Vegetable Vendors Scheme

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Vegetable Vendors Scheme

Bhutan
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

A scheme that has ameliorated mini entrepreneur’s life through Group Guarantee loans and actually penetrated to reach out to almost half the population of the capital.

About Project

Solution: What is the proposed solution? Please be specific!

In Bhutan, poverty is generally assumed to be towards the rural areas of the country but when a need base line survey was carried forth in the capital for increasing the Group loan clients it was identified that vegetable vendors were the right target of this case study. Most vegetable vendors (farmers) come to the capital, Thimphu from almost all parts of the western Bhutan because they can reach the capital within one day. These vendors buy from the villagers and then transport it to the capital for the weekend to sell it to the urban society. The two major constrains the vendors were facing was “more demand less supply” and “access to finance”. This Vegetable vendor scheme was then actually customized to solve the farmer’s problem but eventually when this product was being implemented the impact was very positive not only towards the two major problems but it showed affirmative results on employment, involvement of public, government and bringing out a sustainable livelihood of the individual. Besides the collateral free loan, the other distinct feature under this scheme is about the collection of the loan at the doorstep of the clients. Physically, our product service officer goes to the weekend market and collects the repayments.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

The Vegetable vendor scheme has directly benefitted positively 138 farmers. These farmers now employ an average of 2 indiviudals for employment which means another 276 people are gaining employment through this project. Now some of the farmers have enough money even to save as recurring deposits which they are saving for thier children's education and health issues. As per the data it indicates that five clients have opened recurring deposits ranging from 1000 to 300 monthly with BDFCL indicating extra income of the vendors. The total savings of the 33 groups amounts to $ 16215 (Taking $ 1 = Nu. 47).
About You
Organization:
BDFCL
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About You
First Name

Karma Thinley

Last Name

Dorji

Your Organization

BDFCL

Country

, THI

About Your Organization
Organization Name

BDFCL

Organization Phone

00975-2-322579

Organization Address

Thimphu

Organization Country

, THI

Organization Type

Non-profit/NGO/Citizen-sector Organization

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Your solution
Country your work focuses on

, THI

If multiple countries, please list them here. If your solution targets an entire region, please select it below
Region(s) your solution focuses on:

South Asia.

Range of turnover in your target firms, in USD

Less than $1 Million.

Average turnover in USD of your target firm

2000$

Number of employees in your target firms

Fewer than 5.

Average number of employees of your target firm

2

Specify the size, average and range of expected loans or investments in each target firm

The Vegetable vendor’s scheme is an abstract of the Grammen Group Guarantee loan scheme in Bangladesh. The farmers who avail this scheme do not have collateral to pledge so they form groups who acts as a guarantee for each other. The product had been customized to suit the beneficiary’s social and environmental behavior. The maximum loan amount is $1500 for one individual and the average loan that is disbursed is $ 800.

What stage is your solution in?

Operating for less than a year

Innovation
How does your proposed innovation leverage public intervention in catalyzing private SME finance?

Presently the rural farmers are growing more vegetables because the buying capacity of the vendors has increased through credit facility. Earlier the vendors had to buy limited from farmers in the village and again sell to a middle person who then transported to the capital. Now the vendors themselves act as a retailer and a direct seller. In the process direct employment is created, the average people employed is around 2 per vendor. Due to the increase in purchasing power of the urban society the vendors can now buy more from farmers and sell more to urbanites at an affordable rate.

The government had established a Centenary Farmer’s Market in the capital where the only weekend vegetable market is effectively operational. It starts from Friday till Sunday. During these three days almost 3/4 of the capital’s population which is approximately around 75,000 people visits for vegetable shopping. Due to the organized strategy of the Centennial market all the vendors have a stall and can sell their products directly. Most urbanites prefer organic vegetables that are brought in by the vendors from the villagers. Earlier most purchases were directly from India and then brought into the capital but now the financial cycle is within the country and the cash is revolved inside the nation. This ultimately decreases the dependency on other country.

