Haat Business Services Concept Note – Working Draft
Introduction
Agricultural produce, as identified in various research reports, reach consumers
through a complex web of buying and selling, sometimes involving multiple
intermediaries.i
Broadly speaking, there are 4 types of agricultural markets where agricultural produce
is traded: assembly markets, village retail markets, urban retail and wholesale markets
(“bazaars”), and terminal markets. Generally, the structure and linkages of the
marketing channels for agricultural produce is product specific, i.e. the marketing
channel for potato and rice paddy might be different even though the roles of the
traders are the same.ii
The Haat Business Services (HBS) team has so far been looking to identify and
address market failures and inefficiencies1 specific to haats. The following strategies
are currently being pursued:

Building the Haats as a Platform for Service Delivery
The haats, through capacity building of associations and linkages with private
sector partners, will have controlled governance/monitoring to ensure
transparency, accountability and persistent development facilitating traders to
procure more merchandise, and for farmers/producers to liquidate goods more
efficiently. On implementing this strategy, HBS team, through baseline and post
baseline surveys, will be able to answer the question2 “Can Haats be a platform
for service and information delivery to its users and the wider rural
community within the Haat catchment area?”

Scaling Up the Haats by Leveraging with K inter and intra Component
activities
By analyzing and coordinating with K Component A and B activities and
delivering some of their interventions through the haats, we can help to establish it
as a one stop shop for producers to go to in order to look for solutions. Through
development of specific value chains (paddy, vegetable, poultry) as well as
capacity building of the associations at the haats (HMC, UMMC, MMMC), the
HBS team plans to answer- “How can better functioning Haats lead to the
betterment of farmers/producers?”
The HBS team is looking to develop strategies to further intervene in the agri
distribution system of Bangladesh. The aforementioned strategies will serve to
develop, link and scale-up the markets with the help of the private and public sector
For this concept note, market “failure” or “inefficiency” in the marketing and distribution chain for
agricultural produce will be broadly defined as: any market situation where prevailing prices of goods
and services do not reflect the true value, cost, and assumption of risk in producing, offering, or
consuming them to the detriment of the business environment and society. In short, any situation when
the forces of demand and supply do not meet at a “fair” or commercially sustainable price that
optimizes benefits for buyers, sellers, and society as a whole.
2
Refers to the questions sent to Manish Pandey and Peter Roggekamp on December 17, 2007 titled“Questions K is looking to answer by executing the pilot interventions at the Haats”.
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and aid in its development. The next strategy being considered is to develop the
market information collection and dissemination of the government and the
stakeholders of the distribution chain of agricultural produce.
Research Findings
A report prepared for DFID by International Development Enterprises (IDE) states
that market irregularities empower a few large rice traders and millers, in Bangladesh,
to take majority of the benefitsiii. The report mentions lack of easy market linkages of
producers with large urban markets, few appropriate and affordable processing
facilities, underdeveloped market infrastructure (storage facilities, sheds etc.) and the
absence of collaboration amongst farmers and traders as agents adding to the
irregularities in the markets. These issues are identified as constraints in almost all
secondary sources reviewed.
Popular national dailies, discussing the pricing of agricultural produce, tend to
demonize middlemen and suspected syndicates for pricing failures resulting in higher
prices of essentials and profiteering3 by businesses.iv A Centre for Policy Dialogue
(CPD) report delves further into this issue and shows that such profiteering happens in
the case of some specific agricultural produce such as: paddy price mark-up by
millers (22.9%) and retailers (12.2%); onion price mark-up by retailers (21.05%).v
Chairman of the Regulatory Reforms Commission (RRC), Akbar Ali Khan, attributes
the price hike of essentials to profiteering by certain agents in the supply chain and
advocates setting up separate market monitoring and consumers’ rights protection
agenciesvi. Other reports such as The Daily Star’s monthly publication, Forum, does
not consider this to be a bad thing and refers to ‘profiteering’ as profit maximization
by businesses in the agricultural sector.vii However, without terming ‘profiteering’ as
good or bad, it is one of the variables leading to inefficiencies in the market. It is an
indication that the distribution channel is unfairly allocating too much power to some
of the stakeholders, especially those in closer proximity to the end consumer, while
denying the weaker, and in most cases, poorer stakeholders (farmers and producers) a
fairer price for their produce.
