agricultural mechanization in myanmar

Rural farmers and engines in Myanmar

Table of Contents.

Research Challenge 3

Sample Area 6

Methodology 7

01.Current Landscape 10

02.The Market 12

03.Usage 16

04.Purchasing Behavior 21

05.Choice of engine 24

06.Impact and Ambitions 28

07.Where can Proximity add value? 32

08.Next Steps 39

Appendix. Trends 42

Contents

3

What does the engine market looks like at present?

What are the marketing and design opportunities that will allow us to fill unmet needs in the market?

Explore the engine market keeping a human centered approach in order to provide ideal, affordable, high quality solutions that tackle rural farmers’ needs.

Research Challenge

4

demos

village mechanics

fuel shops

China trade expo

village dealer shops

competition showrooms

farmersYangon main wholesalers market

village agents/advisors

makers/2nd hand market

We’ve talked to...

5

With a special focus on their needs and ambitions...

6

Sample Area

Delta: Kungyangon, Hinthada, Danuphyo

Dry Zone: Meiktila, Pyawbwe, Myttha

Yangon: South Dagon, Bayinnaung

Sample Area

7

Methodology

8

Asking, calling,visiting, observing...

. Polled 80+ demos

. Deep interviews with 10 demos

. Surveys with 20+ dealer shops + local visits

. Visited the 2 wholesalers market in Yangon

. Interviewed 3 second hand repairers in Yangon and 2 outside (Delta and Dry Zone). Researched about agricultural mechanization in India and Kenya - Meeting with Nat Robinson. Interviewed 4 local mechanics and two agents (private company/competition). Visited Yee Shin showroom (competition) and an agent from Good Brother. Visited China trade expo. Visits and interviews to local makers (thresher makers). In depth interviews with 25 farmers (extreme users, regular transitional users, non engine users - men and women).

9

Methods

Quantitative Surveys

Phone interviews

In depth individual and group interviews with flashcards as support

Photography

Unstructured interviews

Surprise visits

On site observation/witnessing/shadowing

10

01.Current Landscape

11

Labor migrationPeople in villages are looking for work opportunities abroad or in Yangon. Labor is becoming scarce and its cost is increasing dramatically.

Access to fuelBig new private petrol stations in the main towns and plenty of small informal shops selling fuel in a bottle.

Efficient TransportVery affordable motorcycles in the rural areas and increased use of trawlargyis.

Use of TechnologyTVs, EVDs, dynamos, mobile phones! Everything happening all of the sudden.

Bridges and roadsNew infrastructure is facilitating an easier and faster access to main towns even from remote villages.

Town mechanicsAvailable knowledge on repairing, rebuilding and maintenance of engines in local villages. Spare parts availability.

A fast transition

12

02.The Market

13

Engines are widely available in the market

Yangon and Mandalay has the best prices for engines in the market. However, even small towns and villages have dealer shops that sell gasoline and diesel engines of a diverse range of brands and prices.

There are also local second hand and repair shops where farmers can purchase engines at lower cost (around half the market price).

Popular and preferred brandsGasoline: Kenbo, Corolla, RobinDiesel: Mercedes, Three Rings, JD, JN, Daiwa, Yong Chai, YMG, AMC, Kubota

Main importers and distributors (Competition)Yee Shin, Good Brother, Tharaphu U Soe Myint, Win Shwe War, Aharthit

Most of the engines in the market are manufactured in China, Thailand and India.

No need to go to Yangon...

DELTA VS. DRY ZONE

In the Delta there is a higher amount of dealer shops and therefore prices are very competitive. The Dry Zone tends to have one or two dealer shops located mostly in the main towns.

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Price ranges:

Diesel7HP: 1.5-1.8 lakh12-13 HP: 2.8 - 3.5 lakh

Gasoline: 5.5-6.5 HP: 75000 kyats-1.2 lakh

2nd hand market prices: Around half the price of the brand new engines

Warranty:Currently there is no warranty or after sales service on most of the engines sales in the market.

Financing:There is no financing or payment plan available for less than 5 lakhs.

Some of the banks providing finance for machinery over 5 lakhs are: MCB in partnership with Good Brother. Also KBZ and AGD.

15

Fuel

Big private petrol stations are present in areas closer to the main towns. In remote villages, small roadside kiosks supply fuel at an increased cost.

Although there are some rare cases of farmers buying fuel in bulks with a payment plan, most of the fuel is purchased cash down. The payment plans seem to exist only if there is friendship between the dealer and the farmer.

