Value Chain Development in Bangladesh

The Finance for Enterprise Development and Employment Creation Project (FEDEC) has been working since 2007 to contribute to economic growth and poverty reduction in Bangladesh. Thereby it focussed on providing microfinance services to micro-entrepreneurs and value chain development services to improve access to markets and build the capacity of small businesses.

During the recent supervision mission, we have met with project staff, NGOs and beneficiaries and have seen many good examples for value chain development in Bangladesh. And while certainly all of them deserve to be shared, below are two examples: Cow rearing and prawn cultivation (the latter project has already successfully been replicated by a different NGO in another region and setting!):

Cow rearing value chain development
With the support of FEDEC, GRAMAUS has started the cow rearing value chain development project in March 2012. Currently about 300 households are participating in two upazillas (Mymensingh and Fulbaria). The project aims at tackling the insufficient level of knowledge and skills regarding cow rearing, raising awareness and practice of artificial insemination and increasing the low selling price of milk at the farmers’ end. As a result, GRAMAUS has developed a project that supports a complete value chain:

Farmers at milk collection point
1. Cow rearing/milk production
GRAMAUS has put in place a veterinary service that offers vaccinations, testing and artificial insemination for cattle. The project’s veterinary visits up to 30 farmers every day and is furthermore available over his cell phone for any questions or concerns the farmers might have. Currently, vaccination and testing is free of charge for the farmers as they are covered by the project. After two years –when the project is completed – GRAMAUS plans to charge a minimum fee to cover their expenses and ensure the sustainability of their intervention, explains Md Abdul Khaleque, Executive Director at GRAMAUS.

In trainings, farmers (husband and wife) learn how to diagnose diseases and to track the medical treatment of their cattle in a booklet provided by the project. Furthermore, the farmers are now also keeping record of costs and benefits. Other elements of the training included improvement measurements for cowshed and fodder. Already, these measures have improved cattle health and increased the milk production on an average of two litres of milk per cow.

The milk collection team
2. Milk collection
Due to the lack of a milk processing plant, farmers had to sell their milk on the market at an unstable and often very low price. In addition, they had to travel several kilometres every day to the market which meant valuable time away from their farm.

The project established a milk collection service. At several milk collection points, a milk collector now buys the milk from the farmers at a guaranteed price of BDT 38 per litre (market price fluctuates between BDT 20 and 45).

The milk collector is a microentrepreneur, supported by the project, who every morning, together with his two employees, tests and collects the milk and gathers the milk at his central cooling station. Currently they are collecting a 100 litres per day and are planning to expand. At 400 litres they will start to make a profit.

3. Milk processing
In the afternoon, the milk is transported to a local cheese factory that sells its cream cheese to stores in Dhaka. Earlier, the owner solely bought his milk from a collection point 200 km away, as there was no local collection. According to GRAMAUS, the owner is interested in buying more milk locally and plans to extend his enterprise – taking a ME loan from GRAMAUS.

In Comilla, farmers have been cultivating fish in their floodplains for several years now.  But cleaning out the plains in November/December in order to prepare for paddy cultivation in the next season came with a low price due to oversupply to the market, resulting in very little profit for the farmers. Two years ago, the Centre for Community Development Assistance (CCDA), therefore started to introduced fresh water prawns as a new species to be grown together with traditional fish species. The advantage of prawns is that, while being a high value product, they come with very little production costs. In fact, farmers only have to cover the costs for the juvenile as seeds. Additional fodder for the prawns is not necessary.

Prawn cultivation in floodplains
In the beginning, it was difficult to convince the farmers. Starting with an original set of 20 farmers, CCDA trained a total of 160 farmers on mixed fish-prawn cultivation, on water treatment, selected farmers to establish and run nurseries and established  demonstration ponds over a period of two years. At the end of this first phase, the farmers had harvested a total of 15,000 kg prawns, in addition to the traditional fish species, resulting in a net profit of Taka 7.5 million for the farmers, about BDT 47000 per farmer.

Prawn harvesting in Comilla
Costs and benefits are shared in proportion to land owned and investments made by each farmer under a community-managed system.  The farmers of adjoining fields in a flood plain have formed an association to manage the production. “We also meet to discuss technical issues,” said Mr Salunddia, who was selected as association head by the 22 owners of the floodplain,  “such as health condition of our fish and how we will go about marketing our produce.” The association also coordinates the marketing activities. Most of the prawns are sold at the local market, some are transported to Chittagong for the export market. Through online forums, such as sellbazar and robibazar, where farmers upload a picture of their prawns and connect with new buyers. To ensure the quality during the transport, CCDA plans to provide the farmers with training on grading and packaging.

By generating jobs, for example in the fishing, nursery and marketing actvities, prawn cultivation also benefits households without any land in flood plains. Since the farmers now control and treat the water quality and stopped using pesticides, the production of traditional fish species went up as well, improving nutrition of the local community. Given the successful test-phase, CCDA decided to scale-up the project in a second phase. The project will now be implemented in two districts (Comilla and Brahmanbaria), involving about 400 beneficiaries.

Hatchery construction site
After seeing the profit made, farmers are very interested in prawn cultivation. So interested that the demand for post larvae (PL)/juveniles could not be met, told M. A. Samad, Executive Director of CCDA. Up until today, the PL had to be bought from a hatchery 300km away. In addition to the high mortality rate during transport, the supply was limited. This is, why CCDA, with the support of PKSF, has started to build its own hatchery in Daudkandi, Comilla, that it will run as a social entreprise. “With this hatchery, we will be able to provide our project participants with 4 million PL per year”, said Mr Samad. “We are also establishing 40 additional nurseries in both districts. The hatchery will enable us to not only provide our participants with better PL, but also at a lower price.”