Micro Finance (ifmr Trust, Kadi)

INSTITUTE OF AGRIBUSINESS MANAGEMENT NAVSARI AGRICULTURAL UNIVERSITY NAVSARI – 396 450 A Project Report On

Microfinance IFMR Trust Kadi (Mahesana)

SUBMITTED BY HITESH K. KARKAR (04-0409-2008) [email protected] 2nd Semester IABM

IFMR TRUST

IABM

Page 1

Declaration

I hereby declare that the project I am submitting for the completion of Industrial Attachment Programme is an original piece of work carried out by me under the guidance supervision of Dr. Ruchira Shukla. The information has been collected from genuine and authentic sources. The work has been submitted in partial fulfilment of the requirement of MBA course in Agribusiness Management.

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Place: Date:

Name of Student Signature

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IFMR Trust

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CERTIFICATE

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ACKNOWLEDGEMENT After passing 15 days at Kadi (Dist: Mahesana), in conducting this project many key persons had performed an important role in my personal exercise.

I convey heartily thanks and deep sense of gratitude towards the followings: Θ Dr R. R. Shah, Dean, Institute of Agribusiness Management, Navsari Θ Mr. Bhaveshbhai Nayak, Project Manager, Dharampur. IFMR Trust. Θ My esteemed guide Dr Ruchira Shukla, Asst. Professor, Institute of Agribusiness Management, Navsari Agricultural University. Θ Dr

Alpesh

Leua,

Asst.

Professor,

Institute

of

Agribusiness

Management, Navsari Agricultural University. Θ Mr. Rahul Thakkar, Asst. Professor, Institute of Agribusiness Management, Navsari Agricultural University. Θ My Dearest Friends for their wholehearted support. Θ All those persons who were directly or indirectly engaged with this project, I am heartily thankful to them.

- Hitesh K. Karkar

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Agricultural University.

Contents Sr. No.

Pa g e No.

2. 3.

Industry Profile • Microfinance • Different models in India IFMR Trust profile Organizational/corporate structure

4.

Senior Management Team

6

5.

Companies HR policies (People Group)

8

6.

IFMR Trust ventures

10

7.

Agreement with National Spot Exchange Ltd. (NSEL)

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8.

A Model of financial services • KGFS Finance IFMR TRUST Activity at Kadi • Indian Scenario • Factors Influencing Castor seed & Oil Market • Castor seed buyers Cost Sheet for Millers Lifting Delivery from Exchange Designated Warehouse Storage Receipt and procedure of financing-farmer Education • Enrolment & KYC of Farmer • KYC documents • Sampling process • Castor seed Quality • Testing method • Packing details • Commodity depositing Process • Storage charges • Weighing process • Warehouse receipt issue • Product features • Events of default Process of • Education • Enrollment process • Commodity deposit at NSEL warehouse • Quality testing process • Storage

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SWOT Analysis

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9.

10. 11.

12.

13.

1

3 4

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Particulars

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23 25

31

Project

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“Farmer/Client Feedback for “Khedut Kendra Dharampur” Introduction Khedut KendraDharampur

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15.

Products and services offered at present

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16.

Objectives of survey and Research Methodology

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17.

Action Plan

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IFMR survey Outcomes – • Analysis of data 1. Maharajpura 2. Shivpura 3. Korda 4. Visatpura 5. Kalyanpura Findings and Recommendations

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Bibliography

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Appendices & Annexure

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IFMR Trust Microfinance

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1.

Industry Profile

Microfinance

Rural households need relatively large sums of money for life cycle needs (such as marriages, festivals and old age), emergencies (such as illness, the death of a bread-winner and floods) and investment opportunities (as much in assets and household goods, for example, as in investments in micro-businesses)i. They therefore need access to a basket of financial services. When looking at rural financial markets, we discover not only the lack of access to credit, but also other financial services (Investments, Insurance, etc) not being available.

Microfinance models in India Operational features of different microfinance models in India Operational Features

Client type Service focus Role of MFI staff

SHG

Groups (15-20 members) Savings and credit

Grameen

Individual Banking/Sector cooperarative

Group(usually 5 members) Credit-regular cycle Organize

Individual clients

Weekly meetings

credit organise

Mechanism

Guide and facility (group may develop autonomy) Monthly meetings

Saving products Insurance

Rs. 20-100/month In early stages

Rs.5-25/week

Credit products

Rs. 5-10,000 also, internal loans from group funds 14-36%

Rs.2-5,000

Varible-often daily varible Link to national companies Rs.15-35, 000

29-41%

18-24%

Often through associated NGOs

Usually none

Enterprise support

Effective interest rate Development service

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Microfinance refers to the provision of financial services to low-income clients, including consumers and the self-employed. The term also refers to the practice of sustainably delivering those services. Microcredit (or loans to poor microenterprises) should not be confused with microfinance, which addresses a full range of banking needs for poor people.

Comparison of Alternative Financial Services Providers Parameter

Microfinance SHG

Loan amount Access Speed Flexibility

MFI

Group

Medium

Variable

Variable Medium Medium

Medium High High

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Informal

Formal

Grameen MFI

Moneylender

family

LowMedium Medium Fixed Low

VariableHigh Medium High High

LowVariable Medium High High

High Low Low Low

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Actual use of MFI Loan- All Model

2.

IFMR Trust

Profile

IFMR Trust is a private trust; it is not a public charitable trust. However, unlike a privately-owned or shareholder-owned company, the trust’s net profit will not go to any individual(s) or body corporate. All profits will be reinvested in Trust activities and companies. As a private trust, IFMR Trust does not have investors. Initial resources for the Trust were provided by ICICI Bank via long-term borrowings.

Mission “To ensure that every individual and every enterprise has complete access to financial services.” This mission can be achieved only through systemic changes in the Indian financial system. Their vision of the financial system comprises three components: 1. Frontline services

provision

of

high-quality

and

adequate

financial

India is a vast and diverse country, with a large rural population. It is unrealistic to expect a few national institutions to have the reach to provide financial services to every individual and every enterprise. The cost-to-serve would be extremely high, and there would be huge information gaps. So it is necessary to have a number of permanent, local and autonomous entities that will serve as the last mile for financial intermediation. 2. Orderly transfer of risk However, local entities would typically be thinly capitalized and concentrated regionally. If their level of activity and outreach is determined only by the extent of direct capital on their books, the entities are doomed to slow rates of growth. If the local footprint of

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The Institute for Financial Management and Research (IFMR), Chennai, is one of India’s most prestigious business schools and academic institutions. Established in 1970, it is recognized as an Institution of National Importance by the Ministry of Finance. Since its inception, IFMR’s mission has been focused on contributing to growth and development efforts in India with an emphasis on finance and research. IFMR also has several key partnerships with some of the leading academic institutions worldwide and offers a stimulating and world class environment to faculty and students alike.

these entities with the ability of well-capitalised financial institutions is combined to manage risk then the scale of operation can be reengineered. Orderly transfer of risk between local entities and larger financial institutions and markets would address information asymmetry as well as the moral hazards inherent in this multi-tier design.

If local providers of financial services hold all the risks locally, clients will be greatly exposed to local and regional shocks, such as natural disasters and crop failure. They will not get the security and liquidity of savings and insurance that can be offered by large, diversified entities. A stable and inclusive financial system should therefore have mechanisms that facilitate the warehousing of risk by well-capitalized and diversified entities that have the ability to manage risk efficiently. Working with several partners, they seek to advocate changes in the Indian financial system that would enable development of the above three components.

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3. Holding of risk by well-capitalized diversified entities

3.

Organizational/Corporate structure

IFMR Holdings

IFMR Advisory Services

IFMR Capital

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IFMR Trust

IFMR Trust Advocacy Unit (ITAU)

IFMR Trust Network Enterprises Fund (NEF)

Kshetriya Gramin Financial Services (KGFS)

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Network Enterprises

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4.

