Entrepreneurship Development through Self-Help Groups (SHGs) and Farmer Producer Organizations (FPOs) in Livestock Sector
According to a report, “The prediction of western economists that small farms will eventually cease to exist as big farmers will buy their land,” did not come true in Asia. We will have to live with the fact of small and marginal holdings and try to make it more viable.” Due to small scale of operation, small farmers, do not get the advantage of scale. However, they can increase the productivity of their farm holdings if farm operations are carried out collectively. Therefore, India, a country of six lakh villages, needs at least one lakh FPOs to transform the agriculture sector. Other Asian countries have used solutions suitable to them for dealing with the problem of small farms. Japan has the concept of part-time farmers, while, Thailand has used the contract farming model and China has adopted collective farming. In India the concept of Cooperative was one of the pioneering forms of aggregation available for the producers to organize themselves to move up in the supply-chain by value addition and business ownership. No doubt, Cooperatives have helped Indian Agriculture to a greater extent, but the cooperative system in the country has been infected by several inadequacies (Sontakki, 2012). Several attempts have been made in the past to aggregate the farmers. One such pioneering attempt was promotion of cooperatives to perform activities in agriculture. By and large, the experiences of performance of cooperatives have been poor with the exception of cooperative, sugar factories and dairy cooperatives in Maharashtra & Gujarat. Apart from these, the success was achieved by some of the groups like Amalsad Cooperative Society for Sapota and farming cooperative (Gambhira) in Gujarat, MAHAGRAPES in Maharashtra, HOPCOMS, TSS and CAPMCO in Karnataka, Mulkanoor Women Cooperatives in Andhra Pradesh etc. In the meantime, several other aggregation models like FIGs, CIGs, and SHGs etc. were tried. But the success achieved with these models was also limited and confined to certain regions. In the recent past, the instrument of farmer producer organization, registered under Companies Act 2013, is emerging as one of the most effective tools, of aggregation. These producer companies are designed in such a manner that they are professionally managed and are able to take care of total supply chain in general and marketing problem in particular. A producer company is basically a group of farmers registered as a producer company under Companies Act, 1956, now 2013 (As amended in 2002). An amendment in Company’s Act 2002 was done on the basis recommendation of Prof. Y.K. Alagh Committee (1998) to add a corporate muscle to cooperatives so that it can bring effective management and good governance. Farmer Producer Company (FPC) is a legal form of the company. These FPCs promoted by the farmers, will be run by farmers and for the benefit of the farmers. Paid staff can be employed to assist in the management of the company. The share capital of Producer Company shall consist of equity shares contributed by members only and member’s equity cannot be publicly traded but can be transferred. The profits generated from the business of the company would be shared among the farmer members only in terms of dividends. At present, across India, around 9500 FPC, have been registered and are in operation. And many of them are laying attention on crop planning, technology infusion, input supply and primary marketing and there is huge potential for these FPCs to leverage their presence in further up the value chain of the agriculture commodities. Hence there is a need to reassess the necessity of FPC because no other models can deal with all the problem of small farmers. As of now, the success of FPCs depends on several aspects including the leadership they get. Hence, it is important to create an environment to attract people with leadership skills. The institution of FPC being relatively new, efforts are being made by the government and policy makers for making it as viable option of aggregation compared to other models of aggregation. No doubt, the experience so far has shown a limited success, the model envisaged is comprehensive with professional management, provision for sharing of profit, reduction in transaction cost and can perform all the activities of supply chain in an organized manner. It is premature to conclude the sustainability of the FPC model. Given its constitution and merits of professionalism with a blend of democratic approach, the rate of success may increase over a period of time. In the light of the above facts, there is a need to ascertain the factors responsible for success of some of the FPCs, so that these good practices can be emulated for the other FPOs in the country. Against this backdrop, an attempt has been made in this study to ascertain the impact of these FPCs on socio-economic conditions of farmers and other stakeholders, including employees of FPCs. Based on the outcome of the study, appropriate policy measures will be suggested for making this initiative a successful one.
