Introduction
Vegetables are important to poor people. They form a vital part of people’s diets as the key source of much of their vitamin intake. As such, vegetable production is a longstanding part of the agricultural production landscape in Bangladesh. As incomes have increased and with changing tastes, there is an increasing opportunity for poor people to participate in the vegetable market in a way that can significantly improve their incomes. However, there are multiple barriers to the participation of the poor in the sector and to the benefits they extract from it.
Since 2003, Katalyst has been working in the vegetable sector in order to improve the position of poor people within it. As with other sectors of the programme, Katalyst’s mandate in vegetables began in the north on limited crop varieties, expanded during Phase 2 to a nationwide mandate and more cross-cutting issues with all vegetables, and in Phase 3, has begun to deepen this impact into more marginal areas. After having outlined the market as a whole and how Katalyst sought to address constraints in multiple areas, this case study focuses on two of those constraints; the marketing and distribution of agricultural inputs. Using the AAER framework which guides these case studies, a lasting impact is shown which is embedded in the system.
The case is structured as follows. The overall market for vegetables is described briefly before focusing in on features and constraints of the inputs market for the vegetables sector. The symptoms and underlying causes of underperformance are identified, and narrowed down to marketing and distribution functions. The major case of seeds is then developed. In seeds, the functions developed through interventions in Adopt, Adapt, Expand, and Respond components of the framework are described together with results at each stage. This is followed by mini-cases on crop nutrition and crop protection which are less mature as sub-sectors, but in which similar constraints in marketing and distribution have been tackled. Specific lessons from the three vegetables cases are then documented together with a timeline of overall interventions.
The overall market
There are both supply side and demand side issues which impact on the profitability of vegetable farming in Bangladesh. On the supply side, Bangladesh exhibits very low productivity in comparison with other countries with similar climatic factors. Both production and productivity have been increasing in recent years and vegetables now account for around 4.5% of gross value added (GVA) in agriculture (BBS, 2012). Approximately 12% of the rural population is involved in vegetable production (BBS, 2013). Nevertheless, vegetable productivity in neighbouring India is 81% higher than in Bangladesh (Vanitha et al., 2013) and so it is clear that there are still issues constraining the growth of the sector[1]. On the demand side, there are issues with post-harvest losses which impact on prices and incomes from sale and the transaction costs involved in the marketing of produce for farmers.
Following an M4P approach, Katalyst began to map the supporting functions and rules that determine the terms of the main transaction involving poor people in the vegetable sector. The focus was put on the role of the poor as producers, rather than as labourers or consumers, and the underperforming elements of the system were determined. There were clear problems with information for farmers on how best to market their products; standards to certify quality of produce; agricultural skills and practices of farmers; post-harvest handling of produce; and with the inputs market in terms of quality, price and availability.
As outlined in the M4P approach, change is affected by altering the underlying causes of underperformance and, as such, Katalyst’s analysis took them into a range of supporting systems. Over its 13 years of work in the vegetable sector, Katalyst has developed interventions designed to address a great number of these constraints. This case study, and the two mini cases which follow, will focus in particular on the inputs market system, a supporting market of the core vegetable market system, as this system has been of vital importance in the recent improvements made in the productivity of vegetable farmers.
Inputs market performance
Provided the pre-requisites of adequate land and water are in place, all agricultural commodities require four main things at the production stage: the raw materials – seed or breed; nutrition to make them grow – fertiliser or feed; protection from damage – crop protection or veterinary services; and finally the knowledge of how to utilise all of these things to ensure productivity. In Bangladesh, there are clear issues caused by the latter of these factors and Katalyst has facilitated a range of interventions to address this constraint, including the successful retailer training which has been represented in a previous case study in the vegetables sector (Gibson, 2006).
Vegetables are a more technically challenging crop than staple crops and their cultivation is more input intensive. The major inputs necessary for vegetable production are seeds, crop protection inputs such as pesticides and integrated pest management (IPM) procedures, and crop nutrition which includes macro, micro, and compost fertilisers. While demand for and usage of inputs in Bangladesh has been gradually increasing over the past three decades, the fundamental problem remains – in the inputs market for vegetables, farmers are not using them enough or at all, and those which they are using are of poor quality. There are three interlinked aspects to this underperformance: lack of access; lack of quality; and lack of use.
Symptoms
Lack of access
Bangladesh is the most densely populated large country[2] in the world. In fact, the population density is three times that of India. Despite this, only a small proportion of the population have access to high-quality inputs and many have no access to retail inputs at all.
There are many places where farmers might acquire inputs from. As with many developing countries, the government of Bangladesh has traditionally played a significant role in the distribution of agricultural inputs. The Bangladesh Agricultural Development Corporation (BADC) is a parastatal entity which is charged with delivery of agricultural inputs to farmers. It has seed, horticulture and fertiliser management wings, as well as a minor irrigation wing. It produces and distributes seed and fertiliser but also has a remit to transfer seed production technologies to the private sector. Production and distribution of vegetable seed has been a relatively recent endeavour for BADC and remains at a very low level of 40,000 tonnes per year. While this is insufficient to have any real impact on the demand for seed, it can have a negative impact on the incentive for private companies to perform the functions of production and marketing. Fertiliser manufacturing and distribution is a more far-reaching public function with up to 50% subsidies for certain types of fertiliser provided by the government (Bangladesh Bureau of Statistics, 2012).
