Developing a social business model in rural Hubei

Global Young Leaders Programme
February 2011
1
Five-year development plan for
Integrated Farmers’ Association of Heshuiping Region,
Jianshi County, Hubei Province, China

TABLE OF CONTENTS
2
Contents
Page Number
1. Executive Summary 3
2. Background 10
3. Objectives 21
4. Scope & Approach 23
5. Business Model 28
6. Financial Services 36
7. Governance 46
8. Production & Marketing 60
9. Community Services 72
10. Implementation Plan 76
11. Risk Assessment and Mitigation 80
12. Recommendations 82
13. Appendices
85

Executive Summary – Background
•  The Integrated Farmers’ Association of Heshuiping Region (IFAH) was
founded in 2008, covering six villages, namely Nongke, Fengxiangshu,
Yangliu, heping, Chunfang and Cacapo, in Sanli Township, Jianshi
County.
•  IFAH aims to protect the interests of farmers, enhance the knowledge
and skills of farmers, advance agriculture modernization, increase
farming revenues and improve the livelihood of farmers, develop rural
economy and social business, advance rural community development
and bring forth a new rural governance structure.
•  IFAH’s mission is aligned both to the Chinese Government’s efforts, and
the Sanli Township’s 5 year development plan to enhance living
standards and income of the community
•  YLP participants were tasked to create a business model that includes
rural governance to aid sustainable development in Sanli township.

Executive Summary – Business Plan
•  A 5-year plan is proposed, with recommendations made on the governance
and financial model for IFAH, changes to crop aggregation and community
outreach programmes
•  A starting capital of RMB 1,000,000 is needed in the first year for the credit
department, and in five years, the cumulative capital will be RMB
$169,000,000
•  Breakeven is expected in the second year
•  Gross Profit of RMB 4,300,000 is expected in the third year eventually
extrapolating to RMB 7,100,000 in the fifth year
•  Average household income from farming is expected to increase by 25%
within 2 years of implementation
•  Overall migration from rural to urban areas is expected to decline, based on
asset building and enhanced farming income
Demonstrating business viability for future extension
of the proposed IFA model

Executive Summary – Operational
Recommendations
•  Finance
–  Introduce the Finance & Investment, and Credit Functions as IFAH’s
sole vehicle for provision of financial services
–  Utilize money remitted by migrant workers to enhance IFAH’s capital
base
•  Production and Supply Chain
–  Review supply chain for pig farming, so as to aggregate and increase
revenue for farmers and IFAH
–  Review crop/land allocation and expand fragrant rice production
Multi pronged approach to enhance income to
farmers

Executive Summary – Operational
Recommendations
•  Governance
–  Review IFAH team composition; enhance management bandwidth,
governance, risk management and transparency
–  Review member leadership structure, from geography based leadership
to functional/crop based groups
–  Enhance internal checks to ensure benefits to farmers
•  Community Services
–  Set up mechanism to train farmers on more effective farming, with a view
to enhancing the overall average household income
–  Enhance healthcare awareness and cultural & educational activities
–  Provide framework for creating positive environmental impact, e.g. waste
collection
Enhance IFA governance and community services

•  The 5 year plan aims to:
–  Enhance the average household income from farming in the Heshuiping
region (year 1 and 2) and eventually to the Sanli township (years 3
onwards) by 25% within 2 years of implementation
–  Empower smallholder farmers by building confidence to join the
professional groups and support IFA
–  Demonstrate that the model can be replicated across townships and
eventually at the county level
–  Make rural vocation/farming attractive thus reducing the migration of
workers to urban areas
–  Improve environmental awareness, and have a positive impact on the
local environment
Executive Summary

China – A society built upon agriculture
•  For over 8000 years, China's smallholder farming
agricultural base has played a key role in supporting the
growth of what is now the largest population of the world
•  Since 1978 and its open market reforms, China has
become the world’s largest producer and consumer of
agricultural products; Currently, it produces 30% of the
world’s corn, 25% of the world’s cotton, 37% of the world’s
fruit and vegetables and half of the world’s pork
•  Structural changes to the economy - despite the healthy
expansion of the agricultural sector, the even faster growth
of the industrial and service sector during the reform era has
begun to transform the rural economy from agriculture to
industry and from rural to urban
10
Source: http://www.iiasa.ac.at/Research/SRD/pdf/IR-03-007.pdf
1978 –
Decollectivization
(free market
reforms)
1953 –
Commune
System
7500 BC –
Domestication of
rice/ rise of
farming
communities and
accumulation of
wealth

Globalization and the growing rural-urban
divide
China’s rapid economic development and
industrialization has created a growing gap
between rural and urban areas
–  China’s urban population has increased from
18.96 per cent in 197 to 46.60 per cent in 2009
–  Per capita disposable income for urban residents
was RMB 17,175 compared to RMB 5,153 for
rural residents
–  Decrease of rural labor force – 80% to 50 % in
less than thirty years
•  The reported urban: rural income ratio is currently
3.35:1 but in reality, the disparity could potentially
be as high as 6:1

11
Source: Consulting Center for Farmers’ Associations (CCFA)

Globalisation and the growing rural-urban
divide
•  To find additional income, there has been an exodus of 200-300 million rural
migrants into developed coastal provinces and industrial cities as migrant
workers
–  The migrants are mostly male and represent over a quarter of the rural farming
population; an average of 1 per household
•  Rural-urban migration together with the expansion of industry has resulted in
the
a)  Breakdown of traditional village social structures (elderly and
children being left behind),
b)  Continual decline of economic sustenance (local farming activities
plummet because of lack of labor, knowledge, leadership), and
c)  Deterioration of the environment (urban sprawl and industry
development impacts)
•  Families, crops, and land are abandoned for the seemingly more viable
option of urban life
12

A new way forward for rural China
•  Currently, smallholder farms have little capacity to benefit from the
opportunities presented by the growth in the agricultural sector because
each farmer is allocated only 1.826 mu of farmland (less than 0.1 ha per
capita)
•  However, if rural communities can successfully scale the collective efforts of
these farmers, the economic potential is over 100M mu of land (1/18 of
China’s arable land) and can provide a solution to the widening gap
between urban and rural areas
13

A new way forward for rural China
•  Current efforts in China:
–  Policy support is close to 1 trillion per year
of funding coming from central government to
improve infrastructure, living condition,
production capacity, social services
–  Microfinance schemes to address bottom of
the pyramid funding for smallholder farmers
–  Structural change both in the form of pilot
grassroots farming programs and research-
led technological innovation
Yet there is still a need for a modernization
model that addresses rural sustainability in
a holistic manner, and serves the
smallholder farmers.
14

15
The Integrated Farmer’s Association of Heshuiping (IFAH)
was formed in ApriI 2008 as a strategic partnership between:
1.  Chinese Academy of Social Sciences Policy
Research Center, Consulting Center for Farmer’s
Association (CCFA) led by Professor Yang Tuan
2.  China Youth Development Foundation
3.  Bright China Group
4.  China Social Entrepreneur Foundation
With the support of the Integrated Rural Development and
Governance Pilot Programme Office, IFAH aims to be the first
model of rural governance that:
i.  integrates the experience of farmers’ associations in
East Asia with the local best practices of asset-
based development
ii.  acts as an intermediary between government
bodies and the farming community that serves the
wellbeing of smallholder farmer economies in rural
China

Integrated Farmer’s Association of
Heshuiping (IFAH)

16
a)  Distribution
b)  production
c)  Supply
a.  Education
b.  Cultural
activities
Financial
services
Social
services
The IFA Model from East Asia and its Potential for China
Source: http://www.iiasa.ac.at/Research/SRD/pdf/IR-03-007.pdf
The Heshuiping model is based upon over 5 years of CCFA research
on existing IFA’s in Taiwan, Japan and Korea. Current East Asian
IFA’s have several core functions including:
•  Needs provision – Farmers centered
•  Social enterprise function – Asset building, separation
of authority and function, internal wealth allocation
•  Collective operation – High efficiency
•  Agriculture extension and education
The success and adaptation of the IFA pilot program in
China can push forward social structural change in China
to ensure
• The sustainable development of society
• Protect the ecology and environment
• Protect people’s health
• Curb corruption and ensure the effectiveness of policies
• To promote civil society and realize democracy
Core
Functions

