Melvin EdwardsEx-officio

World Council of Credit Unionsmail@woccu.orgwww.woccu.org

Improving Agri Food Financing Through CREDIT UNIONS

Improving Agri Food Financing Through CREDIT UNIONS

CTA Caribbean Rural Development Briefings, Caribbean Week of Agriculture (CWA) Grenada, October 18-19, 2010

CTA Caribbean Rural Development Briefings, Caribbean Week of Agriculture (CWA) Grenada, October 18-19, 2010

Credit Unions Worldwide

183 million members

49,000 credit unions

97 countries

Co-operatives – A Distinct Economic Sector

Promoting the sustainable development and

empowering people around the world

to grow through access

to high-quality, affordable financial services.

Improving people’s lives through credit unions

PromotingInternational Credit Union Principles• Safety and

Soundness

• Operating

• Governance

• Consumer Protection

Philosophy is Good Business

One Vote per Member

No discrimination

Business operates for

Members’ Benefits only

Elected Volunteer Leaders

• Affordable rates for comparable services

• Continuing Education

• “Co-operation among Co-operatives”

• Redistribute Surpluses Dividends pro rata Education & Training Community & Culture

SECTOR GOALS

Expanding Inclusive Finance services to consumers and producers in greatest need

Supporting economic development through the financial empowerment

Representing credit union organizations and supporting their efforts to serve

members

Caribbean Credit Unions

2.4 Million Members[40% pop]

342 Credit Unions

Assets US $4.1 BillionPursuing Modernised Institutions

Product Innovation & Diversity

Consolidation Strategies

Business Expansion

Some Statistical Data

Affiliates C. Unions Members Loans Assets

Jamaica 47 968,558 $0.42B (64%) $0.66B

Trinidad 130 575,000 $0.86B (72%) $1.2 B

Barbados 35 130,000 $0.52B (79%) $0.66B

OECS 60 266,000 $0.45B (70%) $0.64B

Belize 13 118, 383 $0.17B (65%) $0.26B

Total 342 2,366,000 $3.19B (72%) $4.45B

• ACCESS for the unbanked and underserved• Strengthening the rural economy• Developing integrated business networks• Supporting communities-at-risk• Encouraging policy, legislative and

regulatory system reform • Rebuilding during and after disaster or conflict• Partnering to address priority needs• “Quality Credit Unions For Everyone”

Approaches To Development

• Bahamas, Jamaica, 7 OECS, Trinidad, Bermuda

• PEARLS Prudential Standards & Monitoring

• AML, CTF, IFRS Compliance

• Stringent Capital and Investment Provisions

• Risk-based Lending and Efficient Collections

• Tighter Audit & Disclosure Rules

• Higher “Fit and Proper” Criteria for Directors

Drafting Harmonised Sector-Specific Legislation & Regulations, and Lobbying

• Removal of Cap on Dividends

• Development Fund – Mandatory, Pooled

• Community Investment & Youth Involvement

• Mergers, Conversions, Shared Services, Branch

• Low-cost Savings, Loan, Funeral Insurance for every member. New Consensus Acts passed Barbados, Bermuda, Antigua, Grenada.

Drafting Harmonised Sector-Specific Legislation & Regulations, and Lobbying

Promoting good governance and supporting effective credit union legislation through Model Law for Credit Unions

Model Regulations for Credit Unions distributed worldwide in four languages

Credit Unions Know Agri-Food Challenges

• Instability in input prices,

• Inconsistency of supply e.g. losses from spoilage and post harvest handling,

• High inventories burden on processors

• Alternatives to grow, use working capital

• Attract investors to finance upscaled units

• Stable /enforceable marketing contractsImpact purchasing power CollaborationOwnership, Management, Governance in FOs

Market Studies Indicate

• Entrepreneurs want higher borrowing limits, customised facilities, convenient locations

• Credit Unions are the most accessible FIs

• Microcredit is ≤15% of loans portfolio

• Av. Loan Size @ CUs=$1975, NDF $10,000

• Same process for MSME & Consumer loans

• Low incidence of Saving for the business

• Public Service environment is unfriendly to small and micro entrepreneurs

• Ministries & Agencies dominate Agri-Sector.

Market Studies Indicate

• Few mega farms, most are micro

• No mega Co-operatives, too many micro

• Farmers’ Organisations are weak at all levels

• Food Security Policies and Strategies lack Implementation

• After CL Financial, more FIs keen to create wealth at home

• Capacity and Confidence GAPs need risk reduction partnerships

Sustainable Rural Agriculture Financing

Must be profitable for both borrower and lender

Competitive agricultural lending efforts have focused on:

1. Value Chain Financing

2. Capacity Building

3. Improving Delivery Mechanisms

4. Markets Integration

5. Risk-based and Supervised Credit Methods

6. Replication of Successful Ventures.

The Value Chain Comprises

Anyone who helps Farmer:

• cultivate

• grow/harvest crops

• Market the crops

• process them into by-products

• deliver them to consumers

5 key requirements

from participants:

1. Trust

2. Credibility

3. Commitment

4. Diligence

5. Competence

Establishing a Successful Value Chain

Credit Union Expansion

includes value chain

financing and helping rural

producers meet their goals.

