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Market Systems
Market Systems

Fixing a Market Failure Provides Profits and Empowerment

Wed, January 25, 2017
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Emily Janoch
Deputy Director for Research, Innovation, Evaluation, and Learning
CARE
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Akram Ali
CARE
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Shahera Khatun says that the biggest changes since her community got a Digital Fat Tester Collection point are that she makes more money than she did before, and now she is able to be involved in the dairy business.

“Before, my husband made all of the decisions about what to do and where to sell our milk. I am not even sure where we sold it, although I think it was to other companies or in the market. Now, the center is close to home, and I can come myself to sell the milk. I have gotten so much education in the 18 months this has been here. Now I know how to raise the cows, and I am selling more milk—higher quality milk.”  

How did the change happen? After five years of focusing on producer group training, we had a major breakthrough. The Digital Fat Tester—introduced by CARE’s Strengthening Dairy Value Chain project with the support of the Bill and Melinda Gates Foundation—corrected a simple market failure: the lack of transparency in testing meant that buyers couldn’t reward high quality milk, and farmers had no incentive to invest in better production.

Women in Bangladesh’s dairy sector face huge challenges: little access to information, limited mobility that prevents them from going to markets, middlemen who take a cut of the profits, and the lack of transparent buying practices. They have little ability or incentive to invest in higher quality milk.

Dairy producers, like BRAC Dairy, also have challenges. They get inconsistent milk quality, since the expense and difficulty of traditional testing methods and the number of middlemen in the existing value chain makes it hard to compensate farmers for producing higher quality. Since they struggle to reach producers, they cannot teach them new techniques that would make for a steady supply of quality milk. So plants run below capacity and companies lose money.

The DFT collection centers change all that. Independent business owners with connections to the BRAC chilling plant system run local centers that provide fast, transparent quality testing close to women’s homes. The machines provide written receipts to farmers so they have a record of both quality and price. And they provide a platform for companies and extension agents to provide new tools and training to women farmers.

Farmers see a huge advantage. Not only are women more able to participate, but they are earning more money. Shahera says, “I can make twice as much money selling through the DFT as I do if I sell in the open market.  And I use that extra income to educate my children and buy higher quality food, as well as investing in the cows.”

Shahera is one producer with one cow, but SDVC is reaching farther than that. They are reaching 26,000 households through 89 collection centers. On average, those farmers receive a 373 percent increase in their income. According to IFPRI, the women farmers in the program (85 percent of whom are women) are more empowered. They are more able to make decisions at home, in addition to their profits and greater involvement in the business.Coupled with an innovative network of last-mile input shops called Krishi Utsho, farmers like Shahera are also able to get lower prices on inputs—up to 92 percent lower—and save 50 percent of their travel time getting to and from markets to buy medicines and food for their cows. The input markets are also connecting to specific suppliers who sell only high-quality products.Farmers are not the only people who benefit. The system works because it’s embedded into a larger market that now has an incentive to change their behavior long-term. In fact, BRAC Dairy, our main private sector partner, grew 31 percent last year. They went from sourcing 2 percent of their supply from farmers like Shahera to 55 percent. In fact, BRAC likes the model so well that they are now using their own resources to scale up through their whole system, which will double the number of farmers it reaches. Other private sector processors are also working to adopt the model to strengthen their own business, using a combination of existing collection centers and starting their own. Because these are market-based systems, they can be sustainable long after the project closes.A few small changes in the market system—collection points closer to home, machines that provide more transparency, and aligning the needs of buyers and producers—can provide all of these benefits because together they solve the market failure. Training alone won’t change a sector unless you can get incentives for all of the actors. DFTs that are locally accessible to producers provide transparency to producers and the companies, and everybody wins.  To learn more, visit http://www.care.org/work/world-hunger/sustainable-dairy-value-chains.

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Emily Janoch is the Deputy Director for Research, Innovation, Evaluation, and Learning for the CARE USA Food and Nutrition Security team focusing on ways to better learn from and share implementation experiences on eradicating poverty through empowering women and girls. She has a BA in International Studies from the University of Chicago, and a Masters' in Public Policy in Internationals and Global Affairs from the Harvard Kennedy School.

Akram has nine years of experience in the field of Agriculture based project management and implementation. He focuses on Value Chain Market Development Approach, M4P Approach, Inclusive Business Model, Enterprise Development, Food Security and Nutrition, Climate Change and Resilience, Market Research & Development, Donor communication and budgeting, ICT-based implementation, Private Sector Engagement, Development communications, Electronic Management Information System and Project M&E.

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