The Senior Management Team

Name

Designation President Bindu Ananth worked with ICICI Bank in its micro finance practice between 2001 and 2005 and was Head of the New Product Development Group within the bank's rural finance business in 2007.

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Bindu Ananth

She founded the Centre for Micro Finance, IFMR, and has published in the Small Enterprise Development Journal, the Economic and Political Weekly, the OECD working paper series and the IFMR working paper series. Senior Vice President, People Dave Wallack worked for over 10 years as an Executive Coach and Organisational Design Advisor for various private sector and political clients in the US.

Dave Wallack

He specialises in building and organisations to operate effectively changing environments.

motivating in rapidly

Senior Vice President- IFMR Trust and CEOIFMR Holdings Private Limited.

Anil Kumar

Anil Kumar started his career in a rural branch of Canara Bank. Later he joined ICICI Bank, where he was Head of the Micro Finance Institutional Development Team, which created over 100 MFIs across the country in 25 states. He was involved in structuring several innovative models of finance to reach out to clients at the bottom of the economic pyramid, and has conducted several training programmes aimed at identifying entrepreneurs for the micro finance sector.

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Senior Vice President, IFMR Trust and Managing Partner, The Network Enterprises Fund Puneet Gupta worked with the Social Initiatives Group (SIG) of ICICI Bank as Coordinator of its education and micro finance programmes.

Sucharita Mukherjee

At ICICI Bank, he led teams that worked to improve the quality of mainstream systems of delivery for education and access to financial services for lowincome households. Senior Vice President- IFMR Trust and CEOIFMR Capital. Sucharita Mukherjee led the origination and structuring effort in credit derivatives and structured finance for corporates at Morgan Stanley in London. Her work includes developing innovative asset-backed financing structures in such areas as intellectual property and healthcare receivables. She was also part of the credit derivatives team at Deutsche Bank in London, structuring creditderivatives-linked repackaged investments for financial institutions.

•

IFMR Trust is governed by a Governing Council. Its key role is ensuring that: • IFMR Trust and its partners stay consistent with the mission of the Trust. • All resources (internal and external) are deployed towards the achievement of the mission, in the shortest possible time.

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Puneet Gupta

5.

People Group

Human resources that they call the ‘People Group’ have following components. Recruiting They have in-house recruiting team that is familiar with their mission and the intricacies of their work. The team has launched a global search that reaches from India to major development-focused cities around the world.

Although all the companies owned by IFMR Trust operate as independent entities, they choose to focus on compensation, leave, and performance management centrally. In this way, they can encourage cross-training and lateral movement of employees within the IFMR Trust companies, as well as IFMR's research centers. This performance management system tracks key competencies and goals that cascade down from the IFMR Trust mission. Processes They have been working on mapping and refining the processes of each IFMR Trust company with the objective of coming up with clearly defined processes and matrices that can be viewed by all employees at any given time. They believe that this level of process transparency will increase the pace of process improvement and will ensure that all employees have a clear sense of how they and their teammates relate to the overall mission of IFMR Trust. Training and development The training needs of IFMR Trust companies are vast. They have launched a separate training company to create quality training material that is relevant to the rural Indian context and can be easily translated into local languages. The training needs seek to serve include skill and knowledge development. However, the greatest challenge is in changing the beliefs of prospective employees so that they are able to see what is possible for them to achieve. Balancing the acquisition of skills and knowledge with transformation of the way people see themselves is the focus of their training effort.

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Performance management

Assessment One of the major challenges facing IFMR Trust companies is employee selection. Over the next decade, IFMR Trust companies expect to hire thousands of employees. Given the scale of their hiring effort they are eager to make early investments in the development of consistent assessment tools that help them to avoid interviewer bias. They have already seen an interest in this project by large Indian employers with whom they expect to work to further refine their assessment tools. Qualities of IFMR Trust Team Members

They seek people who want to solve social problems using entrepreneurial means. Specifically, social entrepreneurs with a market orientation. People who agree with them that access to finance and markets is part of the answer to meeting India’s challenges. People with the entrepreneurial confidence to believe that they can change the world. Systems thinking They are oriented towards looking at entire systems and taking action to fix the whole system rather than just solve a local issue. They want people who share this way of looking at situations. Working at the system level requires enough flexibility to recognize and question unchallenged assumptions embedded in systems that aren’t working. Self-confidence If someone is terrified of the risks involved in a venture like it, he/she is the wrong person for the job. they are at the cutting-edge of finance. It is both dangerous and exciting out here. Their people are confident enough of their ability to change the world and are not worried about an exit strategy. When they succeed, the rewards will have been worth the risk.

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Social entrepreneurship

6.

IFMR Trust Ventures

Each KGFS is expected to have the following characteristics: •

It will have 'thin branches' at the village panchayat level, supported by a strong back-office. There will be a high degree of automation at the branch level.

•

Each branch will have state-of-the-art technology that captures the credit history of rural households.

•

Branches will offer multiple, client-centric financial services including savings, remittance, insurance, small-ticket loans and investments.

•

Using good data capture and analysis, high-performing KGFSs, in conjunction with the IFMR Capital, would be able to sharply reduce cost of funds through securitization.

•

Sharply focused on delivery of financial services KGFSs will serve as information databases and facilitators for other service providers. KGFSs will also provide a local footprint to our Network Enterprises.

2. IFMR Advisory Services, is an Asset Management Company that is launching its first equity fund a private equity fund, the Network Enterprises Fund, to eliminate systemic risk and make small rural enterprises ‘financeable’ by local banks/financial institutions. The NEF will invest in supply chain companies in 10-15 sectors called Network Enterprises (NEs), they in turn will invest in key supply chain gaps, including logistics, technology and certification backend and working capital. They have sector-specific teams organized under leaders to identify potential Network Enterprises (NE) and mentor them. The NEF is a 10-year closed-ended fund. The Fund plans to hold investments for five to seven years. The Fund will exit over the last five years. In this environment, they value innovation, entrepreneurial action, creativity, passion for our mission, and financial acumen. IFMR Trust Microfinance

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1. IFMR Holdings, developing working prototypes of localised, highquality entities to provide financial services in remote parts of rural India. These entities are called Kshetriya Gramin Financial Services (KGFS) companies. IFMR Trust Holdings is creating a network of KGFS to meet the huge, unmet demand for financial services in rural, underserved parts of India. In IFMR Holdings operations, involving the roll-out of Kshetriya Gramin Financial Services; they have a formal hierarchy, with regional structures. In this environment they value hard work, salesmanship, passion for the lives of our customers, customer focus, integrity and consistency. KGFSs will leverage recent advances in technology and financial markets to roll out a network of financial services access points in remote rural India.

Fund Promoter IFMR Trust is the promoter of IFMR Trust's Network Enterprises Fund. IFMR Trust's mission is ensuring universal access to financial services across India. Investment Management Team Investments are managed by a team of four members. The team brings over 50 years of collective experience in financial services, derivatives, venture capital and investments. The team will be expanded to nine members.

a) IFMR consider investment in a Network Enterprise in the NEF's focus sector when it meets the following criteria: b) It has a strategy of investing in rural supply chain acceleration and meets the definition of Network Enterprises. c) It identifies and invests in enterprises in the rural supply chain gaps of the focus sector. d) It is led by an entrepreneur in residence with proven commitment and integrity. e) It is engineered for scale and current returns. f) The NEF will invest in 10 to 15 enterprises. Average investment size would be the equivalent of USD 5-10 million. •

Investment Target Pending the creation of the Network Enterprises Fund, IFMR Trust has so far invested INR 300 million (USD 7.5 million) in various enterprises. We plan to raise and invest INR 6 billion (USD 150 million).

•

Prospects IFMR Trust's Network Enterprises Fund is focused on harnessing commercial capital to address key gaps in rural supply chains. Investments made in various enterprises have so far delivered a yield to maturity of 20%.

