‘Real Growth Opportunity Lies in Agriculture and Small Scale Industries’

P K Mohapatra is the Chief Executive Officer at Everest Bank Limited (EBL).

With an aim to promote the agriculture sector, the EBL established a specialised branch called Krishi Udhyam Bikash Shakha at Rijbiraj, Saptari on August 17. In an interview with New Business Age, Mohapatra talked about reasons behind the newly opened branch and bank’s expansion plans in the agriculture sector. Excerpts:


Why did you come up with a dedicated branch for agricultural services?

The branch will not only concentrate on agricultural services, however, the thrust will be on agriculture and agro based industries. The country’s main focus area should now be agriculture because the new industries are not taking off due to many reasons. Around 66 per cent of the total population depends on agriculture and this sector’s contribution in the GDP is about 39 per cent. Therefore, if some priority is given to agriculture, it will be a contribution to the national economy too.



Why did you choose this particular location Rajbiraj among so many other places?

We found Rajbiraj suitable because the land is irrigated, people have money to spend on land and the area receives good amount of remittance. When we were planning to start this branch, we looked for different localities where agriculture is of prime focus including Chitwan where we already had a presence. We did not have a presence in Rajbiraj though which is an area with high growth potential. As a banker, we will also be interested to mobilise deposits as Rajbiraj has a high potential for deposit growth. So, that is a service for dual purpose – mobilising deposit and at the same time, helping the farmers by financing agriculture.



How do you see the scope of formal lending to Nepal’s agriculture sector?

It is one of the best virgin areas. So far, microfinance companies and Rural Development Bank have been doing agro based lending. All these sectors lend at a high rate of interest that makes the total investment and works literally non-viable. The moment commercial banks enter, we can lend at a much lower rate than present. This will encourage the farmers to borrow money from banks and go for high yielding crop varieties, improved seeds and better livestock. The entire economy will be supported by low interest funding by the commercial banks. For example, in districts like Chitwan, Ilam and Jhapa, a lot of migrant workers have returned from abroad with experience and money. All they need is a little support from the banking system so that they can thrive here, invest and use the experience and money they have gained. At the same time, they can give employment to some other people also.

Why are commercial banks hesitant to lend to this sector?

Banking in Nepal has been excessively based on urban areas. However, activities based in the urban areas are getting saturated. Therefore, the real growth opportunity lies in agriculture and small scale industries. Till now, the concentration was in cities and industrial towns like Birgunj, Biratnagar, Butwal and some other areas. The Nepal Rastra Bank (NRB) has made a mandatory provision to invest at least 10 per cent in agriculture and hydropower out of the total investments made by banks. It is a really appreciable measure adopted by the central bank. Agriculture and small scale industries are two sectors which are going to support the country in the long run.


To what extent does Everest Bank wants to invest in the agriculture sector?

The minimum investment will be what the NRB has already stipulated. Our small effort is to encourage the field people – branch managers and field staff – to look at agriculture from a totally different angle. Many think that agriculture lending is not a good lending. However, it is not true. If a thousand rupees is lent in the agriculture sector, it goes straight to the economy. As socially responsible corporate entities, all banks should target the rural people, particularly those involved in agriculture. We will be coming up with two to three branches having thrust on the agriculture sector within this fiscal year.

We are also preparing setting up a farmer training institute in Nepal. Being from Punjab National Bank, India, we have a huge experience in running farmer training institutes in India and so, we have proposed to begin with at least one institute and replicate that all over Nepal. We are trying to open the training institute that will provide trainings free-of-cost in collaboration with the private sector and IFC (International Finance Corporation) or IOM (International Organisation for Migration).

Such institutes will have basic facilities like soil testing will a simple laboratory. We will also teach farmers to repair agriculture machineries so that they can save money and time. Besides, we will train returnee migrants through these institutes so that they can use their experience and money. It is a long term plan and we should be able to start the first training institute before the close of financial year 2069/70.

Sectoral

By Sushila Budhathoki

Demanding Business of Herbal Products

 
The same products which people have been using since a long time for bathing, worshipping or for makeup, are being used by the modern-age people now.

Consumption of herbal products in Nepal, according to an estimate, is registering an annual increment of 20 per cent. According to Pradip Maharjan, Chief Executive Officer of Agro Enterprise Center (AEC) at Federation of Nepalese Chambers of Commerce & Industry (FNCCI), Nepali herbal products also account for three per cent of the total exports. He further says, “Nepali herbal products meet around 60 per cent of the domestic market demand. The remaining 40 per cent demand is still fulfilled by imports.”

The yearly production of ‘Sancho’, a product of Herbs Production and Processing Company Limited (HPPCL), has reached five million units. Last year, the company produced around 3.4 million units of Sancho. According to Chandra Bahadur Shahi, General Manager of HPPCL, the company is now aggressively marketing the product in villages after having found a tremendous market in urban areas already.

“Due to its popularity, we have been marketing Sancho and other herbal products through our distributors in each development region,” says Shahi. The company has estimated the total turnover of its herbal products at around Rs 100 million last year of which Sancho alone contributes around Rs 70 million. Sancho is a widely popular cure for cold, cough, rheumatism, stuffy nose, fatigue, body ache, muscular ache, headache, neuralgia, sprain and itching. It is marketed by the HPPCL since 2057 BS.