17
IFAH Membership Overview
• Currently, IFAH covers six villages in
the Heshuiping region of Sanli Township,
which is part of the 37 townships which
make up Jianshi County.
• It has 5000 members from 1320
households which make up
approximately 60% of the regional
resident population
Heshuiping region
Community IFAH Members Percentage
No. of villages 6 - -
No. of member groups - 64 -
No. of households 2050 1320 64.3%
No. of people 8180 5000 61.1%

Strengths
•  Strong support from Govt: Sanli mayor
keen on agriculture development
•  Existing association and buy-in of farmers
•  Support from Consulting Centre for
Farmers Association (CCFA)
Weaknesses
•  Limited management bandwidth
•  Limited financial resources
•  Farmers not aware of potential
benefits
Opportunities
•  Aggregation of products and services,
e.g. pig farming produce, to improve
livelihoods
•  Introduction of additional services like
healthcare, insurance
•  Expanding beyond 6 villages
Threats
•  Scattered progress beyond the initial
6 villages covered
•  Lack of demonstrable achievement
of IFAH in the immediate future
•  Inability to attract and retain talent
•  Funding difficulty
SWOT Analysis

Problem Statement
19
Key issues identified:
•  Prevalent poverty in the farming community in Heshuiping region,
current estimates of average household farming income (excluding
remittances) at around RMB 3,000 annually
•  Lack of economic progress, accentuated by lack of access to
capital, resources and technology
•  Limited effective governance framework, management expertise,
and weak institutions
•  Limited economic opportunities locally leading to an exodus of
workers to urban areas and resultant social issues
•  Poor environmental awareness, and adverse impact on local
environment, leading to long term issues
Need for effective rural governance to help
enhance farming income

Objectives
21
•  To alleviate poverty among the rural farmers in the Heshuiping area
•  To create a framework and mechanism for effective rural governance and
sustainable growth
•  To create a sustainable rural credit model for smallholder farmers
•  To increase local household income from farming by utilizing better
practices and by aggregating local produce
•  To stem the emigration of workers to urban areas, and to enhance
opportunities for asset based growth locally
•  To empower smallholder farmers
•  Create a framework that can be replicated in other townships and counties
•  To enhance overall societal and environmental development
Creating a sustainable rural economy…

Scope
•  One farmers’ association for one township
•  Focus on Sanli Township in Jianshi County
•  Covers estimated 37 villages
1 Township,
1 IFA
•  Four key areas:
•  1) Governance 2) Production & Marketing
•  3) Finance 4) Community Services & Benefits
•  Adapted from the East Asian models of Farmer’s
Associations (FA) from across Taiwan, Japan and Korea
5-Year Development
Plan for IFAH
•  Two main stakeholders:
•  The government of Jianshi County and the Integrated
Rural Development and Governance pilot programme
office
•  Consulting Center for Farmers’ Associations (CCFA)
Implementation Plan for
IFAH and Stakeholders
23
Scope of the business plan includes the following three essential
elements:

Key Considerations for Business Plan
Realisation
24
•  The Business Plan is a key tool for IFAH to address immediate risks and
opportunities and implement the core building blocks to achieve its
objectives
•  The Business Plan is NOT immediately intended to attract external
investors as IFAH do not have the requisite governance structures and
resources to move to immediate implementation
•  The 5-year plan is focused on incubating the notion of self reliance
through existing available financial services by piloting business
operations expansion to the 37 Villages within the Sanli Township
•  Upon successful realisation of the benefits of the pilot, the model can
potentially be tailored to be scaled to Jianshi County as part of the next
stage of business expansion

Approach and Methodology
•  GIFT scoping & preliminary due diligence for Global
Young Leadership Program (YLP)
•  Global YLP participants reviewed the background and the
current approach of IFAH
•  Interviews, meetings and field visits with key stakeholders:
–  Government Officials (county and township)
–  Village Heads
–  Member Group Leaders
–  Farmers
–  IFAH Management
–  CCFA Members
–  Bank Representatives
7-9 Dec 2010
19-21 Feb 2011
19-23 Feb 2011
•  Briefings and brainstorming
•  Calibration and clarification with key stakeholders
•  Project planning and mapping
•  Business plan development
22-23 Feb 2011
22-23 Feb 2011
23 Feb 2011
23-24 Feb 2011

Workshops on
global issues
Briefings on
background
Field visits
Debriefing &
Discussion
Final clarification with
relevant parties
Organizing &
Mapping
Agreeing on
Content
Continuing
inputs from
stakeholders
Business
plan
Inspiring
speakers
YLP
&
IFAH

Farmers
&
IFAH

YLP
team

Various
par8es
YLP
team

YLP
team

YLP
team

Approach and Methodology
YLP
team

BUSINESS
MODEL
Integrated Social Enterprise
Performance Indicators
Benefits
27

A model of integrated and profitable
social enterprise
1)  Self-sufficient revenue
model:
–  New credit financing
business capitalizing on
remittance and deposits
from migrant workers
–  Collection and distribution
of key agricultural output
–  Fragrant rice growing
investment
2) Supporting governance
model to ensure management
transparency and farmers
interests are protected
3) Delivery of community
service for improvement of
rural livelihood
Sustainable Livelihood &
Social Impact
IFA
Agricultural
Supply Chain
Supported by Overarching Governance
Finance
Services

Fully Integrated Business Model Across
Revenue and Cost Drivers
Integrated Farmers
Association (IFA)
IFA Credit
Department
Funding
Sources
1) Current Sources (Shih Wah Ching Foundation and
Matching Government Grant
2) Consolidated Village Government Grants
3) Urban Migrant Income Contribution
4) Credit Lending Interest on Re-Payments
5) IFAH & Co-Operative Membership Fees
6) Project Income
7) Other Sources (Rural Credit Union/HSBC/Rabobank etc.)
Manage
Fund Pool
Product
Co-Operatives /
Product Groups
IFA Management
FUNDS
Decision Making,
Governance &
Government Support
Social/Community
Services
Social/Community
ServicesFarmers
Farmers
X% Allocation
For
Lending
X% Allocation
For Projects
Interest on
Re-Payments
X% Allocation
For Social/Community
Services
Agricultural Extension
Projects
Agricultural Extension
Projects
Project
Income
Agricultural
Activities
Agricultural
Activities Agricultural
Products
Agricultural
Products
Buyers
Buyers
Sell Products
At Margin
Payments
60% Re-invested into IFA Funds
20% Cover off Administration Costs
20% Farmer Benefit based on Shareholdings
Undertake supervised
Agriculture Production
Techology
Know-How
Projects
Support
Agricultural
Activities
Products
Consolidated
at Co-Ops
…enables positive return in the long term

IFAH’s Main Business Revenue
Projections
•  Revenue from projects over 5 years:
30
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
$20,000,000
1 2 3 4 5 6
Revenue(other)
Revenue(production)
Revenue(credit dept)
Revenue(membership fee)

31
• Annual Net Income
Growth in year 4-5: 26%
• Breakeven Point: 2 year
• Achieving more than
RMB 4 million in year 5
IFAH’S NET INCOME GROWTH FOR 5
YEARS
Growth potential is very high
(1,000,000)
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Net Income