•

Exit Strategy The NEF expects to get returns in the form of regular dividend and interest payout by the investee companies. It may also make additional returns in the form of terminal value.

3. IFMR Capital, (earlier IFMR Trust Guarantee Company) is being structured as a registered Non-Banking Financial Institution (NBFI)

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Investment Strategy

based in Chennai. The company will be regulated by the RBI under Section 45-IA. It is a financial intermediary that will ensure orderly transfer of risk between the originators and aggregators of risk. In IFMR Capital they apply cutting-edge thinking in financial markets and securitisation, focusing on growth of originators that are relevant to lowincome households (both rural and urban). In this environment they value deep structured finance competence and agility in applying that to the markets we care about.

• • • • • •

Rural financial service providers. Urban financial service providers that focus on low-income households. Municipalities. Rural infrastructure. Small and medium enterprises in the rural sector. Agriculture, low-cost housing, and other sectors relevant to low-income households in both urban and rural areas. IFMR Capital will meet its objective through multiple strategies:

•

•

•

Identifying good-quality underlying portfolios and achieving diversification via pooling of risks across various sectors and geographical locations. Structuring debt to achieve efficient pricing; for instance, priority sector eligible assets for Indian bank investors, investment grade securities with a formal credit rating for fund investors. Using financial tools such as repackaging, securitisation and credit enhancement to tailor products that match the risk profiles of investors, thus facilitating access to domestic and international markets. Further, IFMR Capital plans to develop markets for new asset classes by:

• • • •

Setting market standards for microfinance loan-backed securities, municipal financing instruments and project finance bonds. Developing a sound theoretical pricing framework. Designing rating methodologies for new asset classes and structures with rating agencies. Providing liquidity by making two-way markets in municipal bonds, structured finance securities.

4. IFMR Trust Advocacy Unit (ITAU) IFMR Trust’s principal strategy for ensuring complete access to financial services is advocacy. IFMR Trust Advocacy Unit (ITAU) identifies priorities for research and action to be undertaken by various IFMR Trust ventures and partners. The outcomes of these initiatives are used for effective advocacy. IFMR Trust Microfinance

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IFMR Capital's objective is providing liquidity and developing access to debt-capital markets for critical sectors such as:

To strengthen financial system components that we believe are essential to ensure financial inclusion in India, ITAU supports action-research and pilot projects on access to finance. ITAU disseminates important learning, research and operational strategies to IFMR Trust ventures.

•

•

• • • • •

Understanding the needs and behaviours of low-income individuals, households and small enterprises that have traditionally been underserved by the formal financial market. Designing and testing appropriate channels for a range of financial services and products such as insurance, savings, loans, investments and remittances. Evaluating the impact of financial access on individuals/households and economies. Strengthening the Originate-to-Distribute (OTD) model. Enabling financial market infrastructure for risk transfer. Knowledge-building initiatives. Shaping policy for better regulation and management of risk aggregators.

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ITAU also seeks to influence thinking and action among stakeholders, policymakers and practitioners. It is currently focused on research and action in the following priority areas:

7.

Agreement with National Spot Exchange Ltd. (NSEL)

IFMR Trust has signed a partnership agreement with National Spot Exchange Limited (NSEL) on September 30, 2008. The alliance will create a seamless process for providing finance to farmers and traders against commodity warehouse receipts for the commodities deposited in NSEL approved warehouses. The pilot for this financing model will be launched shortly at Unjha (Gujarat). Under the partnership, IFMR Trust will provide loans to farmers against agricultural commodities deposited in NSEL-approved warehouses, by way of warehouse receipts issued for these deposits. Such post-harvest financing will give farmers the option to wait out the usually low prices offered immediately after harvest, and sell at a later time, when prices tend to rise. It will also allow farmers to take advantage of changing market prices rather than being burdened by them. The loans backed by warehouse receipts will be pooled and repackaged into securities. IFMR Trust will structure, arrange and sell these commodity loan-backed securities in the capital market. This partnership empowers the farmer by providing a liquid market for agricultural commodities accompanied by access to finance. Through this partnership with NSEL, it will unlock tremendous value for both farmers and investors through this partnership with NSEL. They expect this model to be replicated throughout the country in the coming years. IFMR Trust will act as Professional Clearing Member (PCM) of the exchange. The disbursement and repayment of loans made by IFMR Trust will be made through NSEL's PCM system.

Enterprise Partners IFMR Trust works with non-government organizations (NGOs) and companies that share their objectives. Two examples illustrate how a partnership with an NGO or company can work: IFMR Trust Microfinance

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NSEL is a national, institutionalized, electronic spot exchange, promoted by Financial Technologies (I) Ltd. (FTIL) and National Agricultural Cooperative Marketing Federation of India Limited (NAFED). It provides a state-of the-art market place with facilities for risk-free and hassle-free procurement and disposal of farm produce. It provides customized solutions to various problems related to It provides customized solutions to various problems faced by the farmers, traders, processors, exporters, importers, arbitrageurs, investors and the general masses relating to agricultural marketing, storage, warehouse receipt financing, etc.

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An NGO works with women who produce handicrafts. By partnering with one of their Network Enterprise (NEs) on a commercial basis, the NGO is able to provide the women market access at scale and at fair prices. By partnering with our Kshetriya Gramin Financial Services (KGFS), the NGO is also able to ensure inflow of working capital and expansion capital. If any organization is looking to have a rural footprint, either in terms of procuring from rural markets or selling into rural markets, IFMR’s Network Enterprises can provide access to competitive production bases as well as shared infrastructure for distribution. Depending on the sector, and specific needs, other kinds of partnerships can also be developed.

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8.

A new model of financial services

Conceptualised by IFMR Trust, a new model of offering a range of financial services in remote, rural locations of India has completed one year of operation.

The first KGFS company, Pudhuaaru KGFS (PKGFS), started operations in Thanjavur district of Tamil Nadu in June 2008. Two other KGFS entities have been launched more recently: Sahastradhara KGFS of Uttarakhand with proposed operations in the districts of Tehri Garhwal, Pauhri, Haridwar and Dehra Dun, and Dhanei KGFS in Orissa's Ganjam district. These KGFS companies offer a range of financial services and products through branches located in villages.

Beyond micro finance KGFS's mandate, as enunciated in IFMR Holdings' mission, is to "maximise the financial wellbeing of every individual and every enterprise in remote rural India by providing complete financial services". The KGFS model thus goes far beyond the scope of micro finance institutions (MFIs), which have made inroads in remote locations in many regions of India. "The growth of micro finance in India has been unambiguously important for millions of poor households,". "MFIs enable low-income households to take a loan when there is not enough money to meet some critical needs. This allows households to manage cash mismatches in ways that are superior to taking usurious loans from moneylenders, selling assets like gold or buffaloes, or pulling kids out of school." "Just like their middle-income counterparts, low-income households need to have the ability to move their resources across time and space, in such a manner that their needs for finance are met smoothly over a lifetime." To be able to do this, low-income households require "the full suite of financial services, including savings, credit, risk mitigation and insurance and remittances".

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The model is being rolled out by IFMR Holdings, an IFMR Trust venture, through region-specific, not-for-profit entities called Kshetriya Gramin Financial Services (KGFS) companies, registered under Section 25 of the Indian Companies Act.

KGFS's finance suite KGFS companies are being developed to provide this full suite of services in remote, rural locations. After much deliberation, 14 products and services have been identified, to be offered through KGFS branches to all households living within their area of operation. These fall under four categories: Loan products: Joint Liability Group (JLG) loans, loans against mortgaged jewellery (called 'jewel loans' in the Indian banking industry), retailer loans, and loans for rural industries like brick kilns, coir units, and rice and dal mills.

