Financial Analysis of Allo Based Micro-enterprise and Its Impact On Livelihood of Rural Community of Parbat District

(Case studies from three VDCs of Parbat District)

Researcher: Punam Thapa

B. Sc. Final year

Advisor: Chiranjibi Prasad Upadhyaya

Reader

Co-Advisors: Dr. Laxman Pun, Team Leader/CECI Utthan

And Ganesh Gurung, District Program Manager/MEDP, Parbat

A Research Report Submitted for Partial Fulfillment of the requirement for the

Degree of Bachelor of Science in Forestry, IOF, Pokhara.

August 2003

Acknowledgement

This project paper “ Financial Analysis of Allo Based Micro-enterprise and Its

Impact on Livelihood of the Rural Community of Parbat District” has been

prepared as a part of B. Sc Forestry Degree in Institute of Forestry, Pokhara Campus,

Pokhara, Nepal.

My sincere gratitude and deep respect goes to my advisor Mr. Chiranjibi Prasad

Upadhyaya (Reader), Tribhuvan University, Institute of Forestry for his valuable

guidance, constructive comments, timely suggestions and constant support to carry

out this study. I would also like to express my deepest gratitude to my co advisor, Dr.

Laxman Pun, former NPM of MEDEP, for his keen interest, encouragement and

constant inspiration.

I express my sincere thanks and gratitude to MEDEP, for providing financial support

for this study. My heartfelt thanks goes to MEDEP staffs, Messrs R. Munankami, G.

Gurung, G. Paudel, U. Paudel, K. Paudel and all other staff, whose help and

information was important to complete this study.

I personally want to thank the entrepreneurs of Kyang, Saliza and Bhukhatangle

VDCs who enthusiastically provided time, information and suggestions during field

visits.

My deepest appreciation goes to Ms. Ambika Paudel and Mr. Prakash Singh for their

help and I would also like to thank Mr. Govinda Paudel, Mr. Bishnu Chandra Paudel,

Mr. Moon Rawat and Ms. Sudiksha Joshi, who have provided some useful

contributions and suggestions focusing on financial analysis and data interpretation.

Lastly, I would like to extend my deepest gratitude to my group for being so

supportive and co-operative during the study period of four years.

Glossary Benefit In project analysis, any good or service produced by a project

that furthers the objective of the entity from whose standpoint the analysis is being undertaken.

BC ratio A discounted measure of project worth. The present worth of

the benefit stream divided by the present worth of the cost stream.

Cash flow Amount of money generated from the production activity.

Includes both expenditures (outflows) and revenues (in-flows). Discounting The process of finding the present worth of a future amount.

The present worth is determined by multiplying the future amount by the expression 1 divided (1+I) n where I- the rate of interest (discount rate) and n- the year.

Discount rate The rate of interest that measures the opportunity cost of

waiting to consume goods at a later time rather than consuming them today. Used in project analysis to determine the present value of a future cost or benefit.

Indigenous Social activity, which has been set up primarily as a result of

local initiative. Internal rate of return A discounted measure of project worth. The discount rate that

just makes the net present worth of the incremental net benefit stream, or incremental cash flow, equal zero.

Jadibuti A Nepali word derived from the Sanskrit jad, meaning a root

used in medicine, and the Hindi buti, a shrub. It is used to mean plants and plant parts and other derivatives from which medicine and aromatic products are produced.

Net present value A discounted measure of project worth. The value at the current

time of the discounted benefits minus the discounted costs.

Acronyms/ Abbreviations Allo P&W Allo Processing and Weaving

BC Benefit-cost

DFO District Forest Office

DFID Department for International Development

DPO District Program Officer

EV Exposure Visit

FAO Food and Agricultural Organization

INGO/NGO International/Non-Governmental Organization

IOF Institute of Forestry

IRR Internal Rate of Return

LFP Livelihood and Forestry Programme

MEC Micro-enterprise Creation

MEDEP Micro-enterprise Development Programme

m. Meter

MD Man day

NPM National Program Manager

NPV Net Present Value

NTFPs Non Timber Forest Products

List of Contents

Letter of Acceptance i Acknowledgement ii Glossary iii Acronyms/Abbreviation iv List of Illustrations viii Abstracts xi Chapter one: Introduction 1 1.1 Background 1 1.2 The context of the study 2 1.3 Problem statement and justification 2 1.4 Why Allo 3 1.5 Sustainable rural livelihoods framework 4

1.5.1 What is livelihood? 4 1.5.2 Overview 4 1.5.3 Sustainable rural livelihood system analysis framework 4 1.5.4 Sustainable livelihoods objectives 5

1.5.5 Livelihood assets 6 1.6 Initiative in Allo based enterprise development 7 1.7 Scope of the study 7 1.8 Limitation and constraints of the study 8 Chapter two: Objectives 9 2.1 General objective 9 2.2 Specific objectives Chapter three: Literature review 10 3.1 A short glimpse on Parbat district 10 3.2 NTFP defined 11 3.3 Market information 12 3.3.1 Markets 12 3.3.2 Marketing 12 3.3.3 Marketing structures and their limitation: 13 Chapter four: Methodology 15 4.1 Literature review 15 4.2 Research site selection 15 4.3 Data collection 15 4.3.1 Primary data 15 4.3.1.1 RRA/PRA tools 15 4.3.1.2 Key informant surveys (KIS) 15 4.3.1.3 Semi-structured questionnaire survey 16 4.3.1.4 Seasonal calendar preparation 16 4.3.2 Secondary data 16

4.4 Data analysis 16 4.5Assumptions of the study 18 4.6 General assumptions/ limitations 18 Chapter five: Findings and Discussion 19 5.1 Financial analysis 19 5.2 Assessment of investment feasibility on Allo based micro-enterprise 21 5.3 Girardinia diversifolia as a species for Allo cloth making: 22 5.3.1 Introduction 22 5.3.2 Uses 23 5.3.3 Occurrence/distribution 23 5.3.4 Regeneration 23 5.3.5 Sustainability 23 5.3.6 Harvesting 24 5.3.7 Management system 24 5.3.7.1 Naturally occurring Allo plants managed by community 24 5.3.7.2 Cultivation (farming) 24 5.4 Indigenous practice of Allo processing 25 5.5 Seasonal calendar for Allo collection 28 5.6 Allo marketing pattern in the study area 28 5.7 Contribution of Allo based micro enterprise in supporting 30 rural livelihood through generation of capitals 5.7.1 Contribution to natural capital 30 5.7.2 Contribution to financial capital 30 5.7.3 Contribution to human capital 32 5.7.4 Contribution to physical capital 32 5.7.5 Contribution to social capital 32 5.8 Problem and prospect of Allo based micro enterprise in the study area 33 Chapter Six: Conclusion and Recommendations 34 6.1 Conclusion 34 6.2 Recommendations 34 Reference: 36 Annexes i Annex: 1 Questionnaire i

Annex: 2 Name of Allo entrepreneurs of Kyang VDC iii

and Training Provided to them

Annex: 3 Name of Allo entrepreneurs of Saliza VDC iii and Training Provided to them

Annex: 4 Name of Allo entrepreneurs of Bhukhatangle VDC iii and Training Provided to them

Annex: 5 Nursery Technique For Allo management iv

Annex: 6 Tools v

Annex: 7 Map of the Study Area vi

Annex: 8 Photographic Essay vii

List of Illustrations

Tables Table: 1 Land use pattern of Parbat District 11

Table: 2 Forest types, area and major species 11

Table: 3 Expenditure and Benefits receiving from 19

the Production of Allo (Puwa) Clothes

Table: 4 Projected cost for Allo processing NRs. 20

Table: 5 Projected Benefits from Allo processing NRs. 20

Table: 6 Summary Tables of NPV, BC Ratio and IRR Calculation NRs 20

Table: 7 NPV, IRR and BC ratio of Allo processing. 21

Table: 8 Incomes Through Allo in Three VDCs of Parbat District 31

Table: 9 Employments through Allo in 3 VDCs. 31

Charts

Chart: 1 Uses of the Plant 23

Chart: 2 Allo processing 27

Chart: 3 Seasonal Calendar of Allo 28

Chart: 4 Marketing Channel of Allo 29

Chart: 5 Role of Allo in the generation of different Capitals 30

Figures

Figure 1: Sustainable rural livelihood framework 5

Figure 2: Income through Allo 31

Figure 3: Employment through Allo 32

Abstract

This research, entitled “Finanacial Analysis of Allo Based Micro-enterprise and its

Impact on Livelihood of the Rural Community of Parbat District” is a case study

carried out in the three VDCs, Kyang, Saliza and Bhukhatangle of Parbat district.

