India is largest milk producer in the world; in 2006-2007 its milk production was100.9 million tonnes & per capita milk consumption is 246gms/day (2006-2007). It is also having second largest no. of cattle & highest no. of buffalo in the world. This underscores the potential of India to be as the biggest player in the dairy market, at world stage. The overall growth rate of the dairy industry in India is 4 %, which is almost 3 times the average growth rate of the dairy industry in the world. In India, dairy industry is mostly unorganized & only 15 % of this sector is organized. The share of organized sector is expected to rise rapidly, especially in the urban region. Milk processing level is 35 percent.
The growth rate of agriculture is stagnant, below 2% (Recently it touched 4% but next year projection is again gloomy), and livestock sector growth rate is more than 4.5%. Small and marginal farmers own only 33 % of land, and about 60% of female cattle and buffaloes &75 % of households have 2-4 animals on average. Dairying is a part of the farming system in India & feed is mostly residual from crops. Most imp thing is that dairy is a source of regular income; crop income is seasonal so it minimizes risk. Dairying comprises 1/3 rd of rural income. Livestock is a security – asset to be sold in times of crisis. It is also important as it is a tool for rural income generation, rural nutrition & women empowerment.
The value of milk & milk products in India is more than Rs. 1179 billion in the year 2004 -05 (Almost equal to the combined value of the paddy & wheat). Out of India’s total milk production, no less than 65% is consumed unpasteurised. Of this percentage, 44% is consumed in the rural area where it is produced. The remaining 21% of the unpasteurised milk is sold to urban consumers. Rest 35% of the milk production that is pasteurised, 22% is processed by the unorganised dairy sector. This means that only 13% of the Indian milk procurement is processed in the co-operative and privately owned dairy industry. The majority of this, 8% of the total milk procurement, is processed into packaged or loose pasteurised drinking milk for consumers in the major cities. The other 5% is used to make products with added value, such as milk powder, ghee, ice cream, cheese and fresh milk products. Some important milk products are:
Infant Milk Food, Milk Powder, Whitener, Condensed Milk, Malted Milk Food, Butter, Cheese, Ice Cream and Ghee.
The organized industry handles only 15 per cent of milk, with 36 per cent being handled by private dudhias and unorganized players and 46 per cent being retained in rural areas. Within the 15 per cent organized sector share, private and cooperative/government dairies handle an equal quantity. Organized sector is mainly made up of the co-operatives but now the private players like Reliance, Britannia, and Nestle etc. are also coming in this sector.
Dairy sector was de-licensed in 1991. The Milk and Milk Products Order (MMPO) 1992 has some controls over Collection areas/milk sheds specified & processing capacity was fixed. But after revising the MMPO in 2002: controls stand were withdrawn. After that private sector investment in dairying has increased considerably. Previously, co-operatives did not have any competition from the private sector but now considering the potential, several big players are coming in this sector. To strengthen co-operatives, the government has also reduced interference in management & now farmers are free to govern their cooperative organizations.
From 2000 onwards, Indian dairy products, particularly milk powder, casein, whey products and ghee started making their presence felt in global markets. The decade of 2000-10 will be recorded in dairy history as the decade of exports. India today is the lowest cost producer of per litre of milk in the world, at 27 cents, compared with the U.S' 63 cents, and Japan’s $2.8 dollars. Now to take advantage of the lowest cost of milk production and increasing production in the country multinational companies are planning to expand their activities here. Some of these milk producers have already obtained quality standard certificates from the authorities for exports. This will help them in marketing their products in foreign countries in processed form.
Dairy demand is income elastic, this means increase in income and increase in population- high growth rate for dairy. The urban market for milk products is expected to grow at an accelerated pace of around 33% per annum. This growth will come from the greater emphasis on the processed foods sector and also by increase in the conversion of milk into milk products. Specially the demand for Ghee & table butter is rising at faster pace, 8 % & 10 % respectively. By 2011, Dairy India projects the value of the industry to be more than double to Rs 520,780 crores. With all this India Dairy industry is poised to play a bigger & central role at world stage.