2. Insurance products: Personal accident insurance, cattle insurance, weather insurance, and life insurance. 3. Investment products: Savings instruments that provide safety, liquidity and reasonable returns, fixed deposits of public sector finance companies, and a gold accumulation plan that helps customers accumulate their savings in the form of jewellery, and pension plan annuities. 4.

Services: Sale of certified gold coins, and remittance services to enable efficient delivery of money sent by migrant members of village households.

Use of technology Use of technology helps keep branch operations to the minimum. Computers in branches are linked, via towers installed over the branches, to the head office, and all data is subsequently transferred to servers maintained by FINO, IFMR Holdings' technology partner, which does the backend processing. Investment in this technology was the costliest part of setting up KGFS, and also probably the most critical when one thinks of replicating this model in other remote rural areas.

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1.

9.

IFMR Trust Activity at Kadi

Castor seed & Oil Castor (Ricinus communis L.) is cultivated around the world for the commercial importance of its oil. Castor grows under tropical conditions. Castor oil obtained from castor seed is inedible oil but is of great industrial importance. It is used in the manufacture of surfactants, specialty soaps, surface coatings, cosmetics, personal care products, pharmaceuticals, perfumes, plasticisers, grease, lubricants and specialty rubber. Castor meal has uses in agriculture as organic manure.

India is the world leader in castor production and dominates the international castor oil trade. In India, Castor is planted between June to October and harvested between October to April. Gujarat accounts for 86% of India’s castor seed production followed by Andhra Pradesh and Rajasthan. Castor is cultivated in Gujarat in Mehsana, Banaskantha and Saurashtra/ Kutch region. In Andhra Pradesh, Nalgonda and Mahboobnagar districts accounts for 70 % of the total castor produced in the state. The rest is accounted for by Prakasam, Guntur and Ranga Reddy Districts. The major castor seed markets in Gujarat are Rajkot, Ahmedabad, Gondal, Gadwal, Bhabar, and in Andhra Pradesh are Jedcherla and Yemignoor. The annual domestic consumption of castor oil in India is only about 80,000-1,00,000 tons. Of this, the soap industry consumes about 25,000 tons, the paint and allied industries. 35,000 tons and the lubricant and derivatives industry 20,000 tons. India exports castor seed, oil and also meal. However the oil export has the largest share as it is a value added product from castor seed. From India castor oil is exported in two forms – First Special Grade and Castor Oil Commercial. The Indian variety of castor has oil content of 48% and 42% can be extracted, while the cake retains the rest.

Factors Influencing Castor seed & Oil Market •

Variations in castor seed domestic acreage based on yield and price realization.

•

Crop development based on monsoon progress in growing regions (especially Gujarat & Andhra Pradesh).

•

Comparative farm level return on input costs for various crops.

•

Comparative price with other vegetable oils in the domestic market.

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Indian Scenario

•

Chinese and Brazilian crop size and subsequent demand of Indian castor oil in world market.

•

Carryover stocks.

•

Development of new applications and substitutes of castor oil.

Castor Seed Buyers Jayant Oil Mills

Kisan Agro Product Ind.

Bharat Foods Co Operative Limited

Ultra Chemical Works

A Z Agro Ventures

Chemical and Fragrance Corporation, Mumbai

IFMR Trust Microfinance

Deals in Exporting and manufacturing of castor oil, castor oil derivatives, undecylenic acid, ricinoleic acid and zinc undecylenate. Also offering ricinoleic acid kosher grade, nheptanol, methyl ricinoleate and methyl 12 hydroxy stearate acid. Leading manufacturers and exporters of edible oil that includes commercial castor oil, refined castor oil and refined castor oil pale pressed grade. Also offers Castor Oil Pharmaceutical and castor seed extraction meals. Engaged in manufacturing, importing and exporting of castor oil, cooking oil, groundnut oil, cottonseed oil and palm oil. Also offering mustard oil, peanut oil, rice oil, soybean refined oil, sunflower oil and vegetable oil. Exporting of edible oils like castor oil, castor oil dehydrated, castor oil hydrogenated, castor oil refined, dehydrated castor oil fatty acid, groundnut oil and also deals in bulk drugs and aluminium hydroxide magnesium carbonate co dried gel. Wholesale manufacturer and exporter of edible oil that includes sesame oil, groundnut oil, castor oil, linseed oil. Also deals in raw cotton andcotton yarns, oil seeds, peas, lentils, pulses, grains, cereals, bird feed, animal feeder. Suppliers and exporter of edible oils like almond oil, apricot kernel oil, argan oil, avocado oil, castor oil, evening primrose oil, grape seed oil, hazelnut oil, jojoba oil, macadamia nut oil, olive oil, peach kernel oil, walnut oil, wheatgerm oil.

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Buyer

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Arvalli Castor Derivatives Private Limited

Manufacturers of hydrogenated castor oil.

Shreeji Trading Wholesale manufacturer and exporter of Company, Maharashtra castor oil, derivatives oil and lubricants.

Natraj Industries K. S. Exim Limited J. J. Industries Shankar Lal Ram Bharosey Lal Commodities

Suppliers of castor oil. Manufacturers and exporters of castor oil. Manufacturer and exporter of castor oil, edible oil and oil products. Manufactuers of castor oil and exporters of groundnut seeds(peanut),castor seeds & refined castor oil (f.s.g.) Deals all kinds of castor oil and oil products. Manufacturers and exporters of refined castor oil. Engaged in manufacturing of castor oil, expeller mustard oil and mentha oil.

Swarnajyothi Agro&Exports(P) Ltd.

Manufacturers and exporters of castor oil usp, hydrogenated castor oil etc.

Somani Oil Industries

Manufacturer and exporter of all types of castor oil, sesame oil, refined oil, edible oil and non edible oils. Manufacturers and exporters of castor oil, linseed oil, karanjia oil and refined soyabean oil. Exporters of castor oil (of various grades) and its derivatives, castor cakes. Deals in manufacturing of edible oils, castor seed, castor oil and castor oil derivaties. Manufacturers and exporters of castor oil of all grades and other oilseeds.

Mandeep Oil Industries Hardi Sales K. G. N. Industries Limited Rajena Agro Products Private Limited Laxmi Minerals Aalisha Trade Link Kanel Oil & Export Industries Limited

IFMR Trust Microfinance

INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Muskaan Tradex Private Limited Amee Castor & Derivatives Limited N. K. Industries Limited

Manufacturers of all kinds of castor oil. Suppliers of refined soya oil, raw linseed oil, castor oil, karanja oil and edible oils. Manufacturers and exporters of castor oil, edible oil and oil products.

26

Manufacturers of castor oil and arzimon oil etc.

Ishaan Oils Private Limited

Manufacturers and exporters of castor oil and its derivatives, castor oil commercial grade, castor oil first special grade and hydrogenated castor oil. Manufacturing and exporting of cold pressed castor oil, first special grade castor oil, pale pressed castor oil, commercial castor oil and british special grade castor oil. Manufacturing and wholesale supply of castor oil. Manufacturers of Castor Oil and its derivatives.

Laxmi Oil Industries

Panthroli Industries Siddeshwara Oils And Allied Products Private Limited Royal Castor (India) Ltd. Maniram Agro Products Private Limited Synthokem Industries S. K. Enterprise, Masjid Bunder, Mumbai Vasista Foods & Fats Private Limited Keloth Oleochem Private Limited

Modi Oil Mills Paras Chemical Industries

Manufacturers of hydrogenated castor oil. Engaged in manufacturing of castor oil and cold pressed castor oil. Manufacturers & exporters of castor oil, castor oil refined, de-hydrated castor oil & castor oil hydrogenated Etc. Dealing Into All Kinds Of Base Oil, White Oil, Castor Oil, Tailor Made Distilled Petroleum Products. Manufacturers and exporters of castor oil and its derivatives, hydrogenated castor oil etc. Manufacturers of castor oil, pale pressed grade castor oil (ppg), cold pressed castor oil, urethane grade castor oil, hydrogenated castor oil, pharma grade castor oil etc. Manufacturers and exporters of commercial castor oil, fsg castor oil, pale pressed castor oil etc. Manufacturer and trader of castor oil, turpentine oil and eucalyptus oil.

