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Credit Linked Value Chain Finance
of Non Timber Forest Produces
Bibhuti Bhusan Pradhan
Vasundhara
A/70, Saheed Nagar, Bhubaneswar – 751007 Odisha www.vasundharaorissa.org
Tel no/ Fax: +91-674-2542011/12/28 2010
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Credit Linked Value Chain Finance of Non Timber Forest Produces
By: Bibhuti Bhusan Pradhan Research Coordination: Rana Roy Manmohan Barik Bibhuti Bhusan Pradhan ©All rights reserved Part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system with permission, in writing from the publisher. First published 2010 First printed 2010 Published by: Vasundhara A/70, Saheed Nagar, Bhubaneswar -751007 Printed for Vasundhara by: Jagadisha Printers 786, Saheed Nagar, Bhubaneswar – 751007
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Acknowledgement
I acknowledge “Catalyst Management Services, Bangalore” for extending its support in
facilitating this piece of research work. I am especially thankful to Mr. Jitesh Panda of
Catalyst Management Services, Bangalore for his guidance.
My special thanks go to Mr. Tankadhar Behera, Mr. Jhasaketan Kalo and Mr. Santosh Kalo
who have collected the data from the sample households.
I owe to the respondents hailing from different strata of value chains, like NTFP dependent
households, traders, persons working in the microfinance institutions and other players.
I admire Mr. Rana Roy and Manmohan Barik for commendable contribution in coordination
of the research work.
I am grateful to my teammates from ‘Sustainable Livelihoods and Economic
Democratization’ thematic area, other staff in Vasundhara, and the staff of Banaja Banijya
Sangha, Kuchinda, and the staff of Banani Mahila Samabaya Sangha, Barkote for their
continuous support and suggestions for carrying out this research work.
Bibhuti Bhusan Pradhan
31/03/2010
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Content
1.0 Introduction
2.0 The Study Design:
2.1 Objectives of the Study:
2.2 Study Methodology:
2.3 Study sample, key variables, and criteria for selection of the nodes:
2.3.1 Selection of NTFPs
2.3.2 Study Site Selection
2.3.3 Collection of primary data
3.0 Study Process:
3.1 Post Study Phase
3.2 Study Duration:
4.0 Findings of the study
4.1 Area and People
4.2 Findings of the study
4.2.1.0 Mahua
4.2.2.0 Siali Leaf
4.2.3.0 Sal seed
5.0 SWOT analysis of the primary cooperatives vis‐à‐vis value chain finance
6.0 Summary of findings and conclusion
7.0 Recommendations
Annexure I: Household Schedule
Annexure II: Checklist for interaction with Value Chain Players
Diagram 1: Flow of Mahua in the value chan
Diagram 2: Linkage of finance at different levels of Value Chain of Mahua
Diagram 5: Flow of Siali Leaf in the value chain
Diagram 4: Flow of Sal Seed in the value chain
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1.0 Introduction
Vasundhara is a policy research and action group working on issues related to natural resource
governance, sustainable livelihoods and environment development. One of the major focus areas of Vasundhara is sustainable livelihood of the forest dependents. The Non Timber Forest Produces (NTFPs) contribute positively and significantly to improving the rural livelihoods, especially for the poor. It has a considerable contribution to the economic growth, both at local, regional and national levels. NTFP supports the current consumption, provide safety nets and can bring a pathway out of poverty. The main schools of thought to NTFP based rural development include market approach, where the primary collectors would fetch a better price over the existing local market through adding value and by organizing themselves, and the other is political empowerment approach which refers to the secured economic and political rights, otherwise the resources would be appropriated by the elites.
Vasundhara has facilitated formation of 38 Primary Cooperatives and two Secondary Cooperatives spread across five forested and contiguous blocks of Sundargarh, Sambalpur, Deogarh and Angul districts of Orissa. These cooperatives primarily deal with collective marketing of Non Timber Forest Produces (NTFPs) like Mahua, Siali Leaves and Sal Seeds etc. Currently, cooperatives are not actively involved in providing/facilitating credit services. Nevertheless, members need credit services including thrift/credit services and value chain finance.
In recent years, in the operational area of Cooperatives, there is an increasing incidence of Micro Finance activities, through Self Help Groups and Micro Finance Institutions (MFIs). However, there seems to be a mismatch between the current requirements of the community and existing microfinance services/practices.
Members of cooperatives have been expressing the need for thrift and credit services. However, at this juncture, it is unclear, if cooperatives need not venture into credit services, facilitate or provide credit services. Similarly, it is also unclear if organizations associated with thrift and credit services would be able to meet the requirement for thrift/credit services of members/their households.