The growth in the Indian agriculture sector has been impressive in the last three decades exceptfor a few years of ups and downs. There is an increase in production of all agriculture and allied products over a period of time. Even during the Pandemic situation, the growth in the agriculture sector was positive. However, over a period of time, it is observed that the per capita income of the farmers has been lowest among all the sectors. The major constraint of Indian agriculture is the diminishing size of landholding. As per the 2015 census, the proportion of small and marginal farmers is more than 85 percent of total land holdings in the agricultural economy of India. Being smallholders, these farmers suffer from some inherent problems such as the absence of economies of scale, access to information, and their inability to participatein the price discovery mechanism. The only way to solve the problems of these small holders is to aggregate them into a group so that there will be operation of economics of scale. Thus, given the situation of the smallholders, their problems are of prime concern for the sector. Various institutional interventions by government, private and civil society organizations, have tried to link smallholders to the input and/or output markets. In this direction, several attempts in the past have been made to aggregate the farmers into different forms of groups. These include Agricultural Cooperatives, Self-Help Groups, Commodity Interest Groups (CIGs), etc. However, thesuccess achieved has been limited, and are confined to few regions. In the recount past, a new model of aggregation in the form of Farmer Producer Company (FPC) has evolved. The instrument of Farmer Producer Company(FPC),registered underthe Companies Act, 1956 is emerging as an effective tool to caterto the needs ofthe farmers at the grass-root level. Themain objective ofmobilizing farmers into member-owned Farmers Producer Companies, or FPCs, is to enhance the production, productivity, andprofitability of agriculturists, especially small farmers in the country. These models are specially designed to address the problems of marketing. It takes care of post-harvest activities including the entire supply chain and hence is a distinguished model compared to other aggregation models. FPCs offer a wide range of benefits compared to other formats of aggregation. It provides for sharing of profits/benefits among the members and capital is contributed by the members in the form of equity. Over the last two decade, around 9500 FPCs have been promoted in the country. However, due to a lack of awareness about regulatory issues and low capital base, most of the FPCs promoted are found to be not viable. Hence, there is a need to understand the factors limiting the success of these FPCs.
Self Help Groups (SHGs) have emerged as a crucial instrument for realizing Localization of Sustainable Development Goals (LSDGs) and strengthening of local economy through Vocal for Local. SHGs have now become a platform for many group-based interventions based on the basic premises that mobilization of marginalized and poor (women) people have higher outreach of interventions to improve the rural development outcomes. The SHG programs have been observed to have significant impact on women’s access to livelihood, food intake, social capital (Gash 2017), and social empowerment(Banerjee et al.; Brody et al., 2016; Raghunathan et al., 2019). The SHGs also have shown indirect impact on economy leading to overall household welfare by reduction of borrowing rates and usury (Hoffman et al. 2018). SHGs have come a long way from group savings and microfinance to developing microenterprises and employability through training and skills formation, and facilitating public service delivery (health, education, nutrition etc.). SHGs have not only been able to make a presence in the rural manufacturing and services landscape but also emerged as social safety net during the pandemic era and beyond. The economic survey 2022-23 acknowledges the impact of SHGs in reaching the rural community in the pandemic. A new form of governance coalition between local institutions such as Panchayats, NGOs and other stakeholders operating in the rural space, where SHGs played a crucial role. Although, the impact of SHGs on development outcomes is much talked about, equal impetus should be given to talk about what the development organizations and stakeholders can do for the SHG-growth. As the requirement of next-tier of SHGs as small and viable enterprises has emerged, there is a need to go beyond the established value chains and identify areas where further business development of SHGs can take place. Although there is prospect, but there is a data-gap without a large scale centralized SHG-survey to understand the exact background, work, challenges, and solutions for lining SHGs to large markets and corporate supply chains. This may be taken up to create an informed roadmap for SHG-graduation.