Alps Processors

Producers and suppliers of ground nut oil and castor oil.

Gokul Overseas Limited

Manufacturer and wholesale exporter of castor oil, refined palm oil, refined mustard

IFMR Trust Microfinance

INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Shri Ram Oil And Chemical Ind

27

Pawan Agro Industries

INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Crystal Caschem India Limited, Ankaleshwar S. C. Chemicals

oil and vegetable oil. Leading manufacturers and fabricators of castor oil. Engaged in manufacturing refined castor oil and hydrogenated castor oil. Sellers of castor oil.

IFMR Trust Microfinance

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10. Cost Sheet for Millers Lifting Delivery from Exchange Designated Warehouse

1

2

Expenses

Base Price i.e. Castor Seed Loose Price at NEST Terminal for 1 Lot of 75 Kgs - Net Weight APMC Cess 0.6% on Base Price

Lot Size I Bag (75 Kg) 75

Expenses

Rate

From MANDI Total Amt (Rs)

Rate

Amount

(Rs)

(Rs)

20

490.00

1837.50

Base Price (75 Kg Gross Weight)

490

1837.5

11.03

Commission @1.25% -Kutcha Adad APMC Cess 0.6% on Base Price Hammali - For Sieving & Bagging Stitching

22.97 11.03 Per Bag (75 Kg) Per Bag (75 Kg)

Commission @1% - Trader

5.50

0.20

18.38 1895.57

3

NSEL Transaction Charges- @Rs 500/- per One Lakh of Turnover

9.19

Total Cost for 1 Lot i.e. 75 Kgs

1857.71

3.41

Interest cost for paying VAT & getting return considered upto 3 Months - [VAT @ 4% on 1895.57 is Rs 75.82. Interest cost for 3 months for Rs. 75.82 @ 18% p.a. is Rs.3.41/-]

1898.98 2.00

Loading at Mandi

Per 75 Kg Bag

Transportation from Mandi to Mill Unloading at Mill

Per 75 Kg Bag

4.00

Per 75 Kg Bag

1.50

Total Cost for 1 Lot i.e. 75 Kgs

1906.48

Difference in Cost Per Bag of 75 Kg's

48.77

Difference in Terms of Rate per 20 Kg's

13.00

IFMR Trust Microfinance

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INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Sl.

From NSEL Total Amt (Rs)

11. Storage Education

Receipt

Financing-

Farmer

Services Offered By Branch • • • •

Enrolment and KYC of farmers. Providing loan against storage receipt (70% of market value of crop @ 10% p.a.). Electronic spot trading facility in castor seeds with specific warehouse location. Information about Market price at branch, Grading, quality certification, Processes at warehouse, Process of issue of storage receipt at warehouse and standardization of commodity.

Benefits to Farmers •

Increase in holding capacity due to availability of storage receipt finance and hence chances of realizing better price.

•

Increase in bargaining power due to availability of an alternative market.

•

Cost reduction in handling and other activities.

•

Access to a national level transparent market where direct selling to end users would be more beneficial.

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INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

The IFMR Trust Structure

Enrolment & KYC of Farmers •

Business Executive explains about KYC process and documents required.

•

Business Executive captures personal and geographic data about farmers at the branch.

•

After the farmer visits the branch Business Executive will do the physical verification and fill the CIS form.

•

Farmer comes to branch for enrolment with all KYC documents.

•

Business Executive photograph.

•

Finally customer ID is generated.

details

in

CIS

form

and

takes

KYC Documents •

Identity proof(any one): passport, PAN card, voter ID, driving license, Ex-service man card, employee identity card, letter issued by village sarpanch/head of village of panchayat/mukhiya/village administrative officer, caste certificate.

•

Address proof(any one): telephone bill by BSNL, letter issued by village sarpanch/head of village of panchayat/mukhiya/village administrative officer/block development officer, electricity bill, ration card with photograph, letter from current employer, certificate from postal office confirming the address of customer, premium receipt from LIC, voter ID, driving license.

Sampling Process •

No of bags less or upto 2:- 100% testing will be done i.e. Full bags will be sieved for foreign matter.

•

No of bags more than two upto 40 bags.

•

A group of bags sold by a single seller upto 40 bags will constitute one single lot. If number of bags sold by a single seller is more than 40 it will be treated as a separate lot for the purchase of quality testing.

•

Two bags to be selected for sieving through a 4 mm x 4 mm mild steel sieve.

•

The first bag will be selected at random basis.

•

The second bag will be selected in the process of online sampling from each bag.

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INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

captures

•

Apart from this, the exchange reserves the right to conduct testing of test weight by taking a composite sample through online sampling.

Castor Seed Quality Deliverable grade •

Gujarat Castor seed small

Oil content •

Acceptable Range – 44% to 48%. Checked by Test Weight Basis

•

Acceptable Range - 4 to 5%. Checked by Test Weight Basis

Physical Impurity •

Dust (Raj) – Sampled bags will be sieved for finding dust. Allowable upto 350 gms per bag with no deductions. In case dust is between 350 gm to 700 gms per bag, the deduction in weight will be the weight of dust over and above 350 gms of dust from all the bags. In case dust is found above 700 gms per bag, then actual weight of dust will be deducted from all the bags.

•

Stone - Actual weight of stones to be deducted from weight of the bag Upto 300 Gms – 1:1, From 301 Gms to 500 Gms – 1:2, Over 500 Gms – 1:3

•

Husk (Fotri) – Sampled bags to be screened for Husk. Actual weight of husk found after sieving to be weighed and deducted from all the bags.

•

Damaged Seed –If found visually in large percentage in the Bags. Acceptable upto –2% but with a deduction in price. Over 2% Rejected

•

Desi/Paras Eranda – Should not be mixed with castor seed. If found, Lot can be out rightly rejected.

Testing Method •

Test Weight: Done by filling composite sample made from an entire lot in an aluminium tin having a capacity of 4.2 litres subject to the specified acceptable range –

•

Acceptable weight – 2230 Grams.

•

Between 2230 gms to 2000 gms – deduction of Rs.5/- per 20 kg.

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INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Moisture content

•

Below 2000 gms - Deduction of Rs.10 /- per 20 kg.

•

The bags used for delivery should be new or second hand jute bags in good condition without patches and not having been previously used for cement bagging.

•

One bag should contain 75Kg net weight of castor seed with tolerance limit of 5 kgs. Standard weight of bags used for packing castor seed should be one kg.

•

Price is paid on net weight basis. If the farmer delivers anywhere between 70 Kg’s to 80 Kg’s then it will be treated as a good delivery and price will be paid on actual weight received at the warehouse. The farmer will take away the bags, as the payment is done on net weight basis for naked grains without packaging material. Hence, the buyer is required to pay for the packaging material as specified below.

Commodity Depositing Process •

Farmer has to bring a copy of his 7/12 Form or Pani Patra or such other document / certificate establishing his land record while delivering castor seed at the exchange designated warehouse to be submitted to the selling member. A copy of such document should be attached with each deliverable lot of castor seed.

•

Farmers willing to sell / deposit Castor Seed in the Exchange accredited warehouse will be required to bring castor seed to the exchange warehouse where weighment will be first checked and quality certification shall be done. Farmers can sell their commodity on receipt of Warehouse Receipt and Quality Certificate on the same day at the NSEL terminal available at the warehouse provided by any NSEL Member or in their village level branch of IFMR Trust (Khedut Kendra). Weighment and Unloading of Castor Seed will be done on first cum first serve basis. Stocks received from the farmer at the exchange designated warehouse upto 01:00 PM can be sold on the same day. The farmer after execution of sale shall have to fill up the relevant portion of invoice for the onward delivery to the buyer.

