Value Chain Financing

WPS mission is to empower people by mobilizing financial resources and increase access to financial services for improvement and strengthening of the economic and social well-being of stakeholders. This being the case, WPS has committed itself to providing products and services that cater to the needs of the people within its areas of operation. An exploratory study, in partnership with CIDR (Center for International Development and Research), was done to identify the potential value chains in Kisii area, for funding by WPS. The Dairy and Banana products were identified for a pilot.

Objectives of VCF

Two fold objectives include:

• Improve the living standards of dairy, and banana farmers, etc, within the WPS current client niche.
• Increase clientele.Improve the SACCO’s revenue.

Strategies for Dairy VCs

To achieve its objectives on value chains, WPS will partner with other stake holders to do the following value chain channels in the dairy sector: -

• Increase milk production / Cooling / Bulking: To enhance productivity of dairy farmers the Sacco will provide loan facilities to enable them to buy animal feeds, medicine and access artificial insemination. The Sacco will endeavour to institute the best animal husbandry through sponsoring education to the farmers.
• Processing and packaging: The Sacco hopes to partner with the relevant service providers to facilitate this. Presently New KCC is providing the services only to Farmers in Borabu District in Nyansiongo. We hope with increased production New KCC and other partners will consider extending their services to places like Keumbu Division in Kisii Central District.
• Transporting and Distribution: WPS will partner with both informal and formal traders including processors and producers in transporting milk between each step in the value chain.
• Marketing / Retailing: With a reliable strategic partner, farmers will definitely stand to benefit due to its enlarged capacities where they will be assured of ready market for their milk. Retailing includes producers, cooperatives and processors in selling raw or processed milk to end consumers as the other partners WPS will wish to collaborate with.

Strategies for Banana VCs

Key parties involved: To ensure that a tripartite collaboration is established each banana group to be financed should be linked to a Technical and Marketing Service Provider (TMSP), prospective possibly with the banana processing factory(ies) yet to be established in Kisii, and bulk buyers ready to buy banana on contract to add market value addition. In order to obtain technical value added, the farmers must be linked with the Tissue Culture plantlets supplier (e.g. Transagro Enterprises Limited (TEL)).

Target areas

The Agri Business Officer (ABO) will initially operate in Nyansingo (Keroka Branch) and Keumbu Towns, Oyugis and the surrounding areas. The Value chain activity is expected to grow to other locations in the future.

Partnership

In it’s endeavor to enhance the value chain business, WPS will partner with other key stakeholder both in the dairy and banana industries.

Modality / Lending Methodology

Group lending methodology shall be used.
Procedures for Dairy and Banana Groups
The principles are:

• Must be members of pre-existing groups (co-operative etc) older than 2 years with:
  1. Good social cohesiveness
  2. Good leadership
  3. Experience in managing financial activities / groups’ funds
  4. Strong governance culture and operating on democratic principles
  5. No collaboration with other MFI (s) or SACCO (s)
• The SACCO members with other loans (Mama bidii, Jiinue Rafiki, Development loan, Crop Advance, CoDF…..) can be member of the VC Group only if the member is able to prove repayment capacity of the loans.

Characteristics of borrowers

• Must have dairy cows and banana orchard and familiar with cultivating banana and rearing cows
• Must not have defaulted in previous loans either to WPS or any other financial institution
• Prepared to adopt tissue culture plantlets technology, and
• Must be of good character (hard working, honesty, etc) vital for character-based lending methodology
• Purpose of Loan: To finance 1cycle of Dairy + banana within 18 months
• Maximum acreage allowed per group member: 0.5 acre of banana and feeding, medication, AI, etc for minimum of 2 cows.
• Average group size should not below 20 members. May have sub groups of 5 members inside the same group to facilitate joint liability for higher loan amounts. The creation of new smaller groups inside the existing group (subgroups) is compulsory if the group comprises more than 20 members in cycle one.
• If subgroups are created, the joint liability applies at the subgroup level, and not at the big group level.
• One person can be member of only one VC group. Change of group is allowed only for justified reasons confirmed with the first group through a clearance letter sent by the first group leaders. Whenever a new group or new member is to be registered by the VC, it is necessary to check whether the members belong to an existing group or is using a nominee.
• A new member of the VC group must be an existing member of the pre existing group.
• The group must be registered within six months after disbursement and the following years renew their registration and give a copy of their certificate to the ABO. The objective is that the group leaders are the same. But it will not be the case when subgroups are created, or if the pre existing group leaders do not want to be VC group leaders or are not elected as such by the members.

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