Prakash Saini
PGPABM(08-10)
Monday, September 15, 2008
Wednesday, August 27, 2008
A truly “fab”ulous story..........
Fabindia is a brand that needs no advertisement. For over 47 years, the Delhi-based retail chain has been providing world-class handloom textiles. It has the unique distinction of maintaining its relationship with its rural suppliers. With a retail presence of 86 stores in 39 cities, the chain has about 22,000 artisans as its supplier base. This is all set to expand to 100,000 by 2010.
The way the entire system operates is the most interesting part. The mastermind behind the entire plan is the Managing Director of the company William Bissell. Small-scale weavers and artisans are brought under the ambit of a corporate entity, which is called Supplier Region Companies (SRCs), in which they hold shares. There are currently 17 SRCs that are operational throughout India. Matters such as quality control and timely production, together with the basics balance sheet, profit and loss account, dividend, and change of auditor are impressed into the minds of the artisans by the directors.
The artisans and the weavers who know of no other source of income, other than the wages paid to them daily now have a giant leap in their income by becoming the shareholders of a company. The operations of the SRCs are currently managed by The Artisans Microfinance Limited (AFML), which is allowed to have 49 percent of the equity. While the artisans hold 26 percent shares, 10 percent are held by the employees. There is a huge potential of pooling of funds since the rest 10 percent can be held by venture capitalists and outside investors. The authorised capital of an SRC, whose board has one or two artisan-directors, ranges from Rs 40 lakh to Rs 1 crore.
This successful story could ideally be replicated in the agricultural sector. Our farmers are facing problems similar to the artisans in terms of poverty, low standard of living and lack of capital for investment in their fields. But, before any serious attempt is made, all the uncertainties regarding the replication has to be taken into account.
References: Business Today and Business Line, April 15 2007.
Avinash,
PGPABM-I
The way the entire system operates is the most interesting part. The mastermind behind the entire plan is the Managing Director of the company William Bissell. Small-scale weavers and artisans are brought under the ambit of a corporate entity, which is called Supplier Region Companies (SRCs), in which they hold shares. There are currently 17 SRCs that are operational throughout India. Matters such as quality control and timely production, together with the basics balance sheet, profit and loss account, dividend, and change of auditor are impressed into the minds of the artisans by the directors.
The artisans and the weavers who know of no other source of income, other than the wages paid to them daily now have a giant leap in their income by becoming the shareholders of a company. The operations of the SRCs are currently managed by The Artisans Microfinance Limited (AFML), which is allowed to have 49 percent of the equity. While the artisans hold 26 percent shares, 10 percent are held by the employees. There is a huge potential of pooling of funds since the rest 10 percent can be held by venture capitalists and outside investors. The authorised capital of an SRC, whose board has one or two artisan-directors, ranges from Rs 40 lakh to Rs 1 crore.
This successful story could ideally be replicated in the agricultural sector. Our farmers are facing problems similar to the artisans in terms of poverty, low standard of living and lack of capital for investment in their fields. But, before any serious attempt is made, all the uncertainties regarding the replication has to be taken into account.
References: Business Today and Business Line, April 15 2007.
Avinash,
PGPABM-I
Tuesday, August 19, 2008
Food Retail Growth to Double by 2020
The food retail business in India is growing at the rate of 47 % as comapared to the overall retail growth(oraganised) of 26 % and is expected to double at $482 billion by 2020 as against $236 billion in 2006. High disposable income and growing exposure to global lifestyle and other factors such as health consciousness, and convenience have impacted in change in consuming patterns of modern Indian consumers. Around 80 mn Indian consumers who have an annual income of over $5,000 will be the primary drivers of the food retail business, and this was reconfirmed at a CII seminar 'Foodpro 2007' in Chennai.
