Introduction

Bangladesh suffers from an acute shortage of livestock products like milk, meat and eggs.
The domestic demand for milk has been rising faster than the domestic production of milk.
Hence Bangladesh Government has given the priority on the development of dairying at
farmers level to increase the supply of milk from small dairy farms.
In Dhaka district area, small scale dairy farms have been increasing day by day. People have
taken this farming as profitable enterprise.

Scope for Dairy Farming and its National Importance

In agricultural economy, production management, employment of huge people, poverty reduction and
animal protein supply, livestock sector plays very crucial role. But expected development of this
sector is not sufficient. Now the production of this sector among the total production of the country is
only 3%.
In 1998, there were existence of 30,000 duck farms, 61,000 poultry farms and 30,000 dairy farms in
Bangladesh. According to the agricultural census of 1996, the number of cattle, buffalo, goat and ram
are almost same from 1983. Per capita it decreases 20 to 30 percent. From 1991 to 2000 the annual
growth rate of dairy product, meat and egg are 2.7%, 4.3% and 7.7% respectively. 46% of eggs come
from the commercial farm. Major portion of the growth of dairy product is come from the cross
breeder cows. 43% cows are cross breeder. Average milk production per week of each dairy farm of
Bangladesh is 48 liters.
In private dairy farm of Bangladesh 73% of the dairy farms contain less than 11 cows, 17% of the
dairy farms has 11 to 20 cows. It means that most dairy farms in this country are small in size. Only
13% owner of these farm got bank lone to establishing their farm. Rest owner establish their farm with
their own capital. Main profession of 45%, 44% and 11% owners are agriculture, business and service
respectively.
65% dairy farm are governed by stall feeding system, 30% dairy farm are governed by stall cum open
feeding system and the rest 5% dairy farm governed by open feeding system. Farmer on average feed
a cow 5.86 kg straw, 9.16 kg green grass and 5.4 kg concentrate food every day. Amount of
concentrate food is 26%. Among different diseases, 67% dairy farms affected by diarrhoea, 48.2%
dairy farms affected by mastitis and 46.5% dairy farms affected by abort.

Cattle population in Bangladesh is about 24.13 million. In the rural area, cattle are kept mainly for
draught purpose. Only a limited number of farmers have cow for milk production. Maximum cattle
are no descriptive type, which do not belong to any specific breed and termed as indigenous cattle.
These animals are kept mainly in the stall with limited grazing on the roadside; embankment slope,
fallow land and paddy straw are their staple food. Husbandry practices and health care of these
animals are poor. The average milk production of local cows is very low and it varies between 300 to
400 liters per lactation period of 180 to 240 days. Such low productivity of indigenous cows is an
important constraint for future development of the livestock sector. High productive exotic breeds and
their crosses normally do not have adequate resistance against the prevalent diseases.
They do not thrive well in our environment. In spite of all these problems, some people have shown
interest for development of small dairy farms.

Present condition of Livestock sector of Bangladesh

Livestock plays an important role in human civilization. Economic uses of livestock sector is
developed with the change of the nature of soil, air and sunlight associate with civilization. Our
culture highly appreciated large number of cattle of a farmer and culturally we are very much fond of
milk. Demand of this sector increases with increase of population. Density of population is very high
in this country and growth rate is still high. This sector can play an important role to fulfill the
nutrition demand of this huge population. This sector can solve the unemployment problem of the
rural people and can ensure the sustainable multipurpose use of our land. So this sector has the ability
to ensure the certain mobility of the economy of Bangladesh through poverty reduction, nutrition
supply and employment creation.

Types of dairy farm

There are three types of dairy farm in Bangladesh. These are
a) Rural dairies,
b) Pocket dairies and
c) Metro dairies.

Rural dairies
68% rural people get cattle / buffalo and number of cattle / buffalo per family is 3.5. Among
the cattle, 11% are cross breeder and 43% are cows. Number of cows per family in rural area
is 1.5 and on average each cow gives 0.8 liter milk per day. On average each family produces
8.3 liters milk in a week.

Pocket dairies
Some places of Bangladesh are known as milk producing area of Bangladesh. Noticeable
milk producing areas are Baghabari of Serajgang district, Munshiganj district, Tekerhat of
Matharipur district, etc. According to the data collecting from the farmer of Baghabari a
farmer able to income 6088.5 taka in a year if he produces paddy. If he planted green grass in
place of paddy he can earn 26552. taka in stead of 6088.5 taka if he sales the grass. If he uses
these grasses in his dairy farm, he can get 42485 taka and 22 calves in a year, which is very
profitable. Milk production and green grass production at Baghabari increases 7 times and16
times respectively within previous 10 years. 80% cows are cross breeder.