Community-based interventions and collectivization have been hailed as silver bullets against poverty elimination in the last half-century. Evidence suggests that self-help benefit women directly by providing access to information and funds and indirectly by improving women’s wellbeing through agency and self-worth (Mohiuddin et al. 2002; Moyle, Dollard & Biswas, 2006; Sundaram, 2012, Kalyani, Samyuktha, and Agnes 2019). In India, after the COVID 19-led economic lockdown, there has been a consensus among policy makers and practitioners that Self-Help groups should be re-capitalised for mitigating some of the distress emerging from lockdown. India has been a pioneer country in mainstreaming the creation and regularization of self-help groups for the empowerment of women. The National Rural Livelihood Mission (NRLM) alone has approximately 78 lac SHGs (27% pre-NRLM) with a registration of more than eight crore women. There are other community-based interventions by non-government bodies and private sector social workers, leading to the near saturation of villages in terms of group membership and registration. Evidence also points to the positive impact of collective action or SHGs in India in pulling households out of vulnerability, poverty and improving certain health and nutrition behaviours. If we delve into the question of why governments like SHGs, three distinct benefits of SHG can be noticed in the literature: (A) Economies of scope – from a single platform, multiple flagship programs can reach the communities directly ( Siwach 2022; Diaz-Martin 2020) (B) Direct financial empowerment through micro-finance and fulfilment of practical gender needs by creation of livelihood and improved credit market through reduction of non-institutional lending rates in the villages (Hoffman 2021; Brody et al. 2015; Chhatoi, Sahoo, and Dash 2022) And (C ) a third body of literature that points to the larger impact of collectives on creating an empowered, engaged citizenry which in turn leads to strong institutions, successful service delivery and efficient governance ( Kumar et al. 2019; Desai and Olofsgard 2019). The question of low economic opportunities for women has prompted the government to respond with a stronger collectivization approach, where the focus has shifted from SHG-led micro-finance to SHG-led enterprises. With the policy question being “how can the SHGs be strengthened as a profitable entity”, the discussions have now steered towards finding roadmaps for connecting self-help groups with larger business entities, digital marketing platforms, and export councils for business networking and capturing larger markets. The Government of India is also regularly organizing large-scale urban marketing platforms in cities, such as SARAS (trade) fairs and opening dedicated outlets for SHG-made products. It is imperative that while we deliberate how the platform of self-help groups should be strengthened, we do not lose sight of the larger development goal of improving economic participation and opportunities for women and eliminating poverty of all genders. However, to reach the goal of gender-redistributive opportunities, discussions around SHG-led enterprises must begin to identify larger issues from a holistic lens.
How can small enterprises evolve into sustainably profitable businesses?
Majority of the work on entrepreneurship development is concentrated on developing the entrepreneurial capacity of women members, such as training women on brand building or packaging, linking SHGs with digital platforms, etc. For business development there has to be a more holistic approach beyond the skilling of rural women. Although, many SHGs have been formed into enterprises through NRLM, the SHG-owned or SHG-led businesses are either restricted in small sectors such as livestock, basic value chain development in farm, arts and craft material, and culturally perceived ‘feminine’ businesses such as beauty parlours or small shops in non-farm. As a general rule, low-income women’s home-based enterprises are small-scale and under-capitalised. They also routinely revolve around food, and other domestic activities which dovetail closely with women’s reproductive roles, symbolically as well as pragmatically (Chant, 2014; Gosh and Bhandari, 2014). Products produced by farm-based enterprises rarely invite a turnover sufficient to sustain the business in the long term. The quantity produced are also often not enough to compete with mass production scales required for a tie up with large Corporates. In addition to these, large-scale illiteracy among poor rural women restricts high-end market integration, branding, quality control, and the proper pricing of products. How can a viable business be created by small groups with limited capital? The creation of a market and demand is a much larger process than micro-level interventions for skilling and financing. At a macro level, businesses will develop and thrive when economies are strong, and people have a high marginal propensity to consume. Therefore, the policy of enterprise development is inherently linked and dependent on the policies of overall income growth, reduction of inflation, and an increase in disposable income.
