In Bhutan, the land of Gross National Happiness, agriculture is the main source of livelihood for more than half the population but accounts for less than one-fifth of GDP. Along the vertiginous Himalayan slopes of this land-locked country, over 90% of Bhutan’s poor live in rural areas, where they lack accessible, good-quality land and other resources. Opportunities to produce food along these mountain top farms and narrow valleys are limited, with little potential to expand irrigation facilities. In addition, external inputs like fertilizers are inadequate, while farm technology is at a low level. An underdeveloped private sector and high youth unemployment rate further impacts poverty levels.
This project represents GAFSP’s first agribusiness investment in Bhutan, a small kingdom in the Himalayas. The project supports the expansion of Mountain Hazelnuts, a semi-greenfield smallholder-based company, to take advantage of the growing demand for hazelnuts from European confectionary and snack producers in Asia. With GAFSP support, Mountain Hazelnuts will provide hazelnut tree plantlets, inputs, and support to local farmers free of charge. The trees will be planted on fallow land that otherwise has no commercial use for the farmers. Once the trees produce hazelnuts, the company will purchase the crop from the farmers at a guaranteed minimum price and market the hazelnuts to international buyers.
This project will be carried out in conjunction with the Asian Development Bank (ADB). IFC and ADB will each invest US$3 million of equity in Mountain Hazelnuts, which will then be matched by a US$6 million investment by the Private Sector Window of GASFP.
The project is expected to reach 15,000 farmer households, most located in Bhutan’s poorer eastern regions. Farmers will grow hazelnuts to generate income on degraded, unused land, which would otherwise be left barren. Farmers cannot replace existing crops with hazelnuts, which makes the income derived from hazelnuts entirely incremental. These additional earnings from hazelnuts sales are projected to eventually double the household income of a large portion of participating farmers. Including all farmer household dependents, this translates into a project impact of approximately 15 percent of Bhutan’s population.