Partners:

Bangladesh Agricultural University (Mymensingh)
Bangladesh Rice Research Institute (Gazipur)

Problems:

Despite the apparent efficiency of paddy markets, and the numerous marketing channels, small farmers are, in fact, severely restricted in their choice of marketing outlet and in their choice of when and where to sell – in effect, they have little control over the disposal of their paddy. Paddy marketing is restricted by household cash demands, which is closely linked to input markets controlled by local elites. Smaller farmers are trapped in poverty through indebtedness and dependence upon the wealthy and influential households in their communities. Without the control over marketing decisions, these farmers are unable to access better prices for their paddy. Marketing must therefore be viewed in the context of households’ livelihood strategies and their asset base, of which social capital plays a vital role.

Achievements:

The main output of this project was a methodology to identify marketing constraints faced by small-scale paddy producers, as well as formulating institutional innovations which could help address these constraints. The conceptual framework for analysis included the use of new institutional economics, with its central concept of transaction costs, married with the sustainable livelihoods framework. The research, undertaken by economists and anthropologists, focused on ascertaining the level of transaction costs in paddy markets; how these costs shape the structure of the marketing system, and, in particular, the linkages between participants.

The methodology proved useful not only in enabling the analysis of a commodity sector but also in providing a framework for exploring problems faced by small-scale paddy producers in Bangladesh, leading to the exploration of institutional innovations to address constraints,  reduce transaction costs and enhance crop marketing to the benefit of small-scale producers.

One of the main recommendations to emerge from the analysis was the development of inventory credit schemes.  An inventory credit scheme would address a) inefficiencies in the Government Procurement Scheme, including its failure to ensure stable prices for small-scale farmers due to corruption, levies, small volumes and long distances to the centres and, b) the lack of investment and working capital which, forces small-scale farmers to sell paddy soon after harvest, at a time when paddy prices are at their lowest, to repay debts, mainly incurred for input purchasing.