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What is a Value Chain?

Value chains and microfinance: what is the link? Calvin Miller – FAO, Moderator Hugo Couderé – Alterfin Michael de Groot – Rabobank Foundation Tom Rausch – Pride Africa/DrumNet Miriam Cherogony – IFAD Kenya. What is a Value Chain?.

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What is a Value Chain?

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  1. Value chains and microfinance:what is the link? Calvin Miller – FAO, ModeratorHugo Couderé – AlterfinMichael de Groot – Rabobank FoundationTom Rausch – Pride Africa/DrumNetMiriam Cherogony – IFAD Kenya

  2. What is a Value Chain? The full range of activities required to bring a product or service from conception through the various stages of production and delivery to final consumer. A value chain includes all actors including producers, processors, suppliers, wholesalers and retailers and consumers. A value chain is defined by its particular consumer segment.

  3. Value chain finance – financial products and services flowing to and/or through a VC to address the needs of those involved in that chain, be it a need for finance, a need to secure sales, procure products, reduce risk and/or improve efficiency within the chain. Defining Value Chain Finance VCF Approach – to understand the value chain and its participant needs and structure finance and services to best address them. • Objectives: • Align and structure financial products to fit the chain • Reduce costs and risks of finance

  4. Producer-driven Buyer-driven Facilitator-driven Integrated Value Chain Business Models For value chains and value chain financing, a business model refers to the drivers, processes and resources for the chain. Four types of business models:

  5. Value Chain Finance Tools/Products 1. Product Financing 2. Receivable Financing 3. Physical Asset Collateralization 4. Risk Mitigation Products 5. Financial Enhancements

  6. VC Lessons and Links for Microfinance • Understanding: • the client • the market • the value chain partners • Assessing: • risks • competitiveness • relationships and processes • rationale and needs for financing by those in the chain • Structuring financial services: • according to the business model and strengths of VC participants • adapting and applying appropriate financial products and services • combining products and payments to reduce cost and risk • linking with complementary support services

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