KRISHI UTSHO UPDATEWorking to address inefficiencies within the dairy sector of Bangladesh

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

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

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

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Scale Up Plan

Number of Shops Beneficiaries '000 Company Linkage Agro Processor

Year of Operation

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For-Profit Model• Shop owner fees ($67- fee to join, $1.30- monthly fee)• Commission from supplier partners (~5%)• Break even in year 4

The Franchise Business Model

Business assessment to analyze

Franchisor (CARE)

Franchisee (Shops)

Royalty fees/Franchise charge

Negotiate contracts with suppliers

Design a respected brand

Continuous research and development

Training for expertise development

Conduct advertising for promotion

Company commission

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

Challenges Moving Forward• Forming partnerships with private sector• Branding shops• Shop financing

Branding Benefits• Standardized shops• Reputation and recognition• Easier to expand the number of shops• Krishi Utsho is a symbol of quality

Branding Challenges• Advertising campaign- how to reach customers and

establish brand image• Promotions• Building relationships among shop owners

Progress• 20 franchisees AI training• 15 shops branded and incorporated in network• Positive response- farmers and shops

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

ACI

ACME

BRIDGE P

harm

a

CHEMIS

T

DOCTORSAGRO

ETHICAL

FNF

GLOBE P

HARMA

NAVANA

NOVERTIS

OPSONIN

ORBITEC

POPULAR

RENATA

RAFIQ M

EDICAL

SOLVER

SQUARE

TECHNO

ZENTRY

Other

s0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

4.77%

14.84%

2.43%

10.40%

1.98%

2.77%

1.60%

4.51%

1.22%

4.97%

6.03%

2.37%

4.01%

12.34%

1.40%1.67%

7.21%

4.53%

1.14%

9.82%

Market Share by Medicine company (53 shops)

ACI FEED

AFTAB FEED

ALOM

FEED

CP FEED

FATIMA F

EED

KOLLANY F

EED

LOCAL

FEED

MIN

A MIX

PRAN

RABIA F

EED

SONALYFEED

SAFIA F

EED

TAMIM

AGRO

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

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35.00%

40.00%

2.25% 2.41%0.64%

8.61% 7.37%

2.41%

34.48%

0.48% 0.16% 0.68%3.61% 2.61%

34.28%

Market Share of Feed (By Company) 53 shops

Partnership Progress• Negotiations in progress• A few agreements signed- e.g. Tamin Agro- feed• Field assistant training• Delays with eMIS system

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

Problems Facing Financing• Finding the capital• Lack of collateral• Preventing default• Monitoring usage of capital• Current cost of financing• Regulations

Collateral Possibilities• Use franchise membership• CARE understands value of membership• CARE guaranteeing a portion of the loan?• Shop as potential collateral?

Potential Structural Options• CARE managed loan system• CARE financing operation• Supplier credit system• CARE partnership with lending organization

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

CARE financing• Legally acceptable• No profit to support network• Less than 1% interest (service fee)• No experience• Funding from grants

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

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

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

Recommendations• Branding push• Aggressive with supplier partnerships• Central leader for Krishi Utsho• Develop financing system• Data organization and centralization

Thank You