Round Table: The Business Behind Livelihoods

The Business Behind Livelihoods

Posted: Dec 17 2010 By Nisha Kumar Kulkarni

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