The research was carried out for the partial fulfillment for the requirement of the B.

Sc Forestry Degree at the Institute of Forestry (IOF). This study aimed to analyse the

financial status of Allo processing in the study area. This study also seeked to identify

the market pattern of Allo products and to analyse the contribution of Allo processing

in supporting rural livelihood. Primary data were collected in the field and

secondary data from libraries and /or office records of MEDEP, Parbat. The

assembled data were analyzed; then technically and economically interpreted.

The analyzed data has shown that the benefits received from Allo processing is 1.2

times greater than the cost incurred during its processing. NPV and IRR calculated

concluded that Allo based micro-enterprise has financial potentiality.

The market pattern of Allo product found was quite simple. Allo products were either

sold by entrepreneurs themselves or by MEDEP, Parbat and sometimes by

middleman. Products from Allo have local, national and international market.

The income received from Allo products is a major source of financial capital to Allo

entrepreneurs in the study area. Allo based micro-enterprise can create opportunities

for rural employment; cash incomes, human skill development. Fund generated

through Allo based micro-enterprise can help in poverty alleviation.

Some recommendations have been made for commercial cultivation of Allo. The

people involved in collecting, processing, and marketing should be given further

training. Entrepreneurs should be encouraged to develop co-operative and suitable

marketing system should be sought.

CHAPTER ONE

INTRODUCTION 1.5 BACKGROUND

Nepal embraces very unique geographical regions that contain the tropical plains on

the Indian border in the south, an extensive section of the mid-hills, and the trans-

Himalayan sections bordering Tibet in the North with such diverse geographical

regions, Nepal is one of the world’s richest ecosystems in terms of bio-diversity, and

has supported and contributed to human welfare. In Nepal, the rural populace has

been involved in the collection, or harvesting, processing and marketing of NTFPs

since ancient times. This activity has supplemented their meagre incomes from

subsistence agriculture.

In recent years the value of NTFPs is receiving increasing attention worldwide.

NTFPs, which include hundreds of species of traded and locally used forest products

of biological origin, employ thousands of collectors, village traders and exporters in

Nepal. These natural products are being increasingly recognized for their role in rural

livelihoods, biodiversity conservation and export values. NTFPs are the potential

pillars of sustainable forestry, catering to the changing needs of the people in the

changing environment.

Allo (Girardinia diversifolia, syn, G. heterophylla), also called “Sisnu” in Nepali, is an

0important Non-Timber Forest Product of Nepal. This self–sustaining plant belongs

to the “Urticaceae”, the nettle family. Its english name is “Himalayan nettle” or

“Stinging nettle”. It is a fibre yielding plant locally known as “Puwa”(Magar to

Sherpa language) in the west and “Allo” in the east. Gurung calls it “Nani” or “Ni”.

Bark, young shoot, and leaves of the plant are used for fiber, vegetable and fodder

respectively. It grows wild under the forest and in moist habitat between 1200m to

3000m. It is a perennial robust nettle like plant with stinging hairs.

The stem bark of Allo contains fibres with unique qualities, strength, smoothness,

lightness, and when appropriately treated, a silk like lustre. The Magar and other

ethnic groups have for centuries extracted and spun these fibres to weave durable

jackets, porter’s head bands or straps, fishing nets, ropes, bags snacks, mats, coarse

clothing material blanket in the remote villages of Nepal. Thus the species has

provided raw material for making most of the textiles needed by households for

generation. The forte of Allo is its strength and durability. It is also often lighter and

more delicate-looking than its contemporaries, jute and hemp.

Kyang, Saliza and Bhukhatangle VDCs in Parbat district are the main Allo production

areas, where there exist natural stands. Magar and Gurung tribes mainly inhabit these

VDCs. Sustainable harvesting, processing, and marketing of such minor forest

products may contribute to the advancement of local socio-economic conditions, it

now has national and international markets. Product like clothes, bags, shoes,

tablecloths, etc are being produced from Allo and marketed in Kathmandu as well as

to foreign countries e.g. USA, and Japan.

1.6 THE CONTEXT OF THE STUDY

The present research work “Financial Analysis of Allo Based Micro-enterprise and

its Impact on Livelihood of the Rural Community of Parbat District” was carried

out for partial fulfillment of the requirement of B. Sc Forestry Degree at Institute of

Forestry (IOF), Nepal. Interest on the study of Allo Processing was paid by seeing it

as a potential and existing source of income for rural people of Parbat District at an

individual user’s level and the users group level. Micro Enterprise Development

Program (MEDEP), a project under United Nation Development Program (UNDP),

sponsored it. It is intended that the outcome of the research be useful for the sponsors,

and ultimately to the user group involved in Allo processing of the study area.

1.7 PROBLEM STATEMENT AND JUSTIFICATION

Parbat, a hilly district of Dhaulagiri Zone where the people mainly depend for their

subsistence on agriculture; processing and marketing of Allo may play an important

role in generating income to support the livelihood. Out of several Non-Timber Forest

Products generated income, the income brought by the collection of Allo bark from

the high hills of Nepal as the raw material for Allo textile is becoming one of the

major source to the rural poor. Demand for Allo textile is growing and small factories

are entering in production process, which has created good market for Allo. But, local

people know very little about the scientific processing of the product. The unmanaged

and unscientific processing results in low productivity. However, the details of the

activities and information on the status of marketing and trade pattern are lacking.

Little study has been carried out on the “Financial analysis of Allo based micro-

enterprise or processing”, that too with poor documentation and dissemination of

results. Therefore, it is considered to be an essential to study the financial status of

Allo processing for documentation and utilization. Although the species like Allo is

contributing for both domestic requirements and income generation for rural

livelihood, there is hardly any study showing the extent of processing and marketing

of Allo that supports the rural livelihood in the remote area of the nation. It is obvious

that scientific processing and marketing of Allo can provide several employment

opportunities to local people and generate revenue for the nation. But the lack of

appropriate processing tools and technology, knowledge about status, collection,

value addition, marketing and cultivation of the species at local level limits their

potential contribution to the socio-economy of rural livelihood. There is little

information on marketing and fluctuation in price of Allo processed materials. Thus,

the involved local people are getting very low price of their products in comparison to

final price of the product. Information on all the above-mentioned issues cannot be

obtained until formal research is carried out. That’s why the need for the detailed

study was felt. So, this study will help to explore the solution of the problem

statement by researcher’s field visit, observation, and opinion collection from the

experts, market and the community.

1.8 WHY ALLO

During the last ten years, an interest in NTFPs has taken the world by the storm. This

is due to the increasing recognition of the fact that NTFPs can provide community

needs for improving rural livelihood, contribute to household food security and

nutrition, help to generate additional employment income, offer opportunities for

NTFPs based enterprise, contribute to foreign exchange, support biodiversity and

other conservations objectives (FAO, 1995). Vast sums have been invested in

exploring the potential of NTFPs (Wollengerg, 1999). Nepal is also not far from this

condition. In the present scenario of forestry development in Nepal where with the

rapid handing over of national forest as community forest, there has been

deterioration in revenue earning. In this context, the importance of NTFPs has

increased and has been emerging as a primary source of the revenue earning of the

country. At present, NTFPs have become the focal point of sustainable management

and bio-diversity conservation globally (Ray, 1997)

Out of many NTFP resources, Allo has been identified as one of the potential resource

for rural enterprise development that makes the base for sustainable livelihoods of the

rural areas (MEDEP, 2001). It is becoming one of the commercially important species

due to the high demand of its processed materials.

Allo can be a major income generating resource in Kyang, Saliza and Bhukhatangle

VDCs of Parbat district, where abundant Allo is growing naturally and local people

are involved in the collection, processing and selling the product. So, the study had

been proposed to be carried out in the Allo plant and make some recommendations on

the basis of the outcomes.

1.5 SUSTAINABLE RURAL LIVELIHOODS FRAMEWORK

1.5.1 What is Livelihood?

The term “Livelihood” simply means “the means for living” (Oxford Dictionary,

1998). The word “Livelihood” can be used in many different ways. The following

definition captures the broad notion of livelihoods understood here: ‘a livelihood

comprises the capabilities, assets (including both material and social resources) and

activities required for a means of living. A livelihood is sustainable when it can cope

with and recover from stresses and shocks and maintain or enhance its capabilities

and assets both now and in the future, while not undermining the natural resource

base’ (Chambers, et.al. 1992).

1.5.2 OVERVIEW

The livelihood approach is a way of thinking about the objectives, scope and priorities

for development. A specific framework and objectives have been developed to assist

with implementation, but the approach goes beyond these. In essence it is a way of

putting people at the center of development, thereby increasing the effectiveness of

development assistance.