Prices

1 gallon: 4000 kyats1 bottle: 1000 kyatsRoadside kiosks in remote villages might increase the price by 200 or 300 kyats per bottle and 500-600 per gallon.

Bulk fuel for movies?Some farmers might purchase fuel together in order to watch films but it’s a rare behavior for farm use.

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03.Usage

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Irrigation prevails as the main need for engine purchase as well as its main use.

Multipurpose engine 28%

Combined enginewater pump 72%

Irrigation32%

Trawlargyi20%

Machinery17%

Boat14%

Lighting17%

Type of engine

Usage

*Data from demos survey

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Electricity/light Transport: boats,trawlargyi

Custom purposes

19

With a trend moving towards usage for machinery such as: threshers, cultivators, powertillers.

20

Irrigation prevails as the preferred use of farmers for engines in Myanmar. This result is coherent in both the survey results and the field exploration. However the majority of engines observed in the field were not combined (engine connected to pump) but independent engine + pump.

There is an increasing interest and awareness of the use of engines for other purposes, especially related to agricultural machinery and transport.

The use of engines for lighting seems to be decreasing as solar panels are getting popular and affordable.

Delta Dry ZoneMultipurpose use of engines Single use or multiple engine owner-

shipWilling to take risks/early adopters Risk adverseMajority of paddy farmers Diverse crop farmers/harder conditions

DELTA VS. DRY ZONE

In the Delta, there is much more interest and creativity in the multi-purpose use of engines. In the Dry Zone most of the engines were used for irrigation. This can be related to the water scarcity of the Dry Zone, where engines are used and needed almost all year round. In the Delta the need is seasonal and therefore engines tend to fill other purposes.

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04.Purchasing Behaviour

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Mechanic shop between Meiktila and Pyawbwe

“If you don’t own an engine you cannot be a farmer anymore” Farmer in Pyawbwe

“Engines and machinery is the new mindset, is the new era” Agent in Myyitha

“No other reason but cash money is stopping me from buying an engine” Farmer in Hinthada

How do farmers choose their engines?

Trust: Farmers trust other farmers. Before purchasing they ask their neighbors what kind of engine they are using and choose the same one.

In some cases, they will pay the local mechanic to go with them to the shop and help them through the process. The mechanic charges 5000 kyats plus a meal and he offers to set the engine for the farmer.

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Engine knowledgeFarmers do not seem to do research before purchasing an engine. In some cases they didn’t even know their engine brand.

PaymentFarmers are purchasing engines cash-down. They tend to purchase them after a good harvest, some of them expressed they saved money during a period of year.

Neighbor/friend loansSome of the farmers are getting loans from other farmers or family in order to purchase an engine. These loans tend to have high interest rates.

Bank financingOnly available for purchases over 5 lakhs.

These behaviors are consistent in both the Dry Zone and the Delta.

DELTA VS. DRY ZONE

In the Dry Zone farmers without engines were renting from other farmers at high daily rates:6000 kyats/day for diesel 7HP (without fuel)5000 kyats/day for gasoline 5-6 HP (without fuel)

Small farmers not only face high rates but also complicated renting time availability. No renting service in the Delta.

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05.Choice of engine

25

Why do farmers choose diesel engines?

Fuel choice

Why do farmers choose gasoline engines?

The demos say...

26

Advantages of gasoline engines

Lower costEasy to operate (women and men can start the engine without high physical effort)Less intimidating as a first purchase of a mechanized toolSmall sizePortable

Disadvantages of gasoline engines

Less potential to adapt for multipurpose useLess availability of spare parts and repair knowledgeBad and weak reputation on the fieldNot available in the second hand marketHigher fuel consumption

Advantages of diesel engines

Suited for multipurpose useRobust and long life cycleBetter performance for long hours useAvailability of spare parts and repair knowledgePopularity amongst farmersSecond hand market availabilityMore fuel efficient

Disadvantages of diesel engines

Higher pricesPhysical strength required for the start systemBig and heavy - hard to carry

Diesel vs. Gasoline

DELTA VS. DRY ZONE

In both areas farmers interest and fuel choice is diesel. Gasoline engine users were hard to find. The main reasons for their choice were: mobility and easier ignition.Farmers describe gasoline engines as “less robust and less reliable”.

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Horse Power

6.5- 8 HP: Very popular amongst paddy farmers. Works with threshers, pumps, harvesters, landboats, cultivators, and dynamos.

11-13 HP: Also works with diverse agricultural machinery. Fits the suction requirements of the dry zone water table and long hours of usage.

18 HP: Commonly used for trawlargyis.

DELTA VS. DRY ZONE

In the Delta the majority of the farmers use 6.5-8 HP and in the Dry Zone 11-13 HP. This is related to the need for higher suction and longer periods of use.

