Empowerment through Market Led Development ~ The Case of Sunhara Wal-Mart Project Kumar Sankar Das Monitoring &

Evaluation Specialist ASI, India

Page | 1

Empowerment through Market Led Development ~ The Case of Sunhara Wal-Mart Project
Abstract: Over the past two decades, a significant progress on poverty reduction had been made in India. However, Uttar Pradesh has been lagging behind in poverty reduction. Agriculture can be a powerful instrument to tackle poverty by boosting national economy and improving rural livelihoods. Supporting smallholders, who are majority of poor people in rural Uttar Pradesh, to effectively engage with agriculture markets is crucial for poverty reduction. The livelihoods of small-land holder or land less farmers are often constrained by poor access to markets & limited entrepreneurial skills. However, rapid urbanization is opening new domestic & regional markets and also offering new market opportunities for farmers to supply higher value produce. Supplying to these markets offers both higher income and better business relations for farmers. The goal of this study is to explore how market led development can mitigate the constraints of small holders. The present paper will highlight the key steps and procedures in building capacity among women farmers to identify and evaluate market opportunities, making profits and intensifying production while sustaining the resources upon which livelihoods depends. The paper is using a case of Agribusiness Systems Internationals (ASI) Sunhara Wal-Mart Project, implemented in Uttar Pradesh, the biggest and one of the poorest states in India. Sunhara Wal-Mart is a 2 year smallholders market linkage program with social and political empowerment of women funded by Wal-Mart Foundation. It aims to increase the incomes of poor households in Ghaziabad district of Uttar Pradesh, focusing mainly on women, is using innovative approaches to agriculture production and market system development. The Project provides a unique blend of services to private and public sector to build support systems to rural communities along with developing capacity of producers to meet market demands. Key Words: Women, Market Linkage, Livelihoods, Collective Actions, Equity, Value Chain.

------------------------------------Present Address: ASI, 2/34, Vipul Khand, Gomti Nagar, Lucknow, Uttar Pradesh, India, Pin: 226010 Mobile: +91-9005644555; Telephone: +91-0522-4101486; Fax: +91-0522-4101489 Email: kdas@asi-india.org

Page | 2

Introduction:
Poverty reduction in developing countries is one of the most widely shared goals of development initiatives. Today, the most accepted understanding of poverty is that its a human condition that reflects deprivation in many dimensions of human life (Sen, 1999). Since the first Millennium Development Goal (MDG) is to halve the proportion of people living less than $1 a day, poverty reduction is the centre of development discourse (United Nations). Over the last few decades, some regions made substantial progress on poverty reduction in India. However, Uttar Pradesh shows staggering result (World Bank, 2007). Reaching the first MDG by 2015 seems very challenging unless more efforts to fight against poverty in Uttar Pradesh should be made. Agriculture can play a key role in poverty reduction in Uttar Pradesh. In India, agriculture generates almost 40% of national GDP (World Bank, 2007). Therefore, agriculture development can be a powerful engine for national economic growth. Furthermore, growth created from agriculture sector can be beneficial to the poorest. But limited access to guaranteed markets for produce and for the acquisition of inputs is a major problem confronting smallholders. In the age of market liberalization, globalization and expanding agribusiness, there is a danger that small-scale farmers will find difficulty in fully participating in the market economy. In many countries, such farmers could become marginalized as larger farms become increasingly necessary for a profitable operation. In India, farmers and small-scale entrepreneurs lack both reliable and cost efficient inputs such as extension advice, mechanization services, seeds, fertilizers and credit, as well as guaranteed and profitable markets for their output. In this situation, to raise income of the poor through agriculture activities, a transition from subsistence farming to commercialisation and specialisation of agriculture is essential in India. Commercialisation can have positive impact on increasing cash incomes and more farm employment from market-oriented crops, but improve the productivity of traditional crops by modernised production systems (IFAD, 2010). However, limited market access for smallholders traps them in low return or subsistence farming because there are higher risks and transaction costs for participation in markets mainly due to low asset endowments which create avoidance of investment in the commercialisation process (IFAD, 2010). To offset the constraints of market access for smallholders, collective action1 has been proposed as a solution. However, agribusinesses also have constraints to work with the smallholders. Agribusinesses require large volumes of produce to meet plant capacity of purchase orders, and these volumes must be supplied on a regular basis with a consistency in quality (IFRPI, 2006). It is now increasingly evident that smallholder farmers key concern is not only on agricultural productivity and household food consumption, but also on increasingly better market access. Virtually all the Ghaziabad farmers depend on trading for some household needs, and hence seek income generating activities. Enhancing the ability of smallholder, resource-poor farmers to access market opportunities, and diversify their links with markets is one of the most pressing development challenges facing both governments and non-governmental organizations (IFAD, 2001; IFPRI, 2002). Agricultural markets can therefore play significant roles in reducing poverty in poor economies, especially in areas which have not already achieved significant agricultural growth. Day by day, the Government Institutions and Development Organizations are under pressure to shift their outlook from enhancing productivity to improving profitability and competitiveness of smallscale farming, and linking smallholder farmers to more profitable markets. Now both of the institutions are increasingly putting emphasis on transforming subsistence agriculture to make farming a business and to an entrepreneur culture in rural communities, where farmers produce for markets rather than trying to market what they produce, to better understand how communities in