From seed production companies, the most common distribution relationships are arm’s length, with often inputs going through multiple levels of dealers (8,000 registered) or wholesalers before reaching retailers. Retailers, generally multipurpose retailers, sell seeds and sometimes fertilisers and pesticides in many rural areas. In reality, however, these retailers are likely to be located in small towns rather than villages and many people have no access at all to these inputs.
Access is also, to some degree, a function of price. Inputs are only accessible if they are affordable. The gap between best quality seeds and farm-saved seeds has not been bridged by locally appropriate and affordable varieties, so poor farmers are prohibited from climbing the ladder of productivity.
Another driver of the low levels of access is the lack of awareness amongst private sector input providers of the potential business opportunity presented by smaller farmers. In a market that is growing despite underutilisation by poor people, the incentives to enter this unknown market are reduced.
There are some inputs which, until recently, it was simply not possible to buy in Bangladesh. Tight controls regulating which inputs can be sold together with the absence of demonstrable demand has meant that, for example, numerous IPM products which could improve productivity have not been made available to farmers.
Lack of quality
The inputs that are available in Bangladesh, particularly in remote areas, are of poor quality. There are over 100 listed seed companies in Bangladesh, only 20 of whom are selling good quality seed. The majority of these companies are new and are still developing their products and their offer. Unpackaged seed accounts for at least around 70% of seed sales.
Adulteration of seeds, for example, is a common practice and so the productivity of what is supposedly an improved variety will not live up to expectation. Storage of inputs, too, is poor and causes the products to degrade and their efficacy to decrease.
Lack of use
Beyond access and quality, there are also areas where the inputs market is underperforming despite adequate quality and availability. Particularly in less remote and more commercially-oriented areas, inputs of a genuine high quality are available but they are still not utilised to the degree one would expect, given the potential productivity gains.
One reason for this is a lack of awareness of both the products’ existence and their potential benefits.
In terms of the potential productivity gains, an important factor is a lack of trust in the products. The origins of this lack of trust can include: improper usage resulting in lower yields and higher losses; previous experience with poor quality inputs meaning people see a risk in investing in genuine high quality inputs; or poor communication of the potential benefits of using improved inputs. These factors are compounded by established norms of agricultural practices and a lack of willingness to change.
Underlying causes
The input supply market had many supporting functions which were not operating to their full potential. Some of these problems required short-term solutions to generate momentum within the sector. Within seeds, the industry association (BSA) was simply not adequately skilled to perform the coordination function necessary, advocating on behalf of the seed industry and bringing members together to pursue common interests. As such, Katalyst intervened to build the capacity of the BSA. Further, seed suppliers were not taking advantage of the opportunities to introduce higher quality seed and to market this to the potential customers, representing a failure in the transmission of market information from manufacturers to producers and then on to consumers. Here, Katalyst engaged in joint ventures with seed suppliers to source higher quality imported seed varieties, inputs such as germplasm and breeder seed and technical knowledge in order to build the capacity of the seed producing companies.
IPM represented an opportunity to introduce low-cost crop protection solutions which also had a positive environmental effect and catered to a new market in low-residue produce. However, the skills to provide information and training on these inputs which were new to Bangladesh did not exist within the inputs system.
Two interlinked and crucial functions were identified as the underlying causes of the underperformance of the inputs market system documented above – marketing and distribution – and it is those which will be examined in the remainder of this case on seeds and the two mini cases on crop protection and crop nutrition.
Distribution and marketing
These two supporting functions to the effective operation of the inputs market are intrinsically linked. It is important to bear in mind that use of improved inputs is very low in the rural communities targeted by Katalyst. This includes inputs which would allow for participation in the markets for higher-value varieties. Within the inputs market, it is this low level of use that is at the core of low productivity, while general agricultural practices and other demand and supply side drivers are addressed through other components of the programme.
Lack of access, lack of quality, and lack of use are all largely attributable to deficiencies in marketing and distribution. Poor and inappropriate distribution practices meant that many people who had the willingness and ability to pay for quality inputs were not able to buy them. The inputs weren’t stocked at the outlets used by these farmers. Supply was also unreliable and so no brand loyalty could be built. On the marketing side, farmers weren’t aware of the potential benefits so there was a perceived lack of quality which reduced usage. Lack of use was also a result of the affordability of inputs; they weren’t being marketed in a way that was appropriate for poor consumers. It was these underlying causes which Katalyst sought to address in the markets for three separate inputs – seed, crop protection, and crop nutrition – to create systemic change.
[1] The 2006 case study went into depth on the broad features of the market which remain largely unchanged. As such, this case will focus on Katalyst’s work in the sector in overcoming the constraints it experiences.
[2] Countries with a population of greater than 10 million people.