What barriers does your proposed solution address?

Lack of financial capacity, Lack of SME access to skills / knowledge / markets.

If you checked any of these barriers, describe how your solution addresses them

In Bhutan, Business Development Services is one of the major constrain for an upcoming Small and medium entrepreneur. The Government offers different levels of Entrepreneur capacity building trainings but not to the level and reach of the vendors of the vegetable group. Basically this group would require financial literacy training which involves books of accounts, business planning, skill development, marketing and product packaging.

There is a lack of Institutional capacity so as the lending institution what I proposed to sustain this vegetable vendor group is BDFCL will offer the BDS to the group. Under a project grant from UNCDF one of the major building and strengthening up this institution is through Business Development Services to our clients. In this area we had also formed one of the strongest collaboration with the Ministry of Agriculture because it is the biggest ministry in Bhutan that have field staffs all around the country.

Impact
Provide empirical evidence of your proposed solution's success/impact at present. If your project is in the idea phase, please provide evidence that speaks to its potential impact

The Vegetable vendor scheme was initiated by BDFCL on 25th September 2009. A pre appraisal report suggested that the scheme would best fit the vendor target group on studying their financial behavior and business cycle.

Initially when the scheme was initiated there were only 10 groups that consist of 43 individuals who were qualified to avail the scheme. One main criteria of this vegetable vendor scheme is that the vendors has to have a permanent stall at the Centenary Farmer’s Market and form minimum 3 members. After availing the scheme the members have to open an Individual compulsory saving account where the minimum weekly saving amount is $ 25.

As of date there are now 33 groups that consist of 138 individuals availing this scheme. Within a span of year the number of beneficiaries has almost tripled which indicates the success of the scheme. From the group break down there are 43 males and 95 females indicating that gender emphasis is also made during group formation.

The other measure of profitability is through their savings in BDFCL. All group members have Individual compulsory accounts but most vendors have now opened voluntary savings where they deposit their extra money to earn a saving interest rate @ 6% per annum. The report also indicates that five clients have opened recurring deposits ranging from 1000 to 300 monthly with BDFCL indicating extra income of the vendors. The total savings of the 33 groups amounts to $ 16215 (Taking $ 1 = Nu. 47) .

In the Centenary Farmers Market (CFM) there are a total of 310 stalls from which 138 stalls have been occupied by the Vegetable vendors who availed this scheme from BDFCL. This clearly represents almost 45% of sellers are directly benefited through this scheme creating more employment within the project and showing positive approaches towards access to credit.
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How many firms do you expect to reach?

As per the past trend there has been atleast 3 groups which has 9 individuals per group joining the scheme on monthly basis. There is still an opportunity for another 20 groups to join this scheme within one year period.

(I am being a little pessimist about the target group since there is limited stall availability within the CFM)

What is the volume of private SME finance you aim to catalyze?

The Vegetable vendor group is a micro Small and medium enterprenuer group. As per the the data till date for approximately $17,000 has been the total portfolio. Within another six months my expectation would be to grow by another 20% .

What time frame will be required to reach these targets?

To achieve the above mentioned portfolio and a target group of another 20 I am presuming that another 7 months will be the time frame. As per the past trend I am optimist to capture monthly 3 groups. There will be a positive feedback on the new group joining due to the following reasons.

• Success of the existing group in terms of financial and economic
• Business Development Services to be received shortly from BDFCL
• Door step repayment collection by BDFCL

To verify the number of clients BDFCL banking system can generate a report only for the Vegetable vendor clients.

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Does your solution seek to have an impact on public policy?

Yes

What would prevent your solution from being a success?

In the Centenary Farmer’s Market there are mainly two floors where vegetables are sold. The lower floor has only those vegetables that are brought directly from India and the upper floors has only organic vegetables but are a little expensive. One very important aspect is educating the consumers that organic vegetables which are sold by vendors are much healthier than the vegetables which are brought from India. If price is the primary matter for consumers then there is still a threat.

