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CARE International Effective ways to reach smallholders international care australia care thailand care canada care denmark care germany care france care japan care netherlands care norway care austria care uk care usa Value chain financing 18th October 2007 By George Odo The CARE Africa Venture Fund “We seek a world of hope, tolerance and social justice, where poverty has been overcome & people live in dignity & security” Presentation Content Introduction to CARE Background Identifying the problem The Issues & proposed solutions Some Examples Key Learnings Introduction to CARE – The Federation CARE International (secretariat in Brussels) CARE National Members (12) – Australia, Austria, Canada, Denmark, France, Germany, Japan, Netherlands, Norway, UK, USA & Thailand* CARE country offices - Peru, India, Kenya, Indonesia, etc (67 world-wide) ‘CI’ ‘National members’ & ‘Lead members’ ‘Country offices’ Introduction to CARE – Vital stats One of the largest NGOs in the world 14,800 staff globally About 1169 projects in 16 sectors reaching 48 million people in 67 countries & 60 Country Offices Board of 12 ‘National’ members with secretariat in Geneva About US $ 700 million annual budget with 43% spent in Africa, 34 in Asia, 17% in Latin America and 6% Middle East and Europe Works in both development and emergency situations Key Sectors - ANR (14%), SEAD (6%), WATSAN (8%), Emergency (4%), Nutrition (4%), HIV/AIDS (8%), Maternal (4%) & Child health (4%) Introduction to CARE - How we spend our funds Support costs 9% Relief Ops 29% Program costs 91% Less than 10% Administration costs! Development 71% Background - GDP in relation to Poverty Background- NGOs role in the ‘Fourth’ position STATE MARKET The fourth position Fourth Position Goals and Tasks Ensuring entitlements by: •reduction and re-distribution of risk CIVIL SOCIETY •Negotiator/mediator •Validator •exacting compliance from duty-holders •reducing costs of compliance Source: Alan Fowler, NGO Futures – Beyond Aid Fourth Position NGDO Roles : Rights-based principles NGDO GROUNDED IN 'AXIOMATIC‘ETHICS AND VALUES •Watchdog •Innovator/demonstrator Identifying the Problem – CARE’s Making markets work for the poor approach CARE’s MMWTP strategy was published in 2004 in response to UN Commission on the Private Sector and Development The commission’s final report Unleashing Entrepreneurship: Making Business Work for the Poor (2004) recognized that: SMEs in developing countries can drive job creation, innovation and economic growth. BUT Entrepreneurs operating in the informal economy lacked access to the legal systems (enabling environment), financial services & BDS Identifying the Problem – The three pillars of Enterprise development Spectrum of Financial Service Providers Underserved in the BOP Internal Savings & Loan schemes, Money lenders, NFP MFIs FP MFIs, Cooperatives, Revolving Input loan & guarantee funds Internal Savings & Loans $100 loans Small Economic Activities SME Funds, Social Venture Funds, MFI Banks Commercial banks, Private Equity & Venture Capital Funds Small & Medium Enterprises $ 1, 000 to $ 10,000 $ 100,000 to up to $ 50,000 $ 1,000,000 Large commercial enterprises & new ventures $ 1,000,000 to $ 5,000,000 & above Development Financial Institutions National & Regional Investments & Infrastructure Access to Financial Services Proposed Solution Problem Solution High Transaction cost Aggregation Lack of collateral Lack of entrepreneurial experience Guarantees through ‘forward’ Market contracts Entrepreneurial focused TA Weak & Informal Institutions Formalize institutions & governance training CARE’s approach – Integrating smallholders “Start with the market….and work backwards” Aggregation of the smallholders demand for goods or services Inputs/cash advances on credit pre financed By Aggregator/Exporters/buyers Goods Inputs Market Demand Aggregator Produce Market ‘contracts’ as collateral Aggregation of the smallholders goods Examples – Village savings and Loans Also known as Internal Savings & Loans, based upon ROSCAs ‘Merry go round’ model S&L Term ends & distribution to members Savings Lending & repayments Group organization Savings Lending & repayments Regular modest Savings Savings & Lending Investments into Micro enterprises like smallholder farming & consumption Examples - Aggregation of production Examples - Aggregation of livestock production Examples - Aggregation of demand Key Learnings ‘Mimic’ the real world….smart subsidies...’Aid for Trade’…’Market Aid’ Avoid distortion Sustainability Private sector integration Traditional grant funding and traditional development models don’t work Blend commercial and grant mechanisms