IFPRI-CGIAR workshop seeks to enhance agrifood value chains and farm mechanization in Bangladesh

By Razin Kabir, Md. Aminul Karim, Raisa Shamma, Md. Riad Uddin, Julie Ghostlaw

On March 5, 2024, IFPRI and CGIAR, with support from the Bill & Melinda Gates Foundation, organized the workshop, “Agri-food value chains and farm mechanization in Bangladesh” in Dhaka, Bangladesh. The workshop explored the critical role of intermediaries within agri-food value chains and challenges and opportunities facing agricultural mechanization in the country. Approximately 56 participants from the government, private sector, research/academia, civil society, and media joined the event to explore innovative solutions for enhancing agricultural productivity in Bangladesh.

Summary of Event

The workshop opened with remarks from Dr. Akhter Ahmed, Country Representative, IFPRI-Bangladesh, who emphasized the pivotal role of agriculture in Bangladesh’s poverty reduction.

“A recent IFPRI study found that agriculture-led growth is three times more effective in alleviating poverty than other sectors in the economy in Bangladesh,” stated Dr. Ahmed.

While rising agricultural wages have alleviated poverty, it has reduced farmers' profitability due to higher labor costs. He stressed the importance of farm mechanization in mitigating this increase by reducing production costs and enhancing labor productivity. Despite the decline in the agricultural sector's GDP share, it remains the largest employer in rural Bangladesh, engaging 45% of the total rural labor force. He expressed IFPRI’s enthusiasm to continue working with the government, building on nearly four decades of partnership.

Next, representatives from the Bill & Melinda Gates Foundation shared the Foundation’s perspective on the workshop. Ms. Snigdha Ali, Bangladesh Country Lead for Inclusive Financial Systems noted that over half of Bangladeshi adults are now financially included, and the number is increasing. The Foundation is committed to understanding the financial needs of those engaged in agriculture, especially women excluded from the formal economy, as crucial for a cohesive strategy.

Ms. Maria May, Senior Program Officer added, “Providing financial services that truly meet the needs of low-income households begins with gaining a deeper understanding of their livelihoods and how they are currently managing their finances.” The Foundation is supporting the IFPRI research presented at this workshop, both on financial access among intermediary actors in agrifood value chains and work to assess mechanization and identify effective models for financing machines.

Thereafter, Dr. Kate Ambler, Senior Research Fellow, IFPRI introduced CGIAR’s Rethinking Food Markets Initiative. She explained how the initiative aims to address weaknesses in agricultural value chains by generating evidence on innovations, incentives, and policies. In Bangladesh, the initiative focuses on evaluating a profit-sharing financing scheme for livestock fattening and working on the shrimp value chain to enhance production, marketing, input delivery, and traceability.

 

The Guest of Honor Dr. Md. Mahmudur Rahman, Joint Secretary (PPC Wing), Ministry of Agriculture expressed gratitude for this collaboration, highlighting the Ministry and IFPRI’s previous partnerships, such as under the Agriculture, Nutrition, and Gender Linkages (ANGeL) project and the Bt brinjal impact assessment. He emphasized the need for evidence-based policymaking, targeted interventions, and digital innovation for improving value chains. He also acknowledged progress in mechanization but stressed that more work is needed to mechanize crucial operations within agriculture, calling for a renewed commitment to unlocking mechanization's potential.

Agrifood Value Chains Presentation and Discussion

Dr. Ambler and Dr. Alan de Brauw, Senior Research Fellow, IFPRI presented research on digital financial services adoption among intermediary actors in select agricultural value chains supported by the Bill & Melinda Foundation, emphasizing the often-overlooked role of intermediary firms, termed the "hidden middle." While agrifood value chains are often oversimplified as a linear progression from farms to retailers, IFPRI's recent blog tackled this issue by employing network mapping to more accurately depict the intricate web of relationships within these value chains.

Intermediary actors remain understudied due to media vilification and a lack of quality data. IFPRI is addressing this gap by documenting the financial needs of intermediary firms in the rice and potato value chains in Bangladesh. IFPRI’s research suggests that most firms have bank accounts, but lack access to those accounts digitally, and conduct most transactions with cash. The research also finds concerns in Bangladesh regarding high margins taken by certain actors in both the rice and potato value chains, particularly during price increases. Government interventions in the rice value chain involve procurement during low prices and import threats during high prices. However, it is unclear whether processors are significantly inflating prices. In the potato value chain, some cold storage operators are accused of charging exorbitant fees, although data collected does not show significant markups. Introducing digital technologies could improve traceability and help understand pricing dynamics better, but resistance to their use persists in rural areas. This research aims to develop innovative solutions to address these challenges and enhance efficiency in agricultural value chains.

Discussant Ms. Ishrat Jahan, Former Resident Representative, IFDC-Bangladesh and Deputy Director, IFDC-Asia highlighted challenges in the agricultural sector, such as cold storage constraints impacting potato growers' surplus production pricing. High interest rates pose a significant obstacle for both intermediaries and farmers. Government subsidies play a role in enabling transformation, but their accessibility and impact remain mixed, with institutions often engaging NGOs to provide loans to farmers. 

During the open discussion, participants echoed the challenges in ensuring fair prices for farmers within the value chain in Bangladesh. Participants emphasized the excessive costs of mobile and digital money, suggesting the introduction of credit facilities for value chain actors. Participants recommended channeling 68% of agri-loans through the banking sector and reducing the cost of digital money. Dr. Anwar Hossain, Scientist, Bangladesh Rice Research Institute (BRRI) raised concerns about the high cost of capital machinery in rice processing and suggested controlling over-polishing to preserve grain and nutritional value. Other participants proposed measures such as government purchase of 10% of rice production, implementing mechanisms to fix rice prices and increase payments to farmers, and emphasized the importance of understanding value chain intermediaries' stocking and import behavior. Dr. Ruhul Amin Talukder, Senior Policy Advisor, IFPRI highlighted challenges in rice import and post-harvest losses, emphasizing the need to examine the role of shadow traders. Dr. Rahman, the Guest of Honor, concluded by stressing the need to address the identified issues within the rice and potato value chains. 