32
5-Year P&L Projections of IFAH
Consolidated

Yr
1
Yr
2
Yr
3
Yr
4
Yr
5

Revenue(membership fee) 31,540 37,540 100,107 162,673 231,497
Revenue(credit dept) 110,000 513,805 2,068,157 5,316,377 10,631,862
Revenue(production) 250,000 1,475,000 5,020,000 5,900,000 6,520,000
Revenue(other) 39,600 105,600 171,600 237,600
Total revenues 391,540 2,065,945 7,293,864 11,550,650 17,620,958
Costs (credit dept) 100,000 622,842 2,235,780 5,167,480 9,711,154
Capex (production) 600,000 750,000 750,000 750,000 750,000
Total costs 700,000 1,372,842 2,985,780 5,917,480 10,461,154
Gross Margin (308,460) 693,104 4,308,084 5,633,170 7,159,804
-79% 34% 59% 49% 41%
Expenses
expense(credit dept) 91,600 117,960 272,473 352,491 460,910
expense(community) 2,000 76,000 119,000 241,000 329,000
expense(production) 54,000 258,000 516,000 774,000 1,032,000
expense(HR) 50,000 146,000 146,000 146,000
Total expenses 147,600 501,960 1,053,473 1,513,491 1,967,910
Operating Profit (456,060) 191,144 3,254,610 4,119,679 5,191,894
Other gains or losses 0 0 0 0 0
Income Before Taxes (456,060) 191,144 3,254,610 4,119,679 5,191,894
Dividend (20% of IBT) 0 38,229 650,922 823,936 1,038,379
Net Income (456,060) 152,915 2,603,688 3,295,744 4,153,515

33
Benefits
Financial:
•  Increase average household income by 25%
•  Increase revenue and productivity through better
utilization of resources and aggregation of
products & IFAH Financial Services
Community:
•  Enhanced and more effective rural
governance
•  Train farmers to enhance knowledge on
agriculture products and techniques
•  Improve public health awareness
•  Greater engagement and social interaction

34
Benefits
Social:
•  Increase opportunities for enhance living
standards, using local resources effectively
•  Reduce migration of workers to urban areas
Environment:
•  Enhance sanitation
•  Improve river water quality
•  Enhance soil quality by
promoting use of organic
fertilizer

Framework
Sustainable Rural
Farmer Livelihood
& Social Impact
Board &
Organizational
Structure
Risk
Management
Social
Responsibility
Transparency
& Decision Flow
36

.
Execu8ve

Director

Product

Group
1

Product

Group
2

Product

Group
3

General
Assembly

Execu8ve

Board

External

Auditors

Village
1

Village
2

Village
6

Village
X

…

37

…

Same
structure

per

village

Product

Group
4

Key:

[]
–
1-‐2
yr
8meline

[]
–
5
yrs
8meline

Headcount

IFA Governance & Communications
Structure
Supervisory

Board

93
Ac8vity

Group
1

Ac8vity

Group
2

Ac8vity

Group
3

Ac8vity

Group
4

Ac8vity
Based
Groups

Audit
Governance &
Decision Making
Implementation
81

IFA Group Communication Model
IFA
Village Groups
- Not all are IFA members
- Not all belong to an
Activity Based Group
- Led by a village head
Activity
Based
Groups
- All are IFA
members
- Bonded together
by common goals
- Led by a group
head
38

Activity-Based Group (ABG)
Who:
Self-governance grassroots entity formed by farmers
who share the same agriculture product/activity and
volunteer to lead in the ABG
What:
Facilitating two-way communication between IFA and
farmers, between EB and farmers
How:
-Financial and community services are delivered to
farmers through ABG and EB’s decisions are acted
upon through ABG.
-Farmers’ opinions and concerns are pushed up to IFA
or EB by ABG.
Why:
smaller group size + shared interests = stronger bond
among farmers
§  Decision flow
§ Opinion /product flow
§ Service flow
FARMERS
ABG
EB IFA
Key:

Roles and Responsibility in IFA
General Assembly
- Elected by village representatives
- Elect board of directors
- Review and approve annual budget
- Vote on direction and major projects of IFA
Executive Board
- 9 farmers elected by the General
Assembly (GA)
- Not more than half can hold village level
administrative role
- Call general assembly
- Reviews the annual budget
Executive Director
- Evaluated by Government, CCFA
and one nominated EB member on an
annual basis
- Government secondee/ Non-IFA member
- Leads all IFA projects and initiatives
- Review and develop annual plan
Supervisory Board
- 1 farmer and 2 independent directors
- Ensure decisions are executed and capital
allocated as planned

42
EXECUTIVE

DIRECTOR

Human

Resources
&

Admin

Finance
&

Investment

Community

Outreach
&

Environment

Produc8on
/

Supply
Chain

Public

Aﬀairs

Credit

IFAH Management Team Structure

[]
–
1-‐2
yr
8meline

[]
–
5
yrs
8meline

Staﬀ

Headcount

Critical to the success of implementation for the
5-year plan, effective utilization of human
resources needs to be made.
Key:

KEY AREA/RESPONSIBILITY CENTER GA EB
Executive
Director
•  Project launch - Approve Review
•  Annual Budget Approve Review Implement
•  Capital/Asset allocation - Approve Review
•  Partnership agreement (with
Cooperatives etc)
Approve Review Implement
•  Dividend payout Approve Review Implement
•  Social/community investment - Approve Review
•  Lending rate - Approve Review
•  IFA Borrowing - Approve Review
Decision Flow
•  Designed to ensure clear and transparent decision making
•  Ensure Farmers’ welfare is considered in all decisions (General Assembly as the main voice of farmers)
•  Provides measures to mitigate risk and fraud
Increased executive board empowerment

KEY AREA / RESPONSIBILITY CENTER GA EB ED
Investment/procurement *
> 50,000 (amounts above)
21,000 - 50,000 (amounts in range)
< 20,000 (amounts below)
√
√
√
Loan Amount
> 40,000
> 20,000
> 10,000 (* NB: Range to the start of superior’s)
√
√
√
Audit report √
IFA staff recruitment and layoff √
ED recruitment and layoff √
Authority Flow
•  NB: (*) Amounts will increase on an upward adjustable scale and approved by the general assembly with
the growth and expansion of IFA
•  Highlights key decision makers’ level of authority in specific key areas usually prone to fraud & lack of
transparency
IFA to take equity stake in
the coorperatives

Process Scenario
Decision Making & Approval
For a typical procurement
or investment decision to
be made, a scenario-
based approach is
presented to exemplify
decision and authority
flow.
Aim:
- To ensure implementation
of best management
practice
- Keep approval conditions
set and properly
documented
- Remain mindful of time
required for processing and
release of funds
NB: (*) Amounts subject to
increase as organization
grows.
FOR REFLECTION: THE ORGANIC FERTILIZER PLANT CASE

IFA Integration/Partnership with
Professional Cooperatives
•  Common assumptions
–  Smallholder farmers can see and benefit from the integration/partnership of IFA
and cooperatives
–  Both IFA & the cooperatives see value in integration/partnership
–  Main driver for partnership/integration is financial
•  What IFA brings to the table
–  Access to investment and lending funds
–  Strong government relationships and support
–  Robust governance and management structure
–  Provide economies of scale in production capability (by enabling consolidation of
small holder assets) and access to potentially larger markets
•  How IFA can benefit from the Cooperatives
–  Transfer of technology and know how
–  Access to current established distribution channels
–  Access to established brand/marketing
–  Provide economic benefits for small holder & revenue stream for IFA

IFA Integration with Professional
Cooperative as a Shareholder
Executive Director
recognizes potential
partnership opportunity
Potential investment/
partnership opportunity
presented to Executive
Board & General Assembly
General
Assembly
to decide
whether to
participate
Yes
No
IFA injects capital
investment into cooperative
& becomes a shareholder in
the cooperative
IFA appoints a representative
to the cooperative board/
management team, approved
by Executive Board
IFA mobilizes smallholder
farmers & enables
communication between
parties
Farmer benefits by
selling produce
back to cooperative
IFA benefits in profit
sharing GateStage
Beginning
Results
Cooperative shares
technology/know-how to
appropriate smallholder
farmers

