Presenter Slides - E-Workshop: Agricultural risk management with FAO and ILO
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Slides from our presenters from ILO and FAO for our E-Workshop discussion on managing risks and seizing opportunities among small holder and subsistence farmers.
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Presenter Slides - E-Workshop: Agricultural risk management with FAO and ILO
- 1. Agricultural Risk Management Innovations you should know about Patricia Richter Technical Officer Social Finance Programme Pranav Prashad Microinsurance Officer of the Microinsurance Innovation Facility Live-tweet the session! @MicroCredSummit, @ilo, @faonews use #Commit100M Emilio Hernandez Agricultural Finance Officer Agribusiness and Finance Group Rural Infrastructure and Agro-industries Division (AGS) Use the Q&A box on the top-right to send questions to the Panelists. Campaign Commitment E-Workshop Series
- 2. Agricultural Risk Management Innovations you should know about Join ILO and FAO in announcing YOUR CAMPAIGN COMMITMENT: mcs2015.org/commitonline Feel free to write to us at mycommitment@microcreditsummit.org Don’t forget to tweet your takeaways of this E-workshop @ilo @faonews @MicroCredSummit using #Commit100M To know more about ILO, please visit www.ilo.org or write to spf@ilo.org To know more about FAO, please visit www.fao.org or write to FAO-HQ@fao.org
- 3. The reactive increase in supply has been similar across the world 0 200000 400000 600000 800000 1000000 1200000 1400000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total production of different commodities in Asia, LAC and Africa (in thousands of MT) Source: FAOSTAT 0 50000 100000 150000 200000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Asia Latin America Africa 0 50000 100000 150000 200000 250000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Cereals Fruits and vegetables Meats 3
- 4. Some agricultural products are increasing in value more than others Total export value of different commodities in Asia, LAC and Africa (in millions of USD) Source: FAOSTAT Asia Latin America Africa 0 10000 20000 30000 40000 50000 60000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 0 10000 20000 30000 40000 50000 60000 70000 80000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 0 2000 4000 6000 8000 10000 12000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Cereals Fruits and vegetables Meats 4
- 5. The supply response has been driven by a rise in productivity Average yields for different commodities in Asia, LAC and Africa (in thousands of Hg/Ha) Source: FAOSTAT Asia Latin America Africa Cereals Fruits and vegetables 0 50 100 150 200 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0 50 100 150 200 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0 20 40 60 80 100 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 5
- 6. A critical determinant of productivity has been long-term investment in agriculture Agricultural capital stock in Asia, LAC and Africa (in million of 2005 USD) Source: FAOSTAT Asia Latin America and the Caribbean Africa 680000 700000 720000 740000 760000 780000 800000 820000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1700000 1750000 1800000 1850000 1900000 1950000 2000000 2050000 2100000 2150000 2200000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 0 100000 200000 300000 400000 500000 600000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 6
- 7. Dominance of domestic private investments in total agricultural capital stock Components of agriculture investment for a sample of 31 developing countries Source: ODI, 2012 7
- 8. The lag of formal financial services in rural areas Credit market served by informal sector Savings market served by informal sector Source of savings and credit services for the rural population in LAC in 2011 Fuente: FINDEX, 2012 0 5 10 15 20 25 Ahorró dinero el año pasado, zona rural Ahorró en una institución fin. el año pasado, zona rural Usó préstamo el año pasado, zona rural Préstamo de institución fin., zona rural %ofruralpopulation 8
- 9. Fuente: FINDEX, 2012 0 5 10 15 20 25 30 35 Saved any money in the past year, rural Saved at a financial institution in the past year, rural Loan in the past year, rural Loan from a financial institution in the past year, rural %ruralpopulation Credit market served by informal sectorSavings market served by informal sector The lag of formal financial services in rural areas Source of savings and credit services for the rural population in South East Asia and Pacific in 2011 9
- 10. Fuente: FINDEX, 2012 0 5 10 15 20 25 30 35 40 45 50 Saved any money in the past year, rural Saved at a financial institution in the past year, rural Loan in the past year, rural Loan from a financial institution in the past year, rural %ruralpipulation Credit market served by informal sector Savings market served by informal sector The lag of formal financial services in rural areas Source of savings and credit services for the rural population in Subsaharan Africa in 2011 10
- 11. The lag of formal financial services to agriculture from the firm’s perspective Ag. credit as a share of total credit vs. ag. GDP as a share of total GDP for select countries in Asia during 2010 Source: FAO and WDI, World Bank 0 5 10 15 20 25 30 35 40 Cambodia Pakistan Vanuatu Bangladesh Bhutan Indonesia Sri Lanka Thailand Philippines Samoa Maldives Korea,… Ag credit as share of total credit (%) Ag GDP as share of total GDP (%) 11
- 12. The lag of formal financial services to agriculture from the firm’s perspective Ag. credit as a share of total credit vs. ag. GDP as a share of total GDP for select countries in Latin America during 2010 Source: Centro de Estudios Peruanos, 2011 6,06 8,5 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 México Perú Rep. Dominicana Colombia Panamá Costa Rica El Salvador Honduras Guatemala Bolivia Ecuador Chile Brasil Argentina Nicaragua Uruguay Venezuela Paraguay LAC / Promedio América Latina y el Caribe: Porcentaje del PIB agropecuario respecto al PIB total y del crédito agropecuario respecto del crédito total Cartera agropecuaria / Cartera total bruta (%) 2010 PIB agropecuario / PIB total (%) 2010 12