•

The farmer may bring and deposit goods at the Exchange accredited warehouse along with duly filled CID form through the NSEL Member. The members must use separate forms for each delivery at NSEL. The Warehouse will accept the delivery from Monday to Friday between 08.00 am and 01.00 pm. The member should deposit the goods within the specified time, in order to have hassle free delivery of Castor Seed against their transactions.

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INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Packaging Details

Farmers not desirous of selling the castor seed on the day when he brings the goods to the warehouse can store the goods in the warehouse after having quality checked for sale subsequently. In such case, storage charges shall be applicable and goods have to be compulsorily packaged in jute bags. In case the farmer willing to store has not brought his castor seed in good conditioned jute bags, such bags can be supplied by the warehouse at extra cost as defined under packaging below. Since the farmer brings naked grains, which is to be graded and packaged, the buyer has to pay the labor charges as specified below. The buyer is also required to pay the cost of bags as mentioned in Storage Charges Section below.

•

There is no distinction between old and new crop and hence stocks will be accepted based on the contract specifications as specified by the Exchange.

•

Before deposit, goods have to be compulsorily weighed at the designated weigh bridge / weigh scale and will be monitored and certified by the warehouse supervisor. It is to be ensured that the Castor Seed delivered at the warehouse should comply strictly with the acceptable tolerance limits as prescribed by the Exchange in the contract specification.

•

On receipt of Castor Seed at the warehouse and during unloading the same, random sampling for quality analysis of physical properties, oil content and moisture testing will be done by the quality certifying agent based at the exchange warehouse. If required, the bags will be opened and will be spread on the floor for verification/analysis.

Storage Charges •

Rs. 0.15 per bag per day (1 day billing cycle exclusive of tax, if any) to be paid by farmer.

•

These charges are inclusive of insurance and fumigation charges.

•

These charges are payable by the buyer only. There are no charges to farmers for selling Castor Seed on the exchange platform.

Weighing Process •

Lot size of One to Five Bags to be weighed individually through electronic weigh scale.

•

More than five bags to be weighed at weigh bridge.

•

Castor seed arriving in loose form in trailors will be weighed at weighbridge and treated as a single delivery unit.

IFMR Trust Microfinance

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INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

•

•

Warehouse receipt (on delivery unit basis i.e. 75 KG) along with a quality certificate will be issued by designated warehouse for all Castor Seed kept in the designated warehouse.

•

First of all commodity inward document (CID) will be issued by depositor upto D+0, 1:00 pm.

•

Quality certificate would be issued by Quality Certification Agency upto D+0, 5:00 pm.

•

Finally warehouse reciept would be issued by warehouse upto D+0, 5:00 pm.

Product Features •

Loan against storage receipt

•

70% of market value of crop

•

The tenure of each loan shall be less than or equal to the validity of the warehouse receipt subject to a maximum period of 12 months.

•

Interest Rate - 10% per annum

•

Limit per borrower- Farmer : Ceiling 10 lakhs

• •

Margin call at 85% 3 days to bring the margin money

Events of Default • •

If the borrower does not bring the required top up margin within stipulated time of margin call. If the stop loss is triggered.

•

If repayment has not been made as per the repayment schedule fixed and goods not lifted by the borrower

•

If there is any deterioration beyond acceptable levels quality or impairment of the goods stored.

IFMR Trust Microfinance

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INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Warehouse Receipt Issue

12. Process  Education Who

The Branch Executive will meet opinion leaders in the village (Sarpanch, members of panchayat, Head master,) and few people in the village to brief them about IFMR Trust and announce that we shall be shortly opening our branch in the village. Branch executive will talk about warehouse receipt finance product through NSEL for which IFMR Trust enrollment is necessary Branch executive will carry the product feature booklet which will be in Gujarati and describe all the product features in detail After discussing the product feature, to get the warehouse receipt loan the branch executive will inform that the enrollment is on and will end on the following date - will not end…. At the outset the branch executive will inform that enrollment does not gurantee them loan, eligibility is based on our product features.

When

Where

Branch Prelaunch Executive of Branch

Village

Branch Prelaunch Executive of Branch

Village INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Steps

Branch Continuous Village Executive Branch Prelaunch Executive of Branch

Village

Branch Prelaunch Executive of Branch

Village

Who

Where

 Enrollment Process Steps Branch executive will inform the farmers about the KYC documents required for taking the loan and photograph Branch executive will collect the geographic and personal information of the interested farmer - This will happen at the branch.

IFMR Trust Microfinance

When

Branch executive

During education program

Branch executive

On visit

Village

initial Branch

36

INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Branch executive will give an enrollment time &date to the interested farmer at ATMNE branch - This will be walk in Before - (After in our case) the farmer visits the branch the branch executive will complete the physical verification on the client and fill the information in the CIS form(The CIS form will need to be modified to have the option of tagging the warehouse receipt with the profile of the farmer in the CIS form) - This will come after photo Farmer comes to ATMNE branch for enrollment with all the required KYC documents Branch executive captures details in the CIS form and takes photograph and a customer ID is generated at the backend This ID will form the Client ID for trading purposes on NSEL ATMNE gives a unique customer ID

ATMNE branch

ATMNE branch

 Commodity deposit at NSEL warehouse Steps Farmer intimates the ATMNE branch about deposit of commodities at the NSEL warehouse End of day, ATMNE informs warehouse about deposit of commodity Farmer brings his stock to NSEL warehouse Farmer will fill the deposit application form at the warehouse

IFMR Trust Microfinance

Who

When

Where

Farmer

1 Day in advance

ATMNE branch

BE

1 Day in advance

ATMNE branch

Farmer Farmer /ATMNE

Day the farmer brings the commodity

KadiWarehouse Kadi Warehouse

37

The warehouse manager will Warehouse Day the draw the sample Manager farmer brings the commodity Sample will be drawn from Warehouse Day the different sides and depths till Manager farmer the required amount of sample brings the around 1Kg is avaliable commodity The sample will be mixed till a Warehouse Day the homogenous mixture is Manager farmer obtained after which it will be brings the analzed commodity

KadiWarehouse KadiWarehouse KadiWarehouse

Steps Moisture Content-Basis 4.5% The moisture should be allowed up to 5% maximum during July to October.

INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

 Quality testing process When After sample amount is available

Oil Condition-Basis 47% Between 47 to 45 with discount 2:1 Below 45: Rejected Physical Impurity-Basis 3% Acceptable up to 6% with a discount of 1:1 Above 6%: Rejected All other kinds of seed, dead seeds, damaged seeds (Immature, shriveled and broken if any), grains free shell (Husk) of Castor Seeds. Shell (Husks) covered on castor seed and separated there from shall be considered as “dirt” Allowance for dead seeds and damaged seeds: All dead seeds and damaged seed shall be reckoned as dirt. ( 10 mm Mild steel Sieve No.4/18 will be used for refraction to determine physical impurity) Black Seed-Maximum 1% If the drawn sample is withing the parameter of NSEL, the warehouse manager will start weighment of the commodity.

