Project Report on Microfinance (IFMR Trust Kadi)


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Project Report on Microfinance (IFMR Trust Kadi)

  2. 2. DeclarationI hereby declare that the project I am submitting for the completion ofIndustrial Attachment Programme is an original piece of work carriedout by me under the guidance supervision of Dr. Ruchira Shukla. Theinformation has been collected from genuine and authentic sources.The work has been submitted in partial fulfilment of the requirement ofMBA course in Agribusiness Management.Place: INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIDate: Name of Student SignatureIFMR Trust Microfinance 2
  4. 4. ACKNOWLEDGEMENTAfter passing 15 days at Kadi (Dist: Mahesana), in conducting this projectmany key persons had performed an important role in my personalexercise.I convey heartily thanks and deep sense of gratitude towards thefollowings: Θ Dr R. R. Shah, Dean, Institute of Agribusiness Management, Navsari Agricultural University. 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. KarkarIFMR Trust Microfinance 4
  5. 5. ContentsSr. No. ParticularS Pa g e No. 1. Industry Profile 1 • Microfinance • Different models in India 2. IFMR Trust profile 3 3. Organizational/corporate structure 4 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) 14 INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI 8. A Model of financial services 16 • KGFS Finance 9. IFMR TRUST Activity at Kadi 18 • Indian Scenario • Factors Influencing Castor seed & Oil Market • Castor seed buyers 10. Cost Sheet for Millers Lifting Delivery from Exchange 23 Designated Warehouse 11. Storage Receipt and procedure of financing-farmer Education 25 • 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 12. Process of 31 • Education • Enrollment process • Commodity deposit at NSEL warehouse • Quality testing process • Storage 13. SWOT Analysis 35 Project IFMR Trust Microfinance 5
  6. 6. “Farmer/Client Feedback for “Khedut Kendra Dharampur”14. Introduction Khedut KendraDharampur 3815. Products and services offered at present 3816. Objectives of survey and Research Methodology 3917. Action Plan 3918. IFMR survey Outcomes – 41 • Analysis of data 1. Maharajpura 2. Shivpura 3. Korda 4. Visatpura INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI 5. Kalyanpura19. Findings and Recommendations 45 Bibliography 48 Appendices & Annexure 49IFMR Trust Microfinance 6
  7. 7. 1. Industry ProfileMicrofinanceMicrofinance refers to the provision of financial services to low-incomeclients, including consumers and the self-employed. The term also refersto the practice of sustainably delivering those services. Microcredit (orloans to poor microenterprises) should not be confused withmicrofinance, which addresses a full range of banking needs for poorpeople.Rural households need relatively large sums of money for life cycleneeds (such as marriages, festivals and old age), emergencies (such asillness, the death of a bread-winner and floods) and investment INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIopportunities (as much in assets and household goods, for example, asin investments in micro-businesses)i. They therefore need access to abasket of financial services. When looking at rural financial markets, wediscover not only the lack of access to credit, but also other financialservices (Investments, Insurance, etc) not being available.Microfinance models in IndiaOperational features of different microfinance models inIndia Operational SHG Grameen Individual Features Banking/Sector cooperarativeClient type Groups (15-20 Group(usually 5 Individual clients members) members)Service focus Savings and credit Credit-regular credit cycleRole of MFI staff Guide and facility Organize organise (group may develop autonomy)Mechanism Monthly meetings Weekly meetings Varible-often dailySaving products Rs. 20-100/month Rs.5-25/week varibleInsurance In early stages Link to national companiesCredit products Rs. 5-10,000 also, Rs.2-5,000 Rs.15-35, 000 internal loans from group fundsEffective interest 14-36% 29-41% 18-24%rateDevelopment Often through Usually none Enterpriseservice associated NGOs supportIFMR Trust Microfinance 7
  8. 8. Actual use of MFI Loan- All Model INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI Comparison of Alternative Financial Services ProvidersParameter Microfinance Informal Formal SHG Grameen Moneylender family MFI Group MFILoan Medium Variable Low- Variable- Low- Highamount Medium High VariableAccess Variable Medium Medium Medium Medium LowSpeed Medium High Fixed High High LowFlexibility Medium High Low High High LowIFMR Trust Microfinance 8
