Outgrower and Value Chain Fund (OVCF)
The Ministry of Food and Agriculture (MOFA), with assistance from the German Development Cooperation has instituted an Outgrower and Value Chain Fund (OVCF) to support outgrower schemes and integration of small holders into commercial agriculture. The OVCF is inviting Outgrower and Value Chain Schemes (OVCSs) to express their interest in participating in the OVCF Project. The operation of the OVCF began on 1st April 2011 with funding from the German Development Cooperation through KfW.
The Fund will provide medium to long term loans (of at least 3 years) for financing agricultural value chains.
An OVCS, is expected to consist of a Financial Operator (e.g. a bank), a Technical Operator (processor, exporter, buyer, etc) and existing group(s) of Outgrowers, who have come together to undertake a medium-long term project on a specific commodity. Isolated specific interventions along the value chain for specific commodities/enterprises are also eligible for this support. It is expected that the three parties (Financial Operator, Technical Operator and Outgrowers) will together apply as one OVCS to access the Fund.
In the event of an OVCS getting approval to access the Fund, a tripartite agreement detailing out the responsibilities of the members will be signed.
The responsibilities of the members of an OVCS are:
- Financial Operator (FO): The bank/financial institution itself as the financial operator will approve the farmers’ credit applications as well as those of TOs. It shall have the obligation to provide loans either through the TO to the outgrowers or to outgrowers on their own merit and to provide banking services to the TO as well as to the outgrowers. It shall accompany the clients throughout the loan duration. Among others, the project’s bank shall regularly issue statements of account and follow up very closely their customers’ debt services. Finally, it shall have to bear the full credit failure risk.
- Technical Operator (TO): The TO shall provide technical and advisory services to the outgrowers to ensure quality standards of the production and guarantee to purchase the harvest according to agreed prices. The price definition (method of calculation and the relevant references) shall be defined in the tripartite agreement. The TO, shall also be in charge of technical project coordination. The TO will together with the project’s bank screen the participating outgrowers, according to the eligibility criteria (spelt out in the tripartite agreement). The TO will also support the formation and strengthening of farmer associations. Finally, the TO shall arrange to deduct at source loans falling due from sales proceeds of outgrowers to pay the bank.
- Outgrower: The outgrowers shall have the obligation in the process of the project to provide certificated user rights for the farm land, to invest in modern production inputs, to deliver his harvest to the TO and to service the principal repayment as well as the interest charged. They shall themselves into outgrower associations and remain members. These associations should be in charge of negotiations with the TO and the FO and should ensure the regular delivery of the products to the TO and the repayment of the individual credits to the project bank.
The OVCS, in expressing interest in accessing the Fund, should show proof of the following in their selected project:
- Poverty reduction impact
- Willingness of TO to work together with the outgrowers and to support outgrower associations
- Availability of a sustainable business plan at the TO level
- Marketing opportunities for the value chain products
- Job creation potential
- Environmental sustainability
- Potential to replicate successful approaches or to create innovative approaches
- Synergy between TO and FO
- Proven track record of TO
- Reliable accounting system at the TO level
- Project shall favor equal participation of all groups and if possible give preference to vulnerable groups
- Economic viability of the investment
- Financial sustainability of the investment
- Documentary evidence of approval for the FO to do business by Bank of Ghana
- Realistic cash flows generated from the investments undertaken
How To Apply
This announcement is also available at MOFA website: www.mofa.gov.gh
For enquiries, please write to:
The Fund Manager
Outgrower and Value Chain Fund
Ministry of Food and Agriculture
P. O. Box M. 37
Or send mail to:
Closing 31 Dec, 2011