Strengthening
the Dairy Value Chain
in Bangladesh
Funded By
Bill and Melinda Gates Foundation
Goal of the Project
Targeted landless and smallholding households
(income<$2/day) in North and Northwestern Bangladesh
have increased incomes and more sustainable livelihoods
through incorporation into a strengthened milk value chain
Objectives of the Project
Improve the milk collection system in rural and remote areas
Increase production by improving access to inputs, markets, and
services by mobilizing groups of poor producers and input service provider.
Improve the breeding/Artificial Insemination (AI) network
Ensure access to quality animal health services at the producer level
Improve the policy environment.
Project figures till date
Area of operation
Total participating households
District
9
Upozila
23
Union
91
Village
385
27068
Farmer leaders
2529
Milk collectors
276
Livestock health workers
171
Information Service Centers (ISC)
47
Community Agri-Shops (CAS)
130
Household average production
1.47 (liters/day)
Household average milk sales income
33.54 (Taka/day)
Average income of Input shops
18141 (Taka/Month)
Livestock health worker income
12604 (Taka/Month)
“ The project has employed a group
approach to mobilising farmers.
From engagement, farmers progress
through categories C, B and A
(chronologically), graduating from C to B
to A on the basis of their skill and
competency acquisition ”
SDVC Group status
Year
Only Women
Group
Only men
group
Mixed
group
Total
% of
women
group
Year 1
115
6
170
291
32%
Year 2
66
1
161
228
36%
Year 3
142
6
216
364
41%
Total
323
13
547
883
37%
Group Savings
Prospect & Progress
“Access to finance is critical for small
holder farmers to enable them further invest
in dairy development. But due to lack of
attractive financing options, farmers, who
have one or less than three cows, are
reluctant about seeking loans from financial
institutes since the conditions are not
favorable ”
Access to Finance by Smallholder farmers
The traditional financial institutes in Bangladesh are wary of the dairy industry in
general for its exposure to various forms of risk and are thus unwilling to provide
seasonal loans without some risk mitigation. Very few loans are available that cater
to the specific needs of the industry.
Dairy farmers need relatively larger loan than an average micro-finance loan and if
held to the weekly or monthly repayment schedule like others, it becomes
problematic to repay because a cow does not become profitable or, in other words,
it can not generate milk, as soon as it’s bought.
The financial institutions exist in the working area, that SDVC has observed, are:
􀁺 Public Bank
􀁺 Private Bank
􀁺 NGOs
􀁺 Moneylenders
􀁺 Families, Friends, and Relatives
Role of Financial institutions to support
smallholder farmers:
The loan requirements of Public banks in Bangladesh, albeit encourage various
agro based industry to apply for financing, may be too stringent for small scale
farmers to apply. In reality, on the local level, small scale farmers are often out of the
lending net because of various inadequacies in terms of meeting bank requirement.
As a result, only mid size farmers, who are potentially less risky clients with
collateral, can only use these loans. Interestingly cooperatives do not mitigate the
risks for the banks as well, as there is no one to hold responsible in case of
defaults.
There is apathy and indifference in the Private banks about giving loans to dairy
industry. The industry is considered to be too risky and inefficient to be considered
for large loans.
The issues regarding NGOs credit are like: Paying in weekly installment did not go
with the milk production cycle; very high interest rate (12%-15%) was detrimental to
the small farmers;imposing flat method of interest rather than decline method, and
Do not have risk mitigating coverage for damage to the cattle
Group Savings
“Since banks and other financial institutions
are not interested in providing loan to the
small producers in the bottom of the pyramid,
SDVC facilitated an informal savings
activities through clustering efforts; i.e.
encouraging farmer groups in group savings
mechanism.”
Group Savings status
No of Groups engaged in savings (As of
Mar'2011)
Region
Year-1
groups
Year-2
groups
Year-3
groups
Total
SDVC
109
175
252
536
# of groups formed
291
228
344
863
37
77
73
62
% of groups engaged in
savings
Savings figures across the regions
Region
Avg total savings per group (As of Mar'2011)
In BDT
Year-1
groups
Bogra
Year-2
groups
Year-3
groups
Total
9890
8361
3310
7187
Rangpur
13912
6501
2451
7621
SDVC
12125
7327
2833
7428
How do the groups utilize their
Savings?
Utilization of Savings
Group members are using the savings amount in different mechanism; such as:
1. Revolving savings amount as loan within group members. Group members
taking loan from savings amount to meet their dairy related need
2. Weekly savings providing to members by rotation to purchase feed only. In this
process producer can purchase big volume of feed which results lower
purchase cost.