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06.Impact and Ambitions

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“ I want to be able to expand my plot ”

This is the most common desire amongst farmers. They want to buy more land, grow more crops, diversify their produce. Some of them want to buy a bigger house, a solar panel, a powertiller.. Some want to pay out their debts.

“ All the farmers are getting one”

As the country changes rapidly, it is possible to identify a desire to move forward and adopt “new” technologies. A feeling of ‘peer pressure’ was common to identify among the farmers that didn’t own engines.

“ I am afraid that soon I am not going to be able to afford hiring labor anymore ”

Another common preoccupation amongst farmers, as agricultural labor costs are increasing from 2000 kyats towards 5000 kyats per day.

Drivers for engine adquisition

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Engine and fuel vs. labour

= 3000 =

=

=

+ +

+

To irrigate a 1.7 acres plot of flowers in the dry zone a farmer needs:

But if he doesn’t use an engine he needs:

1.5 hoursevery 3 days

1 day

A total expense of 500K every day.

The costs saving per day are: 5500K, which means they could pay back an 1.5 lakh engine in 27 days.

*This is a real example chosen out of various consistent stories we heard in the field. However, there are other factors that can influence this calculation such as labour cost in the area, fuel cost, weather changes, type of crop, water table, and additional income for farmers as a consequence of time savings. We recommend this should be explored further in partnership with the finance team.

A total expense of 6000K every day.

1500K

1500

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Benefits according to farmers

Potential of expansion: While they spend less hours irrigating the plots some farmers have explained that they have been able to take care of other tasks and even grow multiple crops at the same time.

Time and effort savings: Some farmers transition from watering cans others from treadle pumps both methods imply high physical effort and time consumption.

Financial savings: As labor becomes less and less affordable the investment in fuel allows them to save money every month.

DELTA VS. DRY ZONE

In the Dry zone the need of engines seemed more urgent. Farmers are paying higher prices not only for labour and engine rental services but for cows rental as well. In both areas farmers have little awareness of their expenses and savings.

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07.Where can Proximity add value?

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What we think...

Mobility: Diesel engines are heavy and big. Could we add wheels and a frame to make it easier for them?By exploring this we realized that the big majority of farmers do not have the need or interest to transport their engines. If they don’t live next to their plots they leave them at the plot or in some few cases they will carry them for longer distances in carts or trishaws. Wheels won’t save the problem and farmers didn’t seem motivated in investing a bit more money for this. Regardless,we should look for a light and compact engine after we fulfill more critical requirements.

b). Needs focused design

Mobility Less physically demanding ignition system

Safety

Some of the needs identified in the field were:

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Less physically demanding ignition system: The ignition system of diesel engines is tricky. However it seems that the number of cases of farmers that have this problem is very low, not big enough to justify the investment of designing an added battery start system.

Safety: Engines are big investments for farmers and they are perceived as ‘luxury items’. We explored the need to provide a secure system to prevent theft, thinking that this could also reduce the need for mobility. However this was not a big problem in the field.

No room for innovation?

Engines have been extensively used and explored in other countries and they have evolved through years and years of testing. Although they are new for the Myanmar market, it was hard to identify big needs that could improve the engines that are currently being imported in order to match the local farmers and to justify the cost of design and manufacturing.

Level of potential value: Low

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Import to

Warehouse

TrishawsTrucks

In order to sell engines and pumps, Proximity’s distribution channel will have to be modified in order to fit with the size and weight of the product.

What we think...

Our distribution channel will be an added bonus for farmers that are considering to purchase an engine. It might accelerate the purchasing process for the farmer by having local demos available to provide guidance and advice. However it seems that engines are available and accessible even in remote villages. By delivering to their doorstep we would be able to provide a better service to farmers but we would not fill a pressing need. Without a better distribution channel, farmers will still be able to purchase engines.

DemosAgentsDealers

Motorbikes Individual Households

Ship to Transport via Sell to

a). Distribution Channel

Level of potential value: Medium

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d). Yetagon approved label

Yetagon approved label:

The idea is to provide farmers with a label that implies that the engine being sold to them has been quality tested and approved by our product brand.

What we think...

Some farmers are scared of purchasing low quality ‘Chinese products’ and most of the engines in the market don’t offer any kind of quality label or warranty.

We found some farmers trust their neighbors and the local mechanics without even knowing the brand of the engine. However, others, especially Yetagon customers, have good relationships with demos and trust their buying advice.