  9. 9. 2. IFMR Trust Profile 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. IFMR Trust is a private trust; it is not a public charitable trust. However, INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI 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 provision of high-quality and adequate financial services 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 IFMR Trust Microfinance 9
  10. 10. 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.3. Holding of risk by well-capitalized diversified entities 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 INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI 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. IFMR Trust Microfinance 10
  11. 11. 3. Organizational/Corporate structure IFMR Trust IFMR IFMR INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI IFMR IFMR Trust Holdings Advisory Capital Advocacy Services Unit (ITAU) IFMR Trust Network Enterprises Fund (NEF) Kshetriya Gramin Financial Services Network (KGFS) EnterprisesIFMR Trust Microfinance 11
  12. 12. 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 banks rural finance business in 2007. She founded the Centre for Micro Finance, IFMR, and has published in the Small Enterprise Development Bindu Journal, the Economic and Political Weekly, the OECD Ananth working paper series and the IFMR working paper series. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI 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. He specialises in building and motivating Dave organisations to operate effectively in rapidly Wallack changing environments. Senior Vice President- IFMR Trust and CEO- IFMR Holdings Private Limited. 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.Anil Kumar 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.IFMR Trust Microfinance 12
  13. 13. 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. At ICICI Bank, he led teams that worked to improve Puneet the quality of mainstream systems of delivery for Gupta education and access to financial services for low- income households. Senior Vice President- IFMR Trust and CEO- IFMR Capital. Sucharita Mukherjee led the origination and INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI 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 Sucharita property and healthcare receivables. Mukherjee She was also part of the credit derivatives team at Deutsche Bank in London, structuring credit- derivatives-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. IFMR Trust Microfinance 13
  14. 14. 5. People GroupHuman resources that they call the ‘People Group’ have followingcomponents.RecruitingThey have in-house recruiting team that is familiar with their missionand the intricacies of their work. The team has launched a global searchthat reaches from India to major development-focused cities around theworld.Performance managementAlthough all the companies owned by IFMR Trust operate asindependent entities, they choose to focus on compensation, leave, and INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIperformance management centrally. In this way, they can encouragecross-training and lateral movement of employees within the IFMR Trustcompanies, as well as IFMRs research centers. This performancemanagement system tracks key competencies and goals that cascadedown from the IFMR Trust mission.ProcessesThey have been working on mapping and refining the processes of eachIFMR Trust company with the objective of coming up with clearlydefined processes and matrices that can be viewed by all employees atany given time. They believe that this level of process transparency willincrease the pace of process improvement and will ensure that allemployees have a clear sense of how they and their teammates relateto the overall mission of IFMR Trust.Training and developmentThe training needs of IFMR Trust companies are vast. They havelaunched a separate training company to create quality training materialthat is relevant to the rural Indian context and can be easily translatedinto local languages.The training needs seek to serve include skill and knowledgedevelopment. However, the greatest challenge is in changing the beliefsof prospective employees so that they are able to see what is possiblefor them to achieve. Balancing the acquisition of skills and knowledgewith transformation of the way people see themselves is the focus oftheir training effort.IFMR Trust Microfinance 14