1.5.3 SUSTAINABLE RURAL LIVELIHOOD SYSTEM ANALYSIS

FRAMEWORK

The framework developed by the Department for International Development (DFID)

present the main factors that affect people’s livelihood, and typical relationship

between them. It can be used in both planning new development activities and

assessing the contribution to livelihood sustainability made by existing activities.

This framework suggests that there are a number of basic elements, which interact and

produce sustainable livelihood system in every area. Namely they are contexts,

conditions and trends, livelihood resources, institutional process and organizational

structures, livelihood strategies and sustainable outcomes.

1.5.4 SUSTAINABLE LIVELIHOODS OBJECTIVES The sustainable livelihoods approach is broad and encompassing. It can, however, be

distilled to six core objectives.

Figure1: Sustainable rural livelihood framework

Vulnerability Context

Livelihood Assets

Transforming Structures And Processes

Livelihood Strategies

Livelihood Outcomes

PP

F

N

H

S

I n orde r t o ach i eve

Key H- Human Capital S- Social Capital N- Natural Capital P- Physical capital F- Financial Capital

Source: DFID, 1999

• Improved access to high-quality education, information, technologies and training

and better nutrition and health;

• A more supportive and cohesive social environment;

• More secure access to and better management of, natural resources;

• Better access to basic and facilitating infrastructure;

• More secure access to financial resources; and

• A policy and institutional environment that supports multiple livelihood strategies

and promotes equitable access to competitive markets for all.

1.5.5 LIVELIHOOD ASSETS

• Natural capital: Natural capital is the term used for the natural resource stocks

from which resource flows and services (e.g. nutrient cycling, erosion protection)

useful for livelihoods are derived. There is a wide variation in the resources that make

up natural capital, from intangible public goods such as the atmosphere and

biodiversity to divisible assets used directly for production (trees, land, etc.).

•Physical capital: Physical capital comprises the basic infrastructure and producer

goods needed to support livelihoods.

Infrastructure consists of changes to the physical environment that help people to

meet their basic needs and to be more productive (e.g. roads, market places, electricity

supply, clinics, schools, hospitals).

Producer goods are the tools and equipment that people use to function more

productively (e.g. farm animals, tools, machinery, agricultural inputs, buildings and

equipment).

•Human capital: Human capital represents the skills, knowledge, ability to labour

and good health that together enable people to pursue different livelihood strategies

and achieve their livelihood objectives. At a household level human capital is a factor

of the amount and quality of labour available; this varies according to household size,

skill levels, leadership potential, health status, etc.

• Social capital: Social capital is the set of social relationships upon which people can

draw in order to expand their livelihood horizons. These include kinship and

friendship ties, patron client and other feudalistic relations, membership of formal

groups, various types of reciprocal arrangements and relations built up through trust,

form example those between users and sellers. Social capital also includes

membership of organizations, which provide loans, grants and other forms of

insurance against income shocks.

• Financial capital: Financial capital refers to cash; both income and savings, plus

stocks of liquid capital that can be converted into cash in times of need.

1.6 Initiative in Allo Based Enterprise Development

The Micro-Enterprise Development Programme (MEDEP) has been designed to

support the HMG's Ninth Plan's objective of achieving poverty reduction through the

development of micro-entrepreneurs from low-income families. Ministry of Industry,

Commerce and Supplies (MOICS) is executing MEDEP in collaboration with

technical and financial supports of the UNDP in partnership with several other

national and district level agencies. The programme is being implemented in ten

districts representing all five-development regions, two districts (one in hill and one in

terai) from each region. The selected districts have been prioritised based on the

resource and market potential for poverty reduction through micro-enterprise

development. MEDEP aims to reduce poverty of hardcore poor families through

development of sustainable micro-enterprise, and capacity building of service delivery

mechanism related to micro-enterprise development. MEDEP focuses mainly on

three-target beneficiaries: hardcore poor families at the grassroots level, service

delivery organisations at the national and district levels, and the buyers, local

businessmen, shop keepers and all consumers of the micro-enterprise products.

MEDEP has provided support services to rural entrepreneurs to establish varieties of

micro-enterprises in rural areas. The important categories of enterprises that MEDEP

beneficiaries have chosen and established are Food and Beverages, Textile and

Clothing, Wood and Timber, Non-Timber forest Products, Bamboo and Based

Products, Repair and Services, Foot and Leather Products, Paper Products, Chemicals

and Chemical Products, Non-Metallic Products, Metallic Engineering Products,

Honey based Products and Other services, etc. Parbat is one of such districts in the

remote area of the Mid Western Development Region with huge resource of Allo,

which could be utilised to establish sustainable micro-enterprises for poverty

reduction of the rural community. MEDEP has taken initiatives in enterprise

development of Allo based products.

1.7 SCOPE OF THE STUDY

The study is an attempt to provide an exposure about this indigenous processing of an

NTFP, which stands as a potential source of sustaining the livelihood of rural people

of the suitable areas. The financial analysis of Allo shows the financial viability of this

species. With proper management and utilization Allo enterprise can be replicated to

other potential sites.

1.8 LIMITATION AND CONSTRAINTS OF THE STUDY

Following were the limitations of the study:

1. Lack of sufficient secondary data on Allo and it’s processing made the study

difficult.

2. The study has been completed within the given period with limited resources.

Even then, attempt has been made to provide valid information in this study.

3. Harvesting time of Allo was August-December, which did not coincide with

the research period, so harvesting, processing, etc., could not be observed.

CHAPTER TWO

OBJECTIVES

2.1 General objective:

The general objective of the research was to analyze the financial status of Allo

processing in the study area and its contribution in supporting livelihood of local

people.

2.2 Specific objectives:

Ø To identify the market pattern of products of Allo in the study area

Ø To assess the financial return of existing processing system

Ø To analyze the contribution of Allo and its products in supporting rural livelihood

in the study area.

CHAPTER THREE LITERATURE REVIEW

3.1 A short glimpse on Parbat District

Parbat, a hilly district of Dhaulagiri Zone, is situated between 27° 58’N to 28° 39’

N latitude and 83° 34’E to 83° 59’E longitude and has an area of 54900ha.

Headquarter of the district is Kushma. The political boundaries of the district

extend in the east to Syanga and Kaski districts; Baglung, Myagdi and Gulmi

districts in the west; Myagdi and Kaski districts in the north and Syanja and Gulmi

districts in the south. The altitude varies from as low as 762m to as high as

8091m. The area is made up of steep slopes, deeply incised narrow valleys and

occasional plains. The climate of the district ranges from Mild Temperate to

Alpine. The northern part is moister, due to high rainfall and southern part is dry

due to low rainfall. The average annual rainfall is 1950ml. The average maximum

and minimum temperature are 26.2oC and 14.3oC respectively.

Parbat is the most densely populated district, with the highest density of people

per unit of forested land. Total populations of the district are 1,74,357 and among

them 83,430 are male and 90,927 are female. Educational ratio of female and male

is 1:1.06.The average annual population increase rate is1.91percent (2048-

2057BS), comprising 29,902 households and average family size 5.83 (DDC,

2002). Major caste of the district is Brahmin (41.1%) followed by Chhetri

(14.1%). Others castes are Magar, Bishwakarma, etc.

Administratively, the district is divided into 11 Ilakas and 55 village development

committees (VDCs). A black toped road passes through the middle of the district

called Pokhara-Baglung highway

Land type and forest type in Parbat district.

Relief, climate, soil, accessibility, and the distribution of population influence the

land use pattern. The lower valley, plain, river banks, gentle and middle slopes

and flat hill tops serve as agricultural land while the steep slopes and inaccessible

areas are covered with forests, shrubs and grasses. The land use pattern and forest

types are given below.

Table: 3 Land use pattern of Parbat distict

S. No Land use pattern Area (Ha) Percent 1 Cultivated land 18588 33.83 2 Cultivable

Agricultural land 10019 18.23

3 Grazing land 5772 10.51 4 Forest cover 19997 36.42 5 Others land 556 1.01 Total 54900 100.00

Table 4 Forest types, area and major species

S. No Forest Area (ha) Major species 1 Conifer 2064(10%) Khotesalla,

Louthsalla 2 Broad leaved 13913(70%) Sal, Chilaune,

Katus, Mahuwa, Phalant, Banjh, Champ, Okhar, Raktachandan, Gurans.

3 Shrub 1488(7%) 4 Mixed 2532(13%) Broad leaved and

coniferous. 19997(100%)

3.2 NTFP Defined: Terms including minor forest products, non-timber forest products, very important

products and non-wood forest products are all used to denote forest products other

than timber and wood. In Nepal, the terms minor forest products, NTFPs, and

Jadibuti, i.e., Medicinal and Aromatic Plants (MAPs), are used interchangeably.

