Better poultry value chain development through microfinance in Vietnam

Transcription

1 Better poultry value chain development through microfinance in Vietnam 6th University Meets Microfinance Workshop on Savings and Rural Finance 17 & 18 June 2011 University of Groningen, Groningen. Netherlands NGUYEN Ngoc Anh Former student of the European Microfinance Program Solvay Brussels School of Economics and Management University Libre de Bruxelles

2 Relevance of the research Why poultry? Poultry farming is a popular agricultural activity in Vietnam (80% of rural households) According to the Vietnam Household Living Standard Survey 2008, the poultry breeding makes up 50% of the total value of husbandry activities in Vietnam and 85.27% of husbandry breeders take part in poultry breeding The financing for this commodity has not paid as much attention as other commodities, for example coffee, tea, livestock, etc. Access to two poultry related projects: Pandemic Influenza: Preparedness and Response and Stamping Out Pandemic and Avian Influenza in Vietnam Why value chain? Value chain approach widely used in agriculture to identify necessary intervention for a better situation of agriculture and rural development in Vietnam, but not much in the sector of rural microfinance in this country

3 Outline of the research Introduction Chapter 1: Literature review (value chain and value chain microfinance) Chapter 2: Current situation of poultry value chain in Vietnam Analysis of poultry value chain in Vietnam (fact and figures, poultry product system, popular model of poultry value chains in Vietnam, policies for poultry chain development) Microfinancing poultry value chain in Vietnam (clients, suppliers, products and services) Chapter 3: Analysis of the microfinance in poultry value chain in Vietnam Microfinancing poultry value chain in Vietnam (microfinance actors, poultry stakeholders with access to microfinance products and services) Microfinance products and services for poultry value chain in Vietnam (financial and non-financial) Methodology providing microfinance services (group lending and individual lending) Microfinance and the link with poultry value chain Case study Conclusion: Findings and recommendations

4 Methodology (i) Current situation of poultry value chain in Vietnam Desk study : collect secondary data (ii) Policies for the development of poultry commodity (iii) Microfinancing of poultry commodity (i) Survey on small and medium scale poultry stakeholders with qualitative and quantitative questionnaires in 5 provinces: Hanoi, Hung Yen, Bac Giang, Thai Nguyen and Quang Tri Field study (ii) 2 PRAs: - One with poultry stakeholders of small and medium scale in Hung Yen province - One as combination of workshop, field trip, chicken tasting events, weekend market, interview, discussion, and observation with leaders of some poultry value chains (iii) Case study: ATK chicken and egg value chain in Dinh Hoa district, Thai Nguyen province

5 Sample scale of the survey Province Hung Yen Bac Giang Thai Nguyen Quang Tri Hatchery household Breeder (Nursery, layer, fatterner) Collector/ Trader Slaughter house Retailer Total Note Retailer and also slaughterer Hanoi Retailer and also slaughterer Total

6 Result

7 Main financial sources accessed by poultry stakeholders External financial flow Internal financial flow Formal actors 50% Semi- formal actors 8.11% Informal actors 13.51% Interlinked credit arrangements 33.33% Commercial banks (Bank for Agriculture and Rural Development) 21.43% Mass organizations 8.73% Relatives, neighbors & friends 13.49% Non- profit banks (Vietnam Banks for Social Policies) 28.57% Small and medium scale poultry entrepreneurs (individuals, households, cooperatives and enterprises) in rural area

8 Poultry stakeholders with access to microfinance services Retailers 55,56% Slaughterhouses 40% Collectors/ Traders 80% Breeders 69,66% Hatchery households 50% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

9 Items Financial products Lenders Lending technique Loan terms Loan size Payment method Credit offered by formal financial institutions Product 1 Product 2 (0.65% - ( %/month) 1.77%/month) Vietnam Bank for Social Policy Group lending (through mass organizations) - Vietnam Bank for Agriculture and Rural Development - Other commercial banks Credit offered by semi-formal financial institutions Product 2 (0.65%/month ) Product 1 (1%/month) Women (with its own budget) Poultry projects/ programs but through the network of local Women Union or a professional association Individual Individual Individual (with guarantee of the Women Union/professional association) - 3 years - 3 years - 1 years - depending on production cycle Maximum loan Maximum loan / / amount: ~ 1000 amount: ~ 1000 household household Monthly or quarterly payment Monthly payment Pay interest and principal at the end of the loan term Pay interest and principal at the end of the batch Product 3 ( %/month) Projects/ program but through technical agencies In group of interest group Credit offered by informal financial institutions Product 1 Product 2 (0- (2-2%/month) 3%/month) - Relatives, friends, neighbors Individual Money lenders Individual - 1 years - flexible - flexible <330 >330 Weekly pay interest and pay principal at the end of the loan term Principal is paid at the end of loan term Monthly or quarterly payment

