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Myfpo presentation


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Myfpo presentation

  1. 1. Digital Platform for FPOs Anil Chopra Field Fresh Vegfru Pvt Ltd  Better Prices  Greater Transparency  Effective Governance  Improve Supply Chain Efficiency  Mitigate Risk  Reduce Cost Transforming Corporate Governance of FPO with Technology
  2. 2. Defining the Problem – some theory
  3. 3. Our understanding of FPO Ecosystem This institutional arrangement facilitates an “alternative method of coordinating production and marketing”. The effectiveness of this structure depends on the nature of transactions; • Within farmers group • Between farmers and resource institutions • Between farmers and managers • Between farmers and markets
  4. 4. Resource Institutions • Resource institutions - can be an NGO, a private company or a government agency. • The resource institution executes the policies of the government and offers a rules- based trust mechanism; i.e., the rules promulgated from time to time must be in coherence with previously crafted rules. • New rules that conflict with old rules or are not as favorable as the older ones create a trust deficit and impact the growth of the producer-cooperative [rules that differentiate FPC from cooperatives] • Empirical evidence from Mexico and Central America shows that when farmer producer organizations are supported by and directly linked to supermarkets, they are more likely to remain economically sustainable as opposed to farmer producer organizations supported by non-governmental organizations (Hellin et al., 2007) (This would be equally true for online marketplaces)
  5. 5. Managers • Managers are hired by the producer company to provide professional expertise in operating the producer company and the necessary human capital • Early studies in the Asian context associate poor performance of producer organizations to ‘sizeable inefficiencies’ of human capital and management variables rather than the size of the producer organizations (Ali and Byerlee, 1991) • Evidence from China also indicates that more than size (the average farm size of the Chinese farmer is smaller than that of the Indian farmer) it is the access to advanced technology that explains the difference in farm incomes between contract and non-contract farming (Miyata, Minot, & Hu, 2009)
  6. 6. Farmers • Farmers – are the smallholders who form and own the producer company. The social structure (or the nature of inter-relationships) of farmers represents the social capital in the system (Wambugu et al., 2009) • The evolutionary trajectory of the producer company depends on the interplay between the social structure and the market structure. The more closely knit structures have greater cohesiveness which leads to higher levels of trust • In the producer company, farmers are expected to imbibe both – cooperative and market-oriented values, which leads to a peculiar conflicting situation. • The owner-shareholder dynamic, a key element of the cooperative form, promotes an inward approach which is likely to conflict with the development of a market- oriented approach (outward approach).
  7. 7. Genesis of Governance issues at FPOs The FPO institutional arrangement is basically a set of contractual relationships, explicit or implicit Governance issue arises when (a) 'there is an agency problem, or conflict of interest, involving members of the organization, such as owners, managers, workers or consumers’ and, (b) 'the transaction costs are such that this agency problem cannot be dealt through a contract' (Hart, 1995, p. 678). Defining agency problem - A conflict arising when people (the agents) entrusted to look after the interests of others (the principals) use the authority or power for their own benefit instead.
  8. 8. Transaction Cost Economics (TCE) – a primer
  9. 9. The FPO Ecosystem (from a TCE lens) First, the role of the resource institutions is transitory with the objective to facilitate the progression of the producer company towards the adoption of market-based mechanisms. Second, farmers would eventually imbibe, partially or substantially, technical, financial and market knowledge, and take up or actively guide the management of the producer company.
  10. 10. The FPO Ecosystem (from a TCE lens) Social Structure (key to internal governance) o Cohesiveness - strong social relationships build trust which (reduces opportunism) improves internal governance o Homogeneity, social, cultural or economic, improves governance, i.e., consensus building and decision making involves less transaction costs o Cohesiveness and Homogeneity increase the size of farmer producer company without dissipation of governance capacity (why cooperatives do not spread beyond a particular socio-economic region) o Knowledge – low levels of technical and market knowledge induce conflicts with managers o in the absence of cohesiveness, homogeneity, and knowledge, the managerial role becomes more powerful, the FPO may operate more like a commercial entity.
