Rapport analyses de donn

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MANAGING RISK IN FINANCING AGRICULTURE
Managing Risk in Financing Agriculture M.
Malick NDIAYE, Director of Credit and
Branches Senegalese Agricultural Development Bank
(CNCAS)

Johannesburg, 1st -3rd April 2009
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OUTLINE

• OUTLINE
• - SENEGAL BRIEF REVIEW
• - AGRICULTURAL CREDIT SYSTEMS
• - CNCASs APPROACHES ON RISK MANAGEMENT
• - RESULTS AND CONSTRAINTS
• - LESSONS LEARNT
• - CHALLENGES FOR FUTURE ?

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Senegal Small developing country

• Senegal West african country in Sahel region
• Superficie 196 000 km square,
• Population 11 milions ( 60 live in rural
  area, 52 are women )
• GDP 5 000 billions FCFA (1 FCA 655,957 Euros
  fixed rate)
• Average annual growth rate 5 - 6
• Income per capita less than 600 US (SNPMA)
• Large share of informal sector in the economy
• Member of regional and subregional organisations
  ECOWAS, UEMOA
• Current characteristics of agriculture
• Low productivity of main productions (peanuts,
  cotton, rice, vegetables )
• Contribution of primary sector on GDP 15-17
• Domestic markets are not well organised 
• Low revenues for producers and large way of
  poverty
• But, keep good contribution to the economic
  growth and poverty reduction.

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Agricultural Credit systems in Senegal
historical evolution

• Two different periods
• First period 1960 to 1980
• Public extension and credit services providers by
  SODEVA and BNDS
• In 70s Senegal had been faced a very difficult
  macroeconomical situation
• PASA Agricultural Adjustment Programme Sector
  (IMF World Bank)
• All agricultural extensive services were
  dissolved (SODEVA, ONCAD)
• Second period 1980 to 2008
• 1984 CNCAS is created in a particular context
• Started activities with two branches Matam and
  Dakar
• Last 20 years CNCASs network is growing fast
  20 branches in 2008
• CNCAS is a young financial institution becoming
  leader in rural financing.
• 1980s MFIs emerging systems in our country
• 2000 Commercial banks try to be interested in
  rural area (competition).

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A BRIEF ON CNCAS

• FCFA 2 300 millions Shareholders Capital
• 209 Employees
• FCFA 7 230 millions in Revenues
• FCFA 539 millions in Net Income
• FCFA 106 000 millions in Total Assets
• CNCAS is at the 8th place in national market
  banking and the fisrt in rural market financing
• 20 Branches in different locations ( see country
  map below)
• 13 Banking correspondant (USA, Europe and
  Africa).

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CNCAS NETWORK
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Agricultural credit systems history and context

• In the begining context (Even now) ?
• Mobilize savings as a source of loanable funds.
• How to access to market as source of refinance ?
• Competitive rates of interest on deposits and
  loans ?
• How to have our loans repaid and make profit ?
• How to manage our risks through portfolio
  diversification ?

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Agricultural credit systems Major risks

• What kind of major risks we face ?
• Large informal financial system,
• Lack of collateral and high risk for investments,
• Profitable investment opportunities are not
  directly available,
• Rural sector is very fragile unorganized, not
  sustainable,
• Clients have a poor credit history or none.
• These difficulties explain why
• Commercial banks were (are-even now) not in rural
  area.

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Agricultural credit systems major risk
identified

• Risks at crop production level
• - Weather risk drought, flooding (climate
  change)
• - Specific riks diseases, cricket and bird
  invasion
• Market risks
• - Price risk
• -Price volatility creates incertitude about the
  possibility of obtaining enough value from the
  sales of products to cover production costs.
• - Confidence risk
• - Consumers are increasingly demanding. Beyong
  the aspects of quality which are generally well
  managed by food industry, consumers are raising
  new concerns about food safety.

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FINANCING SUPPLY CHAIN MODEL TOMATO PRODUCTION
International, domestic markets

Bank Lender financials services
provider (CNCAS)
Fertilizers, seed entreprises traders
Loan
Charing risk, information
Information on programme
Financial services
Payments through account
Small farmers/tomato production (CNCFTI)
Tomato Processing Company (SOCAS)
Crop production
Production contract
Collateral fund 50/50
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APPROACHES DEVELOPED ?