India is the fourth largest economy in terms of purchasing power parity and the consumer base is growing with the households of annual income of over $5,000 expected to increase from the current 81 million to 147 million by 2015. The processed food consumption is all set to treble to $300 billion by 2015 and the value of processed fruits & vegetables will increase to 10% in 2009-10 and 15% in 2014-15. All these are a clear indicator of the future the food retailing has and this gives all the agri business managers a prospective carrer in this sector.
SOURCE: CII conference"FOODPRO 2007" AND CSO
Manisha Mishra,
PGPABM-II
India is the fourth largest economy in terms of purchasing power parity and the consumer base is growing with the households of annual income of over $5,000 expected to increase from the current 81 million to 147 million by 2015. The processed food consumption is all set to treble to $300 billion by 2015 and the value of processed fruits & vegetables will increase to 10% in 2009-10 and 15% in 2014-15. All these are a clear indicator of the future the food retailing has and this gives all the agri business managers a prospective carrer in this sector.
SOURCE: CII conference"FOODPRO 2007" AND CSO
Manisha Mishra,
PGPABM-II
Monday, August 18, 2008
VIbrANtMANAGE: ThE NeW BlOg 4 ThE NaYe LoG
http://managevibrant.blogspot.com/
All work and no play makes jack a dull boy. Put in your thinking hats & freak out..........
All work and no play makes jack a dull boy. Put in your thinking hats & freak out..........
Sunday, August 17, 2008
Is ban on future trading in commodities justified……..???
After getting some insights from the commodities course made me to write this article. As myself being pro future trading I cannot resist people saying future trading leads to inflation. There is reason to it why I am saying that future prices don’t lead to increase in the prices of the commodities. We saw in the February 2007 that the future trading in the wheat was banned, even after the ban; the prices of wheat continued to rise sharply and reached $400/quintal. The reason for this abrupt increase in the prices was low output from major producers like US, Argentina, Australia and the subsequent ban on export of wheat by these countries. So I see no reason in banning wheat future trading as the price rise was due to lack of supply of the commodity to meet the rising demand.
The same is case with ban on trading of tur and urd which were banned for trading one month prior to wheat ban i.e. on January 2007, the production of tur in the year 2005-06 was 2.74 million tonnes while it was 2.31 million tonnes in 2006-07 how can decline in production match with day to day rising demand in this case the prices of the commodities are likely to rise.
In order to review whether futures trading really cause price hike government of India appointed a committee under the leader ship of Abhijit Sen. The committee had submitted its report. As per the report this committee had made an observation that food grains at no point accounted for more than 6% of total volumes of future trading in agricultural commodities. In fact the current volume of future trading in commodities in India is quite less than the international norms. More over the draft report of the expert committee on futures commodity trading, has recommended better regulation and participation by farmers in the commodities market even while saying that there was no evidence to suggest that futures trading stoked inflation.
As it was rightly by Mr. Bhashyam Seshan,CS (NCDEX) that exchanges as like NCDEX who trade in commodities futures are just playing the role of thermometer, they help us to know what is the current situation in the market which will further help us to decide what steps can be taken to avoid the foreseen price volatility. There is no use breaking the thermometer just because it is showing high temperature.
Future trading is just a price discovery mechanism and in order to improve this mechanism we need to standardise our local mandis which helps us to get the spot prices, it is very necessary that the spot prices should be arrived by fare means by suppressing the faulty practices of trade like hoarding or black marketing. In fact our government should take certain steps so as to involve the farmers in to this business so as to benefit directly from the benefits of future trading and secure his future position by mitigating the risk involved due to price fluctuation.
The same is case with ban on trading of tur and urd which were banned for trading one month prior to wheat ban i.e. on January 2007, the production of tur in the year 2005-06 was 2.74 million tonnes while it was 2.31 million tonnes in 2006-07 how can decline in production match with day to day rising demand in this case the prices of the commodities are likely to rise.
In order to review whether futures trading really cause price hike government of India appointed a committee under the leader ship of Abhijit Sen. The committee had submitted its report. As per the report this committee had made an observation that food grains at no point accounted for more than 6% of total volumes of future trading in agricultural commodities. In fact the current volume of future trading in commodities in India is quite less than the international norms. More over the draft report of the expert committee on futures commodity trading, has recommended better regulation and participation by farmers in the commodities market even while saying that there was no evidence to suggest that futures trading stoked inflation.
