Ginger farming is one of the main sources of cash income for the small farmers of the mid-hills in Nepal. The net income of farmers involved in ginger cultivation is significantly higher than that of competing crops (paddy, maize, wheat and fresh vegetables). The value of ginger export has been increasing over the years and doubled in the last decade. Nepal is a significant producer of ginger ranks within the top 15 world exporters. Ginger in Nepal is traded in three forms – fresh, dry and processed.
However, despite opportunities in the sector, there are pressing constraints that needs to be addressed to contribute to the chronic poverty that persists in the region. Farmers and traders in East Nepal are prone to extremely lower margins due to presence of soft rot/rhizome rot disease (loss up to 30% in the field), lack of domestic facilities for industrial extraction and distillation, traditional drying and processing techniques (loss of oil content by 20%) and dominance of a single trade outlet in Naxalbari, India.
Despite proven potential for increased income through semi and fully processed ginger that has yielded good results in the west, 75% of ginger from Nepal is traded as fresh. In the Eastern region, processing of any form (even simple washing and packaging) is yet to be institutionalized. This has limited the bargaining power of farmers and traders of Nepal in comparison to their counterparts across the border. Under prevailing production and marketing conditions, the poverty reduction impact is high as most of the farmers producing ginger in the East are small farmers, for whom it is their main source of cash income, while the rest of the supply chain creates income for poor agricultural laborers.
The International Trade Centre report highlights the fact that many educated people are entering the ginger trade in Nepal because for potential higher returns. The report also highlights that if appropriate interventions are in place, ginger is expected to bring back people to rural areas (foster reverse migratory trends) to take advantage of the vacuum created in processing technologies. Mercy Corps will ensure appropriate ‘social inclusion measures’ to balance out disparities and dominance of higher castes. Accordingly, poor ethnic minorities and other disadvantaged groups will be targeted for greater participation along the ginger market chain.
The project will create direct economic benefit to marginalized farm families, who will have additional income for investments in children’s education, increased cash crop farming, and diversified economic activity.
The project aims to raise the incomes of poor, marginalized farmers in the Eastern hills of Nepal by helping farmers, processors, and exporters increase their profitability of doing business in high-grade, fibreless ginger. Ginger provides a unique opportunity because it offers:
- high poverty reduction capacity
- high scalability (> 32,000 farmers)
- high employment opportunity for women in processing, grading and packaging
- increased export earnings and resultant foreign exchange additions
- high market demand for processed fibreless ginger in domestic and export markets.
Target participants will include smallholder ginger farmers, the Ginger Association of Nepal, and a specialty ginger exporter, Himalayan Agro Farm. Pilot activities will include
- assisting 200 ginger farmers pilot and demonstrate the profit potential of improved production and innovative terms of trade with buyers of fibreless ginger
- assisting Nepal ginger traders and exporters improve market competitiveness by piloting improved processing, grading, and trading practices with farmers and end buyers via forward contracts, hedging and institutional buy-back arrangements
- 15% increase in profit margin per unit of production
- 15% increase in earnings from fibreless ginger sales
- 60 new jobs created
The total budget for the program is $43,000.