Market Assessment

Financing Agricultural Value Chains in Africa. Focus on Coffee and Sesame in Ethiopia, GIZ, 2011

    Description
    This study reviews the agricultural finance environment in Ethiopia, with particular reference to the coffee and sesame value chains, with a view to identifying strategies and tactics which will improve that access for commercially-oriented agriculture. Accompanying the value-chain analysis is a review of both the agricultural and financial sectors in Ethiopia, with a performance dashboard for each.

    The report is structured as follows:
    • Section 2 on Agriculture includes a high-level review of the agricultural sector, together with sub-headings which break the analysis into the macro-, meso- and micro-level factors with have the most impact in enabling access to finance for agriculture.
    • Section 3 on the Business Environment is a short section focusing on some cross-cutting factors.
    • Section 4 is focused on the financial sector.
    • Section 5 on Value Chains is an overview of the structure of the coffee and sesame agricultural subsectors,the current role of financial services within these value chains, and some suggestions for practical interventions.
    • Section 6 includes recommendations and critical success factors;it points out some key strategies and policies which would have a major beneficial impact on access to finance for commercially-oriented agriculture

    Summary of results
    The key recommendations are as follows:
    - To continue the policy dialogue with the government about the benefits of liberalising the financial sector;
    - To work closely with the NBE to continue its financial sector reform programme, to improve its institutional capacity, and to adopt new approaches to both monetary policy and financial sector regulation and supervision;
    - To strengthen the co-operative movement, including both producer co-operatives and financial services co-operatives, and particularly the introduction of strong apex structures to lead the sector;
    - Focus development finance on equity investments, at least for the time being, and to support foreign and domestic capital with co-financing arrangements;
    - Work with agribusiness to establish or deepen outgrower schemes and contract farming, and facilitate access to supplier finance in due course;
    - Strengthen the business and financial skills of highpotential producers and processors through a programme of Enterprise Development Services (EDS);
    - Work with the Ethiopian Commodity Exchange(ECX) to build on its operations and support the use of commodities as security for short-term finance; and
    - Develop the commercial banking sector, and particularly the Commercial Bank of Ethiopia