Farm Mechanization Presentation and Discussion

Next, Dr. Mehrab Bakhtiar and Dr. Ben Belton, both Research Fellows at IFPRI, presented IFPRI’s policy research on agricultural mechanization, outlining the objectives, achievements to date, current status, and future research needs. This research was initiated in response to a request from the Ministry of Agriculture to investigate agricultural mechanization trends across crops and regions, evaluate the national support program for agricultural mechanization, assess the impact of agricultural mechanization, and provide evidence-based policy recommendations.

In Bangladesh, the decline in agricultural labor force participation alongside rising real wages has underscored the critical importance of mechanization. While there have been advancements in mechanization, there are large regional variations, with the lowest levels of ownership in coastal zones and the northeast and the highest levels in the west and northwest. Government support programs have increased machinery ownership, particularly among large farmers, but access remains a challenge for smallholders due to factors like limited access to credit and skilled operators. IFPRI's analysis reveals that while certain agricultural tasks like irrigation and land preparation are highly mechanized, mechanization remains limited in labor-intensive tasks like planting and harvesting. Additionally, IFPRI’s research identifies challenges in the rental market, financing, spare parts availability, and skilled labor. Knowledge gaps include the extent of adoption of mechanization post-2018, impacts of new machines, financial viability of rental service models, and effectiveness of incentives for machine purchases. Addressing these knowledge gaps and challenges in access and financing will be crucial for promoting equitable and sustainable agricultural mechanization in Bangladesh.

Representing a private sector perspective, Dr. F.H. Ansarey, Managing Director, ACI highlighted the need for farm mechanization in Bangladesh to improve productivity. Dr. Ansarey emphasized the importance of government subsidies in facilitating mechanization but also pointed out issues with timely subsidy repayment. He underscored the positive economic impact of mechanization, particularly with combine harvesters, and discussed the potential for further growth in the industry. He closed by outlining areas for future research, including the cost of production, service charges, parts availability, and the need for mechanization in different crop types, expressing optimism about the industry's potential for growth and innovation.

IFPRI’s Dr. Talukder moderated the mechanization discussion, highlighting several issues that have influenced farm mechanization, including the evolution of the tax regime, financing mechanisms, private sector participation, and regulatory standards. While existing data provides insights, Dr. Talukder stressed the need for new research to better assess the extent and impacts of mechanization. IFPRI’s findings suggest limited gains in yield, labor, and farm profitability, possibly due to low mechanization rates in critical stages like transplanting and harvesting. Hence, Dr. Talukder emphasized the importance of considering the scale and appropriateness of machines. Research must address machine sizing for fragmented farmlands and digitalization gaps.

Dr. Anwar Faruque, former Additional Secretary, Ministry of Agriculture highlighted challenges in accessing finance for agri-machinery and rising machinery prices. During the open discussion, issues discussed included the importance of government support for the private sector to enable farmers to purchase machines, and mechanization in the horticulture sector. Dr. Wais Kabir, Executive Director, Krishi Gobeshona Foundation, stressed the importance of learning from past mechanization projects and strengthening local capacity for effective implementation. Dr. M.A. Sattar Mandal, former Planning Member at Ministry of Planning and former Vice Chancellor, Bangladesh Agricultural University discussed the evolution of mechanization in Bangladesh, noting the shift from fixed assets to mobile tractors and combine harvesters. He raised concerns about the effectiveness and equity of current incentive programs and called for a rigorous reassessment.

Closing

Dr. Alan de Brauw, IFPRI closed with key takeaways. He emphasized the importance of agri-food value chain development and agricultural mechanization, particularly amid urbanization and declining agricultural labor force participation. Efficient value chains are key for ensuring food access and affordability for consumers while also ensuring higher margins for producers. Finance is crucial for facilitating mechanization. Dr. de Brauw highlighted challenges, such as caps on mobile money transactions and banks' reluctance to lend to farmers, and suggested exploring models from other countries, such as Hello Tractor in Nigeria.

 

 

Resources:

• Watch the full program (YouTube link)
• Brochure, “IFPRI’s Research on Agri-Food Systems in Bangladesh” (PDF, 3.4 MB)
• Project note, “Financial Access and Digital Services within Agri-Food Value Chains in Bangladesh” (PDF, 266 KB)
• Presentations:
  • “Transforming of Bangladesh Agriculture” (PDF, 7.7 MB)
  • “Rethinking Food Markets and Value Chains for Inclusion and Sustainability” (PDF, 6.3 MB)
  • “Financial Behavior of Midstream Actors in the Rice and Potato Value Chains” (PDF, 2.0 MB)
  • “Policy Research on Agricultural Mechanization in Bangladesh” (PDF, 9.6 MB)
• The workshop received widespread media coverage from The Daily Sun, The Daily Star, The Daily Observer, Dhaka Tribune, The Financial Express, and the New Age.

This blog is partly based on research funded by the Bill & Melinda Gates Foundation. The findings and conclusions contained within are those of the authors and do not necessarily reflect positions or policies of the Bill & Melinda Gates Foundation. For more information on the Climate Change x Agriculture investment, please visit the project page on the IFPRI-Bangladesh microsite. For more information on the CGIAR Research Initiative on Rethinking Food Markets, please visit the official website.

Photo Credit (all photos): Cloud MarCom