As it was rightly by Mr. Bhashyam Seshan,CS (NCDEX) that exchanges as like NCDEX who trade in commodities futures are just playing the role of thermometer, they help us to know what is the current situation in the market which will further help us to decide what steps can be taken to avoid the foreseen price volatility. There is no use breaking the thermometer just because it is showing high temperature.
Future trading is just a price discovery mechanism and in order to improve this mechanism we need to standardise our local mandis which helps us to get the spot prices, it is very necessary that the spot prices should be arrived by fare means by suppressing the faulty practices of trade like hoarding or black marketing. In fact our government should take certain steps so as to involve the farmers in to this business so as to benefit directly from the benefits of future trading and secure his future position by mitigating the risk involved due to price fluctuation.
Kalpakant C. Pawar
PGPABM-II
MANAGE.
Saturday, August 16, 2008
Changing Agri Commodity Market.....SAMANVAYA.....
Mr. Pradeep Srivastava and Mr. Shashi Shekhar Interacting with students at MANAGEMr.Pradeep Srivasatva, Senior Manager (Purchase), Britannia Industries Limited (BIL) was on campus on 13th August. He was accompanied by Mr. Shashi Shekhar, Manager (purchase) at BIL. Being a very affectionate alumni of PGPABM (batch 97-99) of MANAGE, he addressed the joint session of current 1st and 2nd year of PGPABM on changing agri-commodity markets, challenges in procurement of wheat etc. He also dwelt on the importance of developing insights and contrarian way of thinking while taking a view of the markets so that right decision on timing and price of buying can be taken. In his own words “Keep your eyes and ear open all the time to understand things better than others”. On being asked about the slowdown in economy he said that commodity inflation will require more vigil by managers and this makes the role of agri-business managers more vital. He said “Despite some signs of slowdown, this is the best time to be an agri-business manager”.
He particularly asked the students to build a strong foundation in Statistical tools and techniques because of their growing relevance in the complex markets of today. As an answer to a query he lauded the opening up of MCX spot exchanges and wished that it succeeds. In his view “Commodity exchanges are the future of trading in India” and bans on trading on wheat etc. are due to nascence of future markets here. “Things will improve with our growing understanding of how the markets work”.
He particularly asked the students to build a strong foundation in Statistical tools and techniques because of their growing relevance in the complex markets of today. As an answer to a query he lauded the opening up of MCX spot exchanges and wished that it succeeds. In his view “Commodity exchanges are the future of trading in India” and bans on trading on wheat etc. are due to nascence of future markets here. “Things will improve with our growing understanding of how the markets work”.
Monday, August 11, 2008
Visit of Mr.Sanjay Das,National Category Manager-Staples.....SAMANVAY..
Mr. Sanjay Das visited the MANAGE campus and talked about Retail industry and Spencers retail and their status in India. He talked about the major retail formats of Spencers. According to him “Mergers are leading to profit generations but due to business tycoons entering in organized sector prices will hike.” Mr. Das is an alumni of MANAGE (1998-2000) and has worked with companies like ITC, Monsanto etc. He focused upon the qualities which an agribusiness professional should possess in these times of severe competition and asked students to work on innovative ideas and concepts to strengthen their foundation. He said “Future of Agri business managers in retail is good” but its for the students how they cash it.Here we begin..
Mr.Poonia at SAMANVAY…..The Industry Interface Programme. 
Mr.Poonia interacting with students at MANAGE, Hyderabad.
Mr. Poonia visited the campus and talked about present scenario of Agro Chemical industry. He threw light on the various requirements which an agribusiness manager needs to fulfill while getting into this sector. He talked about various pros and cons of prevailing scenario of the industry in India as well as World. He had a long interaction with the students and gave them the insights of agrochemical sector. According to him “Ag. Chem. Market is 5% inspiration and 95% perspiration.” and said that students entering the input sector should be prepared for the grind in initial years. “Indian Ag. Chem. Market is worth 690 MM $ US, out of which 61% is held by insecticide and 17% by herbicide” said Mr. Poonia
Excerpts:
“India is a market facing with business with small customers spread around the country.”
