This document provides an overview of the Oromia Coffee Farmers Cooperative Union (OCFCU) and its role in establishing the Cooperative Bank of Oromia (CBO) to provide banking services. Some key points:
- OCFCU was established in 1999 with 34 cooperatives and has since grown to 311 cooperatives and over 288,000 member households.
- It helped establish the CBO to give farmers and cooperatives access to credit, and is now a major shareholder and client of the bank.
- OCFCU sells members' coffee, provides social services, and facilitates credit and market access. It has increased coffee sales, profits, and dividends significantly over the past
Banking service to Oromia Coffee Farmers Cooperative Union (OCFCU)
1. OROMIA COFFEE FARMERS COOPERATIVE UNION (OCFCU)
BANKING SERVICE TO OCFCU AND ITS MEMBER COOPERATIVES
Presented
By
Dessalegn Jena
July, 2014
Nairobi
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2. Outline
1. Introduction and Background
• Some facts about Ethiopia
• Role of Agriculture in Ethiopia
• Characteristics of the rural sector
• Financial Sectors in Ethiopia
• Efforts of Financing Agricultural Sector in Ethiopia
2. Structure of farming community in Ethiopia
• Financial need of Farming Community
• Unique problems of Farmers access to finance
3. Effort to finance cooperative sector
• Establishment of Cooperative Bank(CBO)
4. The Role of OCFCU in establishment and Governance of CBO
5. Establishment and Current Status of OCFCU
6. Recommendations
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3. Some Facts about Ethiopia
Area 1,104,300 sq. Km
Agriculture land 345,130 Sq.Km
Arable land 13,606,000 ha.
Population is about 90 mil
Rural population 85%
Population growth rate 2.9%
Per capita is about $500
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4. Role of Agriculture in Ethiopia
Agrarian country and agriculture plays vital role in
national economy.
The economy policy is Agricultural Development Led
Industrialization /ADLI/.
Agriculture accounts 46.3% of GDP 83.9% of export
and 80%of labour force.
Small scale producers contribute more than 90% of
agricultural products.
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5. Characteristics of the Rural Sector
Agricultural activities are the main stay
Low level o productivity
High level of poverty
Undeveloped infrastructure
Poor entrepreneurial development
Natural resource degradation
Poor saving habit
Shortage of capital
Poor credit facility
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7. Effort of Financing Agricultural Sector
• Government Banks
The loan is advanced by guarantee of Regional
Governments
Guarantee is 100% in the case defaults
• Micro Finance Institutions (MFIs)
Newly established system to mitigate risk of
default
The farmer is provided with voucher and receive
agricultural inputs from co-ops,
The cooperatives collect their money from MFIs
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8. Cont’d
• Financial Inclusion
Ethiopian Financial Inclusion Project (EFIP)
Financial Inclusion Support Unit (FISU)
• Warehouse Receipt Financing
Agreement is made between ECX and
Commercial Banks to finance 60% of the value
of commodity
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9. The Structure of Farming community
• Cooperative Sector
Farmers/Household
Primary Cooperative Societies
Union
Federation
• Other service providers
Processors
Transporters
Input suppliers
• Stakeholders
Local Government
Regulatory Bodies
Value Chain supporters
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10. Financial need of Farming community
To increase production and productivity
For processing and packaging
For infrastructure development
For product marketing
For social welfare,
For diversification
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11. Unique problems of farmers access to
finance
Agriculture is less attractive field of business as to
financial sectors.
Agricultural sector is considered as high risk
Illiquid and perishable Collateral
Small transaction size,
Geographically dispersed clients
Poor Financial management
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12. Efforts to Finance Cooperative Sector
• Establishment of Cooperative Bank of Oromia (CBO)
Cooperative bank of Oromia is registered in accordance with article 304
of the commercial code of Ethiopia and licensed by NBE.
CBO is mainly(70%) owned by cooperative societies.
Mission:
To Provide full-fledged and customer responsive
banking service for cooperative societies, other
entities, and individuals with special emphasis to
agricultural and agro-based businesses financing,
and to maximize shareholders’ value through use
of competent and disciplined employees, visionary
leaders, and modern banking technologies.
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13. CBO’s financing Priority:
Agriculture and agro-processing
Cooperatives business activities
Export oriented activates
• Current status of CBO
• As of Dec 31,2013
Asset =7.3 billion birr
Capita =901.34 billion birr
Loan portfolio =3.2 billion birr
Coops’ Loan = 27-30%
Recovery rate =98.5%
Branch network = 102
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14. CBO’s Financing experience.
o Credit products:
Investment loans.
