By – N V Ramana, Group CEO, BASIX 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

Constraints on Rural Transformation: Some Insights from the Field Credit: Savings exceed credit, yet every one is credit-starved Infrastructure Constraints: e.g. Power, Water Labour Training and Mobility: Many unemployed but workers unavailable Commodity/Product Market Information: New segments un-addressed, older ones crowded

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 Livelihood Triad Market Linkages Value Addition Productivity Enhancement Risk Management (Lives & Livelihoods ) Credit TASS Micro-Credit

The Livelihood Triad IDS LFS Ag/BDS 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 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 Ag/BDS Productivity enhancement Risk mitigation (non-insurance) Local value addition Alternate Market Linkages - Input supply, output sales Remove the cetnral triange

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 Identifying Key Players and Initiating Collaborative Action PROCESS 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 Output Market People’s organization Research & Technology

Collaborative polygon for the Lac sub-sector in Jharkhand, India

Collaborative Polygon for Livelihood Promotion in Groundnut Grown by 800,000 farmers in AP Credit (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 BASIX CREDIT Ag/BDS 2000 Potato growers Seed Potato Buyback Arrangement Frito Lays India Ltd.

Lessons in Micro-Insurance Offer products Distribute Insurance Insurer BASIX Rural Customer Inputs for products 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.

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 ‘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.

THANK YOU nvramana@basixindia.com