Metro dairies
Metro dairies are developed at the urban areas. Most of them are small in size. All most all farmer
byes the total food for their cattle at higher cost but the farming at these areas is still profitable
because price of milk and meat in these areas are high. Farmer easily get training, medicine, vaccine,
etc compare to the rural people and these farmer are more conscious than the farmer of rural area.
80% cattle are cross breeder. Metro dairies have great opportunity to flourish because it is quite
profitable.

Need of a financial assistance from banks for dairy farming

Project Formulation for Bank loan

4.1 Project can be prepared by a beneficiary after consulting local technical persons of State Animal
Husbandry Department, DRDA, Dairy Co-operative Society / Union / Federation / commercial
dairy farmers. If possible, the beneficiaries should also visit progressive dairy farms and
government / military / agricultural university dairy farms in the vicinity and discuss the
profitability of dairy farming. A good practical training and experience in dairy farming will be
highly desirable. The dairy co-operative societies, if existing in the villages would provide all
supporting facilities particularly for marketing of fluid milk. Nearness of dairy farm to such a
society, veterinary aid centre, artificial insemination centre should be ensured.
4.2 The project should include the following information on technical, financial and managerial
aspects in detail based on type of unit and capacity.

Technical:
a. Land and land development (Location, area, suitability, proximity to road, site map etc.)
b. Proposed capacity / No. of milch animals
c. Civil structures (Sheds, store room, milk room, office quarters, staff room etc.)
d. Equipment and Plant and Machinery (Chaff cutter, Silo pit, Milking machine, Feed grinder
and mixer, Milking pails/milk cans, Biogas plant, Bulk coolers, Equipment for manufacture of
products, Truck/van)
e. Housing Type of housing (Area requirement Adults, Heifers (1-3 years), Calves (less than 1
year)
f. Animals (Proposed species, Proposed breed, Source of purchase, Place of purchase, Distance,
Cost of animal)
g. Production parameters (Order of lactation, Milk yield (ltrs. per day), Lactation days, Dry
days, Conception rate, Mortality(%) Adults, Young stock)
h. Feeding (Source of fodder and feed - Green fodder, Dry fodder, Concentrates. Fodder crop-
rotations- Kharif, Rabi, Summer. Fodder cultivation expenses, Requirement and costs)
i. Breeding Facilities (Source, Location-Distance (km.), Availability of semen, Availability of
staff, Expenditure per animal/year )
j. Veterinary Aid Source (Location-Distance (km.), Availability of labour and other staff, Types
of facilities available, If own arrangements are made-Employed a veterinary
doctor/stockman/consultant, Periodicity of visit, Amount paid/visit (Rs.), Expenditure per
animal per year)
 k. Electricity (Source, Approval from SEB, Connected load, Problems of power failure,
Arrangements for generator)
l. Water (Source, Quality of water, Availability of sufficient quantity for drinking, cleaning and
fodder production, If investment has to be made, type of structure, design and cost)
m. Marketing of milk (Source of sales, Place of disposal, Distance (km.), Price realised - (Rs. per
liter of milk), Basis of payment, Periodicity of payment
n. Marketing of other products (Animal age, place of sale, price expected, Manure
Qty./animal, Price/unit (Rs.), Empty gunny bags- Number, Cost/bag (Rs.)

Financial:

a. Financial viability (Internal Rate of Return, Benefit Cost Ratio, Net Present Worth)
b. Financial position of the borrowers (Profitability Ratios, Debt Equity Ratio, Whether Income
Tax & other tax obligations are paid upto date, Whether audit is up to date)
c. Lending Terms (Rate of Interest, Grace Period, Repayment Period, Nature of Security)

Managerial:

Borrowers profile

a. Individual/Partnership /Company / Corporation/ Co-operative Society /Others

b. Capability in managing the proposed business
c. Experience in proposed activity or others
d. Financial soundness
e. Technical and other special qualifications
f. Technical/ Managerial staff and adequacy there of

Others:

a. Name of the financing bank

b. Training facilities
c. Assistance available from State/ Central Government
d. Regulatory clearances, if any etc.

5. Appraisal of the Project

The scheme so formulated should be submitted to the nearest branch of the bank. The bank's officer
can assist in preparation of the scheme or filling in the prescribed application form. The bank will
then examine the scheme for its technical feasibility and economic viability.
6. Sanction of Bank Loan and its Disbursement

After ensuring technical feasibility and economic viability, the scheme is sanctioned by the bank. The
loan is disbursed in kind in 2 to 3 stages against creation of specific assets such as construction of
sheds, purchase of equipment and machinery, purchase of animals and recurring cost on purchase of
feeds/fodders for the initial period of one/two months. The end use of the funds is verified and
constant follow-up is done by the bank.