• Financial services proposal
• Principle Flexibility instead of rigid criteria
• Account deposit for individual and group farmers
• Loans for group farmers (social group solidarity)
• Special conditions of financial contracts
  (interest rate, low deposit mobilization)
• Non-financial sercices
• Training rural populations particularly farmers
  and leaders.
• Intensive participation of CNCASs team in
  meetings, trade exhibitions, annual reports
  organised by farmers associations and local
  development Projects.
• To be active member of some farmers
  organisations
• CGER (Farmers management center)
• To be partner of the government (implementation
  policy sector, fund raising for agriculture,
  impact of subsidies on rural credit)

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RESULTS
SUCCESS STORIES SUCCESS STORIES SUCCESS STORIES SUCCESS STORIES

Relations between farmers organisations and financing performances Relations between farmers organisations and financing performances Relations between farmers organisations and financing performances Relations between farmers organisations and financing performances Relations between farmers organisations and financing performances Relations between farmers organisations and financing performances Relations between farmers organisations and financing performances Relations between farmers organisations and financing performances Relations between farmers organisations and financing performances Relations between farmers organisations and financing performances Relations between farmers organisations and financing performances Relations between farmers organisations and financing performances Relations between farmers organisations and financing performances Relations between farmers organisations and financing performances Relations between farmers organisations and financing performances
                         
Crops Companies (factories) Companies (factories) Farmers organization Farmers organization Number of small organizat Number of small organizat Number of producers concerned Number of producers concerned Average loan/year (M cfa) Average loan/year (M cfa) Average loan/year (M cfa) Repayment rate Global rating Global rating
Tomato SOCAS SOCAS CNCFTI CNCFTI 250 250 10 000 10 000 1 800 1 800 1 800 99 A A
Cotton SODEFITEX SODEFITEX FNPC FNPC 1 918 1 918 60 000 60 000 2 500 2 500 2 500 95 A A
Rice - - CIRIZ CIRIZ 850 850 50 000 50 000 2 800 2 800 2 800 89 B B
Peanut SUNEOR SUNEOR CNIA CNIA 980 980 700 000 700 000 1 500 1 500 1 500 85 C C
CNCFTI Collateral fund mobilized 1 CFA per each Kg of tomato bought (0.5 F by farmers, 0.5 F by SOCAS) CNCFTI Collateral fund mobilized 1 CFA per each Kg of tomato bought (0.5 F by farmers, 0.5 F by SOCAS) CNCFTI Collateral fund mobilized 1 CFA per each Kg of tomato bought (0.5 F by farmers, 0.5 F by SOCAS) CNCFTI Collateral fund mobilized 1 CFA per each Kg of tomato bought (0.5 F by farmers, 0.5 F by SOCAS) CNCFTI Collateral fund mobilized 1 CFA per each Kg of tomato bought (0.5 F by farmers, 0.5 F by SOCAS) CNCFTI Collateral fund mobilized 1 CFA per each Kg of tomato bought (0.5 F by farmers, 0.5 F by SOCAS) CNCFTI Collateral fund mobilized 1 CFA per each Kg of tomato bought (0.5 F by farmers, 0.5 F by SOCAS) CNCFTI Collateral fund mobilized 1 CFA per each Kg of tomato bought (0.5 F by farmers, 0.5 F by SOCAS) CNCFTI Collateral fund mobilized 1 CFA per each Kg of tomato bought (0.5 F by farmers, 0.5 F by SOCAS) CNCFTI Collateral fund mobilized 1 CFA per each Kg of tomato bought (0.5 F by farmers, 0.5 F by SOCAS) CNCFTI Collateral fund mobilized 1 CFA per each Kg of tomato bought (0.5 F by farmers, 0.5 F by SOCAS) CNCFTI Collateral fund mobilized 1 CFA per each Kg of tomato bought (0.5 F by farmers, 0.5 F by SOCAS) CNCFTI Collateral fund mobilized 1 CFA per each Kg of tomato bought (0.5 F by farmers, 0.5 F by SOCAS) CNCFTI Collateral fund mobilized 1 CFA per each Kg of tomato bought (0.5 F by farmers, 0.5 F by SOCAS) CNCFTI Collateral fund mobilized 1 CFA per each Kg of tomato bought (0.5 F by farmers, 0.5 F by SOCAS)
CNCFTI and FNPC are both delivering technical and commercial services to their members CNCFTI and FNPC are both delivering technical and commercial services to their members CNCFTI and FNPC are both delivering technical and commercial services to their members CNCFTI and FNPC are both delivering technical and commercial services to their members CNCFTI and FNPC are both delivering technical and commercial services to their members CNCFTI and FNPC are both delivering technical and commercial services to their members CNCFTI and FNPC are both delivering technical and commercial services to their members CNCFTI and FNPC are both delivering technical and commercial services to their members CNCFTI and FNPC are both delivering technical and commercial services to their members CNCFTI and FNPC are both delivering technical and commercial services to their members CNCFTI and FNPC are both delivering technical and commercial services to their members CNCFTI and FNPC are both delivering technical and commercial services to their members CNCFTI and FNPC are both delivering technical and commercial services to their members CNCFTI and FNPC are both delivering technical and commercial services to their members CNCFTI and FNPC are both delivering technical and commercial services to their members
Closely partnership (PPP) wich is benefit for all the relevant actors. Closely partnership (PPP) wich is benefit for all the relevant actors. Closely partnership (PPP) wich is benefit for all the relevant actors. Closely partnership (PPP) wich is benefit for all the relevant actors. Closely partnership (PPP) wich is benefit for all the relevant actors. Closely partnership (PPP) wich is benefit for all the relevant actors. Closely partnership (PPP) wich is benefit for all the relevant actors. Closely partnership (PPP) wich is benefit for all the relevant actors. Closely partnership (PPP) wich is benefit for all the relevant actors. Closely partnership (PPP) wich is benefit for all the relevant actors. Closely partnership (PPP) wich is benefit for all the relevant actors. Closely partnership (PPP) wich is benefit for all the relevant actors. Closely partnership (PPP) wich is benefit for all the relevant actors. Closely partnership (PPP) wich is benefit for all the relevant actors. Closely partnership (PPP) wich is benefit for all the relevant actors.
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Bank/ consumers International market
C O M M 0 D I T I E S
LC
Off shore Loans
Off shore bank
Pool local bank CNCAS
CNCAS
Repayment local bank
Collateral management
Loan
Agreement (CMA)
SGS/ACE/COTECNA Inspection Companies
Industries (processing, stock) SUNEOR
Quality/quantity goods
Payment
Traders Logistic transport
Loans
Payment
Loans for inputs
Small farmer producers (peanuts)
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CONSTRAINTS