  15. 15. AssessmentOne of the major challenges facing IFMR Trust companies is employeeselection. Over the next decade, IFMR Trust companies expect to hirethousands of employees. Given the scale of their hiring effort they areeager to make early investments in the development of consistentassessment tools that help them to avoid interviewer bias. They havealready seen an interest in this project by large Indian employers withwhom they expect to work to further refine their assessment tools.Qualities of IFMR Trust Team MembersSocial entrepreneurshipThey seek people who want to solve social problems using INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIentrepreneurial means. Specifically, social entrepreneurs with a marketorientation. People who agree with them that access to finance andmarkets is part of the answer to meeting India’s challenges. People withthe entrepreneurial confidence to believe that they can change theworld.Systems thinkingThey are oriented towards looking at entire systems and taking action tofix the whole system rather than just solve a local issue. They wantpeople who share this way of looking at situations. Working at thesystem level requires enough flexibility to recognize and questionunchallenged assumptions embedded in systems that aren’t working.Self-confidenceIf someone is terrified of the risks involved in a venture like it, he/she isthe wrong person for the job. they are at the cutting-edge of finance. Itis both dangerous and exciting out here. Their people are confidentenough of their ability to change the world and are not worried about anexit strategy. When they succeed, the rewards will have been worth therisk.IFMR Trust Microfinance 15
  16. 16. 6. IFMR Trust Ventures1. IFMR Holdings, developing working prototypes of localised, high- quality 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, under- served 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. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI 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 16
  17. 17. Fund Promoter IFMR Trust is the promoter of IFMR Trusts Network Enterprises Fund. IFMR Trusts 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. Investment Strategya) IFMR consider investment in a Network Enterprise in the NEFs focus INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI 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 Trusts 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) IFMR Trust Microfinance 17
  18. 18. 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 low- income 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. IFMR Capitals objective is providing liquidity and developing access to debt-capital markets for critical sectors such as:• Rural financial service providers.• Urban financial service providers that focus on low-income households.• Municipalities.• Rural infrastructure. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI• 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 18
  19. 19. 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. 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:• 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 INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI 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. IFMR Trust Microfinance 19
  20. 20. 7. Agreement with National Spot Exchange Ltd. (NSEL)NSEL is a national, institutionalized, electronic spot exchange, promotedby Financial Technologies (I) Ltd. (FTIL) and National Agricultural Co-operative Marketing Federation of India Limited (NAFED). It provides astate-of the-art market place with facilities for risk-free and hassle-freeprocurement and disposal of farm produce. It provides customizedsolutions to various problems related to It provides customized solutionsto various problems faced by the farmers, traders, processors,exporters, importers, arbitrageurs, investors and the general massesrelating to agricultural marketing, storage, warehouse receipt financing,etc.IFMR Trust has signed a partnership agreement with National Spot INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIExchange Limited (NSEL) on September 30, 2008. The alliance willcreate a seamless process for providing finance to farmers and tradersagainst commodity warehouse receipts for the commodities deposited inNSEL approved warehouses. The pilot for this financing model will belaunched shortly at Unjha (Gujarat).Under the partnership, IFMR Trust will provide loans to farmers againstagricultural commodities deposited in NSEL-approved warehouses, byway of warehouse receipts issued for these deposits. Such post-harvestfinancing will give farmers the option to wait out the usually low pricesoffered immediately after harvest, and sell at a later time, when pricestend to rise. It will also allow farmers to take advantage of changingmarket prices rather than being burdened by them. The loans backed bywarehouse receipts will be pooled and repackaged into securities. IFMRTrust will structure, arrange and sell these commodity loan-backedsecurities in the capital market.This partnership empowers the farmer by providing a liquid market foragricultural commodities accompanied by access to finance. Throughthis partnership with NSEL, it will unlock tremendous value for bothfarmers and investors through this partnership with NSEL. They expectthis model to be replicated throughout the country in the coming years.IFMR Trust will act as Professional Clearing Member (PCM) of theexchange. The disbursement and repayment of loans made by IFMRTrust will be made through NSELs PCM system.Enterprise PartnersIFMR Trust works with non-government organizations (NGOs) andcompanies that share their objectives.Two examples illustrate how a partnership with an NGO or company canwork:IFMR Trust Microfinance 20
