AG R I C U LT U R E & RURAL DEVELOPMENT JOINTNOTES ISSUE 62 JUNE 2012 Lessons from Scaling Up 69572 Developing Value Chains for Wool – Lessons from Mongolia The new “Lessons from Practice: Assessing Scalability� report aims to provide specific tools and guidance to World Bank Task Team Leaders (TTLs) and other agricultural development specialists which can assist them in identifying the potential for scaling up small, innovative projects throughout the entire project cycle – from inception through completion. The report, developed in collaboration with the Heller School for Social Policy and Management at Brandeis University, draws on lessons from the experience of the Development Marketplace (DM) in funding small innovation projects and offers strategic advice to agricultural practitioners on assessing the scalability of such projects. This Note is based on a case study from Mongolia from the report. Effective agricultural interventions need to be scaled THEORY OF CHANGE (TOC) up in order to improve global poverty reduction One key recommendation for the new report – efforts. However, it is also imperative that key derived from this case study and two others – lessons and recommendations be identified which emphasizes the need for a simple and effective can help highlight the most necessary components Theory of Change (TOC). This project’s TOC rests on to ensure these interventions are properly scaled the claim that improving the average grade of fiber up. Recognizing this need for scaling up lessons and and formally certifying this improvement can serve recommendations, ARD conducted a case study of as a catalyst for increased benefits for all sectors the “Value Chain Development of Textile Products� in the value chain. This TOC targeted the problems project in Mongolia in order to identify some of of the quality of raw material and the development these critical components. This case study explored and consolidation of the whole value chain within the lessons from a joint World Bank Development Mongolia. In order to bring about this Theory of Marketplace -Voluntary Service Overseas (VSO) Change, training and information was provided to project, which focused on (1) improving the quality of herders to increase their awareness of the benefits raw Mongolian Cashmere, yak wool, and sheep wool; of improved quality – increasing incentives to (2) strengthening linkages within the entire cashmere improve and certify the quality of their raw products. and wool value chain – from herders to manufacturers; A fiber grading laboratory was established outside and (3) increasing the international competiveness of of the capital, Ulaan Baatar, in order to make access firms that produce high quality final goods in Mongolia. to these services easier and more affordable. These activities focused on changing the asymmetries In order to facilitate these changes, the project in grading information which left producers of introduced a local grading laboratory for quality cashmere produces, provided a reliable source of market information through radio programs and other methods, and provided capacity building programs to address shortfalls in infrastructure, knowledge and capacity along the textile value chain in Mongolia. These efforts have improved the livelihoods of beneficiaries in four areas in Mongolia through training in grading and marketing for herders, provision of equipment to herder associations, the establishment of a grading facility and improvements in manufacturing techniques. Furthermore, this project also highlighted the importance of a well structured Theory of Change (TOC) for success and provided key insights into other critical elements for successful Shearing sheep in Selenge Aimag, Mongolia scaling up. Photo: Sally Mayberry / World Bank raw materials disadvantaged in regards to both price negotiations as well as knowledge necessary to improve Project Benefits the quality of their animals’ natural fibers. Furthermore, • Increased incomes and more secure, stable livelihoods value was also added at both the household and for herders manufacturing levels through the provision of training and equipment for home production of woolen and cashmere • Mongolians benefit from increased consumption by goods and the strengthening of vertical connections in the herders and added employment opportunities from value chain which lowered transaction costs and raised the sorting operations percentage of raw material sold to national factories. • Some traders will benefit from increased income and a This project’s focus on the entire cashmere and wool more stable market system. product value chain was a key aspect of its innovativeness • Manufacturers will benefit from reduced transportation and overall effectiveness. By addressing not only the costs, a greater supply of high quality fiber, lower quality of the raw material, but the timeliness and appeal transactions costs, better design and increased of product design, the quality of final products, and the international sales. effectiveness of national and international marketing this project was able to design an effective TOC which • Mongolians benefit from the retention of more value strengthened linkages between all areas along the added from the cashmere and wool industry value chain. LESSONS FOR SCALING UP The establishment of a local grading facilities incentivized There is now a clear interest among stakeholders in herders to improve their wool, providing manufacturers Mongolia to continue with this project and scale up these with increased quality for production. Furthermore, innovations. Demand continues among herders who training and other capacity building mechanisms participated in the original project for further training and implemented during this project helped ensure that technical assistance. This demand also exists among these incentives reached as far down as the household other herders wishing to benefit from the program through production levels – providing economic incentives for the participation. Manufacturers seeking an expanded supply most vulnerable participants in this value chain. of high-grade cashmere and wool also welcome the larger arena of raw material sources which could be created CONCLUSION through the scaling up of this initiative. This desire for The Value Chain Development of Textile Products project in scaling up among beneficiaries is augmented by a series Mongolia was an innovative intervention which provided of lessons which can inform the scaling up process. both economic improvements along the value chain Among the most effective lessons showcased by this and important lessons on how these improvements project is the local legitimacy and ownership it has can be scaled up further. This project targeted strategic garnered among primary beneficiaries. This ownership stakeholders and beneficiaries along the textile value provides a critical driver for scaling up the successful chain, helping to provide economic incentives for herders, elements of this intervention and helps to ensure the manufacturers, households and others. In addition to ultimate sustainability of project initiatives. This drive is creating appropriate drivers and spaces for scaling up coupled with clear spaces which have been created by to occur, these incentives were instrumental in bringing this innovation. VSO has already established strong ties about a Theory of Change embraced by the local in the region and has government backing to expand this beneficiaries – thus helping to ensure maximum benefit project to reach more herders in more areas throughout and long-term sustainability of this intervention and lay the Mongolia. Another key lesson for scaling up illuminated groundwork for effective scaling up. by this project is the importance of appropriate incentives for facilitating the desired Theory of Change and creating the necessary drivers and spaces for effective scaling This ARD Note was prepared by John Mackedon, Gunnar Larson, and Kaisa Antikainen under the guidance of Fionna Douglas, with special up. Throughout this project economic incentives were thanks to Susan Holcombe and her team at Brandeis University. emphasized along the textile value chain in Mongolia. 1818 H Street. NW Washington, DC 20433 www.worldbank.org/ard