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Rural Enterprise Finance
Blue Blue Rhino consultants provide services in
the fields of institution building, client services, product development, and
research and development, and with these services look beyond microfinance. Together with its partners, BlueRhino is
especially interested in Rural Enterprise Finance (REF). REF invests in Small and Medium Sized
Enterprises (SMEs) and value chain development, as well as in building management
capacity on top of existing (e.g. farm input) financing structures. This is
especially viable in a community-based set-up, making use of existing community-based organizations (CBOs),
leveraging their handling and service capacity. In this, BlueRhino is
particularly keen on developing value chains in the field of biodiversity
products, i.e. natural products produced in an environmentally and
socio-economically sustainable way. Limitations of Rural
Microfinance In our recent work with microfinance, we
have come to identify some key obstacles in creating lasting impacts for
microfinance clients, small rural producers in particular. Whereas MFIs have
steadily increased their handling capacity and provide more loans to more
clients, rural production and income have rarely increased, and in some cases
decreased due to oversupply in local markets. The major obstacle is the
inability of MFIs to move beyond a certain level, for reasons of limited
mandate, lack of investment capital, predominance of client over product focus,
and restricted capacity to analyse value chains in rural settings. Rural To overcome these limitations, Blue Rhino has
designed the concept of Rural Enterprise Finance, as a most crucial add-on to
rural microfinance. The concept aims to develop financial services for rural areas,
focusing on enhancing local production and income. It can be applied to farmers
and local producers of commercially viable biodiversity products alike. The way REF can operate is by introducing Small and Medium Sized
Enterprises (SMEs, in our approach operating at a lower capital intensity than
most other SME financing schemes) lending in rural settings, and adding larger
investment capacity to remove key bottlenecks in rural value chains, as
explained in the scheme below.
REF
Approach The
approach in REF is a phased one and starts with product identification in a
selected region in cooperation with microfinance and business development
partners. Per product, the value chain will be analysed to identify obstacles and
opportunities for value addition. Market research is also an integral part of
this first phase. The second phase will focus on building processing
and marketing facilities following a pattern of concentric circles: starting at
village level and gradually expanding into local, regional, national and even
international levels. Beyond the local level, the building of actual facilities
will be replaced by establishing private sector trade and marketing linkages. Partnership Development REF partnerships will engage various
interested actors at various levels (so-called multi-stakeholder approach).
Blue Rhino has recently completed a first survey of potentially interested MFIs
in Sub-Saharan Africa and in South and Southeast Asia, the initial target areas
for REF. Per region, partnerships will be built on the backbone of the handling
capacity of these MFIs, and based on particular requirements to work on removing
value chain obstacles relevant to their regular microfinance clients. Furthermore, BlueRhino cooperates with External partners that Blue Rhino aims to
bring along into these regional partnerships are funding agencies willing to
facilitate the process and investment funds needed to finance facilities to be
built. It is expected that this second category of partners will be able to
invest on a venture capital basis with the selected MFIs, installing investment,
facility and market development management capacity in the process. Call for Partners At this juncture, potentially interested
funding agencies and investors can indicate their interest for involvement in
one of the regional partnerships, and become actively involved in the
preparations of the first phases per region, which are about to commence early
2008. Inquiries For further information, please refer to
Blue Rhino’s website at http://bluerhino.nl
or contact Blue Rhino’s REF Manager, Mr. |
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