Rural Investment by Government:
recommended improvement
48
Central Government
Provincial Government
Prefecture Government
County Government
Township Government
Village Committee
IFA
Farmers
Government Project Funding
Current funding route for
social security projects:
Distribution of project funding
through township government and
village committee
Key areas:
- Health care
- Social security
- Pension
- Infrastructure development
- Education
Proposed funding route for new
community related projects:
contract based outsourcing of government
projects to IFA
Key areas:
- Environmental management, including
waste collection, land regeneration
- supplies shop
- Elderly care
- Rural community integrated service center
- Health education
- Women organisation
- Cultural activities
Key benefits:
- Improved efficiency
- Community ownership
- Self-governance :
payment by farmers to
cover part of the cost
-Reduced corruption

FINANCIAL SERVICES - OVERVIEW
•  Focus on 5 Key Financial Services to
enable a sustainable and profitable
Business Model
•  Existing Mutual Assistance Schemes in
Villages (eg. Ca Ca Bo and Yang Liu)
will eventually be absorbed into the IFA
Financial Services Model
•  Undertake Central Claims Processing
for Tobacco Farmers
•  Supported by sound supporting
processes for Financial Accounting,
Financial Controls and overall IFA
Governance Model
•  Enables effective collection, analysis
and management of key demographic
information to support the Public Affairs
Function
50
Financial
Services
Micro-Finance
Savings
Scheme
Capital Mutual
Assistance
Scheme
Financial
Education &
Awareness
Central Claims
Processing
Short Term Services (1 to 2 Years)
Services provided progressively
over 5 years
Creating Value-Add and Streamlining Current Financial Services

51
FINANCIAL SERVICES – CAPITAL MUTUAL
ASSISTANCE SCHEME
•  Short Term (1-2 years) Financing
Scheme to fund Start-Up Capital
•  Pooling together smaller amounts from
farmers (approximately RMB500 to
RMB2000) with matching funds (up to
RMB500) from the government
•  Funds used for Micro-Finance without
collateral at an annual interest rate of 7
to 10%
•  Loan Term up to 12 months
Critical Step To Achieve Economic Self Reliance

•  Micro-Finance Loan amount RMB
5,000 to RMB 50,000 (without
collateral)
•  Loans > RMB 50,000 will be secured
through the Rural Credit Union under a
strategic partnership with IFA (with
collateral)
•  Adjustable Interest Rates based on
Credit & Income Profile of Farmers
•  Term Loan of approximately 1 year to 5
years structured through short term
repayment
•  Providing convenience through
empowerment of the IFA Group Heads
52
FINANCIAL SERVICES – MICRO-FINANCE
Credit Function
Farmers
Farmers
Group Heads
Credit Processing Credit
Disbursements
Credit Control
Credit Manager
Submit Applications
For Approval
After Credit Checks
Completed Approved
Applications
Offer and
Signing of Offer
Letter & Agreement
Funds
Disbursement
(Cash/Remittance)*
Submit Application
Forms for Processing
Provide and
Collect
Application Forms
and Provide Education
& Awareness
Provide and
Collect
Application Forms
and Provide Education
& Awareness
Credit Monitoring
and Control
FUNDS
* Cash/Remittance to be used for Short Term. Once IFA obtains licence to receive
deposits the amount will be remitted directly to the farmers IFA Savings Account

53
FINANCIAL SERVICES – SAVINGS SCHEME
•  Key integrator of Product Co-Operatives into IFA Business Model through means
of investment and shareholdings
•  Facilitates establishment of strategic relationships with Commercial Banks/Credit
Unions
•  Receive Deposits from farmers and migrant workers paying out an annual interest
rate of approximately 2.6%
•  Providing convenience through aggregation of savings accounts maintained with
multiple financial institution
•  Pooled Deposits to contribute to micro-financing and investment opportunities
•  Providing farmers visibility and transparency of summary financial status and other
activities through technology enablement (e-Farmer Kiosk)
•  Longer Term (> 5 years) scale to promote IFA as Integrated Service Centre i.e.
provide services to farmers such as direct debit facilities for bill payments
IFA as an Integrated Financial Service Provider

54
FINANCIAL SERVICES – SAVINGS SCHEME
Migrant Workers
Migrant WorkersIFA Banking
Account
FUNDS
Farmers
Farmers
Group Heads
Deposits
utilised for microfinance
and other
investments
IFA Invests in
Co-Operative
Product Co-Operative
Product Co-Operative
Co-Operative
Maintains IFA Banking
Account
Obtain and Receive
Deposit Instructions & Monies
From Farmers
Deposit
Farmers Monies
Obtain
Deposit
Receipt
Provide
Deposit
Receipts
To Farmers
Withdrawals
Partner
Commercial
Bank
Migrants transact monies
through IFA Partner
Public Affairs
Department
e-Farmer Kiosk
Agricultural Supplies
Store
Agricultural Supplies
Store
Check Financial Status
(Savings, Credit)
& Update Demographic
Information
Maintain
Demographic
Information
Micro-Finance
Agriculture
Extension
Projects
Farmer Sales/
Investment
Returns
Community
Outreach
Programmes
The Savings Scheme is a Key Service Enabler for IFA as it represents the heart of IFA’s
business operations in effectively linking farmers, migrant workers, financial partners and co-
operatives in order to achieve supply chain and capital efficiencies and gains

55
FINANCIAL SERVICES – CENTRAL CLAIMS
PROCESSING
•  Tobacco industry operates as a single
monopoly in China through the
Chinese National Tobacco
Corporation (中国国家烟草公司)
•  Central Claims Processing Services
provided only to Tobacco Farmers
•  Provides scale efficiencies in-line with
consolidation of mutual assistance
schemes into the IFA structure
•  Farmers receive monies faster than if
directly interacting with the Tobacco
Collection Centres
Finance & Investments
Function
Financial Accounting
Finance Manager
IFA Banking
Account
Farmers
FarmersDeliver tobacco crops
and obtain receipts
Deposits monies
due to farmers
into IFA
Banking Account
Submit
Claims on behalf of farmers
Group Heads
Reimbursement
(Cash/Remittance)*
* Cash/Remittance to be used for Short Term. Once IFA obtains licence to receive
deposits the amount will be remitted directly to the farmers IFA Savings Account
Process Claims
and Submit
For Approval
Approved
Claims
Withdraw
Reimbursement
Amounts
for Farmers
Tobacco Collection Centre
Tobacco Collection Centre
Hand over claims
to Group Heads

56
FINANCIAL SERVICES – FINANCIAL
EDUCATION & AWARENESS
•  Key Service Component which
underpins the Financial Services
Model and is a key input in the Risk
Management Process
•  Integral part of Community Outreach
Programme by:
–  Providing Financial & Debt
Management Awareness
–  Assisting Farmers to
safeguard and take control of
ownership over their financial
security
–  Promote and Provide
Education on the Benefits of
IFA’s Financial Services

57
FINANCIAL SERVICES – SUPPORTING
PROCESS
•  Day-to-Day Financial Operations
•  Organize Incoming Investments
(Grants etc) and IFA Investment
•  Manage Disbursement of Funds to
Farmers, Projects, Community
Services or other initiatives based
on the direction and approval of
the IFA Executive Board
•  Budgeting & Forecasting Activities
•  Periodic Financial Reporting

FINANCIAL SERVICES – SUPPORTING
PROCESSES
•  Organization Structure provides for clear
segregation of duties to mitigate risks of
fraudulent activities
•  Establishment of a Delegation of
Authorities Framework
•  Supervisory Board and External Auditors
provide “check and balance”

