The ‘Marking markets work for smallholder farms and rural producers’ project focussed on increasing income and employment opportunities for marginalised rural communities in Bangladesh’s dairy sector.

1. Making Markets Work for Small Holder
Farmers & Rural Producers - Bangladesh
Key points
Donor: European Commission
Dates: April 2007 – Present
Sector: Dairy
Location: Gaibandha district,
Bangladesh
Successes: 200% increase in
business transactions, 300%
increase in paravet incomes
Impact Awards winner 2011
Background
The ‘Marking markets work for smallholder farms and rural producers’ project focuses on four
districts of Bangladesh. The Gaibandha district is used here to illustrate the impacts and
lessons learned.
Practical Action is working with four local NGOs and 12 small-scale grassroots associations.
Dairy, beef and pottery were selected as the most promising subsectors to help smallholder
farmers challenge poverty.
Objective: To increase income and employment opportunities from production and trade in
farm and non-farm activities for marginalised rural communities in Bangladesh.
The problem:
One of the main challenges addressed by the project is the low income and livelihood
opportunities of dairy producers and other marginalised market actors, such as local vets, due
to lack of access to appropriate credit, low investment and low returns.
What we did:
Participatory Market Mapping: bringing market actors together to find blockages and
opportunities
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2. Once the dairy sub-sector had been selected for Gaibandha district, the project team
facilitated Participatory Market Mapping Workshops along with key actors from the market
system to identify constraints and opportunities. The main barriers to sector growth were
identified as:
Low volumes of milk production
Low working capital for collectors
No capital for purchasing motor vehicles to increase paravets’ outreach
No reinvestment in the agro-vet drugs and inputs shop
No credit options for commercial grass cultivation
To address these constraints, the project facilitated the formation of groups or associations of
producers, collectors, paravets and processors to increase their coordination and influence.
The project also created the District Enterprise Development Network (DEDN), a space for
public and private market actors to collaborate around the implementation of strategies and
activities aimed at tackling some of the barriers mentioned above.
The project organised “market tours” for key market actors to listen to the experiences of
smallholder farmers who were not getting appropriate credit and other services and inputs.
Helping market actors to identify critical problems and come up with solutions that work for
them
During the market mapping workshops, market actors identified that access to appropriate
credit services at different points of the value chain was a critical leverage point to transform
the market system. The team conducted rapid market surveys which showed that around
Tk8’125,000 ($110,000) were required for 284 value chain actors. The survey also showed
that the available credit was 10 times greater than required in only four finance institutions
that were providing small agricultural loans.
The project sent a list of interested actors and their credit needs to those four banks so that
the banks could meet them and assess their credit needs and business capacity.
Building connections and trust between market actors
The project team consulted with partner NGOs which have existing micro-credit programs to
extend credit of a maximum of Tk10,000 ($140) with 12.5% interest rate. After a series of
consultations, they customized their credit program to increase the loan ceiling, increase the
duration of repayment etc. for small holder livestock farmers.
The project identified finance institutions who were providing loans to small and medium
livestock enterprises and tried to link them up with marginalised farmers. At the beginning,
project staff had difficulties helping smallholder livestock farmers access Tk40,000-50,000
($550-$680) for purchasing hybrid cows to produce higher volumes of milk. However, visible
impacts at the market system level are motivating banks and other finance institutions to
change their attitudes and practices to give credit to the entire value chain. For example,
loans have been disbursed to 122 dairy market actors in Gaibandha District. This is also
making smallholder farmers in other sub-sectors more confident about the growth potential of
their own plots and business.
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3. Building the skills of strategic actors (not just the “poor”)
The project carried out learning sessions for finance institutions about credit policies and
products and to share experiences about appropriate credit packages, facilities and
repayment system, amongst other issues. As a result, a bank which has SME and agricultural
development credit programs (BSCIC) and other local credit providers introduced improved
credit packages that are more suitable to the needs of different market actors and less risky
to the most marginalised smallholders.
Improving Livelihoods
Over the past two and a half years, value chain actors in the dairy market in Gaibandha
district have increased their business volumes after receiving customised credit amounting to
Tk2’972,000 ($40,000). As a result, business transactions of milk and calves producers
have increased by 200% in two years.
With this extra income, producers are more aware of children’s schooling, quality food, social
responsibilities, as well as proper cattle management. By observing these changes in the
producers’ livelihoods, milk producers who were not part of producers groups are now forming
them or joining existing ones to increase their access to credit. Based on producer groups’
recommendation, banks and other credit institutions have assessed non-group members for
value chain financing.
Increased Paravet Incomes
A total of 24,397 marginalised farmers are getting services from paravets selected by the
project. These local veterinarians are carrying out vaccinations, primary treatments and
deworming.
Using credit provided by the local finance institutions, paravets purchased motorbikes and
treatment kits which, in turn, allowed them to provide faster, higher-quality services to more
smallholder farmers. As a result, paravets’ incomes have increased 300%.
Milk Collectors Loan Assistance
With the help of the project, milk collectors received their first loan ever for business
expansion. They invested part of the money in better and larger milk pots which allowed
them to trade larger amounts of milk. “If we see the collectors’ milk market is ensured and
the processors are proactive to buy milk, we feel secure to give loans as the collectors are
already in the market chain” said the manager of the credit provider KSB. This pro-activeness
of the processors leads to increased sales targets with higher quality, processed milk.
Lessons Learnt
The project created an understanding that value chain financing in the dairy sub-sector offers
an opportunity to increase the scope of the sector while reducing the associated cost and risk.
The changing attitudes of the credit organizations led to more stability of each business and a
comprehensive new look at the value chain financing model, tools and approaches.
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4. If all market actors build strong relationships between them, credit institutions are more
willing to extend credit. This was one of the most important lessons for the facilitation of
improving credit services.
If the project had not facilitated links with DEDN, but rather provided seed-money to the
value chain actors, the project would have created market distortions, dependency and
business uncertainty.
Carrying out Participatory Market Mapping is vital to identifying the leverage points for future
interventions. Through this process, the stakeholders themselves identified that lack of value-
chain financing is the common barrier for sector growth. The project team easily designed the
intervention whilst staying within budget. This cost-effective approach for market
development increased the stakeholders’ confidence and ownership of the process of market
development. After the market map had been reviewed and the changes visualised, the
paravet association has now drawn a separate market map to identify the leverage points of
the paravet service sector.
Another lesson learned from this project is that credit can give access to simple technologies
that make a great difference such as:
Gloves and covered milk pots to improved hygiene
Lactometers for measuring quality of milk
Women-friendly grass-cutting machines to reduce required effort and time
Using aprons during vaccination and minor operations to reduce livestock infection
and mortality
These simple and low cost technologies could inspire the credit providers to extend further
credit as they can observe their credit is providing added quality and improved incomes.
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