Similarly, a healthy and sustainable agrarian sector must develop for a farm-based value chain to be successful (FAO 2014). Without profitable farm production, the value chain neither sustains nor captures a stable market. Even within the SHG-led programs such as the NRLM, enterprise development strategy needs extensive access to data. Having correct information such as ‘which product is in demand?’ ‘Where is the potential market for this product?’ ‘What are the safe channels for distributing?’ ‘What is the cost implication?’ is important for business survival. Any change in demand should be communicated quickly to enable the fast adaptation of the enterprise. There are good examples where SHG-producing garments have quickly adapted to the pandemic and have started producing facemasks. However, these are limited examples on a small scale. Expecting enterprises to go into high production and investment in a product that is no longer in demand may result in loss, which in turn reduces women’s engagement in the enterprises. With the information at hand, there needs to be active mechanisms to explore new innovations to produce more with less. SHG women-led art and craft businesses also have a limited, primarily domestic, market. SHGled businesses currently revolve around low-investment low-return products, such as homemade processed or semi-processed food (pickles, sweets, condiments), traditional art and crafts (clothes, linens), wood, and pottery work. However, in a single market, the scope for extending the demand for these products is limited. As the experience of different marketing platforms shows, few products struggle to make any profit. Developing new businesses should have internal strategies to analyse and communicate market conditions, demand status, and capacity to swiftly enter new markets. The internal strengthening of production should be met with the external strengthening of the markets. Therefore, the overall economic health of the rural and adjacent urban areas should be closely monitored.
Not just ‘economies of scope: How can women engage in the mainstream economy?
For ensuring success in enterprise and livelihood development, new SHGs should be trained in sectors beyond the traditional low-return SHG-led business and skills, such as processed food and/or small crafts and products. A potential sector in this case is roads, transport, and infrastructure maintenance (Manisha Gupta et.al, 2018). The entry of women into these sectors is still much lower than that in other sectors, whereas the demand for transport in rural areas is an ever-growing market. It is time for a viable business model to be developed for SHG women to assume rural transportation businesses and establish highreturn enterprises. Key stakeholders may be invited to coordinate in terms of creating the business model, identifying sectors that will be integrated with the transportation sector, along with sources of investments beyond SHG’s own funds. Corporate Social Responsibility in India spent around 426 crores on gender equality and old age-related work in 2021-22 FY (NITI Ayog, 2021). Compared to nearly 8700 crores of CSR in health and sanitation works, gender-related work did not get much focus from CSR. The private sector should be invited to establish SHG-led business models in the rural transport sector as a new and sustained livelihood intervention under CSR. Other than the transport sector – maintenance of constructed roads in PMGSY, road assets such as toll booth management and vehicle maintenance contracts for small and large vehicles may also be done through SHG-led enterprises. CSR funds may also be invited by State Rural Livelihood Missions under ‘skill training’ vertical of CSR in India for designing special training for these new areas and imparting the skills on the SHGs across India. For the true development of SHGs to the next stage of economic entities, the SHG platform should be utilized to train women in highly productive and high-return skills.
Breaking the gender paradox: How to ensure continued participation of women in the mainstream economy?