58
•  Undertaking Stringent Credit Checks
(Financial Needs, Family Members, Size
of Land, Monthly Income etc.)
•  Short Term Repayment of Loans and
Credit Profiling
•  Monitoring Controls over Loan
repayments
Risk Management & Financial Controls
Finance Manager
Finance & Investments Function
Funds Disbursements & Management
Central Claims Processing (Tobacco)
Financial Reporting
Operations Finance Management
Savings & Deposit
Management
Personal Deposits
Investor/IFA Deposits
Credit Function
Credit Control
Credit Disbursements
To Applicants
Credit DisbursementCredit Processing
Credit Application
Processing
Demographic Information
Management
- Maintains Relationship with Financial Institutions
- Financial Reporting to IFA Executive Director, Supervisory and
Executive Boards
- Preparation of IFA Annual & QuarterlyReports
- Central Claims Approvals
Credit Monitoring
(Loan Defaults,
NPL etc)
Credit Manager
- Credit Application Approvals
- Maintains Relationship with Credit Union
- Credit Reporting to IFA Executive Director, Supervisory and
Executive Boards

Production and Marketing Strategy
•  Heshuiping is a unique place due to the
diverse products it can produce
•  In consideration of building community
confidence and building up IFAH’s
management experience, the five year
plan will initially focus on providing support
and strengthening the capabilities of
farmers going (or already) into breeding
pigs and farming rice
•  As IFAH’s operational capacities are
strengthened and it gains know-how, the
organization can refine the model in order
to focus on other products
60
Pigs Rice Vegetables Rapeseed
Kiwi Fruit Green Tea Chestnuts Konjac
Potato Tobacco
Mandarin
Oranges
Develop successful
examples of farmers
and breeders in high
margin products

Key Focus
Improve farmer’s livelihood and IFAH’s profitability through:
• Investment in Fragrant Rice production and production volume
increase
• Set up of pig farming supply chain collection and sales network
Supply Chain
Improvement
Develop IFA brand as quality agricultural produce
• Develop Township level branding for Sanli agri produce
• Branding transition and inclusion of key commercial produce under
single umbrella
Branding
Development
and
Marketing
Effective supply chain and brand awareness to provide
new revenue stream for IFAH and farmers

Fragrant Rice: The Potential
•  Current fragrant rice production is constrained by lack of
processing and warehousing facility
•  Limited funding and investment impeding further expansion of
Professional Fragrant Rice Cooperative
•  Untapped potential of smallholder farmers (3570mu
uncultivated land and 1500mu regenerated riverbank area)*
•  Positive market condition and return (RMB480/mu for normal
fragrant rice, and up to 5-8 times for organic fragrant rice)
* Suitability of rice growing subject to detailed land utilisation study
Fragrant Rice – A key starting point
for IFAH demonstration

Fragrant Rice: Enablement of Supply Chain
•  Capital investment of RMB 900K for processing and storage
investment
–  Funding: Profession Rice Coop RMB300K + IFAH RMB600K
•  Smallholder farmers to venture into fragrant rice growing
•  Seeding, agriculture technical services assistance, and sales
and distribution through Professional Cooperative
•  Expected return:
–  Breakeven by Year 4
–  Profit of RMB 912,000 over 5 years
63

Pig Farming: The Supply Chain
IFAH owns a pig breeding farm. Formation of a
supply chain would help the smallholder farmers to
strengthen their capacity in pig farming:
•  To provide quality piglets for farmers to raise
•  To provide the logistic services to collect the
pigs from the farmers and sell to the market
•  Can afford to buy the pigs from the farmer at
a higher price because it is able to get better
pricing from consolidating the volume
•  This will help to increase the revenue of
smallholder farmers
64
Improved revenue of IFAH and smallholder farmers
through the scale of economy
Pig Breeding Farm
Pig Farmers
Collection and
Distribution
Market

Pig Farming: The Untapped Market
•  IFA to provide the new breed of pigs:
–  Improve the pig’s quality to increase the lean meat and reduce fat
–  To provide branding and awareness to the consumers on the
benefits of the new pig
•  Brand the New Breed Pig as Lean from Year 2:
–  Able to price the pig 10% above market rate
•  Brand the Pig as Traditionally-grown from Year 5:
–  Able to price the pig 30% above market rate
–  Requires quality checks to ensure that
the pigs are grown traditionally
•  Expected return:
–  Profit from Year 2
–  Profit of RMB 4m over 5 years
65

Branding Strategy for IFAS Products
•  Rebranding IFA to Township level
inline with expansion plan
•  Change the name from IFAH
(Heshuiping) to IFAS (Sanli
Township)
•  Year 1 and 2: transition period
–  Relying on the existing well known brand,
like 三里香 rice, to promote IFAS. IFAS
just appear as an endorsement
–  Building a new brand for the Pig farming
business
–  Introducing IFAS and their products to
Government, market and famers through
different channels
–  Building name awareness gradually
66
Option 1
Option 2
Remark: Logo just for reference only.

Branding Strategy for IFAS Products
•  Year 3 – 4: Brand build-up period
–  Building strong awareness for IFAS
–  Logo will be used on all products,
Supply stores and other area
–  Build IFAS website to promote IFA
and all productions
–  Beginning to establish an affinity and
loyalty to IFAS brand and the
products under its umbrella amongst
those customers
•  Year 5 and onwards
–  Brand maintenance
67
IFA Logo
IFA + Rice Logo

Sales & Marketing: Target Markets
•  IFAH Stores (supply stores and grocery stores)
•  Local (supermarkets, hotel / restaurant, deeply process factory, and
direct delivery to consumers)
•  National markets (supermarket / organic food chain outlets in
Wuhan/Shanghai and other cities via strategic partners, such as
Carrefour & Wal-Mart)
68

Prioritization of Projects and Allocation
of Resources: Long Term Success
69
•  Focus on immediate value and business necessities.
•  Keep the implementation simple, focused on value, and structured
with a plan
•  Review the existing initiatives
•  Governance structure must be in place to review the project viability
and business case prior to each investment.
IFAH needs to show results now and any project that could be taking
away resources and focus from the organization in delivering value,
should either be put on hold or terminated

The Production of Organic Fertiliser as a Revenue
Source for IFAH: Further Review Required
70
•  IFAH is in the process of setting up a pilot organic fertiliser production
facility that converts local organic agriculture waste into organic
fertiliser through a fermentation process
•  Full-lead Bio Tech in Taiwan is the project partner providing the
technology, however they do not have prior experience in China and
have not obtained organic fertiliser certification in China
•  The technology and design of the production facility needs to be
reviewed in accordance with the organic fertiliser certification
standard in China to meet all the quality, health and safety
requirements. At present, the setup and management of the pilot
production facility have not addressed all the requirements. Upon
initial assessment, the plant does not appear to be appropriate for the
villages.

The Production of Organic Fertiliser as a Revenue
Source for IFAH: Market Development in the Future
71
•  The organic fertiliser produced by the current technology needs to be
sold as a high-end organic fertiliser at RMB 1500-2000 per tonne to
justify its cost of production with high-energy demand
•  The target market for high-end for organic fertilisers are organic fruits
and vegetables producers
•  However, the development of a high-end market in Heshuiping region
is still in its infancy. Sales channel needs to be developed to market
the fertiliser to other places in the county where the fruits and
vegetable industry are more mature, but this is not practical or a
priority at this stage
•  IFAH can play a role in developing the local fruits and vegetables
industry through organising production and marketing groups and
providing the needed technical assistance and practical know-how in
organic farming and supporting farmers to obtain government
subsidies for using organic fertiliser.

The Production of Organic Fertiliser as a
Revenue Source for IFAH: Next Steps
72
•  The project needs professional consultation, and IFAH needs to
consider alternatives, including seeking other technology providers in
China, and consider other more affordable technologies such as
biogas reactor and composting. Field testing needs to be done with
professional design and implementation, funded by the technology
provider, with third party certification
•  Key questions to be answered:
- What type of organic waste can be used as raw material?
- Are dead animals permitted?
- What is the energy needs?
- What are the emissions?
- Is the fertilizer in solid, liquid or semi-liquid state?