“Indian Ag. Chem. Market is worth 690 MM $ US, out of which 61% is held by insecticide and 17% by herbicide.”
“GM crops are hampering insecticide business, thus insecticide companies need to have to have strong portfolio to survive.”
‘Maximum competition to basic manufacturers is given by generic manufacturers.”
“Rapid commoditization is leading to conversion of brands into commodities.”
“Technology is shortening the life cycle of product.”
“Distribution Channels have now become capital intensive, decentralized and delayered.”
“Mergers and acquisitions are the order of the day as it leads to synergy of resources.”
“Ag. Chem. Market is 5% inspiration and 95% perspiration.”
Sunday, August 10, 2008
Great Job Guys
Dear All
A great effort. My best wishes are with all of you and I am sure you will make all efforts to spread all the information about agri business in India. I am sure in the times to come you will become the source of information for all be it industry, academics, planners or students. Please ensure you keep this Blog live all the times and also ensure that the information you post on this Blog is authentic and credible.
All the Best
Prof. Sanjeev Varshney
XLRI Jamshedpur
India
A great effort. My best wishes are with all of you and I am sure you will make all efforts to spread all the information about agri business in India. I am sure in the times to come you will become the source of information for all be it industry, academics, planners or students. Please ensure you keep this Blog live all the times and also ensure that the information you post on this Blog is authentic and credible.
All the Best
Prof. Sanjeev Varshney
XLRI Jamshedpur
India
Change in the name of blog
Hi friends , there is a small change in the name of blog to make it more reachable to all the people outside MANAGE and everyone. This step has been taken to increase the traffic to the blog. Now the blog will be called as AgribiZMANAGE instead of MANAGEagribiZ.
Shashank.
Shashank.
Friday, August 8, 2008
Wednesday, August 6, 2008
FINANCIAL STRATEGIES FOR VALUE CREATION”
INTRODUCTION
India has a large rural population, spread over a large area posing a challenge for the Government to develop them, Financial Institution to involve them in their purview and Corporate to tap the bottom of the pyramid for sustainable market development. One of the most important hurdles in the fulfilment of these goals is the lack of financial inclusion. Government spending on rural development is not giving results due to the inefficiency of the system (Trickle down effect), financial institution can’t finance because of high risk involved and corporate not able to tap the rural market because of lack of purchasing power of the rural people. If we analyse the data of last few years we see the gap between the rural and the urban standard of living is increasing and the financial institution and the corporate are concentrating more on the urban population because of high returns and easy accessibility. The argument can be bolstered by following data. Number of small borrowing account in rural areas increased by 2.5% where as the same in urban areas increased by 13.8% between 2000 and 2005. For the same period number of bank offices increased by 330 in rural areas where as in urban areas it rose by 2575(source: RBI). This growing inequity need to be curtailed and minimised for the purpose of poverty reduction and overall growth of the rural India. So to achieve an overall social improvement through financial inclusion, a perfect frame work in which Government, Financial Institutions (FIs) and Commercial entities can work together, is required. The barriers to “ready” rural access to finance are high transaction cost, credit information asymmetry, high uncertainty or risk, use of credit for non-productive purposes, lack of training, knowledge and awareness about opportunities and changing technology etc. In the context of solving these issues and achieving stated objectives, a model in which different stakeholder can play a substantial and effective role with equal participation from government, financial institution, private companies and the rural masses can change the scenario of financial inclusion at very grass root level. Following role need to be played by different stakeholders to achieve 100% financial inclusion:
1. Government
The assistance provided by the government in the form of National Rural Employment Guarantee Programme “NREGP” (which includes providing at least 200 days of guaranteed wage employment in every financial year to every household whose adult members volunteer to do unskilled manual work) can be divided into two parts. One will be given as wage and the remaining part (approx. 30%) can be kept as security by the Government. Amount kept by government can be used as security by the Financial Institution to provide credit to any other adult member of the family to start up his /her own work, recommended by the person working under NREGP. This step will increase the confidence of FIs in rural lending as it will mitigate their risk. Also, policy issues like Credit Information Bureau Act, 2006 (Dr.Rakesh Mohan, 2006) can help the FIs to get credit information about these people, so the credit limit can be decided accordingly. The Government can take such a step with any other scheme meant for rural development. The interest earned by government by keeping the security amount with banks can be used in project like Bharat Nirman.