An article by the Economist, titled Food Prices Cheap No More, ascribes the global
increases in food prices to factors such as: increased demand for essentials, especially
meat and poultry products, stemming from increased income levels in developing
countries; and higher usage of grains for bio-fuel (e.g. ethanol) production. The article
highlights how this is happening at a time not of scarcity but of abundance as 2007
saw the largest global cereals crop on record (1.66B tonnes) viii. The increased
international prices coupled with natural calamities have contributed heavily to the
increase in agri commodity prices in Bangladesh. In light of the global and local
increased prices of commodities, a more efficient distribution network has the
potential to enable the poor farmers and producers of agri goods in Bangladesh to
generate more revenue.
Profiteering is broadly defined here as making “excessive” or “supernormal” profits on essential
goods that are in short supply, i.e., prices that are not justified by the corresponding costs, valueaddition, or assumption of risk, or prices that are inflated through unethical or anticompetitive means
such as creating artificial supply shortages through hoarding or creating barriers to entry for
competitors.
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2
Reports by CPD and the Power and Participation Research Center (PPRC)ix identifies
lack of government policy support (e.g., anti-hoarding policies, proper allocation of
fertilizer & seeds, and price of diesel, kerosene), and low market information
availability, as constraints leading to market inefficiencies.x A report by the Palli
Karma Sahayak Foundation (PKSF) largely concurs with this view, but adds
infrastructural shortcomings and lack of access to finance of farmers/producers and
traders as further constraints.
Government Solutions
The Government of Bangladesh (GoB) plans to intervene in the distribution system of
agri produce to reduce the price of essentials by increasing supply to the market and
setting up price monitoring and control mechanisms. However, the GoB’s plan to
import large quantities of ricexi and carry out open market sales (OMS) at a fixed
pricexii sends negative price signals to traders. Such government influences could lead
middlemen in the distribution chain to decrease their purchases and may eventually
result in the price of paddy to fall. An article in the Economist, titled “The End of
Cheap Food”xiii and another by the Agriculture and Rural Development Department of
The World Bankxiv states that even though dearer food prices hurt consumers, in the
long run it increases the income of the poor. The Economist article makes the case
that heavy handed government interventions, such as price controls, eventually
discourage producers and “almost certainly fail”.
In Bangladesh, if the price of paddy is kept artificially low, farmers will get lower
prices for their produce making them switch to other high margin crops like
vegetables. This may cause the supply of paddy/rice to fall and increase the demand
for fertilizer, as vegetable requires relatively higher quantities. Deviation from the
cropping pattern used by the government to supply fertilizer and seeds to the poor
farmers could hurt productivity and aid to the woes of the poor as well as increase
government subsidy spending. Recent shortages of fertilizer after 2007 floods and
Hurricane Sidr gives us a snapshot of what may happen in the long run if subsidies
and price control measures are put in place indefinitely.
In order to send positive signals to the market, the HBS team feels that the GoB has to
tackle the market failures on multiple fronts. Developing a system of market
information collection and dissemination (as public goods i.e. freely available)
would be key to reduce abuse of
market powers (e.g. by enacting
antitrust policies, price controls,
etc.) and externalities (such as
subsidies and fines).
Figure 1 shows how non-existent,
uncoordinated, inaccessible and
unreliable information leads to
problems
in
policy
making,
intervention design, and imperfect
competition, which in turn Figure 1 Market Failures Stemming from Information Failure
accentuates the market
failures.
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The GoB has a system of information gathering and research called the National
Agricultural
Research System
(NARS)
of
Bangladeshxv.
NARS consists of
ten
research
institutes under the
umbrella
of
Bangladesh
Agricultural
Research Council
(BARC).
The
institutes
are
depicted in Figure Figure 2 National Agricultural Research System (NARS)
2.
According to the information on the institutes’ websites, they are mostly autonomous
with set mandates and management. Increasing coordination and partnerships between
these institutes has the potential to widen and deepen their impact on the rural farmers
and producers.
Possible Strategies
In order to address market inefficiencies/failures, the Haat Development Services
(HDS) team is looking to develop the agri market information collection and
dissemination by both public and private sector stakeholders of the distribution chain
by facilitating the creation of a centrally managed source of regularly updated agro
market information database.