COMMUNITY
SERVICES
73
Training
Infrastructure
Healthcare
Cultural Services

Community Services:
Aim
•  Increase yield of production & average household income
•  Fill crucial knowledge gap on product pricing, technology,
machinery, financial management and business opportunities
•  Attract migrant workers back to and retain youth in the villages
•  Improve healthcare awareness and health status
•  Initiate cultural activities to help engage villagers and improve
livelihood
•  Enhance environmental awareness and overall living conditions in
the villages
•  Support innovation in agriculture production and natural farming
74
Create better living conditions through economic and
environmental enhancement

Community Services:
Actions
•  Training on agricultural know-how in each village at least twice a year
•  Training for young generation: highlight the value and opportunity of
livelihood in farming, and learning Chinese and English terms at the
same time
•  Cultural extension: identify 4-5 volunteers from each village as well as
Action-based groups to coordinate activities
•  Free healthcare sessions and home visits for members
•  Waste management initiative: to collect garbage and clean the river
75

Community Services:
Resources Needed
•  1 coordinator for agriculture extension and administration
–  Budgeted for in overall IFAH structure
•  Budget for agricultural training by specialists/consultants:
–  Allocation of 20% of IFAH revenue for community services, membership
fees and potentially training grants from banks
•  Logistics for rubbish collection (e.g. vehicle maintenance & delivery)
–  Suggest government to provide funding as part of public service delivery
•  Nominal amount as incentive for cultural activity volunteers
–  ~RMB 2500 per year
•  Budget for healthcare, waste collection and miscellaneous training
(e.g. healthy aging, farm health tips, cooking a healthier meal, etc.):
–  Government funding support to be discussed
76
Details available in appendix

Commence deposit taking & mature to final financing model
Implementation Plan
Setup of credit
mutual assistance
scheme
Year 1 2 3 4 5 6
Strengthen
Governance and
Organization
Preparation for
Community
Services launch
General
Assembly
Gradually extend to the whole Sanli Township
Pig Farming Supply Chain
Fragrant Rice Production Expansion
Launch of Community
Services continued and
enhanced
Community Services continued and enhanced

Five-Year Implementation Timeline

Year 1: 1st Quarter
(Month 1-3)

2nd Quarter
(Month 4-6)

3rd Quarter
(Month 7-9)

4th Quarter
(Months
10-12)
•  Establish Finance Awareness & Education Program
•  Prepare for agricultural training sessions in the 6 villages
•  Liaise with primary schools to set out training for young generation
•  Setup of waste collection stations
•  Rollout Finance Awareness & Education
Program
•  Communicate and promote training plans to
members
•  Source for seed capital
•  Setup governance and functional
organization structure
•  Executive Board to review new
governance, board & management
structure
•  Establish mutual assistance scheme
for farmers with matching funds from
government
•  Apply for training grant
•  Collect data on demographics and
crop production
•  Appoint cultural extension volunteers
•  Establish financial, credit and
control policies and procedures
•  Fill immediate vacancies for
Finance, HR & Credit
departments
•  Train new IFAH staff
•  Set up facility for Fragrant Rice
•  Plan for communications on
the new IFAH model
•  Source independent supervisor
•  Initiate implementation of
waste management
•  Launch training sessions
on agricultural extension
•  Submit application for
license to accept farmers’
deposits
•  Launch PR project for
membership cultivation &
new IFAH model
•  Set up activity-based
groups
•  Seek approval of new
structure & IFAH business
model by GA
•  Recruit
additional IFAH
staffs
•  Finalize
production and
marketing
investment
decision
79

Five-Year Implementation Timeline

Year 2

Year 3

Year 4

Year 5
§  Obtain license for and implement savings
scheme
§  Establish and implement savings
scheme policies & procedures and
operations
§  Ramp down Capital Mutual Assistance
Scheme
§  Launch of agricultural and healthcare
training sessions in 6 villages
§  Launch of cultural extension initiatives
•  Purchase of waste collection trucks
§  Launch of waste collection services
§  Conduct annual audit of IFAH business
§  Recruit additional IFAH management (to
support expansion)
§  Integrate professional cooperatives
§  Extend fragrant rice
production
§  Start cross-bred pig
farming & distribution
§  Conduct annual audit of
IFA business
§  Introduce waste
management program for
other villages
§  Review the progress of IFA
§  Extend IFA for another 10
villages
§  Expand agricultural and
healthcare training
sessions to more villages
§  Elect IFAH executive &
supervisory board
§  Seek new sources of funds
§  Conduct training &
create promotion
materials for other
townships
§  Conduct annual
audit of IFA
business
§  Extend IFA for
another 10 villages
§  Evaluate other
crops for IFA
coverage
§  Seek new sources
of funds
§  Review results
§  Conduct annual audit
of IFA business
§  Extend IFA to other
villages in the Sanli
township
§  Seek new sources of
funding
§  Implement e-farmer
kiosk in agricultural
supplies store
80

RISK
ASSESSMENT
& MITIGATION
81

Risk Assessment Matrix
82
Lack of Alignment of Goals of
Executive Board Members
Non-Transparent IFA Administration
IFA Inability to Attract & Retain Talent
Poor Quality of Training
Inability to Attract Farmers to
Community Programmes
Poor Financial Controls and Risk
Management Practices
Capital Reduction Due to High Rate
of Loan Defaults
Inability to Secure Funding
Poor Quality Agricultural Raw
Materials
1
2
3
4
5
6
7
8
9
Pig Livestock Depletion10
Fragrant Rice Crop Failure11
5
8
2
37
Likelihood
Impact
9
Low Medium High
LowMediumHigh
1
4
610 11
HIGH Risk
MEDIUM Risk
LOW Risk
The Risk Assessment will enable IFA in prioritising activities as part of the
implementation of the 5 Year Plan in order to effectively and efficiently mitigate risks,
in a timely manner, which could threaten the viability and sustainability of the social
business venture

84
Key Recommendations
1) Introduce the Finance & Investment, and Credit
Functions as IFAH’s sole vehicle for provision of
financial services
2) Establish Savings Scheme and utilize money
remitted by migrant workers to enhance IFAH’s
capital base
3) Provide outreach programmes to promote IFAH’s
financial services and assist farmers to safeguard
their financial security
1) Review supply chain for pig farming, and develop
business in pig collection and distribution to increase
revenue for farmers and IFAH
2) Review crop/land allocation and expand fragrant rice
production
3) Seek professional consultation for Organic fertilizer
project, and alternatives, including seeking other
technology providers needs to be considered
4) Review the business model of agriculture supplies
store to ensure long-term business sustainability
1) Set up mechanism to train farmers on more
effective farming, with a view to enhancing the
overall average household income
2) Enhance healthcare awareness and cultural &
educational activities.
3) Provide framework for creating positive
environmental impact, e.g; waste collection,
organic fertiliser.
1) Review IFAH team composition; enhance
management bandwidth, governance, risk
management and transparency
2) Review member leadership structure, from
geography based leadership to functional/crop based
groups
3) Enhance internal checks to ensure benefits to
farmers
FINANCE PRODUCTION AND MARKETING
COMMUNITY SERVICES GOVERNANCE

Key Success Factor – Government
Support
•  Government may consider working with IFA as its strategic
outsourcing partner to execute government-funded policies/projects
because IFA is owned by farmers and acts on behalf of farmers.
•  Government outsourcing is on the rise. IFA may consider
establishing a company (eg. JV) to undertake some government
projects.
•  The Central Government just issued the policy of supporting
agriculture professional cooperatives last year. IFA may consider
how to leverage government support in this area.
•  Responsibilities of township and county pilot program office must be
clearly defined. Township office works closely with IFA to address
IFA’s concerns. Meanwhile county office focuses on seeking more
government funding and projects for IFA and refrains from direct
involvement in township IFA operation unless requested.

