Value Chain Analysis of Banana in Dhanusa

Abstract

Banana is one of the most commercial fruits of tropics distributed in terai to mid hills of Nepal and has been expanding in commercial scale with good potentiality of job creation, income generation and development of several enterprises in its forward and backward linkages. It has ample scope of import substitution from as Nepal imports huge amount of banana in recent years from India. This study has aimed to accomplish the objectives of assessing comprehensive value chain analysis, value chain alliance and financing of banana sub-sector in line with the PAF’s future strategy. Both quantitative and qualitative methodologies were used to collect and analysis primary and secondary data pertaining to the study from different sources using FGD, desk review, KII and field observation. The major strengths for this sub-sector are good potentiality for scale up to meet excess domestic demand which has been limiting by some weakness like lower productivity, smaller volume of production, heterogeneous quality of the produce, Lack of collective marketing, poor bargaining power and haphazard use of pesticides. It was estimated that banana sub-sector can generate annual income of about NRs. 95.8 millions in national level from PAF intervention areas, contributed from NRs. 31.9 million initial investments. Insurance premium cost required to bear by the farmers after getting subsidy from government was estimated about NRs. 0.4 million. Additionally, banana producers require loan fund of about NRs. 11 million to operate the business besides their own PAF CO fund of about NRs. 21.3 million. These estimates were made from the viewpoint of generating about one thousand plus employment in the production of this commodity in PAF area. The estimated volume of physical product was about 1526 MT which can sustain 2 SMEs with the full time employment of 21 persons. Return to investment was estimated at 196.3%, which is sufficiently large to reflect the financial feasibility of banana production. Market share of banana production from 5005 benefited households in the PAF area will account 0.6% of total national market with B: C ratio of 3. The balance fund available for funding in studied PAF based CO is NRs. 1.5 million and is lending operational loan in different productive purpose including banana production to its member at 12% rate of interest. It was estimated that farmers can absorb loan size of up to NRs.100000 per year per farmer based on their risk bearing potential. The COs operating in Dhanusa district have planned to form a district level cooperative coordinating all 17 community organizations in the district for the purpose of enhancing loanable fund. None of the farmers have adopted the insurance scheme and deprived sector loan facility in the study area. But, banana growers are now gradually thinking about the adoption of such insurance scheme and loan facility to expand area under banana plantation. Key gaps in the inputs and services provision level of value chain are lacking supply of timely and quality inputs, little or no monitoring of market, lacking bare foot agro-vets and small volume of investment. Similar gaps for production stage are lack of business and technical management skills, saplings and Small volume of credit. Whereas, collectors are facing the problem of heterogeneous quality of the product producing at scattered geographical region, collecting the product with-out completing pesticides waiting period and daily price fluctuation. Consumers at end market are facing the problem of high price, unhygienic market environment, high residue of pesticides, lacking label and branding of the product. The study has identified some suggestions in terms intervention areas from its findings. Possible intervention for value chain, marketing level are to train leader commercial farmers in marketing of inputs and outputs, dissemination of marketing information from electronic media likes mobile based apps, develop loan product for market related activities, introduction of collective marketing, establishment of linkage with big markets and star hotels and establishment of quality standard for PAF branding. Value chain financing at the level of processing industries, intermediaries, collectors and traders can be intervened through training and education to traders operating in different stages of value chain, establishment of warehouse, introduce loan product appropriate for intermediaries, lobbying with financial institutions to release loan for processing industry, foster collaborations with line ministries and allied departments and introduce technology and digital platform to promote market linkage. To the sum up, different value chain activities of banana sub-sector are potential for scaling up with possible adoption of different suggestions on technical, financial, alliance and administrative aspects in joint efforts of different stakeholders working in this sub-sector.