A brief concept on:

MULTIPARTNERSHIP MARKETING AND AG-BDS SERVICE FOR SMALL PRODUCER GROUPS

"LET'S DO TOGETHER"
(Multi-partnership for prosperity)

Prepared and shared by: Nirdhan (An Ngo for poverty reduction in Nepal) Head Office, Anamnagar, Kathmandu, Nepal Contact: Krishna Tiwari, tiwari527@gmail.com, 01-4102969, 9851096192

December, 2013

1. Background The agriculture sector accounts for one-third of the national GDP. Its contribution to employment, especially in rural areas, is quite considerable and there is a high dependence on agriculture as the major source of income. Over recent decades, agriculture development has failed to keep up with the increased demand from a growing population. With little scope for increasing area under cultivation, population growth has led to falling average farm size and increasing fragmentation, which further scatters the agriculture industry. Entire private sector, especially agro-industries is the engine for agricultural growth in Nepal's context. It pushes to generate and disseminate improved agricultural technologies that farmers can accept and increase farm production and productivity stepping up to higher scale. Commercialization of farming has seriously been taken as the driver of economy that facilitates agricultural industrialization for which the nation is striving for. But, lack of coordinated efforts to organize and unite the fragmented farming has been the major constraint. The collective actions on finding new markets, supporting small farmers/groups to produce quality products at required quantity by agro-industries, and again providing access to the quality inputs (marketing high tech. and quality inputs) seems the ultimate quest. While searching for practical solutions, obviously, it is the time for collective actions to get advantage of multi-partnership and a market platform for agro-business. The approach will pull the farmers to market demands, act more effectively; simply they grow more and get more. 1.1 Nirdhan (An NGO for poverty reduction in Nepal) Nirdhan is poverty focused non-profit making social organization and the first replicator of the Grameen Bank financial system (GBFS) in Nepal. Nirdhan has preceded microfinance in Nepal. It was established in 1991 as a non-governmental organization under the Society Registration Act, 1977. Nirdhan NGO, soon after its establishment started to fight against extreme poverty in Nepal through access to microfinance to poor families. An expedition to expand GBFS throughout rural Nepal was march forwarded by Nirdhan for the first time in Nepal. Nirdhan transferred all of its microfinance operations to the Nirdhan Utthan Bank Limited (NUBL), a sister organization of Nirdhan (NGO) in July 1999 with more than 25000 clients taking NRs. 65,975,092.15 loan; and the expedition has been mutually performed by both of the organizations sharing two sectors viz. financial and non-financial services. Nirdhan, then, has focused its works towards non financial services to the clients of NUBL. Nonfinancial service to the clients/others has included vocational trainings, skill transfer on improved technologies of agriculture and livestock farming, and startup supports for income generation, health and protection and asset recovery through community based micro-health insurance. In the last 5 years, Nirdhan has completed more than 10 livelihoods projects (with the component "increased access to micro-finance") and has served for more than 100000 families for livelihoods promotion. NUBL clients, however, have been getting nonfinancial services to many parts by Nirdhan through different donor supported development innovation projects, but these are limited to a small area and clients. Such types of projects/programs lack regular supports and are generally

