Transcript Slide 1

Value Chain Financing
Value Chain
• 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
Bank
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Large untapped market
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Growth opportunity
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Minimum operations cost •
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Lesser credit risk
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Almost guaranteed
repayment .
Farmer
VC partner
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Quality Produce at reasonable
price
Scaling up opportunity
Consistent supplies ( Registered
farmers)
Addressing the needs of various
high end/retail market
segmentation
Employment/ Entrepreneurship
creation ( suppliers, collection
center, Fresh Mart ( micro
franchises) etc
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Access to finance
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Quality inputs at door step
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High quality seed – Higher
yield
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Less input cost
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Free of cost technical
advisory services
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Secure sales- buy back
agreement.
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Produce grading – for
different end users
–
Win Win For All
Farmer
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Access to large market/
franchises
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Free packaging and
Transportation
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No commission to
Arthi/Middleman
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Alternate cropping ( Potato
replaced Tobacco in Swabi
and Mansehra)
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
users.
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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
KBL
Loan facility
Supplier account
List of registered
potato growers
Settlement of credit line of growers
via standing instructions
Produce sold to VCP
Growers
Value Chain
Partner
Loan settlement
Pesticides, seeds,
Fertilizer supplied.
Produce supplied to
End user
End user
Payment made from
loan amount
Payment made
Input
Supplier
Agreement
BW
KBL & VCP
AC Opening
of VCP
& Suppliers
with KBL
Sharing of Farmer’s
data base with KBL
Due Diligence &
Appraisal
by KBL
Process
Ends
Transfer of remaining
amount in borrowers
deposit A/C
Customer’s
Account Opening
at KBL Branch
Value chain
Lending Process
Flow
KBL Loan’s
Settlement of Ind.
Borrowers
By VCP
Loan Processing
&
Disbursement
Payment by End
Users to VCP in
KBL A/C
Amount transfer to VCP
A/C for seed and inputs
Packaging ,
transportation &
selling of
produce to End user
Input
Distribution
to
Farmers by
VCP
Payment to
Supplier
by VCP
Sarsabz Karobar
Connecting Agro Value
Chains ‘CAVC’
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)
Whole sale
Super Stores
Processors
Retail
• 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
Sarsabz Karobar
‘United Stars Kino’
Sarsabz Karobar
Smart and Renewal
Energy Solutions ‘SRE’
Sarsabz Karobar
‘Friends Flowers’
Thank You