Value Chain Financing Instruments in Sidama Coffee Value Chain, Ethiopia

Abstract

The study assessed the type of value chain financing instruments used and their respective characteristics in Sidama coffee value chain. The study uses data collected directly from Sidama coffee value chain actors through structured interview and questionnaire. Random and purposive   sampling methods were employed. The data was descriptively analyzed by using value chain analysis approach. Accordingly, there exists both direct and indirect value chain financing instruments in Sidama coffee value chain. A number of value chain financing instruments are employed in the chain, but the common instruments identified along the chain are categorized under product financing, receivables financing and financial enhancements. The instruments are characterized as informal and trusts-based and operate under mutual agreement between actors and are mostly the governance is conventional. Even though the conventional nature and poor infrastructure (both physical and financial) to reach each actor are challenges to the chain financing, the growing coffee market, existence of strong intervention, capitalization of cooperatives, the promising trend in the countries private owned financial institutions are found as the strongest side of the chain financing.

Sidama coffee, value chain analysis, Value chain financing, Value chain financing instruments