7. Lending terms - General

7.1 Outlay
Outlay of the project depends on the local conditions, unit size and the components included in the
project. Prevailing market prices may be considered to arrive at the outlay.
7.2 Margin Money
Margin depends on the category of the borrowers and range from 10 to 25%.
7.3 Interest Rate for ultimate borrower
Banks are free to decide the rates of interest within the overall guidelines. However, for working out
the financial viability and bankability of the model projects we have assumed the rate of interest as 12
% p.a.
7.4 Security
Security will be as per NABARD/RBI guidelines issued from time to time.
7.5 Repayment period of loan
Repayment period depends upon the gross surplus in the scheme. The loan will be repaid in suitable
monthly/quarterly instalments usually within a period of five to seven years.
7.6 Insurance
The animals and capital assets may be insured annually or on long term master policy, where ever it is
applicable.

8. Economics of Dairy Farming

A model project with 10 buffaloes is given below. This is indicative and the applicable input and
output costs as also the parameters observed at the field level may be incorporated.

A. Capital Cost

Cost of animals 500000

Transportation cost 10000

Construction of animal shed 60000

Construction of calf shed 24000
 Cost of Chaff cutter and
equipment 60000
Total 654000

B. Techno economic parameters

Type of Animal Graded Murrah Buffalo

No. of Animals 10
No. of animals/batch 5
Cost of Animal (Rs./animal) 50000
Cost of culled animal 5000
Transportation Cost/Animal 1000
Average Milk Yield (litre/day) 10
Floor space (sqft) per adult animal 50
Floor space (sqft) per calf 20
Cost of construction per sqft (Rs.) 120
Cost of chaff cutter (power operated) (Rs.) 50000
Cost of equipment per animal (Rs.) 1000
Insurance premium (% per annum) 5
Veterinary aid/animal/ year (Rs.) 1000
Quantity of Concentrate feed in one bag(kgs.) 50
Cost of concentrate feed (Rs./kg) 12
Cost of dry fodder (Rs./kg) 2
Cost of green fodder (Rs./kg) 1
No. of labourers 1
Salary of labourer per month (Rs.) 4500
Cost of electricity and water/animal/year (Rs.) 150
Margin (%) 25
Rate of interest (%) 12
Repayment period (years) 5
Selling price of milk/litre (Rs./litre) 26
Sale price of gunny bags (Rs.per bag) 10
Lactation days 270
Dry days 150

C. i) Feeding Schedule

Type of
Lactation Dry
feed

Price (Rs.) Qty. (kg) Cost Per Day (Rs.) Qty. (kg) Cost Per Day (Rs.)

Concentrate
12 5 60 2 24
Feed
Green Fodder 1 25 25 20 20
Dry Fodder 2 4 8 5 10
 Total 93 54

ii) Total Concentrate Feed Consumed (Kgs.)

Year Lactaion Dry Total No. of Gunny Bags

Year 1 8250 300 8550 171

Year 2 11250 2700 13950 279

Year 3 11250 2700 13950 279
Year 4 12000 2400 14400 288
Year 5 12000 2400 14400 288

iii) Lactation Chart Per animal

I Batch II Batch
Year Lactation
Lactation days Dry days Dry days
days
I 240 30 90 0
II 240 120 210 150
III 210 150 240 120
IV 210 150 270 90
V 210 150 270 90

D. Economics

Years
Particulars
1 2 3 4 5
Sale of Milk 429000 585000 585000 585000 624000
Sale of Gunny bags 1710 2790 2790 2880 2880
Total 430710 587790 587790 587880 626880
Cost of feeding during
153450 209250 209250 223200 223200
lactation
Cost of feeding during dry
8100 72900 72900 64800 64800
period
Veterinary aid and breeding
10000 10000 10000 10000 10000
charges
Labour charges 54000 54000 54000 54000 54000
Electricity and misc. charges 1500 1500 1500 1500 1500
Insurance charges 25000 25000 25000 25000 25000
Total 252050 372650 372650 378500 378500
Surplus 178660 215140 215140 209380 248380
E. BCR & IRR

1 2 3 4 5
Capital
654000
Costs
Recurring
252050 372650 372650 378500 378500
Cost
Total
906050 372650 372650 378500 378500
Costs
Benefit 430710 587790 587790 587880 626880
Net
-475340 215140 215140 209380 248380
Benefit

PW
Costs 1719259.92
@ 15%
PW
Benefits 1853258.04
@ 15%
NPW 133998.11
B.C.
1.08
Ratio
I.R.R.
30%
(%)

F. Loan Repayment Schedule

Loan Gross Total

Year Interest Principal Surplus
Outstanding Surplus Repayment

1 490500 178660 58860 98100 156960 21700

2 392400 215140 47088 98100 145188 69952
3 294300 215140 35316 98100 133416 81724
4 196200 209380 23544 98100 121644 209380
5 98100 248380 11772 98100 109872 138508