Agriculture export value chain financing success in Fiji

Fiji Government backs expansion of ITC’s innovative approach to agriculture value chain financing to boost small farmers’ incomes and exports.

Fijian exporters and their smallholder farmer suppliers face many challenges to meet rising demand for their products. Under the UK-funded Trade Partnerships Programme (UKTP) ITC successfully applied a new market-driven approach to agriculture value chain financing to boost production and sustainable exports. In common with other developing countries, many farmers in Fiji lack land title documents or credit references and therefore cannot access financing to expand production. Supported by the UK High Commission in Fiji, ITC’s UKTP team and the Fiji-based Financial Management Counsellors Alliance (FMCA) designed a novel approach to overcome financing obstacles.

What makes ITCs value chain financing scheme different?

By mapping GPS coordinates of farm plots, profiling farmers, their products, water, mobile access, and sales they have been able to ensure financial inclusion of women and young farmers. Now financing providers, agriculture extension and bio-security services can see farmers’ and processers’ history and locations using an Internet platform. Visualisation opens-up financing opportunities by improving the accuracy of risk and performance assessments. ITC and FMCA then helped the Fiji Development Bank (FDB) to design an Agriculture value chain facility to extend small loans for expanding farm production based on the supply chain mapping. Pilot testing started in 2020.

Philippe Helluy, ITC’s Senior Adviser for agriculture value chain development said: “In 2021, activities scaled-up with FMCA training and coaching more farmer groups to pre-qualify for borrowing and submit loan applications to FDB.” Lagi Fisher, President of FMCA noted: “To ensure fair play, processer-exporters issue supply contracts to farmers with an agreed minimum price per kg for delivering crops compliant with their sales contracts. Based on these contracts, farmers, FMCA and the UKTP team developed cropping plans and budgets to submit with loan applications. In 2021, farmers were totally disconnected from suppliers and support services due to COVID restrictions. A crop lien put in place by the Bank with exporters provided additional collateral securing Bank loan repayments for farmers directly from ginger sales. The farmers pay FMCA a reasonable fee for their technical assistance, which includes market orientation, financial literacy and records management, loan facilitation, good husbandry and postharvest practices training, monitoring of loan disbursements and performance reporting.

Philippe added: “FMCA’s experience of island culture and farming conditions made them ideal intermediaries between farmers, processers and the FDB. FMCA improved farmer and processer- exporter productivity and financial management in a series of “Bootcamps”. As a result, almost 200 farmers received a series of affordable and predictable loan disbursements totalling more than $700,000 for input costs, land preparation, machine hire, labour and transportation. There have been zero defaults over two years. The scheme has proven to be commercially viable despite the impact of cyclones, COVID and droughts.

Fiji Government backs expansion of the AVCF

On 26 May 2022, the Fiji Development Bank launched an expansion of the Agriculture value chain finance facility with a new $1 million concessional funding line from the Reserve Bank of Fiji. Saud Minam, Chief Executive Officer of FDB said at the launch: “The Agriculture value chain facility is specifically designed for new and existing ginger farmers with 4.99% interest rate per annum for individual loans up to $50,000. The new facility allows farmers in remote areas to lodge their loan applications online and receive funds via mobile wallets, such as M-PAiSA and MyCash. The UKTP/Fiji project facilitated this arrangement by providing a successful prototype.”

Results achieved by ITCs UKTP intervention in Fiji

Now in its third year, the scheme has achieved:

• More than $700,000 worth of loans approved and disbursed with zero defaults.

• Value-added ginger exports increased exponentially in volume and value. 163 farmers now enjoy farmgate prices of >$1.60 per kg for baby ginger – an increase of >60%.

• Farmers employ more young people from their villages. Processer-exporters get predictable supplies and are expanding their workforce and processing facilities.

• An environmentally friendly intermediate processing facility is being built up-country and will employ over 60 people from Q4, 2022.

• The small financial contributions from farmers enable FMCA to continue to assist them after the end of the UKTP project.

This market-driven scheme is very cost-effective. It supports good farmers and socially responsible, well-managed processer-exporters. ITC would like to hear from development financing institutions and donors to help expand the scheme to other food sectors and countries.

This article was originally published by ITC.