  21. 21. An NGO works with women who produce handicrafts. By partnering withone of their Network Enterprise (NEs) on a commercial basis, the NGO isable to provide the women market access at scale and at fair prices. Bypartnering with our Kshetriya Gramin Financial Services (KGFS), theNGO is also able to ensure inflow of working capital and expansioncapital.If any organization is looking to have a rural footprint, either in terms ofprocuring from rural markets or selling into rural markets, IFMR’sNetwork Enterprises can provide access to competitive production basesas well as shared infrastructure for distribution. Depending on thesector, and specific needs, other kinds of partnerships can also bedeveloped. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIIFMR Trust Microfinance 21
  22. 22. 8. A new model of financial servicesConceptualised by IFMR Trust, a new model of offering a range offinancial services in remote, rural locations of India has completed oneyear of operation.The model is being rolled out by IFMR Holdings, an IFMR Trust venture,through region-specific, not-for-profit entities called Kshetriya GraminFinancial Services (KGFS) companies, registered under Section 25 of theIndian Companies Act.The first KGFS company, Pudhuaaru KGFS (PKGFS), started operationsin Thanjavur district of Tamil Nadu in June 2008. Two other KGFSentities have been launched more recently: Sahastradhara KGFS ofUttarakhand with proposed operations in the districts of Tehri Garhwal, INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIPauhri, Haridwar and Dehra Dun, and Dhanei KGFS in Orissas Ganjamdistrict.These KGFS companies offer a range of financial services and productsthrough branches located in villages.Beyond micro financeKGFSs mandate, as enunciated in IFMR Holdings mission, is to"maximise the financial wellbeing of every individual and everyenterprise in remote rural India by providing complete financialservices".The KGFS model thus goes far beyond the scope of micro financeinstitutions (MFIs), which have made inroads in remote locations inmany regions of India. "The growth of micro finance in India has beenunambiguously important for millions of poor households,"."MFIs enable low-income households to take a loan when there is notenough money to meet some critical needs. This allows households tomanage cash mismatches in ways that are superior to taking usuriousloans from moneylenders, selling assets like gold or buffaloes, or pullingkids out of school.""Just like their middle-income counterparts, low-income householdsneed 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 alifetime." To be able to do this, low-income households require "the fullsuite of financial services, including savings, credit, risk mitigation andinsurance and remittances".IFMR Trust Microfinance 22
  23. 23. KGFSs 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:1. 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. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI3. 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. IFMR Trust Microfinance 23
  24. 24. 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. Indian Scenario INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI 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. IFMR Trust Microfinance 24
  25. 25. • 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 Buyer Deals in Jayant Oil Mills Exporting and manufacturing of castor oil, castor oil derivatives, undecylenic acid, ricinoleic acid and zinc undecylenate. Also offering ricinoleic acid kosher grade, n- heptanol, methyl ricinoleate and methyl 12 hydroxy stearate acid. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI Kisan Agro Product Leading manufacturers and exporters of Ind. 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. Bharat Foods Co Engaged in manufacturing, importing and Operative Limited 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, Ultra Chemical Works dehydrated castor oil fatty acid, groundnut oil and also deals in bulk drugs and aluminium hydroxide magnesium carbonate co dried gel. A Z Agro Ventures 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. Chemical and Suppliers and exporter of edible oils like Fragrance Corporation, almond oil, apricot kernel oil, argan oil, Mumbai 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. IFMR Trust Microfinance 25
