Smallholder Quality Penalty in Bangladesh Jute supply chain

Posted on July 11, 2012  /  2 Comments

An op-ed by Harsha de Silva, PhD, in Daily Star, Bangladesh focuses on the Smallholder Quality Penalty (SQP) in the jute supply chains.

The SQP is the financial penalty on the market price imposed on the smallholder by the first-handler (generally a collector) due to uncertainty over produce quality. This allows the first-handler to offset potential losses due to the perception of lower quality when selling to the next handler downstream. The SQP exists in most transactions in the supply chain.

LIRNEasia research on the jute supply chain conducted in 2011 revealed that the SQP is imposed upon smallholders in the Bangladeshi jute industry.

The researchers found that some small traders take away between 2kg and 4kg from in every 40kg from smallholder farmers to compensate possible future loss due to lower perception of quality downstream. Here is the SQP in effect. Those smallholders who follow proper retting procedures are unable to communicate with the small trader that they have acted to improve quality. The small trader lumps together those who follow proper procedures and those who do not. All are subject to the SQP.

The op-ed goes on to discuss possible solutions to resolve the SQP and role ICTs can play in it.


  1. “An information texting service for farmers and small business is to be launched in Mozambique, backed by assistance from the International Finance Corporation (IFC), a member of the World Bank.” Read more.

  2. Sir Fazle Hasan Abed, Founder and Chairperson BRAC, and Kanayo F. Nwanze, President of the International Fund for Agricultural Development (IFAD) have coauthored an article in Daily Star. They said, “Based on the distinct but complementary experiences of Brac and IFAD, we are in full agreement that the greatest potential for South-South cooperation lies in knowledge transfer and sharing of know-how between middle income and least developed countries. Particularly important is the introduction of successful technologies and practices into countries where small holder farmers can be assisted to build agriculture businesses that will lead the way to food security and rural development. Middle-income developing countries with adequate experience and technologies can also help other developing countries replicate and scale up rural poverty alleviation projects and programmes.” Here is the full report.