and stability
•
To develop new areas of services to effectively and
productively meet farmers needs on the strength of highcaliber staff with sound judgment
BAAC Financing on Value chain
Financial
Service
Learning
Support
Activities
Agricultural
Activities
Risk
Mitigation
Support
Activities
Agricultural
Produce
Processing
AMC
Domestic
Consumption/
Export
BAAC’s Model
in Agricultural Value Chain Financing
• Agricultural value chain financing would be successful
if following aspects are well addressed:
- supervised credit management
- productivity enhancement supporting :
productivity increasing and production costs reduction
- marketing channel creation:
group formation, stop selling to middlemen
- knowledge supporting to be self-reliant :
capacity building
- providing of safe guard against risks
From farm to Mouth
Rice value chain
Labour Force Survey As of August 2010
Mil.Person
16
15.45
15.82
14
12
Year 2009
10
8
Year 2010
5.91
6
4
6.11
5.57
5.27
2.65
2.53
3.41
1.93 2.04
2
1.41
1.52
0.83 0.74
1.14
3.59
1.09
0
Farmer
Manufacturing
Construction
Community
Service
Others
Farm Households Serviced by BAAC, FY 2005-2009
Million Unit
6.20
6.07
5.91
6.00
5.80
5.60
6.10
5.68
5.54
5.40
5.20
2005
2006
2007
2008
2009
Rice Cultivation Area in
Thailand (Rai)
=0
< 100,000
100,001 - 500,000
500,001 - 1,000,000
1,000,001 - 2,000,000
> 2,000,000
Converted Area :
1 rai
= 1,600 sqm2
2.5 rais
= 1 acre
6 rais 400 sqm2 =1 hectare
Thai Rice Exporting in 2009
Cambodia
42,667
Tons
Total : 8,592,830 Tons
Total : 5,027 Million US$
Germany
25,604
Tons
Iran
24,144
Tons
Bangladesh
44 Tons
Philippines
156,033
Tons
Pakistan
40 Tons
Indonesia
Malaysia
219,643
Tons
162,437
Tons
Ceylon
288 Tons
India
41 Tons
Rice Value Chain Financing
AMC network establishment
AMC network discussion
AMC : harvesting service
Transportation to AMC marketing center
Sampling for inspection
Inspection tool
Quality & price
Unloading bulk
AMC network : village collecting unit
AMC network : village collecting unit
AMC : organic jasmine rice
Thank You for Your Attention
Q&A
Financial Services
I
Credit Services
Credit services for individual farmers
- short term loans for agricultural production
(working capital)
– loan for seasonal expenses
– repayment term within 1 year (in special cases repayment term
< 1 ½ year)
- Medium and long term loans for investment
– loan for investment in assets which last more than 1 years, in
special cases loan term can last up to 20 years, e.g. loan to
buy agricultural land and machinery
– payment in installment, loan terms more than 1 year
Financial Services
I
Credit Services
Credit services for individual farmers
- Loans for sale postponement of farm produce :
Crop Pledging Schemes: to provide funds to farmers to meet their
immediate expenses while waiting for crop prices to rise after the
harvest season, avoiding thinned to sell their crops when prices
are low. Repayment of this type of loan is normally due within six
months.
- Cash credit lines : To provide a convenient way for clients to
obtain BAAC loans. Clients can withdraw cash from his account
as he needs up to an agreed ceiling and within the period of
loan agreement.
- Long term loans for refinancing old debts
- Loans for farm-related and non-farm activities
Financial Services
I
Credit Services
Credit services for individual farmers
- Loans for overseas working
- Loans for quality of life
- Housing
- Education
- Medical care
- Advanced Credit (A-Cash) -instant cash credit facility for
meeting their urgent needs. The clients can obtain and
repay credit amount at their convenience
Financial Services
I
Credit Services
Credit services for farmer’s Institutions
- Re-lending to members
- Procurement of farm inputs and equipment
- Long term agricultural investments
Learning Support Activities
Model of Sufficiency-economyoriented Community
Project
Second Phase
Inter-dependence
-
-
-
- Stronger community take
part In planning,
First Phase
preparing community
Self-Reliance
data and analyzing
strengths and
change way of living
weaknesses
Practice of keeping
- Conducting joint business
detailed accounts
ventures
of household expenses
abandoning gambling habit - buying and selling
collectively
have occupations that
- Acting as a group e.g.
generate extra income,
occupation, savings,
cutting down unnecessary
resources conservation
expenses
and fringe benefits
Form savings habit
Third Phase
Community Economic
Network
- Development of strong
community to create
community business
network
- Advocate joint trading
and setting up of an
economic network
at community level
Risk Mitigation Support Activities
Weather Index Insurance
- Farmer becomes confident that they will be compensated in times
of drought that caused damage to their crops
- Indemnity payment is utilized to fund a repeated cultivation
- BAAC in collaboration with the General Insurance Association has
rendered the weather index insurance service to maize farmers.
- Service areas currently covering 5 provinces
- Drought index is based on data supplied by eight rainfall stations
under the auspices of the Meteorological Department.
Risk Mitigation Support Activities
Weather Index Insurance
- Insurance premium is fixed at 100 Baht per rai with maximum
indemnity payment of 1,228 Baht per rai.
- Indemnity appraisal relies on rainfall measurement criteria as
stated in the insurance policy and differs from :
- degree of risk prevailing in each locality
- rainfall at each station
- starting of cultivation and crop stage, i.e. planting, growing
or budding
Marketing Support Activities
Agricultural Marketing Cooperatives (AMCs)
- Were set-up in BAAC branch premises to support provision of
quality agricultural inputs and developing marketing channels
for agricultural products produced by client farmers.
- Crop collection: Support from AMC to collect and sell farm
produce.
Crop collection is convenient way for farmers to sell their crops
directly to buyers without any intervention from middlemen at
fair prices in accordance with quality and quantity.
Marketing Support Activities
Agricultural Marketing Cooperatives (AMCs)
- Advantages for client farmers include:
- To purchase farm inputs at fair prices with good aftersale services
- To sell farm products through the AMCs collectively
with fair prices
Central Paddy Markets
to help client to sell paddy at fair prices and on fair
terms and conditions