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Round Table: The
Business Behind Livelihoods
Posted by Nisha Kumar Kulkarni
on December 17, 2010
Agriculture contributes 17% to India’s income. Three
entrepreneurs speak about working in India to support
livelihoods using a for-profit model.
BP: In your experience, what are the current challenges
faced by agriculture-dependent peoples in India?
Venkat Subramanian: When we come from another
industry and look at agriculture, [my wife and myself] saw
that quite a few things are actually not in place. Most of
the issues that are being pointed out, like agriculture
yield, are actually not the real problem. The real problem
was that farmers were actually not having any marketing
mechanisms at all. And the logistics to reach the end
customer were not there. These are much bigger problems than
even trying to increase the yield because even if you try to
increase the yield, it may go up by 10% or 20%, but when you
look at the huge wastage which is happening because of just
poor management…all the interventions have been so far on
the yield to increase area.
Dr. Simon M. Holland: The thing which is usually
uppermost on the minds of the farmers we visit are building
good, remunerative, solid and fair market linkages.
Continued land partition as it moves through the generations
is resulting in increasingly small plots where making a
decent living is ever more challenging. Localized and
individualized knowledge versus generic knowledge is
essential on best practices.
Yogesh Chaudhary: The biggest challenge is to find
employment throughout the year. Secondly, there is obviously
a huge dependence on the rains. Thirdly, most of these
people do not have other skills to work on other things
during their free time.
BP: How does your organization affect agriculture-based
livelihoods?
VS: Basically, what eFarm is trying to do is create a
marketing channel for the farmer. Some of the problems when
we started off from the farmer’s side was typically there is
not much choice for the buyer, so there is one local
commission agent or middleman and since they’re all at very
remote locations, they don’t even know who their end
customer is. As far as they’re concerned, the middleman is
the customer. So to target people in the
bottom-of-the-pyramid (BoP) segment, we worked with
self-improved women who themselves bought from us and they
sold on the street, and that created a small income for
them. In the middle-income group, we sold to the subziwallas
or the mom-and-pop shops which already existed in a lot of
these localities. And we became really back-end supply chain
for them because the large organizations can establish their
own chain whereas the smaller guys cannot end up making
their own supply chain. So we became the aggregator and
de-aggregator for the customers and stakeholders.
SH: Zoraly Solutions has developed a comprehensive
suite of tools to supply knowledge to farmers in an
individualized fashion. We support agri-businesses and food
processors to manage their businesses and farmers more
effectively, including sharing of best practice extension
knowledge. We have a strong focus on on-farm inputs through
which farmers can develop lower cost practices and also aim
towards organic certification for greater value realization.
We provide business diversification tools and support to
farmers and businesses. We also support organic agriculture
programs for businesses and state governments, even
developing a state certification agency for one state. We
work on state and central level government transformation
programs such as the National Pest & Beneficial Surveillance
System, which was sponsored by the UN’s Food and Agriculture
Organization.
YC: Jaipur Rugs makes handmade carpets and, in the
process, provides employment to about 40,000 people mostly
working from their homes. Over 60%-80% of our weaver base is
women. Production suffers tremendously during the harvest
season which means that people go out and work in fields
during those times. We provide employment when they don’t
have other things to do thereby eliminating seasonal
unemployment.
BP: What are the challenges in setting up a for-profit
company operating in the agriculture sector in India?
VS: The disadvantage I see is when you deal in
agriculture in India, for the last 60 or 70 years, it is
always seen as a government hold or responsibility. Almost
all the work on the ground is done by NGOs and aid agencies.
It is not recognized as an industry. The mindset towards
agriculture is still a big blockage. When you say you’re
running an agri-supply chain company, the government doesn’t
trust me because they only like to deal with an NGO. Social
enterprises are very new in this space. The fact that a
corporate can operate like a social organization is
something the government is not very attuned to.
SH: Many constituents from farmers to agri-businesses
believe that services should be provided for free or at very
low-cost, making it difficult to balance customer
expectations with effective business models. It can be very
risky to offer advice as even if severe climate issues cause
problems for the crop, you may take the blame if the farmers
believe you. Also, it’s frequently easier for non-profits to
access government or development agency funding than it is
for the for-profit community.
YC: Well, there is a huge challenge in our industry
to coordinate logistics and get the weaver to deliver
products on time.
BP: Why did your organization decide to go with a
for-profit model?
VS: This again came from the people within the
industry. NGOs can only be like the training arm of the
government or disseminate knowledge or they can be
validating some things, but they cannot participate in
business. When you talk about better money and better
things, you are automatically talking about business; you
are not talking about an aid agency. Even farmers are not
interested in working with aid agencies because they cannot
help them in what they want. It was very clear from the
beginning it had to be a for-profit entity, but we also knew
that it couldn’t be like a very aggressive corporate because
a lot of farmers were being cheated by corporates. We had to
be somewhere in between and create a social enterprise where
we can group these small farmers together and operate like a
business for the end customer.
SH: We believe that we have a very compelling suite
of services that can not only benefit farmers and the
agriculture community in partnership, but are also appealing
to banks and venture capitalists for the type of financing
we need to scale up globally. Further, we believe that the
creativity and rewards we can drive from a for-profit
business are far higher.
YC: We started out in this profession as a means to
earn a living. Fortunately the intentions were always right
and we came up with an exciting model on which
Professor CK Prahalad did a
case study! But in 2004, we also created a non-profit
entity, the
Jaipur Rugs Foundation, so
that we could give a lot more back to the villages.
Q: In your endeavors to support livelihoods in
agriculture, what operational advantages do for-profit
companies have versus non-profit ones?
VS: In our business, the bigger guys don’t want to go
to the grassroots level to work. They’re more comfortable
talking to a business because if something goes wrong, they
can catch their neck. You can never sue an NGO: it’s very
bad PR.
SH: You’re forced to focus on the quality and
effectiveness of the services you offer otherwise no one
would pay for them. You can focus on delivery versus report
writing. You have to develop business models that make
money, which means they are not only sustainable, but also
scalable without the wait for the next round of funding.
Your attention becomes focused on the farmers as your client
to be served versus a number to reach a funding target. If
you get it right, you can attract the best socially-oriented
and -motivated resources, and look to reward them for their
efforts.
YC: I think there is more responsibility built in the
system to ensure inefficiencies are taken care of fast to be
competitive. You are more open to change, be more innovative
to stay ahead of the market which sometimes is a little
challenging in not-for-profit entities. Secondly and very
importantly, in most cases, for profits are
self-sustainable.
About the interviewees:
Yogesh Chaudhary (YC) is a Director at
Jaipur Rugs, a company
founded by his father
Mr. N. K. Chaudhary
Dr. Simon M. Holland (SH) is Founder of Zoraly Solutions
and, since 2007, has been working with Shimla Hills across
numerous projects in India
Venkat Subramanian (VS) is the Managing Director and
Co-Founder of eFarm
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