- 13. The lag of formal financial services to agriculture from the firm’s perspective Ag. credit as a share of total credit vs. ag. GDP as a share of total GDP for select countries in Africa during 2010 Source: FAO and WDI, World Bank 0 10 20 30 40 50 Ethiopia Liberia Burundi Rwanda Malawi Ghana Tanzania Uganda Kenya Sudan Nigeria Zambia Namibia Botswana Seychelles Ag credit as a share of total credit (%) Ag GDP as a share of total GDP (%) 13
- 14. Inequality in the economic benefits seized from agribusiness investment opportunities There is evidence of feasible agribusiness investment opportunities not being seized in poorer developing countries where there is more potential for socio- economic impact. Source: World development indicators 0 100000 200000 300000 400000 500000 600000 700000 800000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Low income Lower middle income Upper middle income High income Agriculturalvalueadded(millionsof2005USD) Low income Lower-middle income Upper-middle income High income 14
- 16. 16 Two Core Questions Client value Whether and under what circumstances do insurance services provide value to low- income households? How to improve client value of products and services through implementation and innovation? Business case Whether and under what circumstances can insurance programmes be viable and sustainable for all stakeholders How to enhance viability through processes and tools : demand enhancement, products, channels!
- 17. People in rural areas need access to a range of financial and non-financial services for various productive and protective purposes: • Purchase stock, equipment and agricultural inputs • Maintain infrastructure • Contract labour for planting/ harvesting • Transport goods to markets • Make/receive payments • Manage peak season incomes to cover expenses in low seasons • Invest in education/ shelter/ health or deal with emergencies • Climate change adaptation and mitigation Farmers, agri-based industry, non-farm enterprises, household consumers
- 18. ILO approach to rural development 1. Innovate, experiment, test 2. Analyze, document and develop tools 3. Disseminate 4. Promote: policy dialogue and capacity building Financial innovations Non-financial innovations Training materials Research papers Other publications Other tools ILO internal ILO external Policy dialogue Capacity building
- 19. Results of rural innovations (1) AMK, Cambodia => Financial Education Programme to improve clients’ RM strategies 1) Reduction of 3.4% in late payments 2) Increase of 10% in insurance uptake 3) Reduction of 8% in clients’ believe that it is impossible to save, increase of 1% in clients’ association of savings and security, through improved handling of debt, as well as attitude towards borrowing NWTF, Philippines => Entrepreneurship Training to improve clients’ RM strategies 1) 13% effect in perception of lower barriers to entrepreneurship 2) Business profit increased by PHP 2’000 (approx. USD 50) 3) Ownership of motorized vehicles increased by 3.5% 4) Incidents of late repayment decreased by 4%, taking out a loan to repay another loan decreased by 10% 5) 5% increase in use of microinsurance to cover unforeseen expenses
- 20. Results of rural innovations (2) Nyèsigiso, Mali => Integrated client training on child labour, enhancing agricultural productivity, financial education to address working conditions (child labour risk ) among clients 1) Incidence of child labour decreased by 26% for girls 2) Some evidence that training increased awareness on child labour (perceived age at which children could start full-time work, importance of secondary schooling) BASIX, India => Client training on improving productivity by reducing occupational safety and health risks 1) Positive results in safety and health at the workplace: 11% decrease in workplace illnesses and injuries, and more clients having a first aid box 2) 37 USD increase in the monthly income 3) Increase in the ability to cover costs (25%) 4) Increase in the adoption of new technologies and practises (to ease physical labour, reduce cost of inputs or increase yield) (54%) 5) Improved working conditions: average daily work hours reduced by -73 minutes
- 21. 21 On client value: Better financial choices in the absence of a shock: productive impact
- 22. 22 On client value: Lower reliance on burdensome coping strategies
- 23. 23 Impact On client value: Lower out- of-pocket spending
- 24. PACE!! • A client value assessment tool developed by the ILO’s Impact Insurance Facility – Assesses value from microinsurance products in relation to alternatives providing protection for similar risks – Takes a client’s perspective – Low-cost; can be applied in a few days – Measures four key dimensions of value: product, access, cost and experience – Looks at both client specifications and related processes • Developed in response to the microinsurance industry’s demand for a simple yet holistic approach to understanding client value in real time • NOT a substitute for demand or impact studies; PACE focuses on improving value, not proving it24
- 25. Technical guide available on our website PACE: Many dimensions of value 25 Product  Coverage, service quality, exclusions, waiting periods  Sum insured to cost of risk  Eligibility criteria  Value-added services simple affordable appropriate Access  Choice &enrollment  Information & understanding  Premium payment method  Proximity Cost  Premium to benefit  Premium to client income  Other fees & costs  Cost structure and controls Experience  Claims procedures  Claims processing time & quality of service  Policy administration & tangibility  Customer care accessibleresponsive
- 26. Key Points • PACE can help you improve the value proposition • Value creation is a process – Mature products often provide better value – If your product remains stagnant while others’ evolve, you will lose market share – It is important to keep abreast of clients’ risk-management needs and preferences • Small changes in product design make a big difference 26