IFMR Trust Microfinance

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 Storage

After quality testing is done the commodity will be brought to weigh bridge Weighment will be done either on the weigh bridge installed at the NSEL warehouse or platform scale The packing material weight will also be considered while calculating the Net weight of the commodity. The bag weight would be deducted from the gross weight. The floor of the warehouse will be covered by dunnage in the form of plastic sheets or wooden mats Stacking of the commodity will start infront of the warehouse manager and farmer The comodity will be stacked having a dimension of 30*20*16, with 2 feet space from the wall on all the sides After stacking is finished ,stack card will be put with clear stacking floor plan The warehouse manager will issue the warehouse receipt to the farmer

IFMR Trust Microfinance

Who

When

Where

Warehouse After manager quality testing Warehouse manager

Warehouse

Warehouse manager

Warehouse

Warehouse Before stacking manager

Warehouse

Warehouse manager

Warehouse

Warehouse manager

Warehouse

Warehouse manager

Warehouse

Warehouse manager

Warehouse

Warehouse

INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Steps

39

13. SWOT

• • • • •

A team of experts with collective experience in rural financial services, venture capital and supply chain management. A deep understanding of mainstream markets and project finance techniques. Partnerships with large companies and NGOs facilitated in large part by the ICICI group of companies working through the ICICI Foundation, a mentor to IFMR Trust. Better and transparent price realisation to the farmers as compared to Mandi. Online Participation of buyers from all across country without physical movement to point of purchase

Weaknesses • • • • • •

Dependent upon volume/demand on the exchange. Requires significant amount of education to be given to farmers. Farmers are not so aware about IFMR Trust activity and their products. Perticulary in kadi taluka IFMR Trust provide loan only on castor Commodity. IFMR Trust provide loan only on NSEL warehouse recipt not on the other warehouse receipt. No fixed parameters of judging quality.

Opportunities • • • •

Futures and options offering to farmers. Arbitrage opportunities for ATMNE. Network of branches working with farmers can allow for other services to be sold or given to farmers (e.g. fertilizers, etc). Can expand its product portfolio.

Threats • • • • • •

Commodity risk management. Existing traders could react in hostile manner. Age old long relationship between farmers and traders at Mandi Dependence of small farmers on traders for agricultural loan. Competitors like RRBs, other financial institutions.

IFMR Trust Microfinance

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INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Strengths

Farmer/Client Feedback For “Khedut Kendra Dharampur”

Submitted To:Mr. Bhaveshbhai Nayak INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Project Manager Dharampur IFMR Trust

SUBMITTED BY:

HITESH K. KARKAR (04-0409-2008) 2nd Semester INSTITUTE OF AGRIBUSINESS MANAGEMENT NAVSARI AGRICULTURAL UNIVERSITY, NAVSARI

IFMR Trust Microfinance

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Acknowledgment I express my sincere thanks to Mr. Rajendrakumar for lending me an opportunity to undertake special project and have such a valuable experience.

A Sincere thanks to our Director Dr.R.R Shah. My project guide Dr. Ruchira Shukla & Internship Co-ordinator Dr. Alpesh Leua also Prof. Rahul Thakkar, for their benevolent support and giving me such a great opportunity to feel

I also would like to thank Mr.Bhaveshbhai Nayak Project Manager, Dharampur. Mr.Sandipbhai Branch Executive, Dharampur also Mrs. Gitaben Branch Manager, Dharampur who helped me in learning and completing this report. Special thanks to Mr. Mitesh Chikhaliya for his everlasting support and guidance in conducting this project. Heartily thanks to Mr. Srikant Thakre, my companion during this entire project. Last but not the least; I would like to acknowledge the warmth and hospitality of the natives of my respondents (Farmers/Traders) for their whole hearted support.

IFMR Trust Microfinance

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INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

the rhythm of business world and also guidance in completion of this report.

14. Introduction

The founding-members of ATMNE began working with IFMR Trust in spring of 2008, exploring various gaps in agricultural supply chains that required the intervention of new operators or investors. It was decided that partnering with the National Spot Exchange Limited presented an opportunity to bring high-value services to an enormous amount of farmers, within a reasonably short amount of time.

15. Products & services offered at present As the first step towards its goal, ATMNE opened its first branch on February 16, 2009 at Dharampur village in the Kadi taluka of Gujarat. Through its partnership the National Spot Exchange Limited (NSEL), ATMNE believes it can achieve its goal of bringing about greater market transparency and price discovery and providing alternate financing options to small farmers, a facility only available to large farmers and traders. ATMNE is an Institutional Trading and Clearing (ITCM) on the NSEL and is installing trading and backoffice infrastructure to enable it to be present across India, wherever NSEL operations exist. ATMNE is currently working with one commodity (castor seed) and offering the following services to farmers at present: a) Providing price information to farmers. b) Buying castor directly from farmers, at prices an average of above the local mandi price. c) Providing access to storage & grading. This is undertaken through NSEL’s warehouse and their staff conducts the grading. d) Financing against stored commodities – farmers who store their commodity in the NSEL warehouse can go to the ATMNE branch office to receive a loan up to 10 lakhs (i.e. 70% of the commodity value) at an annual interest rate of 10%. To avail this product farmers register with the branch and are issued smart cards with their photo on them, to allow for unambiguous identification.

IFMR Trust Microfinance

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INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Agricultural Terminal Markets Network Enterprise Private Limited was legally registered in September 2008. ATMNE has been incubated by IFMR Trust’s Network Enterprises Fund. They have launched a private equity fund, the Network Enterprises Fund, which incubates and invests in companies exclusively focused on sectors where rural households have a competitive advantage as producers or consumers.

16. Objectives of Survey Khedut Kendra Dharampur was established on 16th February, 2009 so in order to know the effectiveness and to know the opinions of farmers/client of the region regarding Khedut Kendra Dharampur survey was conducted. It will be useful for the company to change or modify its strategy as needed for better operational efficiency in the area of microfinance.

Research Methodology

•

Primary: - Data collected from survey of the five villages.

•

Secondary: - Data collected from internet & Internal reports of trust.

Data collection method 1) Personal interview with open ended questionnaire. 2) Observation of farmers of villages surveyed. Instrument of data collection: - Questionnaire Sampling Techniques: - Convenience sampling & Purposive sampling. Sampling Unit: - Farmers/Clients of the Khedut Kendra Dharampur. Sampling Size: - 70 farmers/Clients of five villages.

17. Action Plan This project basically involves survey of five villages of the Mahesana District. The villages surveyed are namely, 1. Maharajpur 2. Korda 3. Visatpura 4. Kalyanpura 5. Shivpura Out of these five villages in Maharajpura and Korda they have members in these two villages and they are looking forward for the entry in Visatpura, Kalyanpura, Shivpura. For successful completion of this project an action plan was prepared, IFMR Trust Microfinance

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INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Source of data collection

Date

Activity

INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

08-07-09 Questionnaire Preparation for Feedback of Farmers Regarding IFMR Trust (Khedut Kendra Dharampur). 09-07-09 Visit to Dharampur Branch (Dharampur Khedut Kendra). 10-07-09 Identification of Villages and Primary Survey of Selected Villages. 11-07-09 Survey of Maharajpura Village. 13-07-09 Survey of Sivpura Village. 14-07-09 Survey of Korda and Visatpur village. 15-07-09 Survey of Kalyanpura Village. 16-07-09 Project Submission and evaluation. & 17-07-09

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18. IFMR Survey Outcomes Analysis of Data

• • • • • • • • •

•

Total 12 farmers surveyed selected randomly from the different parts of the village. Majority of farmers have very small land holding (not more than 10 Vigha) i.e. majority of them are marginal farmers. Educational level is average. Farmers have irrigated land. Mainly two sources of irrigation are there, canal and bore-well. Farmers depend mainly on monsoon crop cotton, castor, jiru, etc. Main source of income is the agriculture. Farmers prefer to sell their commodity in the Kadi APMC due to nearness (20 km). Farmers have to bring the commodity in the market in their own vehicle. There is no any facility in the village to know the market price for particular commodity on specific day. Farmers directly bring the commodity to Kadi market and after coming to market they come to know about price. So if they don’t get satisfactory price then also they have to sell their commodity. Farmers are exploited by private traders so they are interested to deal with IFMR.

Shivpura Village •

Total 15 farmers surveyed selected randomly from the different parts of the village.

•

Medium land holding farmers i.e. 40-100 vigha.

•

Literacy level is good. Majority of farmers have passed Metric (SSC) exam.

•

Farmers have well irrigated land. Mainly two sources of irrigation are there, canal and bore-well. 60-80 % land is irrigated by canal.

