This document provides an overview of the Oromia Coffee Farmers Cooperative Union (OCFCU) and its role in establishing the Cooperative Bank of Oromia (CBO) to provide banking services. Some key points: - OCFCU was established in 1999 with 34 cooperatives and has since grown to 311 cooperatives and over 288,000 member households. - It helped establish the CBO to give farmers and cooperatives access to credit, and is now a major shareholder and client of the bank. - OCFCU sells members' coffee, provides social services, and facilitates credit and market access. It has increased coffee sales, profits, and dividends significantly over the past

1. OROMIA COFFEE FARMERS COOPERATIVE UNION (OCFCU)
BANKING SERVICE TO OCFCU AND ITS MEMBER COOPERATIVES
Presented
By
Dessalegn Jena
July, 2014
Nairobi
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2. Outline
1. Introduction and Background
• Some facts about Ethiopia
• Role of Agriculture in Ethiopia
• Characteristics of the rural sector
• Financial Sectors in Ethiopia
• Efforts of Financing Agricultural Sector in Ethiopia
2. Structure of farming community in Ethiopia
• Financial need of Farming Community
• Unique problems of Farmers access to finance
3. Effort to finance cooperative sector
• Establishment of Cooperative Bank(CBO)
4. The Role of OCFCU in establishment and Governance of CBO
5. Establishment and Current Status of OCFCU
6. Recommendations
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3. Some Facts about Ethiopia
Area 1,104,300 sq. Km
Agriculture land 345,130 Sq.Km
Arable land 13,606,000 ha.
Population is about 90 mil
Rural population 85%
Population growth rate 2.9%
Per capita is about $500
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4. Role of Agriculture in Ethiopia
 Agrarian country and agriculture plays vital role in
national economy.
 The economy policy is Agricultural Development Led
Industrialization /ADLI/.
 Agriculture accounts 46.3% of GDP 83.9% of export
and 80%of labour force.
 Small scale producers contribute more than 90% of
agricultural products.
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5. Characteristics of the Rural Sector
 Agricultural activities are the main stay
 Low level o productivity
 High level of poverty
 Undeveloped infrastructure
 Poor entrepreneurial development
 Natural resource degradation
 Poor saving habit
 Shortage of capital
 Poor credit facility
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6. Financial sectors in Ethiopia
• Formal Financial Sectors
Commercial Banks
Micro Finance Institutions (MFIs)
Insurance Companies
• Semi-formal Financial Sectors
Cooperative Financing
Saving and Credits (SACCOs)
• Informal Financial sectors
Iddir
Iqqub
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7. Effort of Financing Agricultural Sector
• Government Banks
The loan is advanced by guarantee of Regional
Governments
Guarantee is 100% in the case defaults
• Micro Finance Institutions (MFIs)
 Newly established system to mitigate risk of
default
 The farmer is provided with voucher and receive
agricultural inputs from co-ops,
 The cooperatives collect their money from MFIs
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8. Cont’d
• Financial Inclusion
Ethiopian Financial Inclusion Project (EFIP)
Financial Inclusion Support Unit (FISU)
• Warehouse Receipt Financing
Agreement is made between ECX and
Commercial Banks to finance 60% of the value
of commodity
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9. The Structure of Farming community
• Cooperative Sector
Farmers/Household
Primary Cooperative Societies
Union
Federation
• Other service providers
Processors
Transporters
Input suppliers
• Stakeholders
Local Government
Regulatory Bodies
Value Chain supporters
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10. Financial need of Farming community
To increase production and productivity
 For processing and packaging
 For infrastructure development
 For product marketing
 For social welfare,
 For diversification
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11. Unique problems of farmers access to
finance
 Agriculture is less attractive field of business as to
financial sectors.
 Agricultural sector is considered as high risk
 Illiquid and perishable Collateral
 Small transaction size,
 Geographically dispersed clients
 Poor Financial management
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12. Efforts to Finance Cooperative Sector
• Establishment of Cooperative Bank of Oromia (CBO)
 Cooperative bank of Oromia is registered in accordance with article 304
of the commercial code of Ethiopia and licensed by NBE.
 CBO is mainly(70%) owned by cooperative societies.
Mission:
 To Provide full-fledged and customer responsive
banking service for cooperative societies, other
entities, and individuals with special emphasis to
agricultural and agro-based businesses financing,
and to maximize shareholders’ value through use
of competent and disciplined employees, visionary
leaders, and modern banking technologies.
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13.  CBO’s financing Priority:
Agriculture and agro-processing
Cooperatives business activities
Export oriented activates
• Current status of CBO
• As of Dec 31,2013
 Asset =7.3 billion birr
Capita =901.34 billion birr
Loan portfolio =3.2 billion birr
Coops’ Loan = 27-30%
Recovery rate =98.5%
Branch network = 102
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14.  CBO’s Financing experience.
o Credit products:
 Investment loans.