• CONSTRAINTS
• Dependence on government support (subsidies
  programs)
• Committement of Processing Companies is
  determinant in terms of visibility and getting
  easily loans and input (seeds and fertilizers)
  and selling their productions.
• Absence of suitable collateral for farmers
• High risk of default associated with small
  operations
• Markets fragmentation (low volume of crop
  production)

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LESSONS LEARNT

• RISK MANAGEMENT HAS BECOME ONE OF THE MAIN
  CONCERNS OF OUR AGRICULTURAL PRODUCERS
• Technical risks of production tend to be
  increasingly controlled thanks to science and
  technology. Other types of risk have grown in
  importance in recent years (price volatility,
  quality requirements).
• PUBLIC INTERVENTIONS ONLY ARE NOT SUFFICIENT AND
  POLICIES SECTOR MUST BE MORE EFFICIENT
• Among relevant formal financial sector (Central
  bank, commercial banks, insurance companies),
  only Agricultural Banks are actively engaged in
  providing credit to farmers (Support from the
  government and/or external donors).

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CHALLENGERS FOR FUTURE ?

• USING MODERN FINANCIAL INSTRUMENTS IS NECESSARY
• Commodities in stock are a safe collateral, at
  least if the stock are safely managed by a credit
  institute or an independant warehouse operator.
• Crop collateral small farmers can create crop
  collateral together for non-perishable produce in
  proper conditions under joint control with a
  credit society.
• Warehouse receipts this gives banks enough
  comfort to finance transactions, and producers to
  get engaged in inter-seasonal storage to take
  advantage of seasonal price changes.
• Support regional project on Commodities Stock
  Exchange in West African Union.

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CHALLENGERS FOR FUTURE ?

• PROMOTING AGRICULTURAL INSURANCE COMPANY
  INITIATIVE
• CNAAS recently created in PPP approach
  (shareholders capital 35 public sector 65
  private insurance companies).
• Challenge
• Design an alternative, efficient and
  cost-effective crop failure insurance program
  that can be easily reinsured and distributed to
  individual farmers small, medium and large.
• A new way in CIMA area first experience in
  WC Africa
• Operational mechanisms (partenership and
  products)
• Index crop or livestock insurance as collateral
  to lenders
• A pilote is structured with World bank and
  parteners
• Place of microinsurance and reinsurance ?

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Developing a program

• - Identify significant farmer exposure to
  weather
• - Quantify the impact of adverse weather on their
  revenues
• - Structure a contract that pays out when adverse
  weather occurs
• Execute contract in optimal form to reinsure the
  risk in the international markets.
  (Sustainability of agricultural insurance
  products)
• Donors have large opportunities to support this
  new initiative.

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THE END

• THANK YOU

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OTHER USEFUL INFORMATIONS

• LIST OF ACRONYMS
• CNCAS Caisse Nationale de Crédit Agricole du
  Sénégal
• SODEFITEX Société de Développement et des
  Fibres Textiles
• CNCFTI Comité National de Concertation de la
  Filière Tomate Industrielle
• SAED Société dAménagement et dExploitation
  des terres du Delta et du Falémé
• SOCAS Société des Conserves Alimentaires du
  Sénégal
• CNIA Comité National Interprofessionnel de
  lArachide
• ANCAR Agence Nationale de Conseil Agricole et
  Rural
• SUNEOR Société Nationale des Oléagineux du
  Sénégal
• CNAAS Compagnie Nationale dAssurance Agricole
  du Sénégal
• Website cncas http//www.cncas.sn