  26. 26. Arvalli Castor Manufacturers of hydrogenated castor oil. Derivatives Private Limited Shreeji Trading Wholesale manufacturer and exporter of Company, Maharashtra castor oil, derivatives oil and lubricants. Muskaan Tradex Suppliers of castor oil. Private Limited Amee Castor & Manufacturers and exporters of castor oil. Derivatives Limited N. K. Industries Manufacturer and exporter of castor oil, Limited edible oil and oil products. Natraj Industries Manufactuers of castor oil and exporters of groundnut seeds(peanut),castor seeds & INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI refined castor oil (f.s.g.) K. S. Exim Limited Deals all kinds of castor oil and oil products. J. J. Industries Manufacturers and exporters of refined castor oil. Shankar Lal Ram Engaged in manufacturing of castor oil, Bharosey Lal expeller mustard oil and mentha oil. Commodities Swarnajyothi Manufacturers and exporters of castor oil Agro&Exports(P) Ltd. 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. Mandeep Oil Industries Manufacturers and exporters of castor oil, linseed oil, karanjia oil and refined soyabean oil. Hardi Sales Exporters of castor oil (of various grades) and its derivatives, castor cakes. K. G. N. Industries Deals in manufacturing of edible oils, Limited castor seed, castor oil and castor oil derivaties. Rajena Agro Products Manufacturers and exporters of castor oil Private Limited of all grades and other oilseeds. Laxmi Minerals Manufacturers of all kinds of castor oil. Aalisha Trade Link Suppliers of refined soya oil, raw linseed oil, castor oil, karanja oil and edible oils. Kanel Oil & Export Manufacturers and exporters of castor oil, Industries Limited edible oil and oil products.IFMR Trust Microfinance 26
  27. 27. Shri Ram Oil And Manufacturers of castor oil and arzimon oil Chemical Ind etc. Ishaan Oils Private Manufacturers and exporters of castor oil Limited and its derivatives, castor oil commercial grade, castor oil first special grade and hydrogenated castor oil. Laxmi Oil Industries 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. Panthroli Industries Manufacturing and wholesale supply of castor oil. Siddeshwara Oils And Manufacturers of Castor Oil and its INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI Allied Products Private derivatives. Limited Royal Castor (India) Manufacturers of hydrogenated castor oil. Ltd. Maniram Agro Products Engaged in manufacturing of castor oil and Private Limited cold pressed castor oil. Synthokem Industries Manufacturers & exporters of castor oil, castor oil refined, de-hydrated castor oil & castor oil hydrogenated Etc. S. K. Enterprise, Dealing Into All Kinds Of Base Oil, White Masjid Bunder, Oil, Castor Oil, Tailor Made Distilled Mumbai Petroleum Products. Vasista Foods & Fats Manufacturers and exporters of castor oil Private Limited and its derivatives, hydrogenated castor oil etc. Keloth Oleochem Manufacturers of castor oil, pale pressed Private Limited grade castor oil (ppg), cold pressed castor oil, urethane grade castor oil, hydrogenated castor oil, pharma grade castor oil etc. Modi Oil Mills Manufacturers and exporters of commercial castor oil, fsg castor oil, pale pressed castor oil etc. Paras Chemical Manufacturer and trader of castor oil, Industries turpentine oil and eucalyptus oil. Alps Processors Producers and suppliers of ground nut oil and castor oil. Gokul Overseas Manufacturer and wholesale exporter of Limited castor oil, refined palm oil, refined mustardIFMR Trust Microfinance 27
  28. 28. oil and vegetable oil. Pawan Agro Industries Leading manufacturers and fabricators of castor oil. Crystal Caschem India Engaged in manufacturing refined castor Limited, Ankaleshwar oil and hydrogenated castor oil. S. C. Chemicals Sellers of castor oil. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIIFMR Trust Microfinance 28
  29. 29. 10. Cost Sheet for Millers Lifting Delivery from Exchange Designated Warehouse From From NSEL MANDISl. Expenses Lot Rate Amount Total Expenses Rate Total Size Amt Amt I (Rs) (Rs) (Rs) (Rs) Bag (75 Kg)1 Base Price i.e. 75 20 490.00 1837.50 Base Price (75 Kg 490 1837.5 Castor Seed Gross Weight) Loose Price at NEST Terminal for 1 Lot of 75 Kgs - Net Weight2 APMC Cess - 11.03 Commission 22.97 0.6% on Base @1.25% -Kutcha INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI Price Adad APMC Cess - 11.03 0.6% on Base Price Hammali - For Per 5.50 Sieving & Bag Bagging (75 Kg) Stitching Per 0.20 Bag (75 Kg) Commission 18.38 @1% - Trader 1895.573 NSEL 9.19 Interest cost for 3.41 Transaction paying VAT & Charges- @Rs getting return - 500/- per One considered upto Lakh of 3 Months - [VAT Turnover @ 4% on 1895.57 is Rs 75.82. Interest cost for 3 months for Rs. 75.82 @ 18% p.a. is Rs.3.41/-] Total Cost 1857.71 1898.98 for 1 Lot i.e. Loading at Mandi Per 75 2.00 75 Kgs Kg Bag Transportation Per 75 4.00 from Mandi to Kg Bag Mill Unloading at Mill Per 75 1.50 Kg Bag Total Cost for 1 Lot i.e. 1906.48 75 Kgs Difference in Cost Per Bag of 75 Kgs 48.77 Difference in Terms of Rate per 20 Kgs 13.00 IFMR Trust Microfinance 29