NTFPs can be defined as all goods and services for commercial, industrial and

subsistence use, other than wood, derived from forests and their biomass which can be

sustainably extracted, i.e. extracted from a forest ecosystem in quantities and ways

that do not alter its basic reproductive functions (FAO, 1992). By implication, this

definition is concerned with products of plant origin, from natural forests. Also, the

use to which the product is put, ways of sustainable extraction and basic reproductive

functions are extraneous to product definition.

The use of Non-Timber Forest Products (NTFPs) is as old as human existence. In

subsistence and rural economies the role and contributions of NTFPs are crucial

because of their richness of variety, as sources of food, fodder, fibre, fertilizers, herbal

potions, construction materials and cosmetic and cultural products. They support

village-level artisanal and craft activity. NTFPs provide raw material to support

processing enterprises. They include internationally important commodities used in

food products and beverages, confectionary, flavorings, perfumes, medicines, paints,

polishes and more.

In recent years, NTFPs have attracted considerable global interest. This is due to the

increasing recognition that NTFPs can provide important community needs for

improved rural livelihood; contribute to household food security and nutrition; help to

generate additional employment and income; offer opportunities for processing

enterprises; contribute to foreign exchange earnings; and support biodiversity

conservation and other environmental objectives.

More recently, NTFPs have received international attention as a result of:

• The growth of green consumerism in developed countries;

• More open international market;

• Increasing awareness of biodiversity conservation and sustainable and protective use

of forest resources;

• Realization, based on a rowing number of reports, of the potential of multi-use

forest management to generate rural income, and that in many cases NTFPs yield

more income over time than timber species from the same resource;

• Growing recognition of the need to involve people living near forests for sustainable

management of forest resources.

3.3 Market Information:

3.3.1 Markets:

Markets are outlets for products and services. The buyers may be either individuals

or institutions. Market can exist for raw materials, semi processed goods, finished

products or services. They can be local, regional, national and international.

3.3.2 Marketing:

Marketing is basically a technology which is at the disposal of producers to identify

market opportunities in the form of market needs and wants, analyze competition,

develop appropriate approaches to reach the market and to make profit. It uses a

mixture of basic factors comprising product, channels of distribution, promotion and

price by which it satisfies the needs and wants of the customers in the markets.

Marketing operates in an environment, which is created by economic, social, cultural,

technological, political, regulatory, legal, institutional and infrastructural factors, all

of which are beyond the control of the individual operators doing marketing.

3.3.3 Marketing Structures and Their Limitation:

There are three main types of marketing channels in Asia. Farmers market

individually, with the assistance of middlemen or through cooperatives.

• Marketing Individually:

A farmer marketing individually represents a small competitor individually

controlling meagre resources. This limits farmers’ bargaining power in the market,

which is further weakened by a poor financial position and inability to keep up with

rapid changes in market conditions. The small size of surplus marketed by farmers

makes it difficult for them to sell to companies interested in bulk purchases. Farmers

are generally unaware of markets for their produce, and in some instances even when

they are aware, they do not know how to market their products. This ignorance is

perpetuated by a lack of information on markets and prices. Farmers sell to whoever

wants the produce at prices usually set by the buyer. Each farmer makes non-

systematic independent decisions, which are not planned. They thus lose out to

unscrupulous traders.

• Marketing Through A Middleman:

Middlemen have maintained a stronghold on the market scene because they are able

to provide farmers with resources essential to their work: quick credit, non-

bureaucratic and quick payment for goods and good organization. They remain

essential for commodities that require time, storage, space and energy inputs, for

example for products that must be dried, stored, transported, processed and packaged

before distribution. In many cases these commodities are sold and bought several

times, adding value at each step, before reaching the consumer. The technology and

finance to perform these functions are usually beyond the reach of low-income

farmers and are left to middlemen who have the resources.

A combination of the farmers’ lack of knowledge of actual market prices and poor

marketing supports the middlemen. They are often moneylenders, local merchants of

food and beverages and other household requirements. Once the farmer is indebted,

he or she is obliged to sell and buy continuously from the same individual, even when

prices are unfavourable. Poor communication and transportation facilities, highly

segregated markets, and unequal bargaining power between buyers and sellers make

the field more profitable for middlemen. Farmers sell through middlemen for want of

a better marketing system, and because middlemen give cash advances without

bureaucratic intervention in periods when the farm is not producing money.

• Marketing Through A Cooperative:

Cooperatives are in operation in many countries, but very few have been successful.

Major deficiencies in cooperatives are:

• lack of strong leadership to direct the cooperative;

• lack of group homogeneity to ensure a common view on problems and rapid

identification of correction measures;

• lack of planning on long-term goals of the cooperative; and

• lack of government support needed at the initial stages of a cooperative.

CHAPTER FOUR

METHODOLOGY

4.1 Literature Review

For the purpose of collecting information a number of related literatures were cited

and supplemented with the field data. The publications related with this study include

published and unpublished documents of MEDEP, DOF, international and national

organizations and individual experts and scholars.

4.2 Research Site Selection

This case study was carried out in Kyang, Saliza, and Bhukhatangle VDCs of Parbat

District. Parbat District is one of the three districts in Dhaulagiri Zone, located in the

Western Development Region of the country. These Three VDCs were selected after

consultation with MEDEP, staff, Parbat. Selections of the study sites were based on

the following criteria;

• Abundant Allo grows naturally in the study area.

• Allo is locally processed in the area by their indigenous method since time immoral.

• MEDEP has developed and is supporting Allo based micro- entrepreneurs in the

district.

4.3 Data Collection

4.3.1 Primary Data

Following are the methods applied during the study to collect the primary data:

4.3.1.1 RRA/PRA Tools

A number of RRA and PRA tools were utilized to draw the necessary first hand

information for the study. These are listed as follows.

4.3.1.2 Key Informant Surveys (KIS)

People who are Allo entrepreneurs i.e. Allo collectors, processors and also users,

contractors, traders, were consulted and interviewed. This method was used to collect

information on the historical background of Allo harvesting, processing and marketing

n

t=0

1.0

or trading, contribution of Allo processing in supporting rural livelihood and different

problems and prospects etc.

4.3.1.3 Semi-structured Questionnaire Survey

The semi-structured questionnaire survey was employed to collectors, processors,

contractors, MEDEP staff, local NGOs, for acquiring the information on processing,

marketing of Allo, financial return from Allo enterprise, difficulties they faced etc.

4.3.1.4 Seasonal Calendar Preparation

Time and season of Allo collection has been identified through group discussion with

Allo entrepreneurs and crosschecking with secondary data sources.

4.3.2 Secondary Data

Information that could not be available from the field was obtained from existing

literature. The secondary data were obtained from the published and unpublished

materials. The main sources were MEDEP, branch office Parbat and head office

Kathmandu, LFP, Parbat, concerned VDCs, IOF library and few other sources.

4.4 Data Analysis

The cost incurred in Allo processing and benefit received from the final processed

material of Allo were calculated after the data were collected in the field. The

calculations were done at 12 % discount interest rate. To determine the investment

feasibility on Allo enterprise, three economic/financial tools of decision making

namely, NPV, BC ratios, IRR were applied. The following formulas were employed.

(i) NPV= Σ[Rt-Ct] (1.0+i)t

Where,

NPV = Net present value

Rt = revenues or positive cash flows in year t

Ct = costs or negative cash flows in year t

t = year in which the cash flow occurs

n

t=0

1.0

t=0

n

i = interest rate

Net Present Value criterion is one of the most widely used and accepted investment

criteria recognizing the time value of money. It is the algebraic sum of the discounted

costs and revenues at a specified interest rate. It gives the present worth of the net

benefit (i.e., total benefit minus total cost) stream. An investment is acceptable if the

NPV is positive and is not acceptable if it is negative (Leuschner, 1984).

1.0

ΣRt (1.0+i) t (ii) BC ratio=

1.0

ΣCt (1.0+i) t

Where,

BC = cost benefit

Rt = revenues or positive cash flows in year t

Ct = costs or negative cash flows in year t

t = year in which the cash flow occurs

i = interest rate

The benefit-cost ratio is simply the ratio of discounted benefits to discounted

costs. If the ratio is greater than one, the project is yielding more benefits than it

costs.

Investment is accepted if the BC ratio exceeds the unity and not accepted if it is

less than the unity.