Collective Action can be conceptualized as action taken by a group (either directly or on its behalf through an organization) in pursuit of members perceived shared interest (Marshall, 1999). The fundamental principles of collective action are involvement of a group of people, taking a common action to meet the interest.

Page | 3

diverse situations can best achieve their income and other livelihood aspirations through better links with markets. In this context, to response these issues, Agribusiness Systems International (ASI) is implementing the Sunhara Wal-Mart project since 20112. The study is conducted in the Ghaziabad districts of Uttar Pradesh where project is active, and will discuss project interventions and impacts of efforts to promote poor producers at the farmer level. For the purpose of the study, primary and secondary data was gathered. The primary data was collected through direct interviews with groups of 20 randomly selected farmers in the district. Secondary Data was primarily drawn from the project MIS. The maximum respondents in the study are under the poverty line3. Respondents were aged between 25 45 years and included people who owned their farms as well as those who were renting farm plots. The maximum respondents are belonging to lower castes4. The subsequent sections will focus on how Sunhara-Wal-Mart properly addressed these issues. How it explicitly addressed issues relating smallholders market linkages.

Analysis of Case Study:

Section 1: Project Approaches Section 2: Drivers Section 3: Selected Results and Lessons Section 1: Project Approaches In the project area, SHGs are formed with a member size of 10-15 women for the savings and credit activities. The central focus of the project is on building capacity of womens Self Help Groups (SHGs) to sustain and manage income generation activities from opportunities facilitated by the project to access public and private resources such as government programmes and schemes for women and farmers, financial institutions, potential buyers, input suppliers, agriculture service providers. A group of SHGs makes up a village level federation, which in turn make up a cluster federation with other village level federations from the district. The cluster federation is the primary body used by the project to empower women, engage communities and facilitate relations with other stakeholders like Bharti Wal-Mart & other retail players (Parag Dairies, Reliance Fresh). Broadly there is a three tier structure. The Self Help Groups (SHGs) remains at the bottom, Village Level Federation (VLF) at the middle and the Cluster Level Federation on the top which is an Apex body of the Federations. There is

The Project is funded by the Wal-Mart Foundation. It aims to increase the incomes of poor households mostly women in Ghaziabad district of Uttar Pradesh focusing especially on women using innovative approaches to agriculture market system development. Sunhara Wal-Mart provides a unique blend of services to private and public sector actors to build support systems to rural communities, while ensuring ownership and investment of various market participants in developing the capacity of producers to meet market demands. In essence, Sunhara Wal-Mart is addressing causes, rather than symptoms of market system constraints by developing embedded services without ever becoming a part of the end-solution. The project is targeting 2500 small, marginal and landless households with focus on building rural, commercial systems for providing quality inputs, services and information to improve production practices, facilitate streamlined and profitable relationships with buyers, and address gender inequality following the two-prong approach of social and economic empowerment. 3 Poverty Line is an economic benchmark and poverty threshold used by the Government of India to indicate economic disadvantage and to identify individuals and households in need of government assistance and aid. It is also the estimated minimum level of income needed to secure the necessities of life. It is determined using various parameters which vary from state to state and within states also. In 2011, The Planning Commission decides the bench mark on 32 Rupees.
2 4

Any of the hereditary, endogamous social classes or subclasses of traditional Hindu society, stratified according to Hindu ritual purity, especially the Brahman, Kshatriya, Vaisya, and Sudra castes.