This strategy involves coordinating government agencies like Department of
Agriculture Marketing (DoA), Ministry of Agriculture (MoA), Soil Resource
Development Institute (SRDI) etc., to effectively collect relevant market information
so as to develop accurate cropping patterns and models. Accurate plans will facilitate
the government to: better allocate subsidized inputs (fertilizer & seeds); develop
policies to address key areas of failures in the distribution chain; develop contingency
plans in case of natural calamities; and identify areas to deliver training to increase
productivity. Linking the public organizations (SRDI, DAM etc.) with private sector
modelers (IRRI, public and private universities, etc.) will enable the government to
develop better forecasts and cropping patterns and better recover from and deal with
system shocks.
In addition, linking the agro market information database with a commodity
exchange, set up through private public partnerships, can help the distribution and
marketing channel evolve into a modern trading platform. It can also provide the
platform to make the information collection and dissemination sustainable for private
sector entrepreneurs. Such an exchange is currently being promoted and set up in
Ethiopia, jointly by the International Food Policy Research Institute (IFPRI) and
Ethiopian Development Research Institutexvi. Their aim is to modernize the marketing
channels of agriculture produce, and increase transparency and competition among
the market stakeholders.
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Possible Areas for Intervention:
 Facilitate in the development of interlinked data warehouses for consolidated
agro market information and disseminate to public and private sources,
creating better links between them, thereby streamlining allocation of inputs to
maximize agricultural productivity.
This can be done by coordinating with government agencies like Department of
Agriculture Marketing (DoA), Ministry of Agriculture (MoA), Soil Resource
Development Institute (SRDI) with private (Universities, telecoms, multinational
agri input producers, etc.) and not for profit institutions such as the Bangladesh
Economical Research Institute (BERI) to effectively collect and examine relevant
market information
Such an initiative has been undertaken by Soil Resources Development Institute
(SRDI) in collaboration with CEGIS, a not-for-profit Geographical Information
System (GIS) based research organization. It is developing a two gigabyte (2GB)
database that stores soil data using primary information from Upazila Nirdeshika
(Upazila Manual). The system is called 'The Soil and Land Resource Information
System' or SOLARIS. A customized GIS software SOLARIS-GIS is also being
developed to map soil data based on classification (soil texture, land type,
landform, drainage, slope, and surface water recession) and condition (crop
suitability, land zoning, nutrient status and fertilizer recommendation). The system
can analyze data at the upazila, district, and national level. xvii
Facilitating the development of more databases and linking them together, would
further the aim of reducing market failures and inefficiencies.
Possible Entry Points for K:
I. Build capacity of trainers for Government Agencies and Agricultural
Information System (AIS) personnel
II. Develop awareness of the importance of Market Information through
partners such as BERI
III. Facilitate the collection and development of data warehouses on total
Upazila wise cultivatable land (acreage) by coordinating Upazila Market
Management Committee (UMMC), Government bodies such as SRDI,
BARI, BERI etc.
IV. Facilitate the collection of information on Upazila wise cropping pattern and
total input requirement per pattern by coordinating UMMC and Department
of Agriculture Marketing (DAM)
V. Facilitate the development of a forecasting method for contingencies in case
of calamities and building capacity of UMMC/ Municipality Market
Management Committee (MMMC) in association with, Ministry of
Agriculture (MoA) and Flood Forecasting & Warning Center (FFWC)
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Possible Interventions
1. Access to Market and Competition: Due to unsystematic forward integration
and asymmetric information most farmers fail to know the demand and
potential of their product beyond their vicinities therefore ends selling at a
non-competitive price.
Probable Intervention Area:
Establish information centers at structured assembly markets
Entry Point:
I. Identify the potential assembly markets in association with UMMC/HMC
II. Develop and Train Content Providers and Information Disseminators in
association with DAM, HMC and Private Sector e.g. GP CIC, Cellbazaar,
Ghat, Alokitogram
III. Promote contents and create linkage among remote markets
2. Access to Technology: Due to unavailability of inputs and inadequate
knowledge of production technologies, farmers fail to make best use of their
resources and often end up generating negative externalities.
Probable Intervention Area:
Develop content on production know-how based on UMMC based cropping
patterns and disseminate them through workshops and FGDs
Entry Point:
I. Identify major crops and develop contents in association with SRDI, MoA
and Private Sector
II. Develop
III. Conduct workshops and FGDs in association with UMMC, SRDI, IRRI,
BRRI and NGOs e.g. BRAC, ASHA, GAF
3. Access to Market Info: Market info refers to price of
inputs and outputs, supplier information and cost of
transportation etc. The DAM database currently
collects market price information on 15 different
commodities from 42 districts and uploads those to the
database everyday. But that’s not sufficient. Farmers
often end up selling at lower price due to unavailability
of updated information.
