Bharat Inclusion Initiative
Understanding and debundling financial risks of small and marginal farmers in farmer producer organizations
Partner/Client
Bharat Inclusion Initiative
Sector
Incubator platform
Location
Karnataka, Tamilnadu, Bihar, Orissa and Madhya Pradesh
KEY HIGHLIGHTS
- Bharat Inclusion Initiative (BII) is an incubator platform at CIIE.CO that provides entrepreneurs with the domain knowledge, training, financial support, mentorship, and market access they need to bring inclusive, for profit-businesses to life.
- The main aim of the research was to understand if and how successful Farmer Producer Organizations (FPOs) can be a medium to accelerate financial inclusion among small and marginal farmers.
- The study was undertaken with 20 FPOs, from the states of Karnataka, Tamil Nadu, Bihar, Orissa, and Madhya Pradesh between October 2020-March 2021.
APPROACH
- In-depth interviews were undertaken with 360 respondents, consisting of the Chief Executive Officer (CEO), 2 Board of Directors, 10 member farmers and 5 non-member farmers in each FPO.
- Owing to the Covid-19 pandemic, the study used a combination of telephone interviews, video calls, and on-field visits.
- Analysis of the primary data focused on understanding the forward causation, i.e.: ‘successful FPO improves financial inclusion of farmers’ and the backward causation, where ‘a financially included farmer makes his/her FPO successful’.
- Success of the FPOs was gauged in terms of: 1) access to credit and finance, 2) strong management, and 3) profitable operations. The financial inclusion of farmers was defined within parameters of: 1) possession and utilization of a bank account, main modes of financial transaction, 2) access to credit, 3) access to insurance, and 4) access to pension.
INSIGHTS AND FINDINGS
- Analysis of FPO income data showed that in most cases, while turnover amounts are relatively high, revenues are significantly low.
- The FPO profitability is affected by the considerably lower margins kept by the FPO and offering higher margin to farmers compared to the middleman/local market (mandi). Other times, FPO profitability is affected by the considerably lower number of farmers buying inputs and selling produce at the FPO.
- 78% (156 of 200 member farmers) purchase inputs like seeds and fertilizers from FPOs. 45% (91 of 200 farmers) sold their produce through the FPO.
- The key issues faced by FPOs entailed a lack of cash-flows to buy inputs and sell farmer produce, which are the main restricting factor to enhance FPO service offerings and profitability. Many FPO leadership feel that they do not have the necessary business management know-how or technical staff to help them to have appropriate documentation and financial book-keeping.
- In terms of financial inclusion of farmers, while comparing between those who were FPO members and non-members, those who were FPO members showcase much higher trends of financial inclusion with regards to using bank accounts, access to credit from formal sources, insurance knowledge and access and pension schemes.
RECOMMENDATIONS / VALUE ADDITION
- The study provided a contextual understanding of FPO functioning across states and those with different life spans and operational years, to build strategic programs to improve FPO processes and financial inclusion of farmers.
- To strengthen the impact of FPOs, recommendations included focusing on improving market access and revenues, membership growth and farmer engagement.
- For financial inclusion of farmers, the key recommendations were to increase awareness of available formal credit services, and facilitate farmers to avail insurance and pension schemes.