Financing Facilities in place• Factoring• Buffer Funds• Lines of Credit• Guaranteed Lending• Direct Lending

Match Services For Agri-Food MSMEs

• Business Services –Registration Forms, Business Plans, Applications.

•TA helps farmers understand markets, improve soil quality, records & food safety, increase crop yields, and move from subsistence to small commercial farming.

•Training in Entrepreneurism, Business Mgt, Finance.

•Strengthen Organisation capacity.

•Future plans may include crop insurance to protect loans in years of bad harvests, etc.

SAVINGS-DRIVEN MICROFINANCE

Members’ Shares, Members’ Deposits, Institutional Capital primarily.

Technology, Technical Assistance, TrainingInternational and Regional donors: USAID,

USDA, IDB, IFAD, UNDP, CDB, World Bank, EU, Bill and Melinda Gates Foundation,

Commonwealth Secretariat.GOVERNMENTS

Micro-lending Foundation established as an

adjunct to a Co-operative Credit Union• Capitalised by donors, lenders, Government• No Savings or Payment functions• Eligible – All micro, small, medium

entrepreneurs• Women and Rural Clients dominate.

NDF – Montserrat [1987]

Financing MSMEs – CU Scenario 2

Financing MSMEs – CU Scenario 3

Small Business Window within the CUproviding savings, payment, insurance credit and financial education products• City of Kingston CU – Jamaica• Eastern – Trinidad & Tobago • Public Workers – Barbados• La Immaculada, Blue Creek – Belize• Grenville CU (120 vendors) – Grenada• Roseau & Central (hucksters)- Dominica

• Micro-lending Foundation converted to an Enterprise Credit Union

• Capitalised by borrower clients and new entrepreneurs–high average equity, savings

• Women and Rural Clients dominate• Agri-Food loans demand less than 10%

FNDECCU – SKN [October 2009]

Financing MSMEs – CU Scenario 4

CUSO providing specialised, risk-based screening and appraisal of applicant entrepreneurs referred from affiliate CUs

• Optimal use of improved delivery technology

• Facility owned by Co-operative Sector• Endorsed by EU RESTORE Project,

[St. Lucia Dec. 2009]

Financing MSMEs – CU Scenario 5

MICROFINANCE INSTITUTION OWNED by CO-OPs • Direct Financing for Micro, Small, Medium Enterprises• Scope–All types of member-owned for-profit MSMEs• Special Financing - youth, women, rural MSEs• Business Savings at MFI• Personal Savings continue at home CU • Capitalised bu the National League, affiliated CUs,

Farmer/Fish/Service CO-OPS• Current engagements transferred to MFI

St. Vincent - October 2010

Financing MSMEs – Scenario 6

MatchSavings.org is a microfinance program that gives you the opportunity to promote savings before credit as a way

to overcome poverty.

• Introduce the unbanked & underserved to credit unions

• IRNet® has paid out more than $2.8 billion in remittances to 8 countries since 2001

•

International Remittances

Development Programs in 7 Countries

• 250,000+ lives lost, 1 million homeless, • Major damage/loss of government structures• 12 caisses populaires damaged/facing balance

sheet losses• Employees/family members/enterprises devastated • US$1.1 million+ raised globally for Haiti Relief• Focus on repairing/rebuilding credit unions• Raising CU operating standards while rebuilding • Aiming at improved delivery technology

Focus on Haiti – Post Earthquake

KOTELAM Branch BEFORE Earthquake

KOTELAM Branch AFTER Earthquake

Haiti: Post-earthquake Living Conditions

The Future of Haiti?

• Africa: 14,404 CUs and 16 million members

• Asia: 21,233 CUs and 36 million members• Caribbean: 556 CUs and 3 million members (Haiti incl.)

• Europe: 2,418 CUs and 9 million members

• Latin America: 1,784 CUs and 15 million members

• North America: 8,653 CUs and 102 million members

• Oceania: 282 CUs and 4 million members

CUs by World Region

Source: WOCCU’s 2009 Statistical Report

How YOU Can Get Involved• 2012 : United Nations Year of Co-operatives

• Participate in WOCCU training opportunities– World Credit Union Conference, Glasgow July 2011

– 54th Caribbean Convention, Curacao June 2011

• Celebrate International Credit Union Day (Oct. 21,2010) Theme: Local. Trusted. Serving You.

• Stay informed

– Credit Union World, eCommuniqué, www.woccu.org, www.facebook.com/woccu

Opening Flag Ceremony

Melvin EdwardsEx-officioWorld Council of Credit Unionsmail@woccu.orgwww.woccu.org

Thank you