2. Financial Institutions
FIs involved will include Commercial Banks, NBFCs and Foreign Banks. As their major concern is high risk and high transaction cost, the former can be supplemented by security mechanism of the model provided by the government where as the transaction cost can be reduced by the use of concept like Mobile Banking and telecommunication (which will cater to the needs of several villages thus increasing accessibility and reducing cost). Retired Postmen and school teachers can be used as representatives for FIs for credit enhancements in the form of reliable information. Starting with lending activity, a relationship can be built with rural people in subsequent years (in the form of savings and insurance) which will further enhance the business of these FIs. Another forward linkage can be established among the Banks/FIs and the Commercial Entities, who will purchase the end product made by the rural enterprises, in the form of better services and easy lending.
3. Rural household
This model provide a solution for the rural household to get out of the vicious cycle of poor economic condition for e.g. low credit availability leads to low risk bearing ability which leads to low productivity leads to low value addition and finally to low returns. The model benefits the rural household in providing financial inclusion, easy credit availability, full year employment, sense of savings(as the 30% amount with Government will be given to them at the end of the financial year in the form of bulk amount). The credit received by the rural household will be used in starting their own work for which the training and knowledge will be given by the Commercial entities, who will sell their end products in the market. So, by applying this approach we make sure that the credit will be used only for the productive purposes and thus helping the rural household in increasing their income, clearing their debt and improving their living standards.
4. Commercial Entities/Private companies
These entities will provide support to the rural household by providing market for their end products and imparting essential skills and training to produce market acceptable products. In turn, there will be a boost to the rural marketing, rural retailing and consumerism thus tapping the huge untapped rural market, with a sense of corporate social responsibility.
CONCLUSION
As the need of the rural credit is obvious, the proposed model is a win-win situation for the Government, Financial Institutions, Commercial Entities and Rural household with everyone getting benefited. By adopting this model, Government will efficiently use the same resource for NREGP in employment generation as well as facilitating credit to the rural household. Financial Institutions will mitigate the risk and lower the cost of transaction in lending credit to rural masses and in turn will expand their business like insurance at the bottom of the pyramid. From the view point of commercial entities, it will be proved as an opportunity to get associated with rural people to attain a market for sustainable development, whereas for rural people the model will open up a plethora of opportunities to transform the vicious cycle into virtuous cycle
India has a large rural population, spread over a large area posing a challenge for the Government to develop them, Financial Institution to involve them in their purview and Corporate to tap the bottom of the pyramid for sustainable market development. One of the most important hurdles in the fulfilment of these goals is the lack of financial inclusion. Government spending on rural development is not giving results due to the inefficiency of the system (Trickle down effect), financial institution can’t finance because of high risk involved and corporate not able to tap the rural market because of lack of purchasing power of the rural people. If we analyse the data of last few years we see the gap between the rural and the urban standard of living is increasing and the financial institution and the corporate are concentrating more on the urban population because of high returns and easy accessibility. The argument can be bolstered by following data. Number of small borrowing account in rural areas increased by 2.5% where as the same in urban areas increased by 13.8% between 2000 and 2005. For the same period number of bank offices increased by 330 in rural areas where as in urban areas it rose by 2575(source: RBI). This growing inequity need to be curtailed and minimised for the purpose of poverty reduction and overall growth of the rural India. So to achieve an overall social improvement through financial inclusion, a perfect frame work in which Government, Financial Institutions (FIs) and Commercial entities can work together, is required. The barriers to “ready” rural access to finance are high transaction cost, credit information asymmetry, high uncertainty or risk, use of credit for non-productive purposes, lack of training, knowledge and awareness about opportunities and changing technology etc. In the context of solving these issues and achieving stated objectives, a model in which different stakeholder can play a substantial and effective role with equal participation from government, financial institution, private companies and the rural masses can change the scenario of financial inclusion at very grass root level. Following role need to be played by different stakeholders to achieve 100% financial inclusion:
