Where Angels Prey

Where Angels Prey is a novel by Ramesh S Arunachalam. Please refer to www.whereangelsprey.com for more information

Thursday, April 7, 2011

Alternative Financing Opportunities in Primary Value Chains[1]: A Practical Approach for Analysis Using the Small Scale Fisheries Example…

Ramesh S Arunachalam
Rural Finance Practitioner

In one of the earlier replies, suggestions were made that financing the primary producer in a value chain could be reserved for MFIs but this is something that requires careful analysis of the specific chain and tailoring of MFI type credit to those activities in the chain that are suited to be serviced by such MFI credit. And using the fisheries example, this post highlights crucial differences between typical MFI credit and livelihood credit in any value chain and such analysis must always be done by MFIs prior to servicing any primary producer in the value chain

In the case of fisheries, typical micro-credit approaches apply well to financing of vendors/hawkers, etc and perhaps crew of boats (who are coolies and typically do not own assets). Thus, micro-finance is better suited for post harvest financing activity for vendors/small processors. Holistic approaches appear to be more suitable for financing activities in the low income fisheries value chain -- especially for capture fisheries. This integrated approach can be delivered by multi-purpose, large, well networked institutions that can diversify risks across craft types, geographies, etc. The table below highlights major difference between these approaches and MFIs need to do similar analysis whenever they want to service primary producers in different value chains

Hence, supporting fishers in the value chain requires livelihood financing with an integrated approach as has been followed and practiced by SIFFS given in figure 1 below

And micro-credit through MFIs can be used to service vendors, hawkers and others. In fact, a range of possibilities exist as has been mapped in figure 2 and similar analysis will have to be done by MFIs for all value chains before they intervene…in the primary production chain…

[1] Adapted from various resources cited in UNTRS/FAO Study (2008) and primary data collected therein
[2] Adapted from various resources cited in UNTRS/FAO Study (2008) and primary data collected therein

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