Nepal is basically exporting essential oils, Chyawanprash and Shilajit among other herbal products. According to the Trade and Export Promotion Center (TEPC), oil worth Rs 82 million was exported to third countries in 2010-2011. Govind Adhikari, President of Nepal Herbs and Herbal Products Association (NEHHPA), says the herbal industries can get optimum benefit by exporting finished herbal products rather than only exporting crude herbs. He adds, “We are exporting a huge amount of raw materials to India, which in turn, is earning from making the finished products. If we were able to export final products ourselves, we would have earned a tremendous market internationally.” He adds, “Since herbal products are unique, they usually do not face stiff competition.”

The same products which people have been using since a long time for bathing, worshipping or for makeup, are being used by the modern-age people now. Today, the people around the world are inclined towards ‘back to nature’ and demanding natural products ranging from medicines and food items to cosmetics. Germany and France, among other countries, have been considered as major herbal markets in Europe and the popularity of herbal products has a great impact on its development. It is not surprising when many consider Nepal as a country with huge potentiality for herbal trade.

Maharjan recommends exploring the need for investment in herbal industries due to the increasing demand of Nepali products internationally. He says, “There is a huge demand for herbal products internationally because people are lured towards products that are free from side effects. And our products have established a reputation of being natural and chemical-free products.” Nepali Industries are advertising their products through the internet as well and soliciting business online. Most of the Nepali herbal industries maintain websites and use them as a marketing tool for promoting their products.

There are herbal products being sold everywhere and more people are inquiring about natural products such as cream, lip balm, oils and other cosmetics. According to Rina Gongaju, Production Manager at Wild Earth, the company has launched a basic range of products owing to local demand. She shares, “We are wealthy in herbs but it costs dearly to produce a final product because of the technical lapses in the collection and refinement of the herbs.” Wild Earth produces a range of handmade herbal goods such as soaps, massage oils, pillows, smudge sticks and aromatic amulets and sells them in over 30 countries. The company also caters its products to different Nepali hotels, resorts and spa centers.

There are many brands for each range of products like Yak Milk Soaps and Mongolian Mare’s Milk Soap in Wild Wares category. There are other ranges of aromatic pillows namely Passion, Dream, Tranquility, Hangover, Calm, Balance, Soothe and Energy as well as pillows for each zodiac sign. Single products at Wild Earth are priced from Rs 55 to Rs 1,500 while for the herbal set, the prices range from Rs 350 to Rs 3,500.

Adhikari says that Nepali products only acquire Food Phyto Sanitary Certificate and Plant Phyto Sanitary Certificate while buyers in Western countries have increasingly been asking for GMP certificates for aryurvedic remedies, as these products were relatively vulnerable to contamination and unwanted substances. He adds, “Lack of certification is troubling us on exporting herbal products even though there are no complaints about our products.” There are some Nepali companies too who do not apply proper production measures in their production process. Hari Dhital, Administrator at Gorkha Ayurved Company Pvt Ltd, says, “Our products compete with other ‘me too’ products of low quality which have confused the consumers. It has also troubled us in marketing the products.”

Industrialists say that the government provisions are discouraging newer industries, especially the small entrepreneurs. Although Herbs and NTFPs (Non Timber Forest Products) Policy 2004-05 has been endorsed, entrepreneurs are facing a lot of hurdles in its implementation. Adhikari shares his bitter experience in the promotion and development of herbal products in Nepal. “The latest policy has been prepared for the benefit of the industries, however, the government is turning a deaf ear to its implementation,” he complains.

There is a list of 119 NTFPs that are in trade or have the potential to trade. These herbs are used to produce crude herbs, essential oils, extraction items and lokta/argeli papers. They are the raw materials for different ayurvedic products/para pharmaceutical products, cosmetics and vegetable oils too. Different parts like leaf stem extract, pod, root, rhizome, flower, fruit, seed, wood, tendril, bark etc of herbal and aromatic plants are used to produce these items.

According to NEHHPA, there are around 40 companies involved in the production of finished herbal products and 2,000 traders and around 5,000 to 6,000 wild collectors, especially the farmers from different villages, involved in the herbal business. With around 7,000 types of herbs and a kind of bio-diversity rarely found in other corners of the world, Nepal seems the first priority for the investors venturing into herbal business. Maharjan says, “Since the market of herbal products is growing, many western countries are attracted towards production of herbal products. There are a few Nepali companies having joint ventures with foreign companies and are producing herbal products.”

Having seen the potential for herbs and herbal products, many projects have started focusing on the production, processing and marketing of herbal products. AEC reports that High Mountain livelihood Improvement (HIMALI), Raising Income for small and Medium Farmers (RISME), High Value Agricultural Products (HVAP) and One Village One Product (OVOP) are some of the current programs that focus on cultivation, production and marketing of herbal products along with other agricultural products.

The 350 hectares of land owned by HPPCL, if used properly, would also benefit herbal business in Nepal and encourage newer herbal industries for research and development. From a marketing perspective, traditional ayurvedic medicines enjoy good brand value in the west. However, with the demand of quality and harmless herbal products, ‘Trademark Herbal’ is not enough for the aggressive growth of Nepali herbal industries.