- 27. Additional ILO tools for Rural Service Providers… MF4DW Diagnostic Toolkit => Purpose: Help interested MFIs to detect DW challenges among clients. => Elements: • Introduction to Microfinance for Decent Work • Implementation guidelines for the MFI • Guidelines for interviewers • Training materials – Goals of training – Training agenda – Role play • Decent Work questionnaire • Interviewer feedback form
- 28. ILO Rural Capacity Building tools Title of product Description Type Empowering rural communities through financial inclusion Policy brief on financial inclusion for rural communities. Policy advise Protecting the Poor: A Microinsurance compendium. Vol. II Contains chapters on climate change, next-generation index insurance for smallholder farmers, livestock insurance. Knowledge product Making insurance work for microfinance institutions: a technical guide to developing microinsurance Guide for MFI managers on the design and operation of basic insurance products. Introduces fundamental insurance concepts, outlines the prerequisites needed for an MFI and describes the key features of five types of insurance products. Knowledge product Financial Education: Trainers’ Manual A series of training materials designed to teach vulnerable groups – including women and men in poverty, families with working children, youth and migrant workers – financial knowledge and management skills Training Tool Making Microfinance Work: Rural Microfinance A chapter and stand-alone course (in development) in the MFI management training programme “Making Microfinance Work: Managing Product Diversification” Training Tool Village Banking and the Ledger Guide Practical tool for strengthening village banks as a means of giving poor women and men in rural and often remote areas access to financial services (savings and credit), social empowerment and a higher quality of life. Training Tool Rural Academy: Decent Work in the Rural Economy 2-week training event with a 3-day elective on rural finance. Training Course
- 29. 29 Thank you! “Agriculture vulnerability and poverty go hand in hand, but insurance holds out the promise of breaking a part of the cycle that ties them together.” Adapted from Jonathan Morduch, Economist, New York University Social Finance Programme International Labour Organisation www.ilo.org/socialfinance www.ilo.org/impactinsurance Pranav Prashad prashad@ilo.org Patricia Richter richter@ilo.org
- 30. • Produce 2 reports (Africa and Latin America) on effective delivery of agricultural finance services and risk mitigation tools. • Publish a set of policy guidelines and training manuals for designing services and risk management tools for smallholders. • Deliver trainings in Africa, Latin America and Asia on value chain finance analysis as a way of improving service delivery. • Make publicly available all policy and training material related to rural finance and investment on the Rural Finance and Investment Learning Centre (www.ruralfinace.org) • Publish 6 studies on the value of innovative insurance models and cost effective means for scaling. • Expand agricultural insurance activities into 5 new countries by 2017. • Holding three microinsurance-related webinars by end 2015. • Publishing an analysis on how Social Protection Floors and the financial inclusion can help lift people out of poverty by end of 2015. • Produce a publication on how microfinance can contribute to job creation. Campaign Commitment Makers in 2014 See more at www.microcreditsummit.org/make-a-commitment.html
Hinweis der Redaktion
- Private and domestic investors have been the main investors in agriculture, due to very strong informational advantages on complex domestic agricultural markets.
- We also see the marginal role of formal financial institutions at the micro level. For the first time, we have available nationally representative census data on use and sources of financial services world wide. In rural areas of LAC we see an enormous market share captured by informal financial service providers.
- And the reason we see so much inequality in rural areas is that this rise in investment has benefited only specific groups. Poorer countries remain stagnant in their ability to generate gross profits from investments (proxied by value added). However there has been a significant pull in lower middle income and upper middle income countries. A similar distribution of benefits can be inferred within countries.
- RISK side: vulnerability coming from income shocks (climate change [changing weather patterns, resulting droughts, floods], accidents, production shocks)/ lack of social security / poor decisions about money management => WHO are the farmers? Smallholder profile… COPING side: fin and non-fin services Loans, savings, insurance, leasing Financial education Entrepreneurship training Warehouse receipts
- Risk / innovation on… 1a) farmer side => improvements in productivity linked to improvements in occupational safety and health 1b) financial institution side => improvements in considering social and environmental risks and impacts in funding decisions / setting up internal system for this purpose that help both FI and client to create value
- A client value assessment tool developed by the ILO’s Microinsurance Innovation Facility Assesses value from microinsurance products in relation to alternatives providing protection for similar risks Takes a client’s perspective Low-cost; can be applied in a few days Measures four key dimensions of value: product, access, cost and experience Looks at both client specifications and related processes Developed in response to the microinsurance industry’s demand for a simple yet holistic approach to understanding client value in real time NOT a substitute for demand or impact studies; PACE focuses on improving value, not proving it Complements other client value assessment methods