  30. 30. 11. Storage Receipt Financing- Farmer EducationThe IFMR Trust Structure INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIServices 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.IFMR Trust Microfinance 30
  31. 31. 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 captures details in CIS form and takes photograph.• Finally customer ID is generated. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIKYC 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.IFMR Trust Microfinance 31
  32. 32. • Apart from this, the exchange reserves the right to conduct testing of test weight by taking a composite sample through online sampling.Castor Seed QualityDeliverable grade• Gujarat Castor seed smallOil content• Acceptable Range – 44% to 48%. Checked by Test Weight BasisMoisture content• Acceptable Range - 4 to 5%. Checked by Test Weight Basis INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIPhysical 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.IFMR Trust Microfinance 32
  33. 33. • Below 2000 gms - Deduction of Rs.10 /- per 20 kg.Packaging Details• 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 INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI 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.IFMR Trust Microfinance 33
  34. 34. • 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. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI• 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 34
  35. 35. Warehouse Receipt Issue• 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 INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI• 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 moneyEvents 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 35
  36. 36. 12. Process Education Steps Who When WhereThe Branch Executive will meet Branch Prelaunch Villageopinion leaders in the village Executive of Branch(Sarpanch, members of panchayat,Head master,) and few people inthe village to brief them aboutIFMR Trust and announce that weshall be shortly opening our branchin the village.Branch executive will talk about Branch Prelaunch Villagewarehouse receipt finance product Executive of Branch INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIthrough NSEL for which IFMR Trustenrollment is necessaryBranch executive will carry the Branch Continuous Villageproduct feature booklet which will Executivebe in Gujarati and describe all theproduct features in detailAfter discussing the product Branch Prelaunch Villagefeature, to get the warehouse Executive of Branchreceipt loan the branch executivewill inform that the enrollment ison and will end on the followingdate - will not end….At the outset the branch executive Branch Prelaunch Villagewill inform that enrollment does Executive of Branchnot gurantee them loan, eligibilityis based on our product features. Enrollment Process Steps Who When WhereBranch executive will inform Branch During Villagethe farmers about the KYC executive educationdocuments required for taking programthe loan and photographBranch executive will collect the Branch On initial Branchgeographic and personal executive visitinformation of the interestedfarmer - This will happen at thebranch. IFMR Trust Microfinance 36
  37. 37. Branch executive will give anenrollment time &date to theinterested farmer at ATMNEbranch - This will be walk inBefore - (After in our case) thefarmer visits the branch thebranch executive will completethe physical verification on theclient and fill the information inthe CIS form(The CIS form willneed to be modified to have theoption of tagging thewarehouse receipt with theprofile of the farmer in the CISform) - This will come afterphoto INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIFarmer comes to ATMNE branch ATMNEfor enrollment with all the branchrequired KYC documentsBranch executive capturesdetails in the CIS form andtakes photograph and acustomer ID is generated at thebackendThis ID will form the Client IDfor trading purposes on NSELATMNE gives a unique ATMNEcustomer ID branch Commodity deposit at NSEL warehouse Steps Who When WhereFarmer intimates the ATMNE Farmer 1 Day in ATMNEbranch about deposit of advance branchcommodities at the NSELwarehouseEnd of day, ATMNE informs BE 1 Day in ATMNEwarehouse about deposit of advance branchcommodityFarmer brings his stock to NSEL Farmer Kadi-warehouse WarehouseFarmer will fill the deposit Farmer Day the Kadi -application form at the /ATMNE farmer Warehousewarehouse brings the commodity IFMR Trust Microfinance 37
