Amsterdam, The Netherlands We are proud to announce that FACS is now a member of the Coalition for Private Investment in Conservation (CPIC). The organization facilitates the scaling of conservation investment, with sustainable agricultural intensification as one of it focus areas and therefore perfectly fits the Financial Access strategy to accelerate sustainable smallholder finance at scale. We will work with the Coalition’s more than fifty partners to create a larger pipeline of investable priority conservation projects as well as provide structuring support for those deals. Our experience connecting conservation projects with investors also closely aligns with the mission of CPIC. We look forward to working closely with the Coalition in the future to connect conservation to finance.
Taunggyi, Myanmar Last month two of our consultants spend the week at the Taunggyi, Myanmar branch office of the micro finance institution Sathapana Ltd. The MFI is a partner in the Smart Agriculture Myanmar project and as such received capacity building training. Together with the fifteen participants, mostly loan officers, our team discussed the maize crop cycle, the main factors that help generate a higher yield as well as the hurdles and risks associated with maize farmers. Lastly the loan officers were trained in the use of our data collection app and they conducted a field test, interviewing four real farmers at their homes. Over the next weeks Sathapana will continue to interview maize farmers. Thanks to our credit scoring tools they will then decide which farmers qualify for input loans this coming maize season. We will keep you posted on the progress of the project.
Last week the “Climate Smart Lending Platform team” went on a field visit to Nyeri County, Kenya. In this area, there is a great concentration of smallholder farmers and we were interested in finding out first-hand how access to finance, coupled with climate smart terms & incentives, could improve not only farmers’ productivity but also resilience to climate change. We had insightful discussions with some tea out-growers, coffee cooperative representatives and had a tour of Gathuthi Tea Factory Co. LTD on the north eastern slopes of the Abedere ranges. This was the first step in better understanding the supply chain dynamics and challenges on the ground and hope to make good use of the lesson learnt for the next phase of our project! We will keep you posted.
Under the G4AW/ SAM Myanmar programme, Impactterra and Financial Access have signed an agreement with Sathapana Bank for the development of a smallholder finance pilot scheme in Shan State, Myanmar. This collaboration will allow Sathapana Bank, through the use of a customized farmer credit scoring model (developed by Financial Access) in combination with actual weather, agricultural and market data (provided by Impactterra’s Golden Paddy data platform) and tailored technical assistance, to provide financing to large numbers of maize smallholder farmers at significant lower cost and risk. This innovative smallholder financing model is a breakthrough in Myanmar, where tens of thousands of smallholder farmers have no or little access to affordable, formal finance to purchase (better) seeds, fertilizers and pesticides and to transition to more sustainable agricultural practices.
Climate-Smart Lending Platform members, Financial Access Consulting Services B.V. (FACS) and F3 Life Limited have entered into a partnership with Partnerships for Forests to accelerate the provision of climate-smart loans to smallholder farmers in East Africa. Showcased today at the World Climate Summit 2018 – Investment COP in Katowice, Poland – which brought together thousands of government, business and civil society decision-makers to explore business and investment-driven solutions to climate change – the Climate-Smart Lending Platform offers innovative data-driven solutions to reducing climate risk in lending portfolios and incentivizing the adoption of climate-smart farming methods by smallholders. Both smallholders and lenders with smallholder lending portfolios (which currently account for about USD 50 billion globally,) are highly vulnerable to climate change impacts. By incorporating Climate-smart Agriculture (CSA) metrics into credit scoring systems, the Climate-Smart Lending Platform model helps mitigates these challenges and supports smallholder farmers to achieve greater financial inclusion, improved environmental performance and climate resilience. With the support of Partnerships for Forests, FACS and F3 Life will develop an integrated credit services platform which will:
support agri-lenders to provide ‘climate-smart’ credit facilities to smallholder farmers by incorporating requirements and metrics for climate-smart and sustainable land-management including agro-forestry into loan terms and credit scores;
help lenders to overcome risk and costs barriers in smallholder finance by streamlining loan origination processes and providing access to a plug-and-play credit-scoring tool;
apply remote-sensing methodologies to identify and assess the bankability of farmers located in environmentally suitable areas;
monitor the implementation and impact of improved climate-smart farming practices and detect early warning signs for credit and climate risk related loan defaults, caused by amongst others drought, flooding, deforestation or unsustainable land use.
By enabling simultaneous management of the credit and the environmental risk faced by providers of smallholder credit, the credit services platform will increase the flow of climate-smart capital to farmers at scale. This is expected to improve the livelihoods of smallholder farmers and to reduce the economic losses associated with land degradation in sub-Saharan Africa, which is estimated at USD 68 billion per year.
FACS was invited to present at the 9th ISCC Regional Stakeholder Committee in Kuala Lumpur. The discussion focused how the latest developments in remote sensing and traceability can help companies improve their sustainability practices in the oil palm sector. How does FACS add value here? Many of the data points collected for sustainability purposes, coupled with financial technology, can actually help reducing information asymmetries between farmers and banks, therefore improving financial inclusion.
FACS goes to West Africa to explore whether the methodologies and tools developed for oil palm smallholders can be applied to cocoa farmers in Ghana and Cote d’Ivoire who face similar problems in terms of low productivity, aging trees and lack of access to affordable credit. Stay tuned for more news soon…
Replanting of aging oil palm trees requires an investment of a staggering US$ 750 million annually for the next 25 years. The good news is that banks and investors start to realize that by improving data-driven risk analytics and streamlining loan origination it will be possible to develop a less risky, scalable, sustainable and profitable farmer financing model at lower cost. For Tropical Forest Alliance 2020, Financial Access has conducted and published this month a study focused on the large supply-demand gap in oil palm smallholder replanting finance in Indonesia. The study has analyzed a number of smallholder financing programs developed by leading plantation companies and assessed the role of commercial banks, (impact) investors and the Government of Indonesia in this area. The findings of the study were gathered through extensive desktop analysis and interviews with senior managers and experts of some of the leading plantation companies and financial institutions in Indonesia. More generally, this study has also reviewed the main prevailing challenges and issues related to oil palm replanting in Indonesia the perspective of smallholder farmers, plantation companies and other supply chain actors, as well as the Indonesian government. The study can be accessed here.
FACS organized a workshop session in Jakarta, in collaboration with PERBANAS (the Indonesian banks association) and Partnership for Forests. Attendees were local banks, international impact investors and plantation companies – this wide and diverse crowd spurred an interesting discussion on the financing structures available to un-lock oil palm replanting credit for smallholders. This event created the basis for the development of partnerships which will eventually lead to a pilot and a much-needed proof of concept.
Edoardo Cavallo, associate at FACS, presented to industry leaders at the 10th Asia Sustainable Oil Palm Summit in Bali. His presentation focused on the existing innovative financing models for oil palm smallholders and what it takes to scale them up. Three main partnership models were presented:
Guaranteed Partnership Lending: Most commonly observed in practice and rooted in the plasma-nucleus scheme whereby farmers receive financing in exchange of long-term delivery commitments. The key limitation is dependence on the full corporate guarantee from the nucleus company which limits the scale-up potential
Distributed Risk Partnership Lending: This approach relies on a blended finance element, with foreign banks and development finance institutions providing de-risking mechanism. To date, this approach still needs a corporate guarantee under most examples, limiting its applicability.
Full Startup Funding from Impact Investors followed by Loan Sale or Refinancing. Impact investors would channel funds to a local bank and take all credit risk for the replanting phase while the bank only takes counter party risk on the investor. (Impact) investors sells loan to bank after successful replanting.