Generic Policies and Procedures Manual for Taking Financial Services to Value Chains

The manual is organized into three major chapters: BACKGROUND, VALUE CHAIN INTERVENTION MODEL, and MODEL FOR INTEGRATING VALUE CHAIN STRENGTHENING AND FINANCING. A value chain is a network of actors and activities linked to a product that takes the product from primary production to the final consumer. It is a system composed of companies connected through a sequence of production, collection, transformation, and sales. The value added during value chain processes is the critical element that defines the value chain. For example, sugarcane farmers from Santander de Quilichao deliver their product for processing to the Asolpas and Mazamorrero mills, where it is transformed into panela (raw cane sugar) and subsequently sold. Value chains offer options that reduce costs, distribute risks, increase benefits, and obtain long-lasting commercial relationships for rural business organizations and small producers. These value chain networks are based on complementarity and the specialization of tasks and functions among their members to increase competitive advantages and mutual benefits for the entire value chain. Value Chain Financing (VCF) is the credit sequence and other financial services that flow through the different actors to fund the production, collection, transformation, distribution, marketing, and sale of products throughout a chain. Historically, Financial Institutions (FIs) have served different value chain actors independently. However, the methodology proposed in this manual seeks to promote the development and strengthening of all value chain actors together through a portfolio of services that combines finance (credit), savings, electronic money, and entrepreneurial strengthening. Value Chain Finance (VCF) defines the business as a process of integrated units rather than a single activity for a single borrower. VCF recognizes the interaction of small- and medium-sized producers, and in turn, their interaction with large organizations and firms in national and international markets. Without exception, all the actors of the value chain need financing to develop their business activities. There are two types of VCF: direct financing provided by the actors that operate within the value chain, and indirect financing provided to the value chain by an external financial entity. The manual proposes an intervention model that integrates entrepreneurial strengthening into the portfolio of financial services to build or transfer capacity to anchor organizations and guarantee sustainability. The policies and procedures specified in this manual must be fully complied with. However, the Financial Institution (FI) may process, with due justification, the operations of an applicant who does not comply with the terms and conditions mentioned herein. The methodology for offering financial services to value chains involves identifying the value chains, evaluating the value chain and its actors, and developing a portfolio of financial services to respond to value chain needs. The manual describes the identification of value chains, mapping of actors, evaluation of a legal entity (anchor organization), evaluation of an individual (member/supplier of an anchor organization), and identification of needs and delivery of the portfolio of financial and entrepreneurial development services. The manual is intended to be a guide for financial institutions or their managers, supervisors, and sales executives, for identifying, addressing, and preparing a portfolio of financial services for each participant (link) in the value chain. The manual is organized into three major chapters and proposes an intervention model that integrates entrepreneurial strengthening into the portfolio of financial services to build or transfer capacity to anchor organizations and guarantee sustainability.