Probable Intervention Area:
a. Establish info booth or price table at assembly markets
to help the farmers understand the trading pattern in
association with UMMC, DAM and Private Sector.
b. Capacity building of AIS personnel as professional media-men to deliberate
information in mass media and the community.
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4. Access to Contingency Plan: Due to absence of proper AIS and Climate
change information, farmers get little chance to take pre-cautions on natural
shocks. Again due to inadequate contingency plan, they find it even difficult to
recover or re-invest in harvest after any disaster.
Probable Intervention Area:
Establish back-up inventory of inputs at District Level in association with MoA,
Disaster Management Bureau, Ministry of Food and Disaster Management etc.
List of Potential Consultants:
1. S.M. Shahiduddin Iskander
Lecturer
Institute of Health Economics
University of Dhaka
2. John Tracey-White
Marketing and Rural Finance Service (AGSF)
Agricultural Support Systems Division (AGS)
FAO
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Bibliography
i
Challenges of Balancing Producer Incentive and Consumer Satisfaction: Exploring Market Dynamics
of Essentials Through A Triangular Study of Producers, Traders, and Consumers, Power and
Participation Research Center (PPRC), July 2007. pp. 16, 27
Price of Daily Essentials: A Diagnostic Study of Recent Trends, Centre for Policy Dialogue (CPD),
May 2007. p. 5
Value Chain Analysis of Vegetable Production and Marketing System with Special Focus on Dhaka
City Markets, Palli Karma Sahayak Foundation (PKSF), July 2007. p. 10
ii
PPRC, p. 16
iii
Subsector Analysis and Market Assessment: FINE AND AROMATIC RICE SUBSECTOR,
International Development Enterprises, DFID Bangladesh, September 2002. pp. 19-22 Available at
http://www.value-chains.org/dyn/bds/docs/detail/261/1
iv
BBC Bangladesh Sanglap: CONCERN OVER SPIRALLING PRICES OF ESSENTIALS, The Daily
Star, July 29, 2007, Available at: http://www.thedailystar.net/2007/07/29/d70729060175.htm
v
Price of Daily Essentials: A Diagnostic Study of Recent Trends, Centre for Policy Dialogue (CPD),
May 2007. p. 7
vi
Akbar Ali calls for public stand against profiteering, The Independent Bangladesh, January 23, 2008,
Available at: http://www.independent-bangladesh.com/20080123760/country/akbar-ali-calls-forpublic-stand-against-profiteering.html
vii
On agflation, Rahman, Jyoti, Forum, The Daily Star, November 2007, Available at:
http://www.thedailystar.net/forum/2007/november/agflation.htm
viii
Food Prices- Cheap No More, ,The Economist, , Available at:
http://www.economist.com/displaystory.cfm?story_id=10250420
ix
Ibid. p. 27
x
CPD, pp. 27-43
xi
48,000 tonnes rice import okayed, The Daily Star, August 08, 2008, Available at:
http://www.thedailystar.net/story.php?nid=408
xii
Text of CA's address to the nation, The Daily Star, January 13, 2008, Available at:
http://www.thedailystar.net/story.php?nid=19054
xiii
The end of cheap food, The Economist, December 6, 2007, Available at:
http://www.economist.com/opinion/displaystory.cfm?story_id=10252015
xiv
Do Price Increases for Staple Foods Help or Hurt the Rural Poor?, Ravallion, Martin, Agriculture
and Rural Development Department, The World Bank, 1989
xv
The Ministry of Agriculture, Available at:
http://www.bangladesh.gov.bd/moa/moa.html#Agriculture%20Research%20System
xvi
The Ethiopian Commodity Exchange (ECEX):Making the market work for all, Gabre-Madhin, Eleni,
United Nations Conference On Trade And Development, Available at:
http://www.unctad.org/Templates/Download.asp?docid=8982&lang=1&intItemID=4333
xvii
e-Governance and the Agriculture Sector of Bangladesh, Morshed, KAM, Issue 2, Volume 1, 21
September 2007, UNDP, Available at: http://www.undp.org.bd/library/newsletter/e%20%20Focus_Vol_1_Issue_2.pdf
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