(ii) IRR = the internal rate of return is the discount rate that makes the net

present value equal to zero. Hence, IRR is the interest rate equalizes the

present value of costs and revenue. It is the value that causes the following

equation to be true.

n

t=0

1.0 n 1.0

ΣRt (1.0+i) t ΣCt (1.0+i) t

Where, IRR = internal rate of return

Rt = revenues or positive cash flows in year t

Ct = costs or negative cash flows in year t

t = year in which the cash flow occurs i = interest rate

All the data, qualitative and quantitative obtained from primary and secondary sources

have been processed both in computers and manually. The information was

crosschecked with different sources and logical interpretation was done. The

information was then presented in the form of charts, tables, figures, and descriptive

text in different sections.

4.5 Assumptions of the study

• One person can harvest 100kg green plant per day.

• Average 25 % yield (stripped green bark) from fresh plant.

• Average 20% yield (dried bark) from freshly stripped green bark (80% moisture

content)

• Average 40 % yield (Allo fibres) from dried bark.

• Average 70% yields (yarn) from Allo fibres.

• Average ½ kg yarn can make in a day by foot pedal spinning wheel (khutte charka).

• Average 1kg yarn can make 3.5m (25ft) clothes of 63.5cm (25inch).

• Average 12kg of fuel wood is required for 1kg of processed fibre.

• Cloth selling price per meter is NRs. 500.00

• Collection, processing, and final cloth production is one-year activity.

4.6 General Assumptions/ Limitations

• Increased income either by the diversified use of products or by more efficient mode

of processing is difficult to consider in expenditure and benefit projection.

• The additional probable benefits obtained from value-added processing of Allo and

from organized export to the third world countries are difficult to quantify.

t=0 = 0

• Indirect benefits received from soil conservation and environmental protection and

any indirect costs incurred during processing of Allo are not included.

• The total cost and benefit remains constant over the period of five years.

• In practice processing can be done more than once in a year during the season but in

the calculation it is assumed that the processing is done once a year.

• The interest rate used to calculate NPV & BC ratio is 12%. This is because 12% is

an average rate of interest charged by commercial bank when it flows the loan.

CHAPTER FIVE

FINDINGS AND DISCUSSION This section includes the cost incurred during the processing of Allo, projection of

expected income from the final processed Allo product for 5 years, seasonal calendar

of Allo, marketing channel, indigenous practice of Allo processing, problem and

prospects of Allo based micro-enterprise and contribution of Allo enterprise in

supporting rural livelihood.

This chapter also determines NPV, IRR, and BC ratio of Allo processing.

5.3 Financial Analysis

The cost of collection of Allo bark, processing and benefits received from production

of Allo clothes are calculated by the data collected during field study based on

observation, interviews and discussion with the entrepreneurs. The details of the

expenditure and benefits are shown in table 3 below. To determine NPV, IRR and BC

ratio, these costs and benefits are discounted at 12% interest rate.

Table: 3 Expenditure and Benefits receiving from the Production of Allo (Puwa) Clothes S.N Particulars Quantity Man

day Rate NRs. Cost/Income

A. Costs 1. Collection of Allo 400kg 4 100 400.00 2. Stripped green bark (25% yield) 100kg 2 100 200.00 3. Dry bark (20% yield) 20kg 1 100 100.00

a) Cooking dried Allo in ash 20kg 1/2 50.00 4. b) Cost for fuel wood 3 bhari* 50 150.00

5. Beating, washing, and drying fibre after cooking

2 100 200.00

6. Soaking fibres in water and mixing white clay/rice husk or grounded maize

2 100 200.00

7. Drying fibres, beating and cleaning (40% yield)

8kg 1 100 100.00

8. Yarn (70% yield) and spinning time

5.6kg 11 100 1,100.00

9. Preparing loom for weaving 2 100 200.00 10. Weaving clothes 19.6m 17 100 1,700.00

Total Variable Costs for a year (processing once a season)

4,300.00

B. Income Selling clothes (price at village) 19.6m 500/m 9,800.00 Total income (processing once a

season) 9,800.00

*1 bhari = 30kg The projected cost and benefits of Allo processing for the period of five years have

been described on the following table 4 and 5 below.

Table: 4 Projected cost for Allo processing NRs.

S.N Particulars Costs Years

Total Remarks

1 2 3 4 5 1 Variable cost 4300 4300 4300 4300 4300 2 Tools 9250 3 Interest

foregone 1110 1243 1392 1559 1747

Total 14660 5543 5692 5859 6047 37801 Without discount Table: 5 Projected Benefits from Allo processing NRs. S.N Particulars Benefits

Years Total Remarks

1 2 3 4 5 1 Total Income 9800 9800 9800 9800 9800 49000 Without discount Capital requirement for land purchase, cost of seed, cost of weeding are not included

in the calculation. Thus, the initial investment of about NRs14660 will eventually

produce NRs49000 at the end of five year (table 4 and 5).

Table: 6 Summary Tables of NPV, B/C Ratio and IRR Calculation NRs.

Years S.N Particulars 1 2 3 4 5

Total Remarks

1 Discounting Factor at 12% 0.893 0.797 0.712 0.636 0.567

2 Present value of cost stream 13091 4418 4053 3726 3429 28717

With 12% discount

4

Present value of benefit stream 8751 7811 6978 6233 5557 35330

With 12% discount

7 NPV -4340 3393 2925 2507 2128 6613 8 B/C Ratio 1:1.2 9 IRR 75.97%

Total discounted cost and benefits at 12% interest rate are NRs28717 and NRs35330

respectively (table 6). Thus, NPV for Allo processing is 6613. Discounted cost

NRs28717 and discounted benefit NRs35330 means BC ratio for Allo processing is 1:

1.2 i.e., benefits received from Allo processing is 1.2 times greater than that of cost

incurred during its processing when the costs and benefits are discounted at 12%

interest rate. IRR calculated on the basis of above costs and benefits at 12% discount

interest rate is 75.97%.

5.4 Assessment of Investment Feasibility on Allo based micro-enterprise

There are manifold benefits (both direct and indirect) that are received from the

NTFPs domestication and commercialization. NTFPs based Micro-enterprise creation

could be an alternative means to uplift the socio-economic condition of rural

community. Allo, which is an important NTFP, is playing a crucial role in the study

area. Allo based micro-enterprise is helping not only in providing employment to rural

people, but also indicating its potentiality in providing economic benefit to them. If

we recommend Allo based micro-enterprise in the potential areas without sufficient

justification, nobody will do it. Investment must be economically beneficial otherwise

people would invest elsewhere in more remunerative alternatives. Therefore, three

important decision making criteria NPV, IRR and BC ratio have been described here

to justify the Allo based micro-enterprise. The NPV, IRR and BC ratio of Allo

processing have been summarized in table 7 below.

Table: 7 NPV, IRR and BC ratio of Allo processing.

Cost (NRs) Benefit (NRs) NPV IRR BC ratio

For 5 years

37801 49000 6613 75.97% 1:1.2

From table 7 the income likely to be received by the entrepreneurs from the processing would be NRs49000 at the end of five years. If the processing is done more than one time in a season, the income could be more than that is possible from processing once a season.

The NPV of the Allo processing for 1st year has clearly depicted that investment on

Allo based micro-enterprise only for one year or for short term will not be financially

profitable. But the NPV of the processing at the end of five years indicated that the

enterprise based on Allo will be very profitable in the long-term as first year includes

the investment of tools, which will not be incurred in the later years, so in later years

the entrepreneurs will enjoy more of the profit and thus the financial viability if Allo-

enterprise is justified.

BC ratio of Allo processing has indicated 1.2 times more income than the cost

incurred during processing. Similarly, IRR of Allo processing 75.97% shows

tremendous potentiality to invest on Allo based micro-enterprise. As already noted,

for calculating of cost and benefits, the cost for land, seed and weeding are excluded,

therefore, IRR of Allo processing 75.97% may be less when we consider land, seed

and weeding value.

Let us treat these analyses with the economic/financial theories on NPV, IRR and BC

ratio. Leuschner, 1984 explained-“......an investment is acceptable if the NPV is

positive....”. “...... An investment is indicated if IRR exceeds the comparison rate.......”

(Here, comparison rate is 12%). Since, the NPV of Allo processing is positive,

investment on Allo based micro-enterprise is economically viable.

Economic/financial theory on BC ratio is that “.......An investment is accepted if BC

ratio exceeds unity.....”. Here, BC ratio for Allo processing is greater than 1 (unity).