APPENDIX
86
A.  IFAH Stakeholder Chart
B.  Key Assumptions
C.  Governance
D.  Finance
E.  Production & Marketing
F.  Community Services
G.  Risk assessment and Mitigation

IFAH STAKEHOLDER CHART
Appendix A
87

88
Stakeholder Map Current
New

Key:
1) Board/General Assembly
2) Pilot Programme Office (County)
3) Consulting Centre for Farmers’
Association
4) Local Banks/ Credit Union
5) Bureau of Agriculture
6) Ministry of Education
1) Credit Cooperatives
2) Local Banks/Credit Union
3) Private Investors
Advisory & Governance Finance
Partners
IFAH
1) Smallholder Farmers
2) Rice Cooperatives
3) Member Group Head/Village Head
4) Mutual Assistance Cooperatives
5) Employees
6) Other Cooperatives
7) Other IFA
8) Media

Key Assumptions
90
•  The scale to achieved within the 5 Year Timeframe is Sanli
Township (37 Villages)
•  The 5 Year Plan will become an integral component of the Sanli
Township 5 Year Plan
•  1 IFA for 1 Township Model will be adopted
•  Group Heads will be empowered with some administrative and
advocacy/awareness activities
•  Resource support will be provided by the various partnering
Financial Organisations in the form of secondments and awareness
& education
•  Farmers will be willing to pay for specialist training for re-skilling
and skills enhancement
•  Healthcare and Insurance Programmes will be funded solely
through IFA Profits

Key Assumptions… Cont’d
91
Assumptions over 5 year timeframe Measurements
Land Measurement 0.093 Hectares is equivalent to 1mu
Average Inflation Rate 4.25%
Average Salary Increment 6%
Average Personal Taxation Rate 5-10%
Average % of Asset Costs allocated for Maintenance Costs 5-15%
Capital Mutual Assistance Loan Interest Rate 7-10%
Deposit Interest Rate 0.5%
Loan Default Rate Per Year 1.5% of disbursements
Average Increase in Household Income 17%
Approximate Fee for Skills Enhancement Classes Per Year RMB100
Cost Per Household Per Year for Waste Collection RMB 60
IFA Profit Allocation for Healthcare & Insurance Programme 4% (2% each)
Average Agricultural Taxation Rate 0%
91

General Assembly*
•  Elected by village representatives
•  2/3 of the members should be farmers
•  Term: 4 years
•  Members are not allowed to be hired/recruited by IFA
•  Responsibilities
–  having the ultimate authority
–  making and changing IFAH chapter
–  electing & dismissing executive board members
–  reviewing business report and financial report
–  defining and changing membership fees and capital allocated for
social services
–  reviewing & approving the annual budget
•  Held once every year, ad hoc meetings can be initiated by 1/3 of
representatives or by Executive Board
93
*Unpaid positions

Executive Board*
•  Number: 9 farmers
•  Term: 4 years and two terms is the max.
•  Requirement:
•  -All agri-products and villages must be represented.
•  Responsibilities:
–  calling general assembly and acting upon GA’s decision
–  electing and dismissing Chair
–  approving & reviewing performance of Executive Director
–  reporting to the General Assembly on IFA
–  hiring external auditors to do annual IFA auditing
–  reviewing the annual budget
–  setting the strategic direction for IFAH (social & economic growth)
–  making investment decisions,
–  making loan decision on loan amount above 40k RMB
•  EB members must meet at least every quarter.
94
*Unpaid positions

Supervisory Board*
•  Number: 1 farmer & 2 independent directors
•  Term: 4 years and two terms is the max.
•  Requirement:
•  - at least one independent director is a businessman with no conflict of
interest. The other one can be a NGO representative (eg. CCFA ).
–  making sure all decisions are executed and capital allocated as
planned.
–  SB must hire external accountant to do auditing, hiring external
auditors to do annual IFA auditing
–  act as check and balance for all EB activities and decisions
•  SB members must meet at twice a year.
95
*Unpaid positions

Group Head*
•  Profile: farmer with crop-specific technologies and in-group trust and
respect
–  training group members in agricultural extension
–  representing the interests of group members
–  advocating finance and credit awareness (with a key focus on the
saving scheme)
–  undertaking basic finance and credit administration tasks
–  coordinating social services delivery on behalf of IFA
–  passing on key decisions of GA/EB to group members
96
*Unpaid positions

Executive Director
•  Requirements:
–  full time paid position
–  either recruited openly or a government secondee (paid for by the
government)
–  non-IFA member
•  Term: 4 years & maximum of two terms
–  acting upon EB decisions
–  leading IFA work
–  developing annual plan
–  recruiting, laying off and training IFA staff
–  performance evaluation of IFA staff
–  held accountable to EB
•  Performance Management:
–  Evaluated by Government, CCFA & one nominated Executive Board
member
97

Compensation Guidelines
•  Current average monthly per capita income in the area is RMB1500
•  Migrant workers have mentioned that they will consider staying if they can
earn at least RMB1500 monthly in their village/home town
•  Recommended salary guidelines as follows
98
Basic Monthly Variable Bonus~
Entry (eg
accountant)
1500RMB 0.5-1 months*
Mid level (eg
manager)
2000-2500RMB 1-1.5 months^
Senior (eg
Executive
Director)
3000RMB –
4000RMB
1-2 months#
~dependent upon IFA’s financial performance
*Based on individual performance
^Based on department performance
#Based on overall performance

Funding Sources of the County Government
Area Funding Project
Development and investment
of rural China
40 million RMB • Community infrastructure
• Community service
Water utilities 20 million RMB • Potable water
• Water irrigation
Soil revitalization 5 million RMB • Riverbank regeneration
Livestock 3 million RMB • Pigs, sheep, cattle
Infrastructure 12 million RMB • Road
Food security 1 million RMB
Special industry 2 million RMB
5 million RMB
• Vegetable
• Fruit
99

FINANCIAL SERVICES
Appendix D
100

Finance Services
•  Excel reference 1: credit department model
credit department financial model_zl_222.xlsx
•  Excel sheet 2: combined financial model
combined financial model.xlsx
101

Finance and Credit Department -
Savings Scheme Awareness Plan
•  Objective: to raise awareness amongst farmers and migrant
workers of the benefits of making deposits into IFAH
•  Team: Village Heads and migrant workers will be the ones to
mobilize the Awareness Plan
–  Village Heads have the connections within the villages i.e. they are on-the-ground
–  Migrant workers have the money and will understand how other migrant workers
think to encourage them to make deposits
•  Incentive: Team is motivated through a commission based
compensation plan to attain as much deposit as possible
•  Training: IFAH will train the team to promote the Savings Scheme
Awareness Plan
•  Timeline: IFAH will cover 6 villages for the first 2 years and add 10
villages each year
* Larger resources are needed during Chinese New Year when all
migrant workers return to their home.
102

COMMUNITY SERVICES
Appendix E
103

1) Training -- Agricultural Extension
•  Contents for knowledge enhancement:
–  Better selection & use of fertilisers, pesticides, machinery/equipments,
soil, water
–  Improving quality of land, and current crops/animals by technology
–  More productive land use and environmental management
–  Raising other crop/animals, off-season planting
•  Infrastructure required to
start, maintain, harvest &
sell to market
•  Cost concern
–  Product pricing, understanding of
market, & avenues to reach market
–  Work safety (e.g. posture)
–  Business & job opportunities
104

•  How to achieve knowledge enhancement:
(a) Conduct “Train-the-trainer” programs for each village:
–  Agricultural specialists or local successful farmers
àà train village heads & some farmers àà train all farmers
–  Quality, effective & affordable (low-cost) program
–  Approx. frequency of training (depends on type of produce):
•  Busy farming season:
1 class every 2 months x 6 villages = 36 classes/year
•  Off-season: 1 class every month x 6 villages = 72 classes/year
(b) Sharing of latest best practices & technology among villages:
–  Regular sharing by all 37 village heads
–  Sharing sessions to be led by IFA
–  Non-hostile & non-over-competitive environment is key for sharing
105