Working capital loans.
o Types of clients Financed:
Multipurpose Coops
Agricultural Cooperative Unions
SACCO Unions
Coffee Farmers Cooperative Union
Primary coffee cooperatives societies
Others.
o Activities financed:
Production activities:
Agricultural produce marketing activities
Mechanization.
Manufacturing activities
Domestic trade and services
Export and import activities.
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15. `Role of Oromia Coffee Farmers Cooperative
Union (OCFCU) to establish CBO
Initiation of idea for the establishment of the Cooperative
Bank of Oromia to access rural credit,
Pioneer and major Share holder,
Major creditor,
Corporate Governance,
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16. Establishment and current status of OCFCU
Regional State Oromia,
Ethiopa
Above 5000ha – 55 districts
lakes
Between 2000-5000 ha- 15 districts
Less than 2000 ha- 2 districts
Other districts
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17. INITIAL CURRENT
Memb ers
Capital
• 34 Cooperatives
• 22,503 House Hold
• 311 cooperatives
• 288,201 House Hold
• USD 90,000
• USD 15,500,000
Date of Establishment
01 June, 1999
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18. Objective
To Provide market information to Co-op societies
about coffee price at local and international market
To sell their coffee product at better price at local and
international market,
To improve and maintain the quality, productivity and
sustainability of coffee production
To provide coffee farmers with social services
To facilitate and provide cooperatives with credit,
To represent the coffee farmers at national and
International forums,
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19. Deputy General Manager
Board Of Directors
General Assembly
Commercial
Department Finance
Department
Human resource
Department
Coffee
Processing
Factory
General Manager
Supervisory
Committee
Legal
service
Audit
Services
Quality control
Secretary
Planning &
Programming
Department
Extension
Department
Organizational Structure Of
Oromia Coffee Farmers Cooperatives Union
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22. OCFCU’s performance in the last decade
Membership increment from 34—311 cooperatives
Household increment from 22500—288,201,
Coffee sales from 126 tons –-9000 tons
Profit generated from USD 24,000—USD 6.7 million
Dividend paid from USD22,000—USD 3.4 million
Fair Trade premium USD 74,000---USD 1.6 million
Capital increment USD 90,000---USD15.5 million
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23. No Sectors Name of Project Number of project
Accomplished
Number of
beneficiaries
1
Education schools 70 28260
Kinder garden 3 884
Library & laboratory 3 586
Teachers’ residence 2 22
Staff office 3 47
2
Health Health Post 13 93,000
Dry latrine 7 4250
3
Water Development Potable water development 89 41,112
4
Transport secter road 5 27,000
Bridge 9 21,000
5
Coffee Processing Coffee processing mills 34 2580
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Agro-industry Flour mills 5 5,000
7 Warehouse Office and Store 46
4600
8 Museum Coffee museum 1
Total 291 228,341
Projects Undertaken by the Fair trade Premium
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24. Farmers Support
Capacity building
Supply of small farm tools
Supply of quality control accessories
Supply of Beehives
Establishing and supporting of Saving and Credit,
Advisory service
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26. Carbon neutral coffee project
Gimbi Energy Efficient Cook stove Programme
Distribute 30,000 Fuel saving stoves
To produce Carbon Neutral Fair trade Coffee
Reduce Green House Gas emission (36,633(tCO2e)
Each HH is expected to have both stoves (full package)
50% reduction in fuel wood.
Pre-finance – obtained from ICCO, HoAREC – model CDM.
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28. Future plan
Coffee roasting industry establishment
Honey processing industry,
Expansion of processing plant
Coffee complex construction
Expansion of income generating projects
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29. Recommendations to enhance FCUS access to
finance!
Improve the governance and management practices of
cooperative societies.
Improve the financial management and information system of
cooperative societies.
Strengthen the relationship of cooperative movement,
Government cooperatives promotion structures, financial
institutions and other relevant stakeholders.
Formulating and implementing effective risk mitigating
strategies with regard to agricultural lending.
Design and implement credit relief outreach program.
Enhance the agricultural lending skill of bankers to improve
their agricultural loan judgments.
Arrangement of refinance facilities provided for banks
committed to agricultural lending.
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