Value Chain Financing
• A value chain is a chain of activities that a company operating in a
specific industry performs in order to deliver a valuable product or
service for the market.
Value Chain Finance
The term “value chain finance” refers to the flows of funds to and
among the various links within a value chain.
It refers to both internal ( conventional) and external ( emerging
concept) forms of finance:
• Internal value chain finance is financing that takes place within the
value chain, such as when a supplier of inputs or a buyer provides credit
to a farmer.
• External value chain finance is financing from outside the chain made
possible by value chain relationships and mechanisms; for example,
when a bank issues a loan to a farmer based on a contract with a trusted
buyer/ value chain partner.
Why Value Chain Financing?
• In order to spur growth from relatively low-risk lending,
Khushhalibank has been exploring avenues in value chain financing
(VCF) which may allow the bank to not only expand its customer base
and build a healthy loan portfolio but also drive growth in areas which
have hitherto remained untapped.
• The main idea behind value chain financing is to bridge the gap
between unexplored markets and financial institutions .
Win Win For All
Large untapped market
Minimum operations cost •
Lesser credit risk
Quality Produce at reasonable
Scaling up opportunity
Consistent supplies ( Registered
Addressing the needs of various
high end/retail market
creation ( suppliers, collection
center, Fresh Mart ( micro
Access to finance
Quality inputs at door step
High quality seed – Higher
Less input cost
Free of cost technical
Secure sales- buy back
Produce grading – for
different end users
Win Win For All
Access to large market/
Free packaging and
No commission to
Alternate cropping ( Potato
replaced Tobacco in Swabi
Target Segment - VCF
• VCF will target customers who are in relation with Value Chain Partner
(VCP) organization. This relationship of the prospective borrowers with the
VC partner will be in the form of registered growers / suppliers or end
Value Chain Financing will cater to the financing needs of the following:
Certified/registered growers/suppliers of either public or private agribased organizations of repute.
Primary/Secondary dairy milk suppliers.
Artisans, craftsmen, entrepreneurs & small traders involved either in
supply/manufacturing of raw material or finished goods.
End users of technology & energy solutions
Educational institutions (Schools, colleges, vocational training centers).
Value Chain Model
List of registered
Settlement of credit line of growers
via standing instructions
Produce sold to VCP
Produce supplied to
Payment made from
KBL & VCP
Sharing of Farmer’s
data base with KBL
Due Diligence &
Transfer of remaining
amount in borrowers
at KBL Branch
Settlement of Ind.
Payment by End
Users to VCP in
Amount transfer to VCP
A/C for seed and inputs
produce to End user
Connecting Agro Value
VALUE CHAIN PARTNERS
CONNECTING AGRO-VALUE CHAIN PRIVATE LIMITED (CAVC)
VCF for Agri Growers
KBL commenced its 1st value chain financing pilot by partnering with CAVC – a
registered firm which supplied ‘Lady Rosita’ potatoes to PepsiCo International for the
manufacture of ‘Lays’ potato chips. The pilot was kicked-off at Swabi branch was later
replicated at 11 locations with CAVC for different crops.
End User ( Value Chains)
• Sale points in Faisalabad, Lahore and
Islamabad whole sale markets
• Metro ( Lahore and Islamabad)
• Green Valley
• Madina Cash and Carry
• JB foods ( frozen food and French fries)
• PEPSI (lays)
• Fresh Marts
• Small hotels and Chips shops
‘United Stars Kino’
Smart and Renewal
Energy Solutions ‘SRE’