5.3 Girardinia diversifolia as a species for Allo cloth making:

5.3.1 Introduction

Scientific name: Girardinia diversifolia (G. heterophylla)

Family: Urticaceae

Nepali name: Allo, Puwa

English name: Himalayan nettle, Stinging nettle

Allo plant is a tall, stout and erect herb, 1.5 to 3 m. high, with perennial rootstock. The

aerial part is armed with numerous slender stinging hairs. Male and female flowers

are born on the same plant. It grows wild under the forest canopy between the

altitudes ranging from 1200 to 3000m. It grows well in moist, fertile and well-drained

soil. Seedling growth begins in early April and the plant reaches 3 to 4 feet high

within two months and flowers appears in August-September. Fruits ripe in

November-December. Stems shoots up to 10-11 feet height at mature under

favourable condition. Its bark stem contains bast fibers of unique qualities-strength,

smoothness, and lightness and when it is processed appropriately a silk-like luster

appears. Fiber length is found up to 580 mm, which it is said the longest fiber in the

plant kingdom. The leaves are simple and alternately arranged in early stage and

leaves become 3-7 lobes in later stages of development. Leaf length ranges from 10

to 35 cm.

5.3.2 Uses

Traditionally, the fiber obtained from the bark of Allo has been used for a variety of

woven product, namely clothes (Bhangra, east-coat), bags, sacks, tablecloths, porter

strap, blanket etc. and are marketed in Kathmandu and are also exported to foreign

countries like USA and Japan. Young shoots are also consumed as a vegetable in

some districts of Nepal.

Chart: 1 Uses of the Plant

5.3.3 Occurrence/Distribution

Allo grows naturally in the Community forest, farmland, and government managed

forest. The area covered by Allo is traditionally owned or reserved by village for

harvesting only. It is open access to particular village for collection. Farming system

has not yet been developed because sufficient Allo plants are available to full fill need

for handful of village Allo processor. Allo is widely distributed in sub-tropical and

temperate Himalayan zone. It is distributed from east to west Nepal in moist habitat,

under forest canopy, at 1200 to 3000m.

altitude.

5.3.4 Regeneration:

Allo Plant

Bark Young shoot Leaves

Fibre Vegetables

Fodder

Allo can be propagated from seeds as well as from root suckers, and vegetative

propagation is also possible. In fact, no one ever tried to bring the plant into

systematic cultivation because of its easy availability in the wilderness and its high

regeneration capacity. However, to sustain micro-enterprise of Allo processing, it

would be necessary to propagate Allo in nursery and plant in the suitable areas.

5.3.5 Sustainability

It is observed that if Allo is extracted correctly, i.e. cutting the stem without

extirpating the roots, Allo regenerates abundantly next year. Village collectors said

that cutting activity increase the vitality of plant and consequently the quality of the

fiber. The plant regenerates every year. Even though Allo regenerates naturally along

with forest trees are not sufficient in long run if demand of Allo products increases.

Therefore, it is recommended to cultivate Allo in barren farmland for its sustainability.

Training is given to community in Parbat district for its nursery management.

5.3.6 Harvesting:

Community told that cutting Allo plant in 2nd week of October to February (Kartik to

Magh) gives better coppice for next year. However, the most suitable season to

harvest the Allo plant is from August to December. The plant harvested in this time

gives a white and good quality fiber. Stingy nature of Allo plant discourages local

community to harvest it because they are not equipped with gloves and only use a

thick piece of cloth to protect their hand. Community prefers to harvest Allo plant

during winter season, when the cold reduces the stinging force of the Allo. After

cutting the plant, the bark is removed and peeled.

5.3.7 Management system:

Allo plant could be managed by two ways:

3.5.7.1 Naturally occurring Allo plants managed by community

3.5.7.2 Cultivation (Farming)

5.3.7.1 Naturally occurring Allo plants managed by community.

Usually, naturally growing Allo plants are on government forestland. The area

covered by Allo is traditionally owned or reserved by village for harvesting only. It is

open access to particular village for collection. Local community are harvesting it and

making clothes for their use only. Therefore, there is no interest of government to

charge royalty for this plant. However, if communities go for commercial business of

this plant product then government would charge royalty in future. If, Allo plants area

is handed over to community for management purpose then CFUGs would be

exempted from paying royalties of Allo plants and manage it well. Community should

prepare Allo management plan.

5.3.7.2 Cultivation (Farming)

Increasing number of entrepreneurial groups' for making clothes from Allo plants in

different parts of Nepal have threatened Allo plants. The best way to solve this

problem is to bring Allo under the farming system. A simple nursery management

and planting technique helps farming of Allo plants.

5.4 Indigenous Practice of Allo processing

• Harvesting:

Harvesting of Allo is done from Kartik to Magh. After harvesting the plant, the outer

dead bark is removed and is peeled inner bark (bast fibre). If the harvested plant is

dry, then it is soaked in water for a day before peeling bark.

• Drying:

The bark can be dried in one day. Dried peeled barks are bundled and stores in a well-

ventilated room.

• Cooking in Ashes or Caustic Soda:

Inner barks are cooked in a drum containing water with ash of any kind of wood for 3

hours. Fresh raw material cooks faster than the dried one. It is economically more

viable to cook dry ribbon in terms of consumption of fuel wood and extracted fibre

ratio, although time required for cooking fresh bark is comparatively very little. If

caustic soda is used instead of wood ash, it takes 1.5 hours to be cooked. Community

prefers to cook bark-using ashes because it doesn’t abrade the hand and foreigner like

clothes cooked in ashes. The cost of 1 kg of soda is NRs. 60.00

• Beating and Washing:

The cooked fibre is washed in running water usually in a river accompanied by

frequent beating with wooden mallet or hammer. The beating and washing in running

water is repeated for 2-3 times. One man-day is required beating 18 kg cooked fibre.

• Bleaching and Drying:

The fibres thus extracted are mixed with rice husk (chaff), or maize flour, or in a

white clay solution to bleach the pulp to obtain a white shining fibre and making it

soft. The main use of the rice husk is to make the fibres soft and suitable for spinning.

• Washing and Drying:

After bleaching, the clay flour or chaff is removed by washing it and in any case

beating it again. Then pulp is dried in sun.

• Spinning:

After softening, the fibre is ready for spinning into yarn. Mostly, the women are

involved at all stages of collection and processing. The spinning is either done with

self-constructed hand spindle, made of wood or with spinning wheel. Spinning with

the hand spindle is slower than with a wheel, but the hand spindle is preferred because

it is very light to carry and women find it handy and suitable for spinning during their

leisure time or other activities like walking, talking.

• Weaving:

Two persons are required to fix the loom (weaving machine). The fitness of the yarn

depends largely on the skill of the spinner and also on the quality of the fibres. The

yarn thus spun is woven on back-strap loom.

Chart: 2 Allo processing

4MD 2MD 1MD 1/2MD 1MD 2MD 1MD 11MD 2MD 17MD

Collection (400kg)

Stripped green bark

Dry bark

Yield 25%

Yarn from fibre

Preparing loom

Weaving cloth

19.6mm

mmmmmm

Yield 70%

Yield 40%

Yield 20%

20 Kg

100 Kg

Cooking in ash or caustic soda

Beating, Washing and drying fiber

Soaking fiber in water with white clay/rice chaff or

gounded maize

Drying, beating and cleaning

5.6 Kg yarn

5.5 Seasonal Calendar for Allo Collection The ‘Seasonal Calendar’ for Allo plant was prepared by the information gathered during field visit and its verification with secondary resources. Following is the outline of the seasonal calendar of harvest for Allo plant. Nepali months in their abbreviated forms are given in horizontal line. Chart: 3 Seasonal Calendar of Allo Bai Jes As Shra Bha Ash Kar Magn Pau Mag Phal

Chai Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar Apr Flowering Collection time

Allo flowers in the months of August-September. Harvesting of Allo bark in the study

area takes place in the month of October-February. But the most suitable season to

harvest the Allo plant is from August-December.

5.6 Allo Marketing Pattern in the study area

The market chain was quite simple when studied. The collecting, processing of Allo

and preparing Allo clothes were usually done by women, entrepreneurs supported by

MEDEP, Parbat. Allo processed material were sold by the entrepreneurs themselves to

local market or by MEDEP, Parbat either to District or exported when the products

are in demand. Only in few occasions products are sold to middleman. People get

reasonable price. Cost of the products was decided according to the quality of raw

materials, quality of the finished products, etc.

Chart: 4 Marketing Channel of Allo

Community Forest National Forest

Collectors

Final Cloth Production

Allo Thread Production

Local Market

MEDEP, Parbat Middlemen

Marketed at District Kathmandu

Europe, Japan

Processing in Saliza VDC, Parbat

Processing in Bhukhatangle VDC, Parbat

Processing in Kyang VDC, Parbat

5.7 Contribution of Allo based micro enterprise in supporting rural livelihood

through generation of capitals.