•

Cropping pattern: 1. Winter crop: - Jiru, Tomato and castor

IFMR Trust Microfinance

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INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Maharajpura Village

• Main source of income is the agriculture. • There is no any private trader in the village, so farmers prefer to sell Jiru in the Unjha APMC, it is main center for jira in Gujarat, 90 kms away from the village and for other commodity they visit Kadi Market, 20kms away from the village. • Farmers have to bring the commodity in the market in their own vehicle. • Newspaper is the only source to know the market price of particular commodity as prices are decided base on last day trade price in Kadi APMC. But actual price is decided by the traders. • Farmers are exploited by private traders so they are interested to deal with IFMR. • Tomato production is good in winter so there is good opportunity, if seasonal centre is established for tomato procurement. • Many of farmers thinks that the price of commodity should be decide based on export policy.

Korda Village •

Total 14 farmers surveyed selected randomly from the different parts of the village. • Majority of farmers have very small land holding (not more than 25 Vigha) i.e. majority of them are marginal farmers. • Education level is average. • Farmers have well irrigated land. Mainly two sources of irrigation are there, canal and bore-well. Around 50% land is irrigated by canal. Sometime irrigated by village lack. •

Cropping pattern: 1. Winter crop:- Jiru, Wheat, Variyali 2. Summer Crop: - Juwar 3. Monsoon crop: - Cotton, Dangar and Castor.

• Main source of income is the agriculture. • Due to absence of collection centre in the village farmers sell Jiru in the Unjha APMC and for other commodity they visit Kadi Market, 20kms away from the village. • Farmers have to bring the commodity in the market in their own vehicle. No transportation facility is provided by the traders.

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INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

2. Monsoon crop: - Cotton, Juwar

•

Newspaper is the only source to know the market price of particular commodity. Sometime farmers also make phone calls to traders to know the price of the commodity. • Almost all the farmers are member of Khedut Kendra Dharampur but they have no idea about activities of Dharampur centre.

Visatpura Village Total 14 farmers surveyed selected randomly from the different parts of the village. • Farmers have average land holding i.e. not more than 50 vigha. • Literacy level is good. • Farmers have well irrigated land. Mainly two sources of irrigation are there, canal and bore-well.

•

Cropping pattern: 1. Winter crop:- Jiru, Wheat, Variyali 2. Summer Crop: - Juwar 3. Monsoon crop: - Cotton, Dangar and Castor.

• •

•

Main source of income is the agriculture also some farmers do the business of money lending. Farmers prefer to sell their commodity (jiru) in the Unjha APMC, for Tomato they visit Jamalpore market (Ahmedabad) and for other commodity they visit Kadi Market which is 20 kms away from the village. Newspaper is the only source to know the market price of particular commodity.

Kalyanpura village •

Total 15 farmers surveyed, selected randomly from the different parts of the village. • Faremers have average land holding i.e. not more than 50 vigha. • Literacy level is good. • Farmers have well irrigated land. Mainly two sources of irrigation are there, canal and bore-well. •

Cropping pattern: 1. Winter crop:- Jiru and Wheat 2. Summer Crop: - Juwar

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INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

•

3. Monsoon crop: - Cotton, Dangar and Castor. •

INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Main source of income is the agriculture also some farmers do the business of money lending. • Farmer use to sell their commodity in Unjha and Kadi Market. • Newspaper and Phone calls at IFMR centre at Kadi they come to know the market price of particular commodity. Private traders provide credit to farmers for purchasing of inputs so farmers sell their commodity to them only

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19. Findings And Recommendations

•

Farmers gets good price in IFMR as compare to Kadi yard due to absence of intermediaries.

•

Farmers feel safety of payment from local traders because traders are well known to the farmers and past trading experience.

•

Farmer needs not to travel long distance for delivery of his commodity because local traders collect it from their doorsteps.

•

Farmers are not aware of activities of “Khedut Kendra Dharampur” also farmers, who are little aware about centre said that the procedure & documentation is cumbersome. Ex: - if farmer wants to take loan for warehouse receipt than he has to submit 7/12 copy, but in village they face many problems in getting copy of 7/12 from “Talati”.

•

For delivery of commodity farmers have to go to Kadi centre and for payment collection they have to visit Dharampur. It is quite difficult for them.

•

Farmers view “Khedut Kendra Dharampur” as a Private Bank, so they hesitate to deal with it due to past bed experience with some another private trust.

•

Farmers complaint that they have to pay interest for loan taken on their commodity and also loan given is only70% of market value of crop which is not favored by majority of the farmers.

•

Deduction (QC) is more in NSEL as compare to Yard also there is no standard parameter for QC, the way QC is done farmers do not agree with it. Still the farmers prefer to give their commodity to IFMR because there are some advantages as compare to yard/mandi or APMC.

•

Procedure of QC is not transparent according to farmers.

•

In case of Kalyanpura village private traders provides the credit facility so if IFMR Trust provides same facility then it will attract more farmers.

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INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Findings

•

In majority of village the literacy level is not up to the mark so there is need to arrange promotional and it should be design in such a way that people can understand it easily.

•

Farmers are not completely aware about activities of “Khedut Kendra Dharampur”, so there is need to arrange awareness campaign on large scale to understand rural mentality because rural culture is quite different from that of Urban.

•

Ensure the safety of payment to famers. Its major issue in rural area because from the survey the one common point noted is that farmers are not ready to take risk in dealing with new entrants, so in order to penetrate deep in this region, organization needs to develop healthy relationship with them.

•

Documentation procedure for warehouse receipt loan should be made transparent and it should be farmer friendly. Make them feel that “we are here for you”.

•

If possible establish Godown within Dharampur, so that farmers need not to go for Kadi by this way it may also eliminate competition from private traders and people will realize that Orgnization is not “fly by night operator”, but it is here to stay.

•

Only single commodity is accepted, i.e. Castor seed, as there is a verygood scope to expand portfolio by dealing in other commodities specially Jira and cotton because the Unja is a main centre for Jira and still absence of any private spot exchange in the region for jira gives the assurance of success.

•

If farmer want to take loan for his commodity then if possible than it should be sanction based on pre-survey of field i.e. crop grown, expected production, etc and accordingly charge the interest rate.

•

Arrange “Commodity Collection Camp” on any specific day of every week. This will give many benefits like… 1. Commodity may be collected in bulk within short period of time.

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Recommendations

INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

2. Market position will be strengthened by holding large amount of commodities in the warehouse.

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BIBLIOGRAPHY Θ www.ifmrtrust.co.in Θ www.google.com Θ www.wikipedia.org Θ IFMR Trust Technical Note “Access to Micro-Savings for Remote Rural India”.

Θ “Access” Quarterly Newsletter of IFMR Trust and its Partners. Θ Impact Assessment of Microfinance in India (Interim findings from a national study of MFIs in India).

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Θ IFMR Trust Annual report 2007-08.

Appendices & Annexure Questionnaire for Farmer/ Client Feedback Khedut Kendra Dharampur Name of Respondent

:

Address

: Village:

Taluka:

District:

Age

:

Education

: Illiterate:

Mo. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Pin code-

Below 10th : Above 10th : Specific : Land holding

: Irrigated: Un-irrigated:

Cropping pattern

: Summer : Kharif : Rabi :

No. of dependent

:

Source of income

: Farming: Business: Service:

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No. of markets available

:

& service provide by them

Name : Distance: Auction time: Payment condition:

INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Why you go specific market as well as trader?

What are the transportation facilities available?

What are the other facilities available?

What are the sources for known the market price at village level?

Would you know about Khedut Kendra Dharampur and how it work?

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What are major problems at Khedut Kendra Dharampur?

INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI

Are you happy with Khedut Kendra Dharampur work? Why?

Note: - These questions are Subject to Change as per Situation.

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