•  Resources:
–  1 coordinator for agricultural extension and administration
–  3 contract trainers as specialists from CCFA & Bureau of Agriculture
–  Training materials from CCFA & Bureau of Agriculture, with input from
local village heads & cooperatives
–  Training grant from Bureau of Agriculture & Agricultural Bank
–  Note: the China Social Entrepreneur Foundation is no longer providing
any resource to IFAH
•  Timeline:
–  Year 1: preparation, Year 2: start training at 6 villages,
Year 3-5: expand to cover all 37 villages
106

•  Goal:
–  Expose school children to farming as a profession in a fun way starting
from youth
•  About:
–  Farming as an important profession in society and for the country
–  Take ownership and respect your land
–  Science & new technology in farming
–  Learn simple Chinese & English names of farming products
•  How:
–  Mini-farming time as part of the regular curriculum in Labor Technology
Training course or Chemistry course
–  Year 1 - 2: Liaison with primary schools for the villages & curriculum
preparation
Year 3 - 5: Implementation in schools that serve the villages
107
2) Training – Young Generation

•  Reference:
–  Taiwan IFA model to carry out
similar programs in schools
•  Resources:
–  1-2 advisors with honorarium
from CCFA & Ministry of
Education
–  Training materials from IFA &
CCFA
–  Free for children to attend, as
part of regular school class
108
2) Training – Young Generation

3) Infrastructure:
a)  Surveillance and healthcare services
Problems: Current personal and public health
awareness is very limited
How:
–  Surveillance
•  Continue current efforts of annual
health checks
•  Survey of the health and
socioeconomic status of all villagers
(via e-farmer kiosk in IFAH
Agricultural Supplies Stores)
à  Help in data collection & record for
future planning with Sanli Township
–  Healthcare Training (see next slide)
109

110
Member farmers &
their families
IFA
Health awareness
workshops & home visits
Actions:
• IFA takes the initiative to organize free sessions
on:
ü Health promotion & disease prevention
ü Waste management
ü Farm health tips
ü Child-rearing health tips
ü Healthy aging
• Mobilize participation via announcements of
upcoming sessions at IFA General Assembly,
agricultural training sessions and supplies stores
To help members & their families develop a healthier
lifestyle, and therefore healthier villages
3) Infrastructure: Healthcare training
Timeline:
• Year 1: Preparation & promotion
• Aim by Year 2: 6 villages
• Aim by Year 5: 37 villages

3) Infrastructure
b)  Collection of non-organic waste (plastic, cans, glass)
–  How:
•  Provision of waste bins for non-organic waste
•  Designated day, each week, at each household
•  Trucks to bring waste to new garbage station in each village
•  Utilize the 6 small trucks & 2 big trucks already in IFA planning
•  New village regulations (e.g. no rubbish throwing to river)
•  Year 1: preparation & station setup; Year 2: start collection
–  Resources:
•  Training housewives & restaurant chiefs to take initiative
•  Activity-based groups & member group leaders to encourage &
monitor behavior
•  Cost for trucks & drivers/collectors, garbage bins & building
waste stations
•  Apply to township as public service program & for funding
111

4) Cultural Activities
•  Goals:
–  Preserve culture of each village, Heshuiping region & Sanli township
–  Provide a platform in each village for all members to gather &
communicate
–  Mobilize and encourage participation in village activities
•  How:
–  Organizer: Identify 4-5 women in each village to take the lead in
organizing and promoting cultural activities
–  Access: Identify 1-3 locations in each village that are convenient to all
village members to go to and participate in the activities
–  Contents: Regular and fun activities for children, adults and the elderly
–  Resources: Utilize existing cultural assets (e.g. dresses) in the village
112

RISK ASSESSMENT AND
MITIGATION
Appendix F
113

Risk Assessment & Mitigation
114
No. Risk Functional
Area
Likelihood Impact Risk Mitigation
1. Lack of alignment of goals of
IFA, the Government and
Independent Directors
Governance MEDIUM HIGH 1.  Define clear roles and
responsibilities of each role in
the IFA Governance Structure
2.  Rotation through election of key
roles in Executive Board and
Supervisory Board
3.  CCFA to play an intermediary
role in any disputes or alignment
issues
2. Lack of transparency of the
administration of IFA
Governance MEDIUM MEDIUM 1.  Establishment of a strong
corporate governance model,
transparency in systems,
processes, decision making with
clear roles and responsibilities
and segregation of duties
embedded in the organisation
3. Inability to attract and retain
talent within the IFA
Management Structure and
maintain a healthy attrition
rate
Governance HIGH HIGH 1.  Implementation of competitive
staff remuneration packages &
welfare schemes and training

115
No. Risk Functional
Area
Likelihood Impact Potential Risk Mitigation
4. Poor quality of training

Community MEDIUM MEDIUM 1.  Recruitment of skilled trainers
through secondments from
agricultural institutions,
institutions of higher learning
2.  Collaborate with Government to
establish measurement tools
and techniques

5. Inability to attract smallholder
farmers to attend training,
healthcare, insurance and
agricultural extension
programmes
Community LOW MEDIUM 1.  IFA to promote awareness of
benefits through Group Heads
2.  Implementation of periodic
awareness and training sessions
6. Lack of confidence of
investors in profitability of
venture and supporting risk
management and control
processes
Finance &
Credit
MEDIUM HIGH 1.  Establishment of robust financial
and risk management policies
and procedures with clear
segregation of duties and
delegation of authorities
framework embedded in the
Finance & Investments and
Credit Functions

116
No. Risk Functional
Area
7. High rate of loan defaults
resulting in progressive
reduction of capital
Finance &
Credit
LOW HIGH 1.  Implementation of credit rating
system, robust credit collection
& monitoring processes and a
short term re-payment model
8. Inability to secure funding to
commence implementation of
IFA’s business objectives

Finance &
Credit
MEDIUM HIGH 1.  Secure strong investors with
rural financing experience and
long term social view
2.  Aggressively educate farmers on
benefits of contributing to the
short term Capital Mutual
Assistance Scheme
9. Lack of supply of quality raw
materials (e.g.. seeds,
agriculture supplies etc.)
Production &
Marketing
LOW MEDIUM 1.  IFA to source from alternative
suppliers and implement quality
control over raw materials
selection process

117
No. Risk Functional
Area
10. Disease and poor sanitation
conditions leading to pig
livestock depletion
Production &
Marketing
LOW HIGH 1.  Implement stringent
sanitation and hygiene
practices in the pig farms
including quality control
checks on operational
practices
2.  Promote awareness to
farmers on the need of high
levels of sanitation and
hygiene
11. Crop failure impacting
profitability of fragrant rice
business operations
Production &
Marketing
LOW HIGH 1.  Explore opportunities for
insuring against crop failure
as pilot programs are
currently being implemented
in China where such
insurance is characterized by
material cost-based coverage
and government-subsidized
premiums
2.  Implement robust process for
awareness, education and
climate/terrain evaluation
prior to land utilization for
fragrant rice production

118
Acknowledgements
This Business Plan has been put together by 21 members of the Global
Institute For Tomorrow (GIFT) Young Leaders Program - Hubei 2011.
The GIFT YLP team would like to thank the government representatives
from Jianshi County and Sanli Township, the farmers from
Heshuiping region, IFAH, as well as Professor Yang Tuan and her
research team at CCFA for their dedication and support.
We hope that in drawing collectively upon our expertise and passion as
a team, we have been able to contribute to the successful
implementation of this important and valuable project.
TOMORROW MATTERS.

Developing a social business model in rural Hubei

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