5.7.1Contribution to Natural Capital:

Local people used to collect Allo both from Community forests and National forests.

And till now, no royalties have to be paid for the extraction of Allo from the forest.

Natural capital plays important role in the formation of different capitals (i.e.

financial, physical, social and human). Local resource such as Allo has been the base

of enterprise development in the study area.

Chart: 5 Role of Allo in the generation of different Capitals

5.7.2 Contribution to financial capital:

The fund generated from the collection, processing and sale of finished Allo product is

the financial capital.

Contribution to income

Mostly, women were involved in all the stages of collection, processing and

marketing of Allo products in the study area. They used to work together by forming a

group. Altogether 9 members were there at Kyang VDC, 15 members at Saliza, and

10 members at Bhukhatangle VDC.

Above-mentioned 3 groups from 3 different VDCs had received training from

MEDEP, Parbat on the topic, “ Allo Processing and Weaving”. Women group thus

established “ Allo Processing and Weaving Micro-enterprise” and started producing

products like coat, bag, shawl etc. They used to sell their products in surrounding

villages, some are exported to Kathmandu. The products reaching Kathmandu get

sold to foreign countries in most cases. Allo based micro-enterprise was established in

Allo

Clothes for domestic use

Revenue

Financial capital Physical capital Social capital Human capital

Saliza from April 01, and in Kyang and Bhukhatangle from June 01. Sales upto June

03, from three VDCs are given below.

Table: 8 Incomes Through Allo in Three VDCs of Parbat District

S.N. VDCs From To Income 1. Kyang June 01 June 03 NRs. 180655 2. Saliza April 01 June 03 NRs. 435089 3. Bhukhatangle June 01 June 03 NRs. 144781

Figure: 2

B) Contribution to employment Allo processing has become an important source of income for the rural women of 3 VDCs of Parbat District. Following table and chart shows the number of women getting employment thorough Allo based micro enterprise:

Table: 9 Employments through Allo in 3 VDCs.

S.N. VDCs No. Of Employee

1. Kyang 9

2. Saliza 15

3. Bhukhatangle 10

180655

435089

144781

0100000200000300000400000500000

Inco

me

(NRs

.)

Kyang Saliza Bhukhatangle

VDCs

Income Through Allo

Employment through Allo

9

15

10KyangSalizaBhukhatangle

Figure: 3

5.7.3 Contribution to Human Capital

Training, workshop, exposure visits regarding Allo harvesting, processing, marketing

and micro-enterprise creation were provided by MEDEP, Parbat in co-ordination with

LFP and other related agencies, which provided rural people a real opportunity to

learn about external markets, to exchange information, to increase knowledge and

skills and to develop commercial linkages which ultimately helps in human capital

development. Entrepreneurs of three VDCs and training provided to them are given in

Annex 1,2 and 3.

5.7.4 Contribution to Physical Capital:

The group had collectively bought the tools required for the Allo enterprise. There

was no infrastructure or development works done by the entrepreneurs of Allo.

5.7.5 Contribution to Social Capital

To explore the use of technology in “Allo Processing Techniques”, MEDEP, and

Livelihood and Forestry Programmes (LFP, DFID) are working together. The LFP

has agreed to provide their technical expertise in natural resource conservation and

technical inputs on conservation and sustainable harvesting of important natural

resources like Allo and to develop micro-enterprises based on such resource in co-

ordination with MEDEP. Recently, one Allo spinning machine was handed over to

Allo group of Kyang DVC by LFP, Parbat in co-ordination with MEDEP, Parbat.

5.8 Problem and Prospect of Allo based micro enterprise in the study area

The investment on Allo based micro-enterprise is not only financially justified; the

attitude of people is also courageous because Allo is a potential natural resource of the

study area and they don’t need to pay royalty for its collection either from community

forest or National forest, and MEDEP is continuously supporting the entrepreneurs.

Although people are positive towards Allo based micro-enterprise, and investment is

financially indicated, there is no regularity in processing, producing and marketing of

final product. In total 34 women from three VDCs received training from MEDEP,

Parbat, but now there is hardly 15 to 20 have actively involved in this enterprise.

Some problems related to Allo enterprise are as follows

• Lack of an effective leader in the group.

• Lack of communication within the group.

• Lack of co-operation between the group members.

• The processing of Allo is time consuming and making the thread and weaving

clothes is very difficult as well as laborious.

• The main reason behind the married women showing inactive participation lies in

the workload that is faced by them. The unmarried girls are actively involved in the

above activities and there exists conflict in the group about the share in profit of the

enterprise, as the married women investing less time claim for equal share.

Apart from this, improved technology for processing was lacking. The processing

system is traditional and difficult. They follow the same process as their forefathers

did. The presence of stinging hairs in the plant is a source of annoyance to persons

interested in the Allo harvesting and processing. They have felt the necessity of

gloves, as they have been using only a thick piece of cloth to protect their hand.

Recently, a spinning machine was provided to the entrepreneurs of Kyang VDCs by

LFP (Parbat), in co-ordination with MEDEP that will definitely reduce the time

required for spinning. Similar technologies if introduced in other VDCs also would

reduce the total time to be invested in the unit production of Allo cloth which will

result in the increase in the total production and then increase in the income of the

entrepreneurs.

CHAPTER SIX

CONCLUSION AND RECOMMENDATIONS

6.1 Conclusion

• Based on the above analysis, it is concluded that Allo based micro-enterprise has a

tremendous potentiality in the economic upliftment of the rural people.

• Allo enterprise does not show profit in the very first year of the processing due to

the fixed cost of tools but within a five-year period, the entrepreneurs can enjoy profit.

• Projected five-year financial analysis showed profit for once a year processing, if

the processing is done more than once in a season, the profit can be maximized.

• Benefit received from Allo processing is1.2 times greater than the cost incurred

during its processing. NPV and IRR of Allo processing are 6613, 75.97% respectively.

• Mostly women from Magar families were involved at all stages of collection and

processing of Allo plants in the study areas.

• Entrepreneurs were making different cloth items from Allo threads.

• If provided with appropriate technology to simplify the processing, it could increase

the efficiency and productivity.

• MEDEP, Parbat is continuously providing Entrepreneurship Development Training

to the Entrepreneurs of Allo in the study areas.

• Financial and Technical supports to Allo entrepreneurs are provided by LFP, Parbat

in co-ordination with MEDEP, Parbat.

6.2 Recommendations

• To widen the market opportunity of Allo products, suitable marketing system should

be developed and alternate markets should be sought so that the villagers could get the

real benefit.

• Local knowledge of people in Allo should be explored, documented and saved.

• There should be regular interaction between field worker, Allo entrepreneurs and

researcher to discuss Allo management. Progress should be regularly reviewed and

shared.

• Collection, storage and value addition of Allo at the local level should be improved.

Collectors’ co-operative should be established so that bargaining power of collectors’

can be increased.

• The local entrepreneurs should be encouraged to cultivate Allo so that the collection

of Allo can be done in a sustainable manner.

• The local entrepreneurs should be encouraged to carry out the processing of Allo

more than once in a season so that they can increase profit form the Allo enterprise.

• MEDEP, and other concerned agencies should monitor Allo based enterprises

effectively.

• Nursery is necessary to promote the plantation program of Allo. With out plantation

of this species, its use cannot be sustained and present material for Allo based

enterprise will no longer sustain for future. Nursery technique for Allo management is

given in Annex 5

To MEDEP

• Encourage the villagers for commercial cultivation of Allo.

• The farmers are willing to establish Group for Allo processing, so it should be

incorporated and further training should be provided to them.

References

Chambers, R. et. al, 1992. ‘Sustainable Rural Livelihood: Practical

Concepts for the 21st century’. IDS Discussion

Paper: IDS.

Chandrasekharan, D., 1998. NTFPs, Institutions, and Income Generation

in Nepal. International Centre for Integrated

Mountain Development Kathmandu, Nepal.

DFID, 1999. Sustainable Guidance Sheets: Framework.

DFID, London, UK.

District Profile of Parbat, 2058.

Edwards, D.M., 1996. Non-timber forest products from Nepal:

Aspects in the medicinal and aromatic plants .

Forest Research and Survey Centre, Kathmandu,

Nepal.

FAO, 1995. Beyond Timber: Social, Economic and Cultural Dimensions of

Non-Wood Forest Products in Asia and the

Pacific. FAO/RAP, Bankok.

FAO, 1995. Report of the International Expert

Consultantion on Non-Wood Forest Products.

FAO, Rome.

FAO, 2002. Non-Wood Forest Products In 15 Countries

of Tropical Asia An Overview. FAO, Bankok.