Page | 4

a structural link between these three tiers through representation from each tier of the structure. Presently, there are 56 SHGs, 8 VLF and 1 CLF.

Cluster Level Federation Village Level Federation Self Help Group (SHGs) Picture 1: Structure of the Institutions/Federation The key project activity in Ghaziabad is the production and sale of vegetables by women groups. Women farmers dont have to sell their vegetables to a middleman or commission agent in the Mandi. They bring their produce to the nearest collection centre which is formed by the federation and get much higher price. To ensure the supply chain management, the project has delivered a series of trainings on low cost technologies (Nursery Trays Management, Low Cost-Polly Tunnels, Soil Testing, and Using of Hybrid Seeds). Apart from this, the project also provides access to extension services. With a steadily increasing demand from Bharti Wal-Mart, the project is also looking for alternative buyers for better price. The Project Model mainly works by the below mentioned diagram:

Picture 2: Project Model for Market Led Development Section 2: Drivers During the discussion, I identified profitable market, physical & social environment and organisational support are the main drivers for the market led development initiative. Other conditions are farmer cooperative that acts as an effective intermediary between the agribusiness and individual farmers

Page | 5

and transparent pricing and grading system. Finally, the willingness of agribusiness to invest in supply chain development, itself motivated by profitability of the chain, has engendered and sustained relations between smallholders and agribusinesses. As per the feedback I received from the farmers in the field, there are seven main drivers. These drivers are: Profits of the Farmers The Physical Environment Nature of Commodities Role of Farmer Organisation Role of the Agribusiness (Private Sector) Profits of the Farmers The Physical Environment Drivers Nature of Commodities Role of Farmer Organisation Role of Agribusiness Picture 3: Drivers 1. Profits of the Farmers: Unless the farmers achieve consistent and attractive financial benefits, the linkage arrangement is bound to collapse. Farmers have to assure of higher net incomes from this market initiatives than the

Picture 4: Profits of Farmers (MIS Data) current existing systems. In Ghaziabad, women farmers get higher prices for their produce under the Sunhara Wal-Mart Initiatives. Highest amount, which a woman has earned, is Rs.62150. This graph clearly shows that project farmers earned better profits.

Page | 6

2. The Physical Environment: The suitability of physical production environment determines the profitability5 and is therefore crucial for the success. Existence of an adequate communication system (roads, telecommunication) is the very precondition for this market led development initiative in rural areas. Another thing which helps this project is that all the projects farmers are located within a 10 kilometre range and they are also very close to the projects established collection centres. In one hand, the farmers can easily access the project extension services and in other hand, they spend less amount of money in travel. 3. Nature of Commodities: The produce involved in this project activity is high-value, often export commodities with proper quality control. These high value often perishable commodities are needed by processors and super market chains (Bharti Wal-Mart and Parag Dairies). Their perishable nature also demands that farmers sell off the produce as quickly as possible. Every day around 8 PM, the farmers got all information regarding orders by text messages. Early next morning, carts laden with vegetables fresh from the field arrive at the collection centre where a quick check of the vegetables is done to separate out those that dont fulfil Wal-Mart criteria, and then weighed, loaded on to truck, and dispatched for the Wal-Mart Stores in Delhi. Successful links between farmers and agribusiness therefore meets the needs of both parties. For this reason, there are suggestions that linkages should be established on the basis of product and not partners.

Commodities Beet Root Bottle Gourd Cabbage Cauliflower English Carrot Palak Potato Radish Tomato Water Melon

Sum of Quantity (MT) 5.07 0.5 47.5 25.6 1.1 0.5 59.16 32.53 55.22 0.18

Picture 5: Total Commodities Exported to Bharti Wal-Mart and Parag Dairies (Nov11 to March12) 4. Role of Farmer Organisations (Federation): Multinational Corporations (Bharti Wal-Mart), Smaller Private Companies (Parag Dairies) and Mahila Kishan Vikas Sangsthan (Project established Federation) are the main players in this market led development activities. ASI is giving the technical assistance throughout the value chain. The Federation is the key instrument for farmers to enhance their market power by providing training and extension services, and facilitating acquisition of technology and other inputs. In this project, the federation is the main actor through which agribusiness influence practices of individual farmers to achieve the quality requirements of the buyers. There is also a need to inject proper business practices into the federation. The federation is in very early stage. For this, it needs more proper nurturing. It is well known that supermarkets prefer not to deal with individual farmers because they do not deliver
5

Ghaziabad is situated near Delhi and for this, the farmers get the access to the high end markets and also get better price.