  11. 11. The FPO Ecosystem (from a TCE lens) • Different types of farm produce will need different markets. Commodities can be traded anonymously on commodity exchanges; however, highly differentiated farm produce may need relational markets • The output-side benefits for the producer company depend on the idiosyncrasy (or asset specificity) of the produce • Studies indicate that when the produce (such as high-value vegetables) is characterized by high transaction costs associated with market access, the benefits for farmer organizations are more evident (Hellin et al., 2007) • On the contrary, when the produce is more of a commodity, like maize, there is very little difference between market governance and the producer-company (Cheney, Santa Cruz, Peredo, & Nazareno, 2014)
  12. 12. The FPO Ecosystem (from a TCE lens) • When FPOs exploit market opportunities and gain more operational control, they are more likely to integrate vertically in a hierarchical fashion or expand horizontally along the agribusiness value chain or both. • Evidence indicates that farmer producer organizations integrate vertically to form federations at a national level that has more bargaining power. • Governance in the federation is executed through a supra-mechanism. However, their combined power, mainly driven by their collective landholdings and members, can drive them into opportunistic behavior or monopolistic behavior. • Large-sized federations have the potential to influence policy and alter market dynamics. Prior literature conceptualizes this as bilateral oligopoly between the federation of producer-organizations a few large buyers (Jackson, 2007)
  13. 13. What we learned after mentoring 5 FPCs in Haryana
  14. 14. Organizing farmers as FPCs is a laudable objective but FPCs are still in infancy stage – Following are few signals we picked from the ground. • After subscribing the shares of a FPC, a farmer doesn’t have any clear idea on his roles and responsibilities and how FPC will benefit him. • After investing share capital, he has a keen desire to know what business activities are being run by BODs and FPCs Managers. But how to know these activities is the missing link. • Being busy, he cannot routinely visit Company Office even if he wishes so. There is no easy platform available to help him do this. • No easy way for members, other than physical meetings which are time consuming, to share and interact with each members, board members, managers, cast their consent and vote. • FPCs are interested in the member’s produce but do not have an automated mechanism to help members aggregate produce, transparently publish different transaction costs, provide final price realizations, manage production and sale records, train members towards growth and profitability • Commercial and social transactions and interactions at FPOs requires farmers participation which in turn improves the transparency of working and financial transactions. • Management committees, BODs and FPC managers lack business orientation and sense.
  15. 15. Translating theory and our learnings into concepts and solutions
  16. 16. CAPACITY BUILDING Farming, particularly collective farming, need to be run as a business – AMUL’s success is because of this factor TECHNOLOGY SUPPORT Access to Scientific Farming, Crop planning techniques, crop management are often deficient GOVERNANCE TRANSPARENCY Stakeholders not trained in benefits of participatory and democratic decision making process. That defeats the purpose of a collective NETWORK SUPPORT Non Availability of quality inputs, logistics, availability of capital, knowledge og schemes, risk mitigation measures etc limits growth of FPOs Major Challenges faced by Indian FPOs – a conceptual framework Formation of a FPO is a half the battle won, the bigger battle is to make them sustainable by building institutional capacities MARKET ACCESS BUSINESS ORIENTATION Like farming a FPO, production is also a half battle won, the biggest challenge is marketing the produce crops
  17. 17. 3 Pillars of Success identified by us  Transparency and Governance  Supply chain Efficiency  Training and Manpower Development Technology Integration, Network Development & Management are the key enablers here
  18. 18. Pillar 1 - Good Governance: Key to FPOs Growth Eliminate abuse of office for personal gains Transparency - first step in fighting corruption Participation for Collective decision making Knowledge is power “Good governance is perhaps the single most important factor in eradicating poverty and promoting development” said Kofi Annan, 1998.
  19. 19. Pillar 2 - Supply chain Efficiency - competitive advantage Strong Network Relationship Technology Advantage Efficient in Time and Cost Quality at Source, Traceability Pooling of resources is critical to achieve Profitability and Competitive Advantage
  20. 20. Pillar 3 - Training and Manpower Development Multiplier Effect Cut costs, Boost production, Improve Yields, Better Quality Knowledge is power Employment and Entrepreneurship
  21. 21. – a collaborative effort and network effect Ag Expertise myFPO ecosytem Enablers Technology Knowledge • Technology • Tech rich • Development & hosting • Assisted by Wingify Foundation & Vegfru • Knowledge • Kisan Sanchar • Agri Know base / Experts, KVKs, Agri Univs, Advisors • Enablers • NABARD • Partner FPOs • MOA
  22. 22. Developing Effective Networks …… the only solution AgroSupplyCompanies Farming Community AgroProduceMarket • Agro input companies • Distribution and Logistics companies • Weather and Information services • Banks / NBFCs • Insurers • Agro portals • Exporters • Food processors • Modern Retail • Institutions • Wholesalers • Caterers / Others • Online Marketplaces Farmers - (member of producer organizations) • GovernmentAgencies • NGOs / KVKs • Agriculture universities • Research institutes Government / Research Organization FPOs SHGs Coops Large Farms Plantations B2B B2B I2B Supply Chain For these agri-input companies / Service providers, FPOs are potential customers. leveraging maximum offerings of the platform. 2 2
  23. 23. architecture myFPO Web and Mobile App Backend Support Crop Inputs from FPOs and Knowledge inputs from network Partners Admin Web / Mobile App SaaS Cloud Platform No special hardware requirement for Buyers or Suppliers No special hardware requirement from users other than mobile phones
  24. 24. Concepts to coding – a framework When you understand the purpose of a tech application and problem users are facing, know your audience and understand the tech………… coding is a cake walk.. Rest is how one execute, market and scale We believe a collaboration between Wingify Foundation and Nabard can make this possible.
  25. 25. Some sample screens
  26. 26. Registration Module
  27. 27. Corporate Governance Module
  28. 28. Supply Chain Module
  29. 29. Web portal frotend interface
  30. 30. An artist’s view of home page -1 If you are a Manager of a FPO, you can list your products here free of cost
  31. 31. An artist’s view of home page - 2 Post your requirements Latest on Forums
  32. 32. An artist’s view of home page - 1
  33. 33. An artist’s view of home page - 1
  34. 34. Web portal sign-up
  35. 35. Sign up page * Mobile no should be listed with NABARD
  36. 36. Login page
  37. 37. Questions, please