emergency relief/start up supports to the marginal, vulnerable and excluded communities which by nature, might not be supportive towards commercial expansion and agro-business promotion. Nirdhan, thus, is preparing for Agriculture Business Development Service (Ag-BDS) to MFI clients with its own initiation on coordination with some private agencies. Nirdhan is happy to be the active part of nation's target of reducing poverty and appeals to join hands to attain socio-economic empowerment providing better opportunities to families realizing their full potential and enjoy the better quality of lives. 1.2 Nirdhan Utthan Bank Limited Nirdhan Uthhan Bank Limited (NUBL) is the largest Microfinance Institution (MFI) in Nepal, established with a mission to help reduce poverty empowering women and entrepreneurship through microfinance services. NUBL, the leading microfinance bank in Nepal has been providing packages of services to more than 190, 000 rural families in 49 districts of Nepal with a huge network of 118 branch offices and 30,472 groups in 1147 VDCs. More than 60 percent of total loan portfolio of the bank is in agriculture sector. NUBL's loan schemes have always been focused on agriculture loans (seasonal, and midterm loans), irrigation, and agro-business (microenterprise). Recently, the packages were reviewed and revised. Basically, there are four important agriculture loans (Dairy, Irrigation, farm machinery, and crop production) to scale up agriculture/livestock farming to the resource poor farmers. 2. Objectives Creating a tri-party network that takes care and nurture of integrated agriculture business Engaging producers, technical supporters, and agro-industries on maximize Increasing the agricultural production by commodity diversification, mechanization, and commercialization Promoting agro-entrepreneurship finding and expanding markets Increasing agricultural loan and risk management 3. Problem justification Rural livelihoods is mostly affected by poor market infrastructure, lack of access to financial service system, unpredictable pest and diseases management issues, unfair trading system mostly due to lack of information, etc. Promoting entrepreneurship and agro-business has been a major challenge especially from the small scale farming without delivering package of services needed. Agricultural commercialization is facing the same kind of problem to grow up agriculture industry and market. AgBDS service will help to mitigate these problems through decreased per unit cost of production, increased net income of farmers, and wide agro-markets to favor sustainability. Agro-products based businesses like seed, feed, food, and agricultural tools have not been able to provide access to agricultural inputs to rural and remote parts of Nepal. Government of Nepal has its own problem of scarce human resources, limited funds and programs supporting subsidized inputs to farmers, and most importantly lack favorable policy and vision to promote

producers, processer, and markets simultaneously. Direct hamper of nation's inability has often been discussed from production side abiding the sides of agro-industrial demand. Viewing to the national program planning and foreign supports on agriculture and livelihoods in Nepal, pushing factors have always been considered without matching with the pulling factors of agriculture commercialization. Searching for the practical solutions, pulling factors should also be promoted so that harmony between all actors (producers, processing industries, distributors, and consumers) could be achieved that automatically pulls farmers take benefit of certain market platforms and grow more. 4. Methodology Poor and marginal farmers are grouped to enjoy the microfinance service within the SRG (Self Reliant Groups) and GB (Grameen Banking) model. Nirdhan Uthhan Bankl Limited (NUBL) will provide the credit for agriculture production. Agriculture credits have high credit risk which will be taken care and needs to the farming will be provided by Ag-BDS service (non-financial supports such as technical backstopping, technology transfer and building market linkages). The farming might also be grouped further based on the enterprise (crop/livestock) types. Nominal fees will be charged for the package of services under AgBDS from farmers and from other parties in some way. The revenue from the parties will help to continue and expand the services to a wider range of costumers for both pushing and pulling agro production and marketing. At the same time, agro-industries/agro-marketing companies will find an avenue to create new and expand the existing markets while maximizing customer relations within the tri-party network (multi-partnership) will be asset for all. Further, agro-processing/marketing companies will have huge chances of widening their own business scope where they get effective and sustainable income even from utilizing social costs. Ultimately, there will be win-win situation amongst the parties within the self sustaining system. 4.1 Ag-BDS Services The complexity of constraints for a rural farmer such as spars agrarian farms, insufficient manpower, insufficient resources and helping hands, fragmented and unorganized units of production, weak bonds between linkages have been seriously considered. And, Nirdhan (NGO) will provide the package of supplementary services (AgBDS) to the farmers including providing access to the government and private sector services. The Ag-BDS service will primarily include the following: 4.1.1 Skill transfer/trainings Farmers need trainings mainly to grow/rear and market crops/livestock with improved practices so that production and productivity could be enhanced. AgBDS will provide the essential trainings to the farmers with the help of technical experts from DADO, DLSO, ARS/NARC and other institutions by facilitation of JTs under NIRDHAN. Such trainings encourage will encourage farmers to take different types of agriculture loans; and start mechanized and commercialized farming. Farmers will be charged for the capacity building towards tech. suitable to the context.