2.0 The Study Design:
This study design has evolved based on initial thoughts in the study team of Vasundhara, understanding of study team on Micro Finance and follow up interaction between Catalyst Management Services (CMS), Bangalore and the Vasundhara study team. The following points evolved towards finalizing the study design:
• Focus on value chain (VC) finance than on credit services in general (that includes basic thrift and credit services);
• Study contribution of micro Finance sector (including MFIs) on the supply side of value chain finance than its impact on livelihood in general
• Emphasis on developing qualitative understanding (for strategizing) than on wider coverage of the study
• Focus on community in general than on existing members of cooperative • Discussion revealed to largely focus on Value Chain Finance, while understanding the
linkages/implications at family level.
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2.1 Objectives of the Study:
Overall
To develop a strategy to ensure provision of NTFP value chain focused financial services to families dependent on NTFP for their livelihood in context of Orissa
Specific Objectives
• To assess the demand for value chain financial services • To assess to supply of value chain financial services including assessment of contribution of
micro Finance focused organization in enhancing access to Value Chain finance services • To identify the critical gaps and emerging opportunities relating to NTFP focused value chain
financial services • To develop SWOT (Strengths, Weaknesses, Opportunities & Threats) of Vasundhara
promoted Cooperatives in context of Value Chain Finance • To develop an overall strategy for ensuring NTFP focused Value Chain financial services with
focus on Cooperatives promoted by Vasundhara
2.2 Methods of Study:
The overall approach to the study is ‘Credit‐Focused Value Chain Analysis’. Value Chain Analysis in an iterative process has tried to get:
• Overview understanding of Industry; • Developing a Flow Diagram; including a Credit focused Flow Diagram ; • Identifying Actors, Activities and Enterprises; • Understanding relevance/influence of Cooperatives promoted by Vasundhara in the NTFP
Value Chain; • Identifying Credit and BDS Providers – their current efforts; • Assessing current credit needs/demand (with focus on NTFP dependant families); • Assessing current supply of credit (with focus on NTFP dependant families); • Assessing the key trends – relating to credit supply linked to NTFP; • Identifying the gaps and opportunities relating to supply of credit/VC finance; • • Developing pointers for future strategy.
Besides Value Chain Analysis, credit related data have been obtained from NTFP dependent families linked to specific NTFPs. Household would include major and minor suppliers of concern NTFP and those associated/not associated with the cooperatives.
2.3 Study sample, key variables, and criteria for selection of the nodes:
The study plan covers three major NTFP value chains linked to three locations in the project area of Vasundhara.
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2.3.1 Selection of NTFPs
Three Value Chains (Mahua, Siali Leaves and Sal Seeds) at three nodes (Balam, Birda and Kuchinda respectively) are selected purposively for the study. The credit linked value chain for NTFPs under the study were selected for investigation based on the following criteria developed by the study team.
• Products have demonstrated commercial value at the regional or national levels in order to attract local participation.
• Products that are traded through the NTFP based Primary Cooperatives and the Secondary Cooperatives promoted by Vasundhara in Orissa
• Products offer opportunities for increased productivity at the local level, thereby leading to help the poor of the region in poverty alleviation.
• Products are available in sufficient quantity to allow for ‘likely‐to‐be’ sustainable commercial harvesting and have the potential to be brought under locally managed trade of the products.
• Products involve interplay of several actors with varied levels of access and control and offer opportunities for good governance interventions.
It is recognized that these three products are the essential forest products that have potential value in the region. Based on the above criteria and the market information known to the study team, these products appeared to have the highest potential for market development.
2.3.2 Study Site Selection
While Mahua, Siali leaf and Sal Seed are found throughout Orissa except the coastal regions, the nodes were picked for field work for the following reasons:
• The existing natural resource base acts as a significant local source of products for subsistence and economic activities.
• The nodal market point of the commodity was taken into account during selection of the site for specific product.
• Based on the data from the field and previous interaction with different value chain players, the study team selected Balam of Barkote block under Deogarh district as a node for study on Mahua, Birda of Gurundia block under Sundargarh district for Siali leaf and Kuchinda of Kuchinda block under Sambalpur district for sal seed.
• These nodes are also easily accessible to the study team as these areas fall under the prospective area of Vasundhara‐promoted cooperatives.
• Traces of credit‐linked trade of NTFP were reported in these areas by the members of cooperatives.
• The study site comes under the prospective area of Vasundhara‐facilitated cooperatives.
2.3.3 Collection of primary data
Data were collected by • In‐depth Interaction through a Checklist with 20 direct and indirect value chain players in
each node; VC players include primary collectors, traders, cooperatives, Government functionaries, Banks, NGOs working on NTFP etc.
