How to build sustainable business links for smallholder farmers: Value chain development in Bangladesh

Small farmers are always linked to the local private sector, at the time when they buy input and tools from suppliers and when they sell their produce to traders and sellers. But often these linkage are not strong enough to secure high quality input and the necessary technical knowledge, hindering small farmers to increase their productivity and diversify into higher value agriculture production meeting the market demand.

The IFAD-supported Market Infrastructure Development Project inCharland Regions (MIDPCR) addressed this by systematically building linkages among the different actors of one value chain. The project’s Rural Enterprise Component (RED), implemented by the international NGO iDE, aimed at identifying and linking small-scale producers to lucrative market opportunities and adopting a systematic approach to develop sustainable value chains in the project area, one of the most remote and poor areas of Bangladesh.

Until today, the RED activities have led to an increase in crop yield and additional income per farmer ranging from BDT3,000 (USD 40, fruit garden) to BDT21,000 (USD270, fish), strong linkages between different stakeholders of a value chain; sustainable input supply and technical assistance for farmers through to 52 private sector institutions, 4 public agencies and 2 research organisations; adaptation of more than 30 new technologies (such as pheromone traps, pond water and soil testing services, hybrid seeds, plastic crate for vegetable transport, early separation of chicks and inoculum, a bacteria that when mixed with seeds can increase production by 20% and significantly reduces the need for urea fertilizer once plant is grown). Within the two years of project implementation, successful interventions were scaled up throughout the area, increasing the outreach from 20,000 to 72,000 farmers.

Nurul Amin,
Project Manager at iDE
 Nurul Amin, Project Manager at iDE, explains the approach, success factors and lessons learned of MIDPCR’s RED activities:

How did the project strengthen the market linkage and value chains?
The activities, can basically be broken down in 3 steps: First, we identified the agricultural products with the highest commercial potential in the area through field work and studies. These products were chosen based on a number of criteria, such as the potential increase in overall productivity, number of farmers/households involved in the cultivation, geographic dispersion in the project area, potential to structure and strengthen the value chain, opportunities to introduce and access new technologies to improve quantity and quality of production and potential to link with MIDPCR markets. On this basis, we defined target interventions and cluster areas.

Following this, we started to build linkages among the relevant actors of the selected value chains. While local producers normally were only in touch with local traders/sellers when the production was concluded, RED activities brought relevant actors together before the actual production started, which allowed to identify market demand, input shortages and technical assistance needs. This was done through meetings and workshops, such as pre-season planning meetings on the village level, bringing together local suppliers, producers and traders to discuss product market demand, input supply, availability of services and a production plan for the coming season as well as linkage workshops on the Upazilla [sub district] level. These workshops brought together all actors along one specific value chain -the Market Management Committees, traders, suppliers, service providers, producers and relevant government officials – aiming at building relationships among farmers, input suppliers, service providers, traders/buyers; improving the capacity of farmers to seek services from other value chain stakeholders; and creating interest of input suppliers and buyers/traders to expand their business activities.

Poultry farming is particularly suited for 
women farmers as it can be done within 
the farm.  ©IFAD/G.M.B.Akash
Finally, we built the capacity of rural producers enabling them to increase their production and meet market demands by organizing technical assistance and introducing new technologies. In our trainings, we brought in the relevant actors along the value chain as experts and business service providers. In Marketing and Management Trainings, for example, farmers learned how to turn their farming into a commercial activity, about their target markets and how to develop entrepreneurial capacity. Further, together with the farmers, we identified technical issues that were hindering them from increasing their production or meet market quality standards. We then facilitated private sector led technology demonstration at local level and organized visits, for example to expert farmers who were already very successful in their production or utilized new technologies or to the main markets where one specific product is sold or to input suppliers that were known for good quality inputs. While this supported farmers to clarify specimen with main sellers, exporters and marketing managers, it also increased their market access and strengthened linkages with value chain partners.

Do you expect these linkages to be sustainable?
Yes. As those interventions created benefits for all actors along the value chain, it is to be expected, that the created links will be sustained and farmers can continue to grow their business. Also, we already see a spill-over effect: While under MIDPCR mainly farmers who were already farming a particular product, other farmers in the region, once they saw the difference in income made through a new variety or technology, adopted the approach as well.

What were critical factors leading to the success of the project?
The main success factors during the implementation of the RED component were
  • that we applied a market development approach to secure private sector actors’ participation – if there is a business opportunity, the project intervention will be sustainable and beneficial to all stakeholders involved;
  • that we followed a bottom up approach to ensure that activities were demand-driven and addressed the actual needs of farmers,  rather than imposing activities and products from the project; and
  • that the roads and markets constructed under MIDPCR’s infrastructure component ensured an enabling environment for farmers to access markets as well as for suppliers/traders to come to the farm gate.

RED activities have increased the income of fish farmers
by USD270. ©IFAD/G.M.B.Akash
What are the lessons that you take away from this project?
Looking back at the RED activities, there are a number of lessons that we have learned, such as
  • combining value chain development activities with access to finance (as applied in MIDPCR’s NGO activities) will help farmers to adopt new technologies/varieties;
  • both husband and wife should participate in activities as our experience shows that both are controlling different areas within the household, and both joining in the training enables them  to take a joint informed decision rather than one partner blocking it;
  • increasing farmers associations’ business management capacity can ensure sustainability of project interventions and increase benefits for farmers;
  • working with trader associations can potentially open up additional connections for farmers on quality inputs and selling channels;
  • competition is a key factor to ensure quality for the farmers;
  • the private sector should be involved from the design stage if a project is targeting increased private sector involvement.