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The Context
• Opportunities in agriculture sector at micro level are few.
• Limited opportunities in production and manufacturing activities
• The fastest growing sector is trading of goods , services and retailing .
• Trading of commodities which form basic consumption of the community is the most viable option
Agriculture Sector Intervention needs
.
Agro Sector
Pre Harvest• Agri inputs – quality and mkt linkage• Updated knowledge for better profits• Contractual farming• Future Price options• Crop Risk Mitigation
Post Harvest• Storage / Ware housing linked to loan• Local Value addition• Linkage to distant markets through Com. Exchange• Aggregation for logistical advantages• Farm to End user – Value chain
Evolution of Strategy in BASIX
Market Linkages
Value Addition
Productivity Enhancement
Risk Management
(Lives & Livelihoods )
CreditMicro-Credit
Customer Needs1996-2001
TASS
2001 onwards
Livelihood Triad
The Livelihood Triad
IDS
Organize producers into their collectives.
Establish functional linkages for inputs,output & know how.
Formalize : the legal status Help set up enabling systems:
operating,HR and information systems
Revive defunct community organizations
Ag/BDS Productivity enhancement Risk mitigation (non-insurance) Local value addition Alternate Market Linkages - Input
supply, output sales
LFS Savings, Credit, short-term as well as
long-term Insurance, for lives and livelihoods Fund transfers Commodity derivatives Financial orchestration ranging from
grants to equity for livelihoods
Keeping a Dairy Animal is the Single Most Important Livelihood for Rural Poor Women
Services Offered• Productivity Enhancement Services
– Feed and Fodder Management– Artificial Insemination– Management of Animals– Clean Milk Prodcution Methods– Extension programmes on
better dairying practices• Risk Mitigation
– Vaccination– Deworming– Curative Methods ( First Aid
and Primary Health Check-ups)• Local Value Addition
– Institutionalise the producers and supports them in preparation and marketing of the by-prodcuts obtained from milk
• Alternate Market Liknages– Design the Milk routes– Facilitate and collaborate for
market linkages with the Dairy firms
– Reviving the defunct chilling centres
– Facilitate to establish new chilling centres where ever required
Steps in Livelihood Promotion
Selecting Livelihood Activities Suitable for the Poor
Understanding the Value Chain of the Selected Activity
Identifying Intervention Points
Identifying Key Players and Initiating Collaborative ActionPROCESS
STEPS
Observing and Understanding the Economy
Need for striking right collaborations We believe in collaborating with players having domain expertise
to…………….
Financial Services
Training & Extension
People’s organization
Research & Technology
Output Market
Input Supply
Farmers
Enhance competencies, Increase outreach, Reduce transaction costs and Reduce risk for farmers and stakeholders
Collaborative polygon for the Lac
sub-sector in Jharkhand, India PRADAN
Facilitation of input supply, monitoring of production process in farmers’ fields
ILRI Training of field staff & agents, technology transfer to farmers, assessment of crop loss
NBJK Formation of Cooperative society of SHGs for processing & marketing of Lac BASIX
Provides inputs (in credit) and covers risk of crop loss, assists in processing & marketing
produce through cooperative society
Cooperative society
Purchases crude stick lac from farmers, processes and sells to
traders or factories
Wholesale traders or shellac factory buys crude lac from coops or individual producers
Lac farmers
of Khunti &
Thorpa
Collaborative Polygon for Livelihood Promotion in Groundnut Grown by 800,000
farmers in APCredit (BASIX + ICICI Bank with risk sharing)
Training &Extention(NGOs)
Input Supply(Seed Co.)
Producer’s Organisation(IGS)
Output Marketing(Trade, Oilfed)
Research & Technology(ICRISAT, OTRI)
Early Experiments – Working along the Value Chain
2000 Potato growers
Frito Lays India Ltd.
Buyback Arrangement Seed Potato
BASIX
CR
ED
IT
Ag/B
DS
13
Lessons in Micro-Insurance
Insurer BASIX Rural Customer
Offer products Distribute Insurance
Feedback on needsInputs for products
• The rapid scaling up by BASIX and product replication by the insurance companies prove both the viability of such a product and the existence of demand for the same.
• Commodity Risk Management Group's advice on the weather insurance pilot described in the BASIX case study led to replication effects by other insurance companies that insured around 18,000 farmers in the following year.
CURRENT SCENARIO
• Issues faced by Small Farmers:– Absence of information on spot prices– Presence of middle men– Inaccurate planning for next year’s cropping ‘cobweb
effect’– Un-hedged risks for the produce
• Factors dissuading the Lenders from imparting cheap credit:– Absence of reliable price benchmarks– Inadequate accredited warehousing facilities– Inadequate physical logistics– Lack of complete negotiability of warehousing receipts– Lack of legal infrastructure
Challenges in providing services in low density and remote economies
• Small volume of activity per customer
• Geographically disaggregated
• Low literacy and awareness of products and services
• Needs aggregation of a large number of customers for reducing transaction costs
• Need for innovations in products and delivery processes to make access convenient and affordable
FIELD EXPECTATIONS FROM COMMODITY EXCHANGES
• Price Dissemination Price Discovery– Decision on Cropping Pattern– Negotiation for better prices while selling the
produce– Taking knowledgeable decisions regarding
the timing of their decisions to sell
• Price Hedging– Requirement of an aggregator
Challenges….• Future vis-à-vis Options:
– Hedging through ‘futures’ is a complicated financial product and a farmer may not understand all the nuances of transanctions on the commodity exchanges.
– Introduction of ‘options’ would facilitate farmers’ access to the commodity markets.
– Fragmented land size and absence of clear land titles present its own set of challenges in developing any mechanism for option premium reimbursement by Government (Govt. has not taken any decision in this regard so far)
– Large transaction lot size is another related issue restricting access of an individual farmer to commodity markets.
• Price Dissemination and General Awareness:– Country wide replication of the initiatives taken by FMC, NCDEX
and MCX requires substantial investments.• Warehousing facilities
– Immense need for quality warehousing facilities and their acceptability by the overall financing system/ commodity markets.