Undoubtedly, entering a high-remuneration domain is not easy as these spaces are often gender segregated and non-flexible (Siwach, 2020). The key policy challenge is the paradox in women’s achievements in the economy and empowerment. As large-scale datasets suggest, women exit the labor market or remain under-employed or unemployed for a long time if there are gendered barriers such as lack of autonomy to move out of home or value-attachment to certain types of jobs as unsuitable. Increased employment opportunities also have a negative impact on women’s health and mental wellbeing due to the excessive double or even triple burden of productive-reproductive-mental labor. The paradox of higher income relating to lower autonomy for women is also reflected in women-led bodies’ financial decisions. As the business grows and finances become complicated, men increasingly enter the management and control of strategic decisions due to the lack of exposure and experience of women, illiteracy, and apathy of financial institutions such as lenders and banks to fairly treat womenled businesses. Rural Indian households still consider domestic chores as the primary task for women and resist their participation outside of domestic chores. According to the 2019-20 National Family Health Survey data, one in five rural women still needed permission to visit the market or meet friends, and two in five women had no access to money. Data also points to low financial autonomy of women in terms of cash payments against work, or access to savings account for self-use. Unless there is a financial need, families do not encourage women to participate in non-domestic activities, an attitude that is reflected in the low enthusiasm of women in the non-financial meetings of SHGs or gender- or nutrition-related training. Policy responses such as community groups for setting up business enterprises may see active engagement when the family is in financial stress, but as income increases, participation may drop due to the withdrawal of women from the labor market as the primary role of women is seen in domestic work and negative value is attached to women doing business (Chant, 2014). Ensuring women’s sustained participation in the enterprise will require resolving the paradox, which will require interventions in both domestic and non-domestic spheres. While intervention is needed to sensitize households towards the importance of women’s autonomy and make the outdoors genderfriendly and secure, the most important reason for women’s low participation in the economy relates to the excessive care burden on women. Resolving this paradox, a gender-just care economy needs to be built for women to be free to develop and sustain an enterprise (Swamy, 2014). Interventions must be developed to reduce the burden of care on women through institutional and non-institutional support. Internally, skill training and financing of SHGs should be accompanied by holistic development of the psychosocial health and well-being of the members. The entire social-protection network – food security, health protection, assured education, and protection from domestic and non-domestic violence–must continuously function and improve livelihood security to work and show a visible result. It is also not farfetched to state that a child-friendly village where institutional mechanisms of care and child development and protection are strong will be able to provide opportunities for the entrepreneurial development of its women. While there is a need to collaborate with local governance institutions, communities, and households to improve women’s autonomy, financial institutions also need to be sensitized to create a gender-equal environment. It has been widely observed that small businesses run by women have a harder time mobilizing business loan, especially those run by unmarried women (Sunaina Kumar 2022). The banking sector needs elaborate sensitization on gender issues so that women-led enterprises do not face undue hurdles in accessing financial products. (Datta and Sahu, 2021; Viswanathan et.al, 2014) Market volatility is a major vulnerability of women in small enterprises (Quak & Barenboim, 2022). Even during a recession, it is important to create a diverse portfolio of investments and savings to sustain small businesses. A dedicated financial mentor should be placed in the community to facilitate the financial planning and security of small enterprises as well as ensure protection from fraudulent schemes. Even with existing SHG-led enterprises, there is still much to be done.
• Change perception of lenders towards women-entrepreneurs from high to low-risk borrowers
• Intensive business and financial mentoring for capacity building, network development and assigning an expert business mentor at the community.
• Assigning a financial advisor for enterprises with a stable turnover helps them diversify investments and prepare a stable yet profitable portfolio of profit re-investment and individual financial security.
• Assigning a product advisor/design mentor for low-return products
• Prepare an advertisement plan to identify multiple distribution channels.
• Quality control for catching higher markets. Since the domestic market is limited, SHGs should have in-depth and continuous training to match the export quality of their products. • Markets must be accessible and gender friendly to increase women’s participation as producers and entrepreneurs. Interventions for providing provisions of childcare, investments in good roads, welllit streetlights, and public washrooms may all go a long way in assuring women’s participation outdoors and increased mobility. The large-scale gender planning in India is also restricted by a lack of disintegrated data that captures all aspects of SHG development and functioning along with their progress and roadblocks in terms of formation of enterprises. Further SHG-to-enterprise planning will be possible when a national level SHG database is prepared that can capture all the aspects of the existing SHG operations along with sociodemographic attributes of the member households and condition of the surrounding environment or business-ecosystem. In summary, developing a rural self-help group into a viable business enterprise would require multidimensional action from a holistic perspective. Capacity building, financial empowerment, and capitalization may be the beginning. The right solution will emerge once we start asking the right question.
Compiled & Shared by- Team, LITD (Livestock Institute of Training & Development)
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Reference-On Request.