Gregory M. S. et. al, 1992. Financial And Economic Analysis Of

Agroforestry systems.

Jackson J.K., (1994). Manual of Afforestation in Nepal, Volume I

and II. Forest Research and Survey Centre,

Kathmandu, Nepal.

Leuschner, W. A. 1984. Introduction to Forest Resource

Management. School of Forestry and Wildlife

Resources, Virginia Polytechnic Institute and

State University, USA.

MEDP, 2001. Annual Report.

NSCFP, 2001. Participatory Inventory Guidelines For Non-

Timber Forest Products.

Ojha, H. R., 2000. Current Policy Issues in NTFP Development

in Nepal. ANSAB, Kathmandu, Nepal.

Parajuli, D. P., 1998. Cultivation of Cinnamomum tamala in

Marginal Lands For Greater Income at Palpa

District. Banko janakari (p24) Vol.8, No. 1,

FORESC, Kathmandu, Nepal.

Paudel, et. al, 1998. What Hanuman Brought Was Not Only

‘Jadibuti….’. NSCFP, Kathmandu, Nepal.

Prajuli D., Gyawali A. R., Manual of important NTFPs in Nepal. IOF/ITTO,

and Shrestha B.M., 1998. Pokhara.

Rasaily, N. K., Potential NTFPs Production, Processing and

Marketing in Parbat, Nuwakot and Phyuthan

District.

Annexes Annex: 1 Questionnaire Questionnaire no: - 1. Name of respondent: VDC: W.N: Age: Sex: 2.1Main occupation of the respondent:

• Agriculture crop • Services • Business • Others

2.2 Secondary occupation of the respondent: 3.Caste (Ethnicity): 4. Education: (Illiterate/under SLC/SLC and above) 5. How much land u possess? (Land holding in bigha) <0.5/ 0.5-1.0/ 1.0-1.5/ >1.5 6.. What is your family size? <5/ 5-10/ >10 7. What do you mean by NTFPs? 8. What type of NTFPs you are using in daily life? 9. How NTFPS is important to you? 10..If you know about NTFPs, then, please state the causes of management of NTFPs in CF/ other forest.

Information on Allo and it’s marketing situation: 1.What is the youngest age of Allo that you collect for processing? 2.What is the season of harvesting Allo bark? 3.How do you harvest/collect Allo bark? 4.Mention the general uses of Allo. 5.How many kgs/dharnis of Allo bark can you collect once? 6.Do you know the actual price of Allo products? Y/N

7.Is it good price? 8.Do you have your own Allo processing system? Yes/no

8.1 If yes a) What is the processing cost? -Per kg/dharni cost of Allo bark. -Fuelwood cost -Royalty/tax -Transport cost -Others (please specify) b) What is the production capacity?

8.2 If no, do you work in any others Allo processing system? If yes, what is the employment status?

-Labour for collecting bark -Labour for processing -Others (please specify)

9. Are you getting training for a) Conservation Y/N b) Collection Y/N c) Selling Y/N for Allo

If yes, who provides you training? (NGO/Organizations) 10.How many are trained from the users? 11.What is the market of Allo?

c) Domestic/Local - Where? d) Export - Where? e) Others (specify)

12. What is the marketing channel? a) Directly to final producer from collector. b) By means of mediator. c) Collector (first) d) Others (please specify) 12.Is the Allo product sold in raw state or processed? If processed, what type of processing is done? 13.Are there any constraints regarding collection, processing and marketing of Allo? What are they? 14.What do you think about the demand of Allo as a whole? a) Increased b) decreased c) constant 15.What is your expectation towards conservation and community development activity through Allo processing? (Positive/Negative/Neutral) 16.What is your opinion toward managing Allo in your VDC? 17.Is Allo processing and marketing supportive to your livelihood?

If yes, how?

Annex: 2 Name of Allo enterpreneurs of Kyang VDC and Training Provided

S.N Name Training Provided By 1. Manisha Pun Allo P&W, MEC, AT MEDEP 2. Ramshree Pun Allo P&W, MEC MEDEP 3. Ammaya Pun Allo P&W, MEC, AT, EV MEDEP 4. Seti Kumari Pun Allo P&W, MEC, AT MEDEP 5. Pabitra Pun Allo P&W, MEC, AT, EV MEDEP 6. Kali Pun Allo P&W, AT MEDEP 7. Dhanisa Pun Allo P&W, MEC, AT MEDEP 8. Rupa Pun Allo P&W, MEC, AT MEDEP 9. Khantari Pun Allo P&W, MEC, AT MEDEP

Annex: 3 Name of Allo enterpreneurs of Saliza VDC and Training Provided

S.N Name Training Provided

By 1. Gaurisa Garbuja Allo P&W, MEC, AT, EV MEDEP 2. Chhakmaya Garbuja Allo P&W, MEC, AT, MEDEP 3. Bima Chochangi Allo P&W, MEC, AT MEDEP 4. Rati Maya Khorja Allo P&W, MEC, AT, EV MEDEP 5. Jas Maya Purja Allo P&W, MEC MEDEP 6. Gau Mya Khorja Allo P&W, MEC, AT, EV MEDEP 7. Phul Maya Khorja Allo P&W, MEC MEDEP 8. Tika Khor Allo P&W, MEC, AT MEDEP 9. Dham Maya Garbuja Allo P&W, MEC, AT, EV MEDEP 10. Tiki Mya Purja Allo P&W, MEC, AT MEDEP 11. Sita Purja Allo P&W, MEC, AT MEDEP 12. Dhudisara Chochang Allo P&W MEDEP 13. Gaumaya Purja Allo P&W, MEC MEDEP 14. Chhak Maya Khorja Allo P&W, MEC, AT, EV MEDEP 15. Deu Maya Khorja Allo P&W, MEC, AT MEDEP

Annex: 4 Name of Allo enterpreneurs of Bhukhatangle VDC and Training Provided

S.N Name Training Provided By 1. Mina B.K Allo P&W, MEC MEDEP 2. Parbati B.K Allo P&W, MEC MEDEP 3. Kamala Khorja Allo P&W MEDEP 4. Buddhi Subha

Gurung Allo P&W, MEC, AT MEDEP

5. Buddhi Maya B. K. Allo P&W, MEC, AT MEDEP 6. Devi B. K. Allo P&W, MEC MEDEP 7. Dhansubha B.K. Allo P&W, MEC, AT MEDEP 8. Chitra Kumari B.K. Allo P&W, MEC, AT MEDEP 9. Sukmaya B.K Allo P&W, MEC MEDEP 10. Jiv Maya Gurung Allo P&W, MEC MEDEP

Annex: 5

Nursery Technique For Allo management S.N. Activities Description

1 Nursery bed preparation Nursery bed should be prepared by the end of Bhadra

2 Seed collection time Should be collected in Asoj-Kartik when ripe 3 Seed Treatment Seed should be soaked in water 1 day prior to

sowing 4 Time and method of

sowing Sowing is done in Mangsir in the already prepared seedbeds in rows, 2 inches apart.

5 Seedling transplanting The seedlings are transplanted into the poly bags when they are 2 weeks old. Points to be kept in mind during the transplanting of seedlings to the poly bags:

• A stick of the thickness of the little finger and 15cm length is cut blunt at one end and pointed at the other.

• This stick is used to prick out the seedlings and transferred to a vessel with water in it.

• The pointed stick is used to make a hole in the already earth-filled poly bags and the seedling is the sown in the poly bag. The blunt end of the stick is used to fill the earth back after sowing.

• The poly bag should be kept in shade and it should be watered twice a day.

6 Time and method of

seedling planting: Hardening off of the seedlings should be done 2 weeks prior to planting. The shade of the seedlings should be removed and amount of water to be provided should also be reduced. These seedlings should be planted in Asad- Shrawan.

7 Preparing the seedlings through root suckers and cuttings

Allo in natural condition has many seedlings with roots. Such seedlings can be directly planted in Asad-Shrawan, or if they are very small then, they can be kept in the nursery and then planted later. Mature stems of Allo of the thickness of a little finger and 15 cm diameter are cut obliquely and sown in Poush-Magh. Root harmones can be used to speed up the formation of roots. The plants that are ready are then transplanted in Asad-Shrawan.

Annex: 6 Cost of Tools used in Allo processing

S.N. Particulars Rate (NRs.) 1. Drum 1,500.00 2. Tan 3,200.00 3. Koka +Kangi 1,500.00 4. Foot Pedal Spinning Wheel 2,800.00 5. Hand Pedal Spinning Wheel 250.00 Total Cost for Tools 9,250.00

Nepal with Parbat District

Map Showing the Study Sites N