1. Government
The assistance provided by the government in the form of National Rural Employment Guarantee Programme “NREGP” (which includes providing at least 200 days of guaranteed wage employment in every financial year to every household whose adult members volunteer to do unskilled manual work) can be divided into two parts. One will be given as wage and the remaining part (approx. 30%) can be kept as security by the Government. Amount kept by government can be used as security by the Financial Institution to provide credit to any other adult member of the family to start up his /her own work, recommended by the person working under NREGP. This step will increase the confidence of FIs in rural lending as it will mitigate their risk. Also, policy issues like Credit Information Bureau Act, 2006 (Dr.Rakesh Mohan, 2006) can help the FIs to get credit information about these people, so the credit limit can be decided accordingly. The Government can take such a step with any other scheme meant for rural development. The interest earned by government by keeping the security amount with banks can be used in project like Bharat Nirman.
2. Financial Institutions
FIs involved will include Commercial Banks, NBFCs and Foreign Banks. As their major concern is high risk and high transaction cost, the former can be supplemented by security mechanism of the model provided by the government where as the transaction cost can be reduced by the use of concept like Mobile Banking and telecommunication (which will cater to the needs of several villages thus increasing accessibility and reducing cost). Retired Postmen and school teachers can be used as representatives for FIs for credit enhancements in the form of reliable information. Starting with lending activity, a relationship can be built with rural people in subsequent years (in the form of savings and insurance) which will further enhance the business of these FIs. Another forward linkage can be established among the Banks/FIs and the Commercial Entities, who will purchase the end product made by the rural enterprises, in the form of better services and easy lending.
3. Rural household
This model provide a solution for the rural household to get out of the vicious cycle of poor economic condition for e.g. low credit availability leads to low risk bearing ability which leads to low productivity leads to low value addition and finally to low returns. The model benefits the rural household in providing financial inclusion, easy credit availability, full year employment, sense of savings(as the 30% amount with Government will be given to them at the end of the financial year in the form of bulk amount). The credit received by the rural household will be used in starting their own work for which the training and knowledge will be given by the Commercial entities, who will sell their end products in the market. So, by applying this approach we make sure that the credit will be used only for the productive purposes and thus helping the rural household in increasing their income, clearing their debt and improving their living standards.
4. Commercial Entities/Private companies
These entities will provide support to the rural household by providing market for their end products and imparting essential skills and training to produce market acceptable products. In turn, there will be a boost to the rural marketing, rural retailing and consumerism thus tapping the huge untapped rural market, with a sense of corporate social responsibility.
CONCLUSION
As the need of the rural credit is obvious, the proposed model is a win-win situation for the Government, Financial Institutions, Commercial Entities and Rural household with everyone getting benefited. By adopting this model, Government will efficiently use the same resource for NREGP in employment generation as well as facilitating credit to the rural household. Financial Institutions will mitigate the risk and lower the cost of transaction in lending credit to rural masses and in turn will expand their business like insurance at the bottom of the pyramid. From the view point of commercial entities, it will be proved as an opportunity to get associated with rural people to attain a market for sustainable development, whereas for rural people the model will open up a plethora of opportunities to transform the vicious cycle into virtuous cycle
Expanding The Horizons
Its a sincere effort to increase our knowledge of agribusiness from the all those who all are associated with......Please send your contributions .........to expand your REACH.
Subscribe to:
Posts (Atom)