Influencing Financial Inclusion in Programmes: Overcoming barriers to agriculture and enterprise finance

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Barriers to agriculture and enterprise finance are the result of the risks that service providers and investors usually perceive when supporting smallholder farmers, particularly women.  Some of Oxfam’s programmes have successfully increased access to financial and other services through building the capacity of communities and engaging with a network of stakeholders. By successfully influencing the stakeholders, these programmes have ensured inclusiveness in a wide range of contexts. 
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  OXFAM CASE STUDY OCTOBER 2016 www.oxfam.org   A woman forages for herbs to sell, Vyat Dzor Region, Armenia. Photo: Abbie Trayler-Smith, Oxfam INFLUENCING FINANCIAL INCLUSION IN PROGRAMMES Overcoming barriers to agriculture and enterprise finance Barriers to agriculture and enterprise finance are the result of the risks that service providers and investors usually perceive when supporting smallholder farmers, particularly women. 1  Some of Oxfam’s programmes have successfully increased access to financial and other services through building the capacity of communities and engaging with a network of stakeholders. By successfully influencing the stakeholders, these programmes have ensured inclusiveness in a wide range of contexts.  2 1 INTRODUCTION Efforts are needed at both influencing and implementation levels in order to facilitate financial inclusion. To improve disadvantaged communities’ access to credit, we need to influence national policies, create awareness among stakeholders and share risks to support poor women’s enterprises. Financial organizations such as micro-finance institutions (MFIs) and cooperative banks can leverage funds for cooperatives, unions or federations of cooperatives. New types of associations, such as social enterprises, can benefit from financing. Joint enterprises can be developed to generate employment and provide opportunities to youth in rural areas, as well as to support local production. In a fragile context, it is essential to find innovative solutions to financially support people in need. 2 ABOUT OXFAM’S PROGRAMME There are a range of examples of Oxfam’s programmes influencing financial inclusiveness in both long-term development and fragile contexts.  Armenia In Armenia, Oxfam supported an MFI called Horizon Fund (HF). This MFI is part of the national Agricultural Alliance (AA), a multi-sector network actively involved in influencing national policies. Our partnership with HF supported vegetable and fruit production as well as processing enterprises for poor farmers. Loans, together with technical and business development support, helped the enterprises to improve their profits. Altogether, 970 loans were disbursed to farmers under the Austrian Development Agency-funded project from March 2013–March 2015. Disbursement was done twice per year, for spring and autumn agri-activities. The total value of the 970 loans was 58,200,000 Armenian drams – around €108,000 (£83,000). The average value of one circulated HF fund is about €22,000; the repayment rate was 100 percent.  As a result of the success of the pilot enterprises, other organizations also decided to support enterprise development in Armenia. For example: (i) The Orange Foundation, the French G2iA company (Armenian international inter-professional group) and the Rhône-Alpes region of France provided about $25,000 to the Ayrum processing plant to purchase additional small equipment. These organizations plan to increase their investment up to $80,000. (ii) The JOIN project implemented by CARE provided equipment with a total value of $24,700 to the Lchkadzor Agricultural Consumer Cooperative’s business entity, Mirg LLC. Our work in Armenia to link smallholder farmers with insurance companies is still in its initial stages. However, a study conducted with support from the United Nations   3 Development Programme (UNDP) has created awareness and interest among stakeholders. Georgia In Georgia, we supported cooperative enterprises in the European Neighbourhood Programme for Agriculture and Rural Development (ENPARD) project through co-financing schemes. Enterprises are being strengthened around three value chains – minor forest produce, hazelnuts, and fruit and vegetables. The co-financing scheme introduced by the project mobilized communities; poor farmers in remote areas benefited from the co-financing and the increased livelihoods opportunities the scheme created. So far, the total capital investment within the ENPARD project amounts to €1.5m, of which the beneficiary cash contribution is roughly 30 percent – almost €0.5m. So far, 33 cooperatives have been financed. These