4.1.2 Farm/herd visits (both emergency and scheduled) Farmers have many problems related to plant protections and animal health. Agriculture Officers (under NUBL) and JTs will provide the service in supplementary of the governmental services. Frequent farm/herd visits will be conducted by the technicians. Farmers at any time can ask about the problems/risks and possible solutions towards particular situation at the farm. Some supports will also be provided by distributing/making easy access to medicines/vaccines/hormones/pesticides which will be charged as per the market price. This package will help manage risk, and ensure the production and productivity. 4.1.3 Technical backstopping and business counseling Most of the farmers are cultivating traditional methods and have been limited within subsistence agriculture. Agro-entrepreneurship has yet not come into the loop of earning money but just focuses to meet food, shelter and clothing. At the current scale, cultivation costs are generally very high with minimal yield. Counseling the farmers on improved breeds/varieties and other technologies will be provided at regular basis. Ag BDS will help farmers to plan and execute as planned on crop calendar and intensify farming for sustainable benefits. Building entrepreneurship will help farmers think the same farming from business perspective which pushes towards commercialization. Thus, increased benefits to all parties of agro-market from the effective system could be tapped. 4.1.5 Value addition by good pre and post harvest technologies Farmers have not become able to maximize income through the farm products utilizing different utilities (time, place and form utility). Unknowingly low value products are being marketed only due to unmatched harvesting time such as harvesting vegetables during peak season, and without following safe methods and type of edible portion. Method demonstration following improved practices with the help of AgBDS services on proper pre and post-harvest system will lead to increase value of the products. In addition, Nirdhan will facilitate farmers to adopt safe agriculture practices, builds links to post harvest facilities like cold stores/cellar stores/chilling centers or other means. Further, processing of the products like pickle, jam, jelly, marmalade, chips, Biscuits, Dalmoths, etc. making and packaging will add value to the product. On the other hand, employment creation and business promotion will be secured. 4.1.6 Market information and Marketing The price lists of different products at markets in a regular basis will be disseminated and encouragements will be made to catch sustainable benefits by adjusting commodity types and cultivation technology. Hence, increase in the producers' haggling power and providing wider choices to sell the products in different markets will be provided. Further, access to quality input service will also be provided which will buy and sell the processed products, and market them. The revenue stream of AgBDS can also be widened by providing this service. Farmers will also get value of some of the products which would not be possible without such service. 4.1.7 Forward and backward Linkage Product collection and links with different seed, food and feed companies, diary centers, other private firms (Eg. farm machinery business), or marketing cooperatives/wholesale buyers will

make farmers feel secure and encourage area of production. In turn, area of AgBDS service will be increased gradually. Nirdhan, as an AgBDS service provider, will arrange for the linkage of farmers to the input suppliers and markets. Assuring the quality inputs at competitive price and marketing of farm products will also be a cross advantage to create a closer relation with farmers and private firms. 4.1.8 Access to government and other service providers There are many service provider institutions like DADO, DLSO, I/NGOs, etc. who are providing different services to the farmers. Creation of production groups and facilitating them to register with other service providers will help farmers to get resources free of cost/or at low cost. Encouraging farmers to utilize services from Seed and Soil testing labs under Nepal government, and other vaccination camps will certainly make farmers feel a change due to AgBDS, believe as their own solution finder, and will adopt the message disseminated. 4.2 Ag BDS network/multi-partnership Due to the lack of collective actions together, various subsectors fail to achieve success. Agriculture sector is the one which has most distinct as well as dependable parties without one the other parties rarely can think to exist. In Nepalese context, small market sizes and limited boundaries to a narrow circle, fluctuating production trends, hiking food, agro-inputs prices, and unorganized marketing systems has been major limiting factors of commercial farming and agro-industrialization. Ag BDS network will bring producer groups, agro-industries, input suppliers, and other support providing organizations together at a single platform to tackle against and avoid such constraints. In gist, a network will be formed including seed, feed, agrotools companies/marketers, AgBDS service provider, Micro-finance bank, and the producer groups which will be actively involved in agriculture business promotion. In the process, AgBDS service provider, Nirdhan will initiate, act as bridge between parties and lead on execution. 4.3 Activities to be carried out - Enterprise selection, finding feasible farming enterprises - Orienting clients/groups - Calculating area of production, possible production (tonnage) - Agreements between: a. Nirdhan (Ag BDS service provider) and the partners for Ag-BDS services b. Nirdhan/farmer/producer groups and agro industries for input supply and purchase of farm products - Preparation of business plan and detail implementation plan - Hiring staffs and execution - Service delivery to farmers the by Nirdhan with the supports from the partner orgs. 5 Outputs of Ag BDS 5.1 Scope for farmers/ producer groups