10 Lending method Solidarity group lending Group lending Village banking With collateral as red book certifying the ownership of land use Individual lending With guarantors (Usually mass organizations) Regardless collateral

11 Demands of customers towards financial and nonfinancial products Simplify lending procedure & shortern screening and approval process 100% 80% 60% Technical assistance 100% Better understand business activities and demands of borrowers 40% 20% Disburse loan more rapidly 80% 60% 0% 40% 20% Risk support 0% Management skills Create close relationship with borrowers Flexible in collateral Demand of borrowers towards financial services of formal and semi-formal financial actors in poultry value chain Market support Demand of borrowers towards non-financial services of financial actors in poultry value chain

12 Case study: ATK chicken and egg value chain in Dinh Hoa district- Thai Nguyen province

13 Microfinance products provided for poultry stakeholders in the Stop AI Project Financial products For broiler actors - Loan amount: VND 1,500,000/household ( 50 ) - Loan term: 1 batch 3.5 months - Interest rate: 0.65%/month - Repayment: pay all principal and interest rate at the end of the production, after selling out products - Lending methodology: individual For layer actors - Loan amount: VND 7,000,000/household ( 235 ) - Loan term: 1 batch months - Interest rate: 0.65%/month - Repayment: pay all principal and interest rate at the end of the production, after selling out products - Lending methodology: individual Nonfinancial products Technical assistance (Good animal husbandry practices, Good animal slaughtering practice, Internal and external control) Marketing support Risk support Health care support Entrepreneurship, empowerment activities for women

14 Model of micro-financing chicken producers in Dinh Hoa - Sign memorandum and disburse the total loan amount to the Women Union - Guarantee and make loan contract with women farmers participating in the project - Disburse and monitor loan - Collect repayment ASVELIS Representative of STOP Avian Influenza project Women Union Representative of women chicken producers Women chicken producers Breeding chicken for carcass or for eggs - Provide microfinance plus (technical assistance, consultancy and other supports) - Take loan for production individually - Following the procedure of good animal husbandry practice - Make repayment

15 Economic changes Table: Economic data of chicken stakeholders in chicken value chain in Dinh Hoa district- Thai Nguyen province Unit: Vietnam dong Items Nursery (800 chickens/batch) Broiler farm (100 chickens/batch) Layer farm (100 pullets/batch) Slaughterhouse (50 chickens/session) Initial investment 8,500,000 2,000,000 2, ,150,211 Production cost * 9,644,120 7,145,814 47,024,500 4,795,000 Income ** 11,531,200 8,930,710 66,525,000 4,966,667 Profit per batch/session 1,827,358 1,451,563 18,250,500 49,116 Profit per month *** 5,482, ,819 1,327, ,978 Compared with total household s income 68% 40% 70% 10% Table: Difference in the price of STOP Avian Influenza products and other similar products in the market Items Chick (Unit:: VND/chick) Live-weigh chicken (Unit:: VND/kg) Carcass (Unit:: VND/kg) Egg (Unit:: VND/egg) STOP Avian Influenza price 15,000 55,000 90,000 1,700 Market price 13,000 40,000 66,000 1,100 Difference 2,000 15,000 24,

16 Conclusion Microfinance clients: Among stakeholders of the value chain, slaughterhouses and hatchery households should be paid more attention to be able to access to microfinance services since they are key actors of the value chain (ensuring the input and the output products) Microfinance products: Financial products are good, but non-financial products are also necessary for poultry stakeholders -> ensure smooth flow of the products, and loan repayment Adequate solutions in terms of loan size, loan terms, lending methods, lending procedure, etc. for different kinds of poultry stakeholders and value chains are ideal to fit their credit with customers demand, diversify their products and client portfolio. Microfinance actors: Micro-financial actors should also cooperate with each other to define their market segment, connect credit bureau to avoid the overlapping in financing the same stakeholders or putting too much financial flow to a particular group of customers or location. They should follow the whole value chain in collaborate with technical agencies or poultry value chain projects to reduce the risks related to poultry production, from the initial stage of buying input, until selling the output to the market.

17 Thank you! Dear Weekend Market customers, This is a reminder that the Weekend Market will start on Saturday, October 2, 2010 as always. Attached here is our flyer, in which you can find a map to our market. For this week, please note that:» New free-range duck from Soc Son district, Hanoi, will be ready for your taste and comments. Both duck meat and liver will be available» Goloa chicken will be absent from this week until mid-october, but delicious ATK chickens will be right there waiting for you For more information, please visit or contact us directly. Bui Duc Tri Project Coordinator Asian Veterinary & Livestock Services No.4, Lane 67, 67/12, To Ngoc Van st, Quang An ward, Tay Ho district Hanoi, Vietnam Office: +84 (0) Fax: +84 (0) Mobile: +84 (0)