Value Chain Financing Research Articles

Is value chain financing a solution to the problems and challenges of access to finance of small‐scale farmers in Rwanda?

PurposeThe purpose of this paper is to demonstrate the relationship between value chain financing and access to finance of small‐scale farmers in Rwanda. The authors propose two models of access to finance and their correlation with improved productivity and therefore profit for producers was obvious. Value chain financing products in Mukunguli, southern Rwanda have improved the life of small‐scale farmers tremendously.Design/methodology/approachThe paper is based on documentary reviews on value chain financing and direct interviews conducted with 122 farmers and staff from the microfinance institution. SPSS was used to analyze results from the field and actions are recommended for future prospects.FindingsIt was evident from the data collected from selected respondents that impact of the access to value chain financing products had a straight link to the levels of profit and production.Research limitations/implicationsAccess to basic documentation was among the limitations of this paper. Furthermore, reliability of data collected from interviewers was open to question as it required deep analysis on some of the samples.Practical implicationsThe paper includes implications of access to finance in agriculture sector through value chain financing products. The feasibility of the tested products had been approved, by both the financial institution and farmers. Value chain finance has improved the productivity and profits of farmers as well as the profit of the microfinance institution.Social implicationsThe well being of small‐scale farmers has improved tremendously.Originality/valueThe paper is original in proving that value chain finance products can work in Rwanda – the first experience being in Mukunguli. It also proves that a microfinance institution can solve problems faced by small‐scale farmers in remote areas.

Working capital management in the automotive industry: Financial value chain analysis

Financial value chain analysis is used to examine working capital management by cycle times in the value chain of the automotive industry during 2006–2008. The applied method offers a holistic view of the value chain from raw materials to the end customers. The average cash conversion cycle of the value chain of the automotive industry was 67 days. According to the study, the change of cycle times of working capital followed mainly the change of cycle time of inventories. The position of the stages of the value chain measured by the cash conversion cycle did not change substantially from 2006 to 2008.

Book Review: Agricultural Value Chain Finance: Tools and Lessons

Calvin Miller and Linda Jones, Agricultural Value Chain Finance: Tools and Lessons, Practical Action Publishing, Warwickshire, 2010

Closing the gap: Reaching the missing middle and rural poor through value chain finance

Recent gains in microfinance have yet to reach the majority of the rural poor in developing countries. Additionally, a market gap exists for small and medium enterprises (SMEs) caught between microfinance and corporate banking. Standard banking practices for analysing risk and requirements for fixed asset collateral are critical barriers in reaching these markets. However, value chain finance – either from actors within the value chain itself or from external financial institutions – offers alternatives to these restrictive practices. This article focuses on external financial institutions operating in Africa and Latin America that are using innovative approaches to value chain finance to serve both small-scale rural producers and the SMEs that link them to urban and export markets. These unconventional methods for assessing risk and evaluating collateral present promising models for extending basic financial services to SMEs in the missing middle and to the rural poor. They also highlight opportunities for local financial institutions to enter profitable new markets and bring value chain finance models to scale, but doing so will require a change in traditional lending practices and, in some cases, policies regulating local banking industries.

A baker's dozen lessons of value chain financing in agriculture

Value chain finance in agriculture is an approach to financing that uses an understanding of the production, value added and marketing processes in a chain to best determine financial needs and how to best provide financing to those involved. Many diverse and innovation financial instruments may be applied or adapted to fit the specific financial needs of chain actors. Commodity flows and cash flow projections can be used to secure financing and reduce risk. This article looks at this approach and at the application of financial instruments and innovations, drawing lessons for widespread application. The 13 lessons are drawn from 90 cases presented in four regional conferences on value chain finance organized by the Food and Agricultural Organization of the United Nations (FAO) and on a study on structured finance for agriculture. These lessons show the high potential of this approach for successfully increasing finance to agriculture and agribusiness, with less risk and lower transaction costs.

Value chain finance to develop the honey sub-sector in India

Value chain finance is critical in every context to enable low-income producers/ growers to start and expand their enterprises and to help them increase their incomes sustainably. This article documents how credit was important when EDA Rural Systems attempted to develop a beekeeping sub-sector by facilitating bank loans to beekeepers though this has been a challenging task for the EDA project team. Later, on the basis of a value chain assessment of the sub-sector and the experience gained, EDA adopted a more comprehensive approach to addressing other issues limiting the overall growth of the sub-sector. Facilitating credit to beekeepers and other enterprises in the value chains became even more important. Our experience in this subsector suggests that while several other appropriate interventions have to be designed and implemented along with facilitating bank finance to enterprises if a systemic change has to be effected, value chain finance has to make its own contribution to the overall development of a sub-sector.

