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Krishi Utsho Update

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  • 1. KRISHI UTSHO UPDATEWorking to address inefficiencies within thedairy sector of Bangladesh
  • 2. Strengthening the Dairy Value Chain(SDVC)• Project to address inefficiencies within the dairy market• Women as a marginalized group• Works with actors throughout the value chain • Farmers • Collectors • Shop owners • Processing plants • Input Suppliers• Long term economic growth without dependency
  • 3. SDVC Impact• 36,000 farmer members• Over 150 agro input shops with nearly 40,000 clients per month• Higher quality of milk and increased consumption (178%)• Production up from 1.2 to 1.8 liters/day• Doubled the daily household milk sales
  • 4. Krishi Utsho (Agro Source)• For-profit Agro Input shop franchise for farmers• Artificial insemination (AI), medicine, feed, and other agro inputs• 53 input shops- serving 20,000 farmers per month• Rapid growth (35-113% per year)• Expand to more than 250 shops in next few years
  • 5. Scale Up Plan 1000 1000 900 800 800Beneficiaries in thousand 700 600 600 500 500 400 400 400 300 300 250 300 200 200 150 150 200 125 100 100 75 70 50 50 100 37 25 25 25 25 25 20 20 18 15 15 15 15 15 15 15 15 12 10 10 10 8 5 5 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Year of Operation Number of Shops Beneficiaries 000 Company Linkage Agro Processor
  • 6. For-Profit Model• Shop owner fees ($67- fee to join, $1.30- monthly fee)• Commission from supplier partners (~5%)• Break even in year 4
  • 7. The Franchise Business Model Franchisor (CARE)Royalty fees/Franchise charge Business assessment to analyzeCompany commission Negotiate contracts with suppliers Design a respected brand Conduct advertising for promotion Training for expertise development Continuous research and development Franchisee (Shops)
  • 8. The Supply Chain• Partnerships with private sector suppliers to ensure quality inputs and gain revenue• 2 potential CARE roles: • Central ordering supplier distribution, or • Standard products, supplier ordering and distribution• Cost effective• Central ordering and supplier distribution more attractive to private sector
  • 9. Challenges Moving Forward• Forming partnerships with private sector• Branding shops• Shop financing
  • 10. Branding Benefits• Standardized shops• Reputation and recognition• Easier to expand the number of shops• Krishi Utsho is a symbol of quality
  • 11. Branding Challenges• Advertising campaign- how to reach customers and establish brand image• Promotions• Building relationships among shop owners
  • 12. Progress• 20 franchisees AI training• 15 shops branded and incorporated in network• Positive response- farmers and shops
  • 13. Private Sector Supplier Partnerships• Top input suppliers in quality and quantity• Commission• Supplier goal and CARE goals differ• Contracts for individual product• CARE should consider fewer, larger partnerships- easier to attract larger suppliers
  • 14. Market Share by Medicine16.00% 14.84% company (53 shops)14.00% 12.34%12.00% 10.40% 9.82%10.00%8.00% 7.21% 6.03%6.00% 4.77% 4.97% 4.51% 4.53% 4.01%4.00% 2.77% 2.43% 2.37% 1.98%2.00% 1.60% 1.67% 1.22% 1.40% 1.14%0.00%
  • 15. Market Share of Feed (By Company) 53 shops40.00% 34.48% 34.28%35.00%30.00%25.00%20.00%15.00%10.00% 8.61% 7.37%5.00% 3.61% 2.61% 2.25% 2.41% 2.41% 0.64% 0.48% 0.16% 0.68%0.00%
  • 16. Partnership Progress• Negotiations in progress• A few agreements signed- e.g. Tamin Agro- feed• Field assistant training• Delays with eMIS system
  • 17. Financing• Number one concern of shop owners• Shop owners want loans up to $1000 with 8% interest• Why? • No capital for inventory or physical improvements • Loans too expensive (15-20% interest) • Will spur high growth and expansion to other sectors • One-stop shop
  • 18. Problems Facing Financing• Finding the capital• Lack of collateral• Preventing default• Monitoring usage of capital• Current cost of financing• Regulations
  • 19. Collateral Possibilities• Use franchise membership• CARE understands value of membership• CARE guaranteeing a portion of the loan?• Shop as potential collateral?
  • 20. Potential Structural Options• CARE managed loan system• CARE financing operation• Supplier credit system• CARE partnership with lending organization
  • 21. CARE Managed Loan System• CARE runs loan organization using money from investors or grants• Large knowledge of shop economics• Additional source of Krishi Utsho profit• Increased control• Higher interest rates• Legally difficult• No experience• Least feasible
  • 22. CARE financing• Legally acceptable• No profit to support network• Less than 1% interest (service fee)• No experience• Funding from grants
  • 23. Supplier Credit System• No foreign capital• Different credit duration based on item• Need for collateral• CARE guarantee?• Cheap?• Suppliers are less supportive• What do they require?• No capital for physical improvements
  • 24. CARE Partnership with a Lending Org• Partnership with Aunkul Foundation?• Aunkul infrastructure• CARE attracts capital- grants or investors• Obtain a low interest rate (4%)• CARE assist with info on shop performance- eMIS• Most viable option• Loans in tranches- must repay to get larger tranche
  • 25. Financing Points to Consider• Overhead cost of lending• How to fully utilize CARE information• Currency risk if foreign investors participate• How to get the lowest interest rate?• Size and duration of loan• Group lending• Expanding the loan pool
  • 26. Recommendations• Branding push• Aggressive with supplier partnerships• Central leader for Krishi Utsho• Develop financing system• Data organization and centralization
  • 27. Thank You