We think that by letting the farmers know that we have tested and approved the quality of the engine this can reduce the anxiety of the investment. A label represents a good opportunity to take advantage of our brand awareness.


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c).Plug and Play Model

Plug and Play Model: We explored the idea of finding an engine that could fit different purposes that are relevant for farmers i.e. a diesel 7HP engine could be used with a pump for irrigation as well as with a cultivator, a thresher, a dynamo, and a landboat. However, we found that especially in the Delta this is already happening. We could add value by communicating this to other farmers that don’t know about it. This can give them confidence in the versatility of their investment, especially in the Dry Zone. This finding is helpful for Proximity to consider if we choose to source a diesel engine and want to maintain compatibility with other machinery.

Cultivator

Thresher Transport

Dynamo/lighting


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e). Finance Plans

A finance plan for purchasing an engine:

At present, dealer shops or bigger distributors are not providing any kind of payment plans for purchases lower than 5 lakhs. This means that low income farmers have no means of buying an engine unless they save for a long period of time or borrow money from private moneylenders at high interest rates.

What we think...

We consider financing as the biggest competitive advantage for selling engines to rural farmers. When we asked non engine users if there were other reasons except cash-flow stopping them from buying an engine they couldn’t think of anything else. This would be a good way of providing small farmers the opportunity to keep up with their plots as labor prices become less and less affordable.

Level of potential value: High

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The biggest value is on...

Finance Plans

Considering the factors described above and the main findings of this research, the biggest need for the lowest income farmers that don’t yet own engine relies on financing.

This area should be explored further with the finance team and Yetagon credit team. To design and create an innovative model that suits the current needs of rural farmers and the desired impact of the service.

The others factors explored in this chapter could be taken into consideration after defining a financial service strategy. The plug and play communications effort, the Yetagon approved label, and a door to door delivery have the potential to work as added bonuses.

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08.Next Steps

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01. Finance focused researchProximity finance? Yetagon credit? Feasibility analysisPotential of repayment, collateral, and others.

02. Curating the right enginesProduct specificationsTesting

03. Distribution model designDealer shops partnerships/Imports?Transportation

04. Communications and demo training

05. Beta launch

Phase 2.

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Potential scenarios

Proximity Finance

Users

Existing dealer channels

Partnership with specific dealer shops that carry the engines we

want to finance.

Proximity Sales and Promotions (communication effort)

Design Team-choosing the right engines

Scenario 1.

43

Pros

Proximity UsersNo need for transport Brand choiceNo need for additional storage or staff

HP choice (2 options)

Not dealing with imports

Widely available

Spare parts availableTime savingReduce costs

Cons

Proximity UsersEngines high price High price w/marginsNo warranty No warrantyNoYetagon brand product

Transport

Complicated finances (multiple stakeholders)

Unnecessary purchas-es

Unhappy demos

Scenario 1.

Proximity Finance

Users

Existing dealer channels

Partnership with specific dealer shops that carry the engines we

want to finance.


Design Team-choosing the right engines

Scenario 1.

44

Potential scenarios

Scenario 2.

Design Team and Proximity FinanceSource and import engines

Users

Demos & agentsvia trawlargyis and

trishaws

Town drop-offs

Channels TeamWarehouses in strategic areasTransport


Orders delivered to dealer shops

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Pros

Proximity UsersProvide fair price Fair priceYetagon brand approval label

Smaller commute (en-gines in remote villag-es)

Proximity with customers

Proximity services

Customer service Feedback and demo support

Promotions of other products w/engineHappy demos

Cons

Proximity UsersStructural changes (time and resource consuming)

No choice of brands

Staff/transport/warehouse investment

No warranty

Transport

Scenario 2.

Design Team and Proximity FinanceSource and import engines

Users

Demos & agentsvia trawlargyis and

trishaws

Town drop-offs

Channels TeamWarehouses in strategic areasTransport


Orders delivered to dealer shops

46

Appendix. Trends

47

Big machinery rental services

Threshers, harvesters, tractors..

Examples of rental services costs for big machinery:

Tillers: 14 000K/acre or 18 000K/acre including fuel

Harvester: 40 000K/acre including fuel(12 persons needed for 1 day of harvesting per acre: labour price: 3000. Total cost: 36 000). 1 harvester can do up to 12 acres/day.

Thresher:27 000K/acre not including fuel.

48

Very affordable solar panels

We witnessed a big amount of rural households using solar panels for lighting and entertainment. The solar panels seem to become more and more affordable, i.e. $1 per 2 watts.

In Kungyangon a government initiative donated solar panels to every household in the village. Farmers seem to be less and less interested in the use of engines for this purpose.