3. With the savings amount few groups purchasing cross breed cows and giving
to members based on agreement among group and members. In some groups
members are providing cross breed cows with a view to ensure improved
breed cow for 100% group members.
4. Group purchasing bulk volume of feed and medicine or arranging schedule
vaccination with the group savings. This cost low for bulk purchasing and they
can arrange vaccination and de warming program maintaining schedule.
5. Deposit savings money in Bank or in group fund (Some groups that yet couldn't
set mechanism for utilization of savings.
7. In maximum cases members using the savings amount in dairy purpose; but
some times groups are also providing loan to meet other emergency needs.
% Distribution of Savings Usage by Year 1, 2 & 3 farmer groups
Input
purchase Input seller
Group year by
Development
Members (%)
(%)
Cow/
cattle
Purchase
(%)
Credit for
other dairy Cash in
related
hand/
purposes bank (%)
(%)
Total
savings
(%)
Yr-1
groups
16
5
13
33
33
100
Yr-2
groups
13
2
3
29
54
100
Yr-3
groups
7
1
0
27
65
100
All Year
13
3
6
30
47
100
Success
Of savings groups
Key successes:
• Savings help small-scale producers reduce their costs in ensuring access to
services and markets.
• In group activities higher participation rate is observed among the savings groups
than other non-saving groups
• Savings group have become more organized than non-savings group
• Savings group get easy access to different input and services; e.g.: groups can
easily purchase necessary inputs and services utilizing their savings and organize
regular vaccination and de-worming campaign with their savings money.)
• Savings groups also invest their money to purchase high breed cows for their
group members
• The relatively large amount from savings can be used as collateral when a group
seeks credit from financial organization.
Group savings:
• increase resources for potential group or individual activities and reduce
dependency on outsiders;
• serve as a form of “insurance against risk”;
• improve a sense of group ownership and promote group repayment discipline;
• facilitate access to outside loans (banks are more willing to give loans to groups
that save);
• can lower the costs of banking and can be used to give bigger loans to members
of the group;
• can be used as emergency loans to members in times of need.
Group savings enable
Credit facility
Credit within the group:
nce the group saving fund becomes big enough, the group may decide to lend part
of their funds to individual members to help them meet their short-term emergency
credit needs. These loans should be small and should be repaid in a short time, so
that other members can also use the fund.
Credit with formal institutions:
The advantages of getting group credit from formal institutions are:
• a group can get more credit;
• members can assist each other in preparing loan applications;
• a group is in a better position to discuss credit with the organization or bank;
• the group can provide evidence of profitability of milk production in the area;
Group loans are usually granted with group liability. This means that each
member is individually responsible for repaying his or her part of the group
loan. If any member fails to repay his or her part, the other group members
must repay it. This rule ensures that all group members repay their part of the
loan - otherwise, the group will not be able to borrow from the bank again.
Challenges
With savings groups
Impediments:
• Some of the savings groups failed to figure out the savings utilization process
• Challenge in keeping fund, credit and accounts by semiliterate members is
commonplace. Though some groups have few literate persons, but they are not
capable enough to keep proper records of savings.
• It is seen that group members can manage small amount of savings money by
themselves, but for big volume they need full assistance from CARE staffs.
• In maximum cases banks are reluctant to open group bank account due to
factors like policy of central bank, and absence of proper registration of such
informal groups from government.
• However, registration of the savings groups remains a challenge. It is due to
complicacy of various preconditions, rules and regulations of different ministries
of the government.
Registration of savings groups
“ Registration of the savings group under agencies of
government like ministry of Youth, ministry of Women
Affairs, or ministry of cooperatives is important to provide
farmers a legal recognition for their group. This formal
recognition will help farmers attain annual grant / aid from
government, take financial loans from banks or from other
microfinance institutions”
Importance and plans for registration
Importance of registration:
(1) The annual grant/aid from government departments will help the farmers in their group
mobilization after SDVC exits.
(2) Registration will give the group recognition as a unique entity which will encourage farmers
to continue different group activities.
(3) Extreme poor producers from registered group can get easy access to VGD card or other
aids (sewing machine, cow etc.)
(4) Other CARE/Non CARE Project may give prioritized support to the registered groups
(5) women affairs will work in awareness and empowerment issues with registered groups.
They will also keep the group in close follow up through regular communication.
Group registration plan:
SDVC is actively facilitating the registration process with government ministries like Youth,
Women Affairs and Cooperatives etc. Though 50% of the groups will be eligible for
Registration by year 5 of the project, but for government’s internal policies of enrolment, SDVC
opts for registering 10% of the savings groups, which will work as model groups for other dairy
Communities to be registered gradually in future.