have around 340 members, of which 40 percent are women. The investment covered 250 households with 1,050 people (including cooperative members and their families). A cash co-financing requirement of at least 30 percent of capital investment is one of the key criteria for the selection of beneficiary groups. The money has been contributed directly from the pockets of beneficiaries. Tajikistan In Tajikistan, Oxfam supported producer groups and linked them with private extension service providers called Technical Assistance Groups (TAGs) and Agricultural Machinery Services (TAMs). As a result of this support, the community-based organizations have improved their capacity to influence financial service providers and establish linkages. Bosnia and Herzegovina  About 1,100 beneficiaries directly benefited from the procurement of ‘starter packages’ for producing raspberries (at a cost of about €1,000 per package). We had three major funding options: (i) 50 percent beneficiaries: 50 percent grant (provided by the Ministry of Agriculture and the municipality in some cases) or 50 percent in-kind loan from the processor; (ii) 30 percent beneficiaries: 50 percent grant, 20 percent own funds (savings or community groups), 30 percent in-kind loan; and (iii) 20 percent beneficiaries: 50 percent grant, 50 percent own funds (savings or community groups). Member cooperative loans were provided by the International Fund for Agricultural Development (IFAD), which had an impact on the interest rate (the effective interest rate was only 7.9 percent – i.e. much lower than average). In the end, 20 percent of beneficiaries took a community loan (to cover the required 20–50 percent of the starter-package price).  4 Occupied Palestinian Territory (OPT): West Bank The national smallholder influencing network in OPT (for the olive sector) includes stakeholders from financial institutions and the private sector who took part in advocating for inclusive finance of the value chains. Fresh fruit and vegetable producers in the West Bank (under the Swiss Development Corporation project) developed a social enterprise called Arduna Agricultural Company. Oxfam guaranteed $50,000 to leverage $360,000 through Al-Reef Finance at the rate of four percent for five years: this was an inclusive model that enabled smallholder farmers and social enterprises to benefit from finance, rather than confining such support to the usual family-based cooperatives. Ethiopia In Ethiopia, Oxfam acted as guarantor for financial institutions’ collateral deposit to leverage funds for cooperatives, unions or federations of cooperatives. For example, in the Comic Relief project for women beekeepers in Ethiopia, we ensured the cooperative bank of Oromia leveraged £200,000 for poor women. We also guaranteed funds to support sesame farmers in Ethiopia. INCLUSIVE FINANCING IN FRAGILE CONTEXTS: AN EXAMPLE FROM GAZA The joint World Food Programme (WFP) and Oxfam Electronic Value-Based Voucher (EVBV) Programme is a humanitarian social protection programme which currently provides food assistance to 12,483   vulnerable non-refugee households (70,902 individuals). Since it started in 2009, it has grown in scale and evolved in terms of its mechanisms and linkages with the local economy and other programmes. In the initial stages of the intervention, vouchers were issued in paper form to a total of 2,335 non-refugee food-insecure beneficiaries, as a safety net. In 2011, an electronic voucher providing a magnetic swipe card was introduced, in an effort to strengthen the efficiency, transparency and monitoring of the programme. Conclusions of the EVBV Programme Mid-Term Review carried out in February 2011 and the voucher review mission carried out in May 2012 recommended scaling up the voucher programme. Accordingly, in January 2013 the caseload was expanded to reach around 10,000 households or 60,000 individuals. Finally, in 2015 it moved to another advanced e-system, through a company under the Bank of Palestine, whereby shops are paid directly each day through the bank. Beneficiaries are selected through a proxy means test formula (PMTF) based on assets, complemented with the Food Consumption Score for better targeting to determine those most in need. The overall objective of the programme is to meet immediate food needs and enhance the food consumption and dietary diversity of the most vulnerable and food-insecure non-refugee populations. Exceptionally, emergency vouchers are given to refugee and non-refugee populations, in coordination with the United Nations Relief and Works  Agency (UNRWA). During and immediately after the 2014 war on Gaza, the project scaled up to reach an additional 50,000 IDP households (300,000 individuals) from across the Gaza Strip.
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