Agricultural
Finance
Market
Scoping
Tanzania 2011
Sample & methodology
 Sample drawn by National Bureau of Statistics (NBS)
 Data collected by Synovate Tanzania
 Listing & screening exercise provided the sampling frame
 Identified 2 015 742 agri-businesses of which 519 972 qualified
 4 094 face-to-face interviews were conducted with agri-business owners
 3 734 interviews with producers
 104 interviews with processors
 256 interviews with service providers
 The survey is representative at:
 National, urban-rural, and agricultural zonal levels
(including Zanzibar) for producers
 National level for processors and service provide
Land-size and income-based
selection criteria applied
$600 or 5 acres of land for
producers
$1,500 for non-producers
?
Business types
Service providers, 3.6%
Processors, 1.6%
Livestock farms, 8.3%
Food crop farms, 48.7%
Cash crop farms, 37.7%
The problem …
• Smallholder & agri-business finance perceived as risky
• There is lack of financial services suited for agriculture
• Limited penetration of financial services
AgFiMS Tanzania 2011
Business Owner Profile
Business owners demonstrate
entrepreneurial characteristics …
3 in 5 are involved in agriculture because they
see it as a business opportunity
See activities as a business opportunity
to grow
56.5
Love farming dont want to do anything
else
7 in 10 have extensive experience in agribusiness
15.6
Dont have other options - will stay in
business
24.9
15.6%
1.2%
Do not want to grow the business
1.5
Want to leave agribusiness
1.5
10.4%
Less than 2 years
6 to 10 years
72.8%
2 to 5 years
More than 10 years
Business owners manage their money
wisely and are willing to take calculated risks
Keep financial records
63.8%
On any given day, know the business’s financial situation
Save, or put money away for business use
93.1%
78.5%
Willing to re-invest profits in the business
93.1%
In bussiness it is neccesarry to take calculates risks
94.0%
Would borrow money to start a new/expand bussiness
88.0%
Would borrow money to improve the cash flow situation of the
bussiness
81.2%
Would borrow money for inputs
80.7%
Business owners make sound
financial decisions
Criteria for choosing credit sources
Best interest rates
62.4%
Best repayment terms
58.5%
Quickest access to money
54.4%
Most convenient to get to
28.5%
Easiest to use
Having borrowed from them before
Ability to meet minimum requirements
14.7%
3.5%
3.0%
AgFiMS Tanzania 2011
Business Environment
Is the environment conducive for these
entrepreneurs to achieve business success?
‘Ownership’ of land is a perception
for most producers
21.2%
More than 90% producers claim land
ownership although less than 10%
have title deeds
8.7%
4.2%
Food crops
Cash crops
Livestock
Lack of access to irrigation systems
inhibits productivity
10.9
Always enough for business needs
17.9
8.1
Always enough water for use but if more
water business can grow
44.8
80.8
Intermittent water supply but enough for
farming needs
Not enough water
10.8
26.5
Water Systems
Own irrigation system
Drip irrigation
Rely on nature only
Level of access to infrastructure not
conducive for business activities, but
mobile phones provide connectivity
Electricity
14.4
Tarmac roads
13.7
Rail
3.7
Mobile
Internet
Landline
67.4
1.8
.7
Limitations in the business
environment results in distressed sales
Preferred
Market?
Distressed
sales?
Sell to a co-op,
wholesaler, trading
company or government
48.3%
Sell mainly in village or to
public
32.1%
Sell mainly to middlemen
19.5%
12% sell on contract
10% sell all products on
contract
Agri-businesses have virtually
no coping mechanisms to rely on
when faced with business risks
Nothing in place
84.9
Savings
5.4
Borrow/sell an asset
4.9
Insurance/job
Other
.9
3.9
Income diversification offering protection?