  38. 38. The warehouse manager will Warehouse Day the Kadi-draw the sample Manager farmer Warehouse brings the commoditySample will be drawn from Warehouse Day the Kadi-different sides and depths till Manager farmer Warehousethe required amount of sample brings thearound 1Kg is avaliable commodityThe sample will be mixed till a Warehouse Day the Kadi-homogenous mixture is Manager farmer Warehouseobtained after which it will be brings theanalzed commodity Quality testing process INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI Steps WhenMoisture Content-Basis 4.5% After sampleThe moisture should be allowed up to 5% maximum amount isduring July to October. availableOil Condition-Basis 47%Between 47 to 45 with discount 2:1Below 45: RejectedPhysical Impurity-Basis 3%Acceptable up to 6% with a discount of 1:1Above 6%: RejectedAll other kinds of seed, dead seeds, damaged seeds(Immature, shriveled and broken if any), grains freeshell (Husk) of Castor Seeds. Shell (Husks) coveredon castor seed and separated there from shall beconsidered as “dirt”Allowance for dead seeds and damaged seeds: Alldead seeds and damaged seed shall be reckoned asdirt.( 10 mm Mild steel Sieve No.4/18 will be used forrefraction to determine physical impurity)Black Seed-Maximum 1%If the drawn sample is withing the parameter ofNSEL, the warehouse manager will start weighmentof the commodity. IFMR Trust Microfinance 38
  39. 39.  Storage Steps Who When WhereAfter quality testing is done the Warehouse After Warehousecommodity will be brought to manager qualityweigh bridge testingWeighment will be done either Warehouse Warehouseon the weigh bridge installed at managerthe NSEL warehouse orplatform scaleThe packing material weight will Warehouse Warehousealso be considered while managercalculating the Net weight ofthe commodity. The bag weight INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIwould be deducted from thegross weight.The floor of the warehouse will Warehouse Before Warehousebe covered by dunnage in the manager stackingform of plastic sheets orwooden matsStacking of the commodity will Warehouse Warehousestart infront of the warehouse managermanager and farmerThe comodity will be stacked Warehouse Warehousehaving a dimension of manager30*20*16, with 2 feet spacefrom the wall on all the sidesAfter stacking is finished ,stack Warehouse Warehousecard will be put with clear managerstacking floor planThe warehouse manager will Warehouse Warehouseissue the warehouse receipt to managerthe farmer IFMR Trust Microfinance 39
  40. 40. 13. SWOT Strengths• 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 INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI 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 40
  41. 41. Farmer/Client Feedback For “Khedut Kendra Dharampur” Submitted To:- Mr. Bhaveshbhai Nayak Project Manager Dharampur INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI IFMR Trust SUBMITTED BY: HITESH K. KARKAR (04-0409-2008) 2nd Semester INSTITUTE OF AGRIBUSINESS MANAGEMENT NAVSARI AGRICULTURAL UNIVERSITY, NAVSARIIFMR Trust Microfinance 41
  42. 42. 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 the rhythm of business world and also guidance in completion of this report. I also would like to thank Mr.Bhaveshbhai Nayak Project Manager, INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI 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 42
  43. 43. 14. IntroductionAgricultural Terminal Markets Network Enterprise Private Limited waslegally registered in September 2008. ATMNE has been incubated byIFMR Trust’s Network Enterprises Fund. They have launched a privateequity fund, the Network Enterprises Fund, which incubates and investsin companies exclusively focused on sectors where rural householdshave a competitive advantage as producers or consumers.The founding-members of ATMNE began working with IFMR Trust inspring of 2008, exploring various gaps in agricultural supply chains thatrequired the intervention of new operators or investors. It was decidedthat partnering with the National Spot Exchange Limited presented anopportunity to bring high-value services to an enormous amount offarmers, within a reasonably short amount of time. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI15. Products & services offered at presentAs the first step towards its goal, ATMNE opened its first branch onFebruary 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 markettransparency and price discovery and providing alternate financingoptions to small farmers, a facility only available to large farmers andtraders. ATMNE is an Institutional Trading and Clearing (ITCM) on theNSEL and is installing trading and backoffice infrastructure to enable itto be present across India, wherever NSEL operations exist.ATMNE is currently working with one commodity (castor seed) andoffering 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 43
