LESSONS FROM THE FIELD
By – N V Ramana,
Group CEO, BASIX
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
.
Pre Harvest
• Agri inputs – quality and mkt linkage
• Updated knowledge for better profits
• Contractual farming
• Future Price options
• Crop Risk Mitigation
Agro Sector
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
Customer Needs
1996-2001
2001 onwards
Market Linkages
Value Addition
TASS
Productivity Enhancement
Risk Management
(Lives & Livelihoods )
MicroCredit
Credit
Livelihood Triad
The Livelihood Triad

IDS




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
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
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
PROCESS
Identifying Key Players and Initiating Collaborative Action
STEPS
Identifying Intervention Points
Understanding the Value Chain of the Selected Activity
Selecting Livelihood Activities Suitable for the Poor
Observing and Understanding the Economy
Need for striking right collaborations
We believe in collaborating with players having domain expertise
to…………….
Enhance competencies, Increase outreach, Reduce transaction
costs and Reduce risk for farmers and stakeholders
Financial Services
Input Supply
Training & Extension
Farmers
People’s organization
Output Market
Research & Technology
Collaborative polygon for the Lac
sub-sector in Jharkhand, India
PRADAN
Facilitation of input supply, monitoring of
production process in farmers’ fields
ILRI
Wholesale traders or
shellac factory
buys crude lac from coops or
individual producers
Training of field staff & agents,
technology transfer to farmers,
assessment of crop loss
Lac
farmer
of Khunti &
sThorpa
Cooperative
NBJK
Purchases crude stick lac from
society
farmers,
processes and sells to
traders or factories
BASIX
Provides inputs (in credit) and covers risk of
crop loss, assists in processing & marketing
produce through cooperative society
Formation of
Cooperative society of
SHGs for processing &
marketing of Lac
Collaborative Polygon for Livelihood
Promotion in Groundnut Grown by 800,000
farmers in AP
Credit (BASIX + ICICI Bank
with risk sharing)
Training &
Extention
(NGOs)
Producer’s
Organisation
(IGS)
Input Supply
(Seed Co.)
Output Marketing
(Trade, Oilfed)
Research & Technology
(ICRISAT, OTRI)
Early Experiments –
Working along the Value Chain
BASIX
Ag/BDS
CREDIT
2000 Potato growers
Seed Potato
Buyback Arrangement
Frito Lays India Ltd.
Lessons in Micro-Insurance
Offer products
Insurer
Inputs for products
Distribute Insurance
BASIX
Rural Customer
Feedback on needs
• 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.
13
LINKAGE OF SMALL
FARMERS TO COMMODITY
MARKETS
CURRENT SCENARIO
• Issues faced by Small Farmers:
– Absence of information on spot prices
– Presence of middle men
– Inaccurate planning for next year’s cropping
effect’
– Un-hedged risks for the produce
‘cobweb
• 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.
nvramana@basixindia.com