Page | 7

on quantity and quality; they do not want to invest more in their operations to improve their performance and for this, supermarkets find it difficult to work with them. But in this case, due to the presence of the federation and also technical assistance from ASI and a local NGO for follow-up investments, coordination etc. the farmers get more benefit from this supply chain. 5. Role for the Agribusiness (Private Sector): The private sector drives the supply chain and in maximum times, they take the decisions of the management of the chain. Success of linkage arrangements has been driven by profitability and effective management of the agribusiness. Demonstrated reliability in terms of reliability in service provision and payments by the agribusiness creates trust in the partner farmers. But I feel, the federation has to work more on governance and capacity building though which they can improve their bargaining skills with the private sectors. The federation has to make itself that capable enough to search for other private sectors players in this agribusiness through which the farmers get more benefits. Section 3: Result and Lessons A. Incomes, Investment Decision and Gender There is an evidence of increased incomes from this market led development interventions. Between December, 2011 to March, 2012 the Ghaziabad farmers sold 224 MT of different commodities to Bharti Wal-Mart, with a value of 19.65 Lakh INR. The integration of gender in this intervention has resulted in more equity in the sharing of benefits. During the FDGs, 80% women said that they have control over economic resources as the payment directly comes to women members of the federation. Now women can say also over the production decisions. There is a change which is observed outside this value chain. Women are now actively involved in the household decision making process like childrens education, marriage, purchase of assets. Few women bought TV, refrigerator etc. for their own house hold after this intervention.

Maximum respondents said that they want to investments more on food security and the accumulation of household assets as well as improving living conditions such as construction of better housing.

Page | 8

B. The Role of Social Capital: While collective action or forming farmer groups is recognized as an almost essential means of making learning more efficient to achieve economies of scale, simply being in a group is not sufficient to be successful in the marketplace. For this, the projects already started communications and knowledge sharing activities between different groups member. The projects already built an effective market linkage and for this, the farmers are more willing to participate in this market led development with incentives. In groups, farmers are also able to meet the large volumes required by the market. This sometimes poses challenges especially in terms of quality and accountability. Dedicated & committed leadership is the vital ingredient if farmers groups want to access and maintain the links. The Projects staffs and the federation workers are capable enough to maintain the links. As groups take on more financial risks and increase their physical and financial assets, governance and transparency are essential to success. The federation has to work more on these issues. From preliminary analysis, observations are that being in groups enabled farmers to convert social capital into human, natural and financial capitals. Being an established group with one year of experience is an important factor in influencing market performance.

Conclusions:
In an attempt to put farmers first, the use of participatory learning approaches have been very crucial for building the capacity of farmers themselves to understand and analyse markets, to identify challenges and opportunities and deal with them using participatory research that draws on new information and indigenous knowledge. Using participatory approaches also has strengthened the prospects of sustainability in new interventions as the farmers become part of the learning and decision making process, rather than just being recipients of information and technologies. In strengthening social and human capital, participatory research should encompass proactive strategies to ensure gender equity and farmers empowerment, so that farmers can access and benefit from market opportunities and can be agents of change. All markets carry risk and prices of agricultural products are particularly unstable. Risks increases as produce and market value increases and therefore farmers need to be fully aware of their exposure and ability to deal with financial risk. In the case of Ghaziabad, taking on a relatively new enterprise was very risky and a step by step implementation starting from a very low scale helps to build farmer confidence in managing an enterprise. The evidence from this case study clearly shows that it takes a combination of many skills to enable farmer groups to identify and maintain market links. One of the over-riding factors from this case study is the importance of strong collaboration between development and business support service providers that provide services, capacity building to keep the farmers competitive in the market place. While this approach has been very effective in reaching small groups of farmers, there are challenges on how to scale this out to reach more than a handful of farmers. Of particular importance is how to link these community micro-level processes to higher macro-level processes where market opportunities and institutional conditions may offer better opportunities for small-scale farmers. These community level processes should therefore be complemented with promoting efficient market institutional innovations and support services such as microfinance, market information systems, business services, pricing policies, input marketing, extension advice, and rural infrastructure that make markets work for poor smallholder farmers.

Page | 9