  44. 44. 16. Objectives of SurveyKhedut Kendra Dharampur was established on 16th February, 2009 so inorder to know the effectiveness and to know the opinions offarmers/client of the region regarding Khedut Kendra Dharampur surveywas conducted.It will be useful for the company to change or modify its strategy asneeded for better operational efficiency in the area of microfinance.Research MethodologySource of data collection INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI • 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: - QuestionnaireSampling Techniques: - Convenience sampling & Purposive sampling.Sampling Unit: - Farmers/Clients of the Khedut Kendra Dharampur.Sampling Size: - 70 farmers/Clients of five villages.17. Action PlanThis project basically involves survey of five villages of the MahesanaDistrict. The villages surveyed are namely, 1. Maharajpur 2. Korda 3. Visatpura 4. Kalyanpura 5. ShivpuraOut of these five villages in Maharajpura and Korda they have membersin these two villages and they are looking forward for the entry inVisatpura, Kalyanpura, Shivpura. For successful completion of thisproject an action plan was prepared,IFMR Trust Microfinance 44
  45. 45. Date Activity08-07-09 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 INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIIFMR Trust Microfinance 45
  46. 46. 18. IFMR Survey OutcomesAnalysis of DataMaharajpura Village • 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. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI • 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 castorIFMR Trust Microfinance 46
  47. 47. 2. Monsoon crop: - Cotton, Juwar • 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. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI • 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.IFMR Trust Microfinance 47
  48. 48. • 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. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI • 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: - JuwarIFMR Trust Microfinance 48
  49. 49. 3. Monsoon crop: - Cotton, Dangar and Castor. • 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 INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIIFMR Trust Microfinance 49
  50. 50. 19. Findings And Recommendations Findings• 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. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI• 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. IFMR Trust Microfinance 50
  51. 51. • 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. Recommendations• 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 INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI 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. IFMR Trust Microfinance 51
  52. 52. 2. Market position will be strengthened by holding large amount of commodities in the warehouse. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIIFMR Trust Microfinance 52
  53. 53. BIBLIOGRAPHY Θ Θ Θ Θ IFMR Trust Technical Note “Access to Micro-Savings for Remote Rural India”. Θ IFMR Trust Annual report 2007-08. Θ “Access” Quarterly Newsletter of IFMR Trust and its Partners. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI Θ Impact Assessment of Microfinance in India (Interim findings from a national study of MFIs in India).IFMR Trust Microfinance 53
  54. 54. Appendices & Annexure Questionnaire for Farmer/ Client Feedback Khedut Kendra DharampurName of Respondent :Address : Village: Taluka: District: Pin code- Mo. INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIAge :Education : Illiterate: Below 10th : Above 10th : Specific :Land holding : Irrigated: Un-irrigated:Cropping pattern : Summer : Kharif : Rabi :No. of dependent :Source of income : Farming: Business: Service: IFMR Trust Microfinance 54
  55. 55. No. of markets available :& service provide by Name :them Distance: Auction time: Payment condition:Why you go specific market as well as trader? INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARIWhat 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? IFMR Trust Microfinance 55
  56. 56. What are major problems at Khedut Kendra Dharampur?Are you happy with Khedut Kendra Dharampur work? Why? INSTITUTE OF AGRIBUSINESS MANAGEMENT, NAVSARI Note: - These questions are Subject to Change as per Situation. IFMR Trust Microfinance 56