86.1% diversify their income sources
Has external regular income apart from agri
4.4
Diversify within agri but other lines
58.7
Diversify within main agri income line
Additional income from family & friends
No diversification
17.1
.2
13.9
Lack of access to networks &
information increases vulnerability
Network wth other agribusiness owners
30.1%
Belong to groups that benefit the buiness
Get financial advice from financial sources
22.8%
15.0%
Dont get financial advice/dont have access
Business advice from agri sources
78.0%
45.3%
Dont get business advice/dont have access
Get appropriate extension services
Dont get extension services
48.9%
41.9%
45.3%
AgFiMS Tanzania 2011
Financial Inclusion
Business operations –
Financial management
Banked
Business owners who have or use any product or
service from any commercial bank for the purpose of
the agri-business
Served by formal nonbank and/or semiformal non-bank
financial institutions
Business owners who have or use any product or
service from any regulated or registered financial
institution which is not a commercial bank (e.g.
SACCOS, MFIs) for the purpose of the agri-business
Formally served
Business owners who are banked AND/OR who are
served by formal non-bank and/or semi-formal nonbank financial institutions for the purpose of the agribusiness
Informally served
Business owners who use informal mechanisms to
manage the financial matters of the agri-business.
This would include services offered by agricultural
associations or groups, input providers, VICOBAs,
VSLAs, ROSCAs etc.
Financially served
Business owners who are either formally AND/OR
informally served for the purpose of the agriibusiness
Financially
unserved/excluded
Business owners who are neither formally OR
informally served for the purpose of the agriibusiness
Sound financial decision-making
does not result in high levels of financial
inclusion for agri-businesses
Financially served
45.7%
Formally served
32.4%
Banked
Served by formal non-bank/semi-formal
institutions
Informally served
Financially unserved
28.2%
8.6%
27.9%
54.3%
Quantifying the amount of credit
in the AgFiMS market
ASSUMPTIONS
• Once-off per source
•Ts 3,1m Bank
• Ts300k SACCO/MFI
• Ts100k Informal
• Ts50k Friends/fam
Banks
SACCOs
MFIs
Informal
Friends/
family
4% business
owners
7% business
owners
27% business
owners
14% business
owners
USD 36m
68.9% of credit
11.7% of borrowers
USD 6m
12.2% of credit
21.3% of borrowers
USD 8m
15.1% of credit
79.3% of borrowers
USD 2m
3.8% of credit
40.2% of
borrowers
•USD 300 on average
•20% of turnover of those who borrow
USD 52m
The role of the informal sector - Credit?
Transactional
products
40.0
30.0
20.0
26.1
10.0
Insurance products
28.8
.5 .0
31.3
Savings products
10.6
30.0
Credit products
Total usage
Formal product usage
96% of all business
owners who use informal
mechanisms use it for the
purpose of credit
AgFiMS Tanzania 2011
Identifying Development Needs
Perceived obstacles to growth
84.2%
Access to markets; toll fees; transport
55.6%
75.3%
58.3%
Access to credit; loans and financial
support; dont qualify
Access to water
44.1%
58.8%
7.7%
13.0%
48.3%
28.6%
29.1%
26.1%
Access to business advice and financial
information
Lack of labour
Getting premises to operate from/Access
to land
Service providers
16.4%
18.0%
24.6%
37.2%
30.9%
13.3%
Processors
Producers
AgFiMS identified capacities
needed for formal financial services usage
• Access to infrastructure
• Access to markets
• Access to/usage of credible financial advisory resources
• Access to/usage of credible business advisory resources
• Access to/exposure to appropriate agricultural advice/support
• Social capital – Access to networks & support structures;
coping mechanisms
The Future of AgFIMS?
Tanzania - first country where AgFiMS was undertaken
The aim is that it will be adopted for other countries
across Africa
Who are behind AgFiMS?
More information:
www.agfims.org
Financial Sector Deepening Trust (FSDT)
Mwallu Mwachan’ga
E: mwallu@fsdt.or.tz
E: info@fsdt.or.tz
T: +255 22 260 2873/5/6
Gatsby Charitable Foundation (GCF)
Ian Anderson
E: ian.anderson@gatsby.org.uk
T: 44 20 7410 0330
Thank you…