The other problem could be interference of grants directly to the farmers. If the vendors are approached by grants by the government then it will spoil their financial discipline which BDFCL has created till date.

Source of funding towards this kind of scheme may get exhausted soon and BDFCL has to look for source of funding.

Sustainability
List all the funding sources that are required for the sustainability of this solution

Bhutan Development Finance Corporation Limited is the only development bank in Bhutan. It’s social mandate is to mainly offer credit to the rural farmers. Till date the vegetable vendor scheme was supported within the BDFCL budget. A total of $ 147,765 was disbursed for the scheme.

The success of this scheme may be till there is credit available so in that case BDFCL may have to look into source of funding from outside. Incase BDFCL borrows money within banks then the interest rates of the scheme will be higher which will eventually have to be paid by the vendors.

Demonstrate how your proposed solution has the capacity to graduate from dependence on public finance. What is the time frame?

The very simple conclusion of this scheme is to bring about a sustainable livehood of an individual in the country. To bring about this phenomenal change in the individual BDFCL has provided two kinds of loans which is the Group Loans and the small Individual loans. The Vegetable vendor category falls within the Group loans but Small Individual loans is where an individual would provide collateral for availing loans.

In my pretext I would say that vegetable vendors will graduate from the group level to avail the Small Individual Loan when they have actually brought some assets. By serving collateral they can then avail higher amounts to start bigger businesses.

Demonstrate how your proposed solution will survive a potential loss of its largest private funding source

The Ministry of Agriculture has supported the entire capital infrastructure building the Centenary Farmers Market where the actual vegetable business is operational.

BDFCL has only intervened into the vendors to fulfill their operational and working capital cost for a short period of one year. The repayments are on weekly basis and supervision and monitoring is at a strict guidance.

Please tell us what kind of partnerships, if any, could be critical to the greater success and sustainability of your innovation

Collaboration between stakeholders is very important for the success of this scheme. Presently, Bhutan Agriculture & Food Regulatory Authority (BAFRA) under the Ministry of Agriculture is the main partner for the success of this Centenary Farmers Market. This department directly controls the food safety and the hygiene of the CFM. At the moment BDFCL is working in collaboration with BAFRA.

There are other stakeholders like the Bhutan Chamber of Commerce & industry (BCCI) who provide the only Business Development Services at a smaller scale to entrepreneurs. The Ministry of Economic Affairs is developing the Micro and Small and Medium Enterprise policy for the country. The Ministry of Labor and Human Resources is presently providing the capacity building skills and technique to the entrepreneurs. All the above mentioned stakeholders are highly important to collaborate with BDFCL to bring in sustainability and success to this scheme.

Are there non-financial issues that could threaten the sustainability of your proposed solution?

As mentioned above presently Business Development Service is a huge requirement for these vendors. BDFCL is only providing financial services but non -financial services like the BDS is highly rated important for a successful business.

In any other words almost 90% of the vendors who had availed loan are illiterate. At the minimum level they should be introduced to financial literacy so that they can atleast keep their books of accounts. As their business grows they need to maintain accounts which at the moment without BDS services they will never learn.

Please tell us if your proposed solution aims to scale up through a high growth sector, expand immediately to multiple sectors, and/or scale up geographically

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In the Economic Development Policy 2010 of the country one of the most essential growths is to concentrate towards Agriculture and by introducing this kind of schemes by BDFCL the Ministry of Agriculture will guarantee support towards such expansion.

Presently the Cooperative act has been framed and very soon there will be many such farmers who will form cooperatives, graduating from smaller groups and applying loans from BDFCL. Group loans of different kinds have been encouraged to form cooperatives.

Regarding the present case there is a lot of opportunity of duplicating this Vegetable vendor’s scheme to other regions of Bhutan. BDFCL has already established branches all over the country and there is not much hindrance towards expansion of the same.
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