Agricultural Value Chain Financing By Chavarin Saila Bank for Agricultural and Agricultural Cooperatives (BAAC) BAAC Historical Background - Established in 1966 - As a Specialized Financial Institution - State Enterprise under the Jurisdiction of the Ministry of Finance Objectives To promote the improved social and economic well-being
of Thailands farming population through the provision of financial assistance for agricultural production, investment and marketing purposes. BAAC Vision To be a secured rural development bank with modern managerial technology focusing on the uplift of small-scale farmers quality of life. Value Standing side by side and Recognizing the Value of People Mission
To render integrated credit services to enhance farmers opportunity for effectively improved productivity To streamline social development regarding agriculturebased learning for the improved quality of life of farmers so that they will be valuable human resource assets and worthy members of society To administer funds in such a manner that the cost is kept at the appropriate level reflecting the banks key mission
with emphasis on liquidity and stability To develop new areas of services to effectively and productively meet farmers needs on the strength of highcaliber staff with sound judgment BAAC Financing on Value chain Financial Service Learning Support Activities
Agricultural Activities Risk Mitigation Support Activities Agricultural Produce Processing AMC
Domestic Consumption/ Export BAACs Model in Agricultural Value Chain Financing Agricultural value chain financing would be successful if following aspects are well addressed: - supervised credit management - productivity enhancement supporting : productivity increasing and production costs reduction - marketing channel creation: group formation, stop selling to middlemen
- knowledge supporting to be self-reliant : capacity building - providing of safe guard against risks From farm to Mouth Rice value chain Labour Force Survey As of August 2010 Mil.Person 15.45 15.82
16 14 12 Year 2009 10 8 Year 2010 5.91 6 4
6.11 5.57 5.27 2.65 2.53 3.41 1.93 2.04
2 1.41 1.52 0.83 0.74 1.14 3.59 1.09 0
Farmer Manufacturing Construction Community Service Others Farm Households Serviced by BAAC, FY 2005-2009 Million Unit
6.20 6.07 5.91 6.00 5.80 5.60 6.10 5.68 5.54
5.40 5.20 2005 2006 2007 2008 2009 Rice Cultivation Area in Thailand (Rai)
=0 < 100,000 100,001 - 500,000 500,001 - 1,000,000 1,000,001 - 2,000,000 > 2,000,000 Converted Area : 1 rai = 1,600 sqm2 2.5 rais = 1 acre 6 rais 400 sqm2 =1 hectare
Thai Rice Exporting in 2009 Cambodia 42,667 Tons Total : 8,592,830 Tons Germany Germany Total : 5,027 Million US$ 25,604
25,604 Tons Tons Iran Iran Banglades Banglades h h 24,144 24,144
156,033 156,033 Tons Tons Indonesia Indonesia Malaysia Malaysia 162,437 219,643 219,643
Tons Tons 162,437 Tons Tons Ceylon Ceylon 288 Tons 288 Tons India India
41 41Tons Tons Rice Value Chain Financing AMC network establishment AMC network discussion AMC : harvesting service Transportation to AMC marketing center
Sampling for inspection Inspection tool Quality & price Unloading bulk AMC network : village collecting unit AMC network : village collecting unit AMC : organic jasmine rice
Thank You for Your Attention Q&A Financial Services I Credit Services Credit services for individual farmers - short term loans for agricultural production (working capital) loan for seasonal expenses repayment term within 1 year (in special cases repayment term < 1 year)
- Medium and long term loans for investment loan for investment in assets which last more than 1 years, in special cases loan term can last up to 20 years, e.g. loan to buy agricultural land and machinery payment in installment, loan terms more than 1 year Financial Services I Credit Services Credit services for individual farmers - Loans for sale postponement of farm produce : Crop Pledging Schemes: to provide funds to farmers to meet their
immediate expenses while waiting for crop prices to rise after the harvest season, avoiding thinned to sell their crops when prices are low. Repayment of this type of loan is normally due within six months. - Cash credit lines : To provide a convenient way for clients to obtain BAAC loans. Clients can withdraw cash from his account as he needs up to an agreed ceiling and within the period of loan agreement. - Long term loans for refinancing old debts - Loans for farm-related and non-farm activities Financial Services I
Credit Services Credit services for individual farmers - Loans for overseas working - Loans for quality of life - Housing - Education - Medical care - Advanced Credit (A-Cash) -instant cash credit facility for meeting their urgent needs. The clients can obtain and repay credit amount at their convenience Financial Services
I Credit Services Credit services for farmers Institutions - Re-lending to members - Procurement of farm inputs and equipment - Long term agricultural investments Learning Support Activities Model of Sufficiency-economyoriented Community Project Second Phase Inter-dependence
- - Stronger community take part In planning, First Phase preparing community Self-Reliance data and analyzing strengths and change way of living weaknesses Practice of keeping - Conducting joint business detailed accounts
ventures of household expenses abandoning gambling habit - buying and selling collectively have occupations that - Acting as a group e.g. generate extra income, occupation, savings, cutting down unnecessary resources conservation expenses and fringe benefits Form savings habit
Third Phase Community Economic Network - Development of strong community to create community business network - Advocate joint trading and setting up of an economic network at community level Risk Mitigation Support Activities Weather Index Insurance
- Farmer becomes confident that they will be compensated in times of drought that caused damage to their crops - Indemnity payment is utilized to fund a repeated cultivation - BAAC in collaboration with the General Insurance Association has rendered the weather index insurance service to maize farmers. - Service areas currently covering 5 provinces - Drought index is based on data supplied by eight rainfall stations under the auspices of the Meteorological Department. Risk Mitigation Support Activities Weather Index Insurance - Insurance premium is fixed at 100 Baht per rai with maximum indemnity payment of 1,228 Baht per rai. - Indemnity appraisal relies on rainfall measurement criteria as
stated in the insurance policy and differs from : - degree of risk prevailing in each locality - rainfall at each station - starting of cultivation and crop stage, i.e. planting, growing or budding Marketing Support Activities Agricultural Marketing Cooperatives (AMCs) - Were set-up in BAAC branch premises to support provision of quality agricultural inputs and developing marketing channels for agricultural products produced by client farmers. - Crop collection: Support from AMC to collect and sell farm produce.
Crop collection is convenient way for farmers to sell their crops directly to buyers without any intervention from middlemen at fair prices in accordance with quality and quantity. Marketing Support Activities Agricultural Marketing Cooperatives (AMCs) - Advantages for client farmers include: - To purchase farm inputs at fair prices with good aftersale services - To sell farm products through the AMCs collectively with fair prices Central Paddy Markets to help client to sell paddy at fair prices and on fair terms and conditions
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