Farmers are at lower strata at present context, lack most of resources, and as a result many other businesses have been limited to a dwarf bench mark. So, the ultimate benefit of the platform should go to small scale farmers. Once the technical advices, entrepreneurship counseling, micro-credit for the production project, access to quality input at right time, and the certainty of market of the farm products will encourage them to scale up level of farming. Sustainable income generation, exploitation of local resources, employment creation, and socio-economic security will be the most possible benefit to farmers. 5.2 Scope for marketing firms/agro-industries Practically saying, the platform would be the most important asset for the private firms to have business friendly environment since the partners stay, discuss and act together for such a social and sacred business. The following benefits explain about scope for agroindustries/marketing firms. - Creation of new markets, expansion of client/member-farmer based marketing through the use of marketing platform - Utilization of network created by each other (different organizations) - Method demonstration of the products and utilization of farmer to farmer dissemination - Chance to know feedbacks about the product from farmers' side at the earliest, experiment and update the product as per the demand. - Reduction of market risk, ease on practical planning for input-output - Scope for other relations such as donor agencies and other technical as well as financial supports - Utilization of social fund on marketing which maintains company and costumer relations and led to mutual benefits - Effective use of marketing cost of the private sector: low cost of operation for all parties Ultimately, private sectors could tap a large scope by maximizing profit; name and fame to a large section of untapped market area from the collective actions. Options to the private firms: Agreement for the purchase of farm products: either with Nirdhan or with farmers Financial support: either based on commission during marketing or based on fixed/regular term amount

5.3 Scope for Nirdhan Nirdhan has recently added BDS under its program sections and accordingly the strategies and plans are being finalized. Ag-BDS will be the major part of the program for nonfinancial service to the NUBL clients. For the execution, Nirdhan will get supporting hands from different sectors (esp. private) and ensure the service in sustainable (Eg. multi partnerships). At first, piloting will be performed for initial 6 months or up to a year. Nirdhan will functionalize one of its wings, a profit making service provider (Nirdhan Marketing Services Pvt. Ltd.) which will sustainably provide the fee-based services. To

sum up all benefits, it will find better ways of prosperity for small scale farmers and other sectors. 5.4 Scope for NUBL NUBL also has scope of getting support from collective actions such as managing, reducing the credit risk of agriculture sector loan, building entrepreneurship among clients level, increasing the agriculture loan portfolio, and maximizing along with the social service business. 6 Sustainability of Ag-BDS

Institutional capacity: As the context never stops, poverty is dynamic. Likewise, definition of microfinance has been changing which can easily be observed from the changing packages of services from the past to present. For the competitiveness, Nirdhan and NUBL have developed a very good intuitional capacity, organizational profile, and have a good network and coverage. NUBL being a well established profit making company, sustainable part is much stronger. Further, there are other private and public sectors which feel need of AgBDS. Human resources: In each branch, there will be one veterinary/agriculture JT which will be backed up and updated on newer technologies by Agriculture Officers of NUBL. There is a program manager for Ag BDS service at head office of Nirdhan which will actively involved in making coordination, updates on technologies and parties of the multi-partnership network. The program manager will lead the Ag BDS. The JTs will directly be involved in market creation of AgBDS, forming different agriculture/livestock produce groups, encourage farmers to join BDS, collect demands, and prepare plans of production and marketing taking advantage of the marketing platform. Staffing and remuneration: These JTs will have basic salary plus incentive based performance/achievement. Performance evaluation of field staffs will be performed regularly at farmer's door, field certification, demand/supply, and revenue/output. Nirdhan marketing Services Pvt. Ltd., profit making company under Nirdhan can be functionalized to implement the service which will have to ensure profitable AgBDS business. Viable income: Farmers have to pay nominal price for the service from Nirdhan (or Nirdhan Marketing Services Pvt. Ltd.). As the platform directly ease for the marketing of a particular private firm and provide quality input service to marginal farmers, marketing and social costs will further widen the revenue stream of Ag BDS so that continuation and expansion to a larger mass could be done as well. During initial years, the farms/herds will be demonstration plots for Ag-BDS where farmers will compare and feel the effectiveness of the service. Gradually, more farmers will want to have such services and the revenue will increase with reduced operational costs, hence the AgBDS service continues and grows up by joining other farmer groups as well. Apart from the linkage charges, sell of the inputs (quality manure such as vermicompost, tea or liquid bio-fertilizers, hormones/growth regulators/medicines, vaccines, pesticides, etc.) will make the Ag-BDS service profitable, replicable, and sustainable. THANK YOU!