 Working capital loans.
o Types of clients Financed:
 Multipurpose Coops
 Agricultural Cooperative Unions
 SACCO Unions
 Coffee Farmers Cooperative Union
 Primary coffee cooperatives societies
 Others.
o Activities financed:
 Production activities:
 Agricultural produce marketing activities
 Mechanization.
 Manufacturing activities
 Domestic trade and services
 Export and import activities.
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15. `Role of Oromia Coffee Farmers Cooperative
Union (OCFCU) to establish CBO
 Initiation of idea for the establishment of the Cooperative
Bank of Oromia to access rural credit,
 Pioneer and major Share holder,
 Major creditor,
 Corporate Governance,
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16. Establishment and current status of OCFCU
Regional State Oromia,
Ethiopa
Above 5000ha – 55 districts
lakes
Between 2000-5000 ha- 15 districts
Less than 2000 ha- 2 districts
Other districts
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17. INITIAL CURRENT
Memb ers
Capital
• 34 Cooperatives
• 22,503 House Hold
• 311 cooperatives
• 288,201 House Hold
• USD 90,000
• USD 15,500,000
Date of Establishment
01 June, 1999
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18. Objective
 To Provide market information to Co-op societies
about coffee price at local and international market
 To sell their coffee product at better price at local and
international market,
 To improve and maintain the quality, productivity and
sustainability of coffee production
 To provide coffee farmers with social services
 To facilitate and provide cooperatives with credit,
 To represent the coffee farmers at national and
International forums,
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19. Deputy General Manager
Board Of Directors
General Assembly
Commercial
Department Finance
Department
Human resource
Department
Coffee
Processing
Factory
General Manager
Supervisory
Committee
Legal
service
Audit
Services
Quality control
Secretary
Planning &
Programming
Department
Extension
Department
Organizational Structure Of
Oromia Coffee Farmers Cooperatives Union
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20. Different Certifications
 Organic
 Fair trade
 Rainforest Alliance
 UTZ
 Tracibility
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21. Farmer
Collector
Supplier
ECX
Exporter
Buyer
Roaster
Farmer
Cooperative
Union
Buyer
Roaster
Retailer
consumer
Retailer
Profit
Profit
Fair Trade
Premium
CooperativeAuction
The Coffee value Chain
consumer 21

22. OCFCU’s performance in the last decade
 Membership increment from 34—311 cooperatives
 Household increment from 22500—288,201,
 Coffee sales from 126 tons –-9000 tons
 Profit generated from USD 24,000—USD 6.7 million
 Dividend paid from USD22,000—USD 3.4 million
 Fair Trade premium USD 74,000---USD 1.6 million
 Capital increment USD 90,000---USD15.5 million
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23. No Sectors Name of Project Number of project
Accomplished
Number of
beneficiaries
1
Education schools 70 28260
Kinder garden 3 884
Library & laboratory 3 586
Teachers’ residence 2 22
Staff office 3 47
2
Health Health Post 13 93,000
Dry latrine 7 4250
3
Water Development Potable water development 89 41,112
4
Transport secter road 5 27,000
Bridge 9 21,000
5
Coffee Processing Coffee processing mills 34 2580
6
Agro-industry Flour mills 5 5,000
7 Warehouse Office and Store 46
4600
8 Museum Coffee museum 1
Total 291 228,341
Projects Undertaken by the Fair trade Premium
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24. Farmers Support
 Capacity building
 Supply of small farm tools
 Supply of quality control accessories
 Supply of Beehives
 Establishing and supporting of Saving and Credit,
 Advisory service
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25. Value chain supporting facilities
 127 wet mills
 26 dry coffee hullers
 2 coffee Processing and Grading Machines
 11 Trucks
 9 vehicles
 5 Buses (services )
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26. Carbon neutral coffee project
Gimbi Energy Efficient Cook stove Programme
 Distribute 30,000 Fuel saving stoves
 To produce Carbon Neutral Fair trade Coffee
 Reduce Green House Gas emission (36,633(tCO2e)
 Each HH is expected to have both stoves (full package)
 50% reduction in fuel wood.
 Pre-finance – obtained from ICCO, HoAREC – model CDM.
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27. Job Creation
• Union
Permanent 137
seasonal 1200
• Primary cooperatives
permanent 1302
seasonal 12000
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28. Future plan
 Coffee roasting industry establishment
 Honey processing industry,
 Expansion of processing plant
 Coffee complex construction
 Expansion of income generating projects
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29. Recommendations to enhance FCUS access to
finance!
Improve the governance and management practices of
cooperative societies.
Improve the financial management and information system of
cooperative societies.
Strengthen the relationship of cooperative movement,
Government cooperatives promotion structures, financial
institutions and other relevant stakeholders.
Formulating and implementing effective risk mitigating
strategies with regard to agricultural lending.
Design and implement credit relief outreach program.
Enhance the agricultural lending skill of bankers to improve
their agricultural loan judgments.
Arrangement of refinance facilities provided for banks
committed to agricultural lending.
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30. Thank You!
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