Value chain governance and access to finance: Maize, sugar cane and sunflower oil in Uganda

While financial institutions have had relatively little success in overcoming the risks and costs of lending to agriculture, rising food prices and shortages have made it imperative to find better ways of increasing financial flows in support of increased agricultural production and marketing. Direct value chain finance transactions operate with the same logic as any other financial transaction. The lender must engage in some form of client screening, client monitoring and contract enforcement. To successfully accomplish these tasks, direct value chain lenders can use information gained through their value chain relationships about their clients and their clients’ businesses. The value chain governance structure influences how easily and successfully a value chain lender can accomplish these tasks. Value chain governance structures can be defined with a typology along a continuum of four types of relationships described generically as market based, balanced, directed and hierarchical. A market-based value...

The Italian CBI 2: New corporate banking services to optimise the financial value chain

In recent times, the payments industry has been deeply affected by technological evolution, which has affected every industrial sector: security, integrity, authenticity of transactions, end-to-end, flexibility, integration with corporate systems and automatic reconciliation are words which have been in use for years, and now is the time to shift them into concrete solutions, as expected by the market. Moreover, the need for European Union harmonisation of payment methods, prices and standards has led to the creation of the single euro payments area (SEPA), which represents a major opportunity for multinational enterprises and banks who operate at a cross-border level. The Association for Interbank Corporate Banking (ACBI), thanks to its numbers (over 620,000 corporates connected and most of the Italian banking system), has ridden the wave and is now becoming a real benchmark for the corporate banking community thanks to the launch of a new Internet-based Virtual Private Network, the use of XML syntax, the integration between the financial cycle (payments) and the supply chain (trade relationships and documents, eg e-invoice). The new services cite the maximum alignment with ISO 20022 standards (UNIversal Financial Industry message scheme) providing bank customers with a set of specific Additional Optional Services built over the core scheme of existing services (eg credit transfer), offering new end-to-end functions, such as the trade documents exchange, and financing traditional solutions which have been now converted to electronic, such as the invoice financing request. But how does it work? And what value added do the new mentioned functions generate for companies? This paper explains in detail all these topics, by describing the experience of the ACBI, the critical factor of success, lessons learned and the value that the model could have in other countries and zones, given the widespread impact on the Italian market.

Value chain financing in agriculture

This paper provides an overview of value chain financing concepts and applications. It highlights issues and directions in the commercialization of agriculture, value chain development, agricultural and agribusiness finance and discusses the potential benefits and cautionary pitfalls associated with value chain financing. It is argued that value chain development supported by appropriate policies, institutions and services that constitute an enabling business environment can be instrumental in leveraging access to financial services in agriculture in developing countries. In this regard, ideas for promoting value chain financing are proposed and questions on its future are offered for reflection.

Value chain financing in agriculture

This paper provides an overview of value chain financing concepts and applications. It highlights issues and directions in the commercialization of agriculture, value chain development, agricultural and agribusiness finance and discusses the potential benefits and cautionary pitfalls associated with value chain financing. It is argued that value chain development supported by appropriate policies, institutions and services that constitute an enabling business environment can be instrumental in leveraging access to financial services in agriculture in developing countries. In this regard, ideas for promoting value chain financing are proposed and questions on its future are offered for reflection.

Buy, lie, and sell high: how investors lost out on Enron and the Internet bubble

In Buy, Lie, and Sell High, Harvard Business School Professor Daniel Quinn Mills offers the first systematic analysis of both the Internet stock bubble and the Enron scandal. Drawing upon extensive new research and insider interviews, Mills uncovers both systemic causes and outrageous misbehavior. He demonstrates how each link in the financial value chain failed, from venture funds to auditors and regulators. Finally, he offers practical guidance for investors and policymakers seeking to avoid the next speculative disaster.

Formal and Informal Credit Markets in Egypt

This paper examines empirically the markets for formal and informal credit in Egypt. Using a dataset specifically collected for the purpose, it examines what factors determine whether or not a person borrows from the informal sector using a probit analysis. The paper then conducts a similar exercise for the informal financial sector and seeks to examine whether any link between borrowing in the formal and the informal financial sectors exists. Conclusions are then drawn as to the role of informal financial markets in the development process. (This abstract was borrowed from another version of this item.)