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• Interview with 30 households in 2 to 3 villages (both major/minor suppliers; and members/non members) in each node through a structured schedule; preferably by joint interaction with both men and women (heads) of the household
3.0 Study Process:
The study process included the following steps:
• Developing draft design of the study • Understanding micro Finance sector • Refining the study design • Inputs to study design and finalization of study design • Finalization of Study Team • Developing tools – Guideline for VC Analysis, Checklist for Interaction with VC Players and
Household Interview Schedule • Pre testing of Tools and Pilot Study • Finalization of Tools • Field Study – Phase 1; about One Week • Analysis and Interpretation • Study Team Meeting in Field (Presentation of Preliminary Findings) • Field Study – Phase 2; about One Week • Further Analysis and Interpretation • Presentation of Study Findings (including pointers for strategy) • Based on inputs in the presentation ‐ refining the Strategy; • Preparation of Report
3.1 Post Study Phase
The post study phase is planned for:
• Dissemination of overall strategy with wider stakeholders • Initiation of Planning/Intervention in Cooperatives, linked to strategy
3.2 Study Duration:
The duration of the study was planned for six months, i.e., from September 2009 to February 2010. It is noteworthy that the Value Chain Analysts and Field Investigators have basic exposure to specific NTFPs and the study area. All of them are involved in the process of facilitation of NTFP cooperatives of primary collectors in the study area in one form or other.
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4.0 Findings of the study
4.1 Area and People
This study focuses on Mahua, Siali leaf and Sal seed: three forest products that are considered non‐timber forest produces (NTFPs). Collection and trading of non‐timber forest products (NTFPs) including these three products is a traditional economic activity in the study area.
The study was undertaken in three different sites for three different commodities. The study area comes under Deogarh, Sundargarh and Sambalpur districts of Orissa. Kuchinda block under Sambalpur district and Sundargarh district come under Tribal Sub Plan area. The three nodes under study are Balam of Barkote block of Deogarh district, Birda of Sundargarh district and Kuchinda of Sambalpur district. This is a contiguous tribal dominated area. The major tribal communities found here are Gond, Munda, Oraon, Kisan, Ho, Bhuyan etc.
Data reveal that Sambalpur district has 50.18% of forest area to the total geographical area, Sundargarh has 43.58% of forest area to its total geographical area and Deogarh has 56.09% of forest area to its total geographical area. This reflects that this tribal dominated area has a high degree of dependency on forest for their livelihoods and culture.
The primary data from the households for studying the value chain of mahua comprise three hamlet villages namely Chakulia, Budhabahal and Sirgida of Rambhei Gram Panchayat of Barkote block in the district of Deogarh. And primary data from households on Siali leaf are collected from two villages namely, Tamparkela and Jalei of Gurundia block of Sundargarh district. Likely, data on Siali leaf from households are collected from Gandam and Purunapani villages under Kuchinda block of Sambalpur district.
Though agriculture is the primary occupation of the people of the area, NTFP has a significant contribution to the income of the household. Almost all the rural households are engaged in NTFP procurement and selling in any form or other. The NTFPs that have major contribution to the household income are mahua, siali leaves and sal seed next to Kendu leaves. As Kendu leaf trade is controlled and regulated by the Government, people have fewer stakes over it. People keep themselves engaged seasonally with many other NTFPs along with Mahua, Sal seed and Siali leaf across the year, mostly during off‐farm season.
Looking at the vulnerability of the forest dependents of Orissa Vasundhara started working on NTFP based livelihoods with advocating for local primary gatherers’ rights over these products and their markets. Following The NTFP policy in the year 2000, Vasundhara started working on community based enterprises for NTFP marketing with an understanding that mere policy change won’t change much without proactive initiatives at the community level. After the enactment of ‘Orissa Self‐help Cooperative Act 2001’ in June 2002, opportunity was created for self‐help cooperatives for NTFP enterprises and Vasundhara got involved directly in Co‐operative promotion in August 2002. The cooperative process is being facilitated in a contiguous patch of four forested and tribal dominated districts of the State. Presently, there are 38 primary cooperatives and two secondary cooperatives having the prospective areas with Gurundia and Bonai block of Sundargarh district, Kuchinda, Bamra and Jamankira blocks of Sambalpur district; Barkote block of Deogarh district and Pallahara block of Angul district.
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4.2 Findings of the study
4.2.1.0 Mahua
The study on the value chain finance of Mahua is undertaken in Balam node of Deogarh district. Data reveals that Mahua is the largest income provider among all the NTFPs to the rural households in the study area. Irrespective of community, most of the rural households are engaged in the collection and procurement of Mahua which provide them critical support in their livelihoods.
4.2.1.1 Flow of produce (Mahua)
Primary collectorKuchia
Local consumption/ Country liquor shop
(Bhati) Trader At Regional level/Node
Ex: Balam
Apex trader in other district
Ex: Rourkela, Jharsuguda, Baripada
Trader in Other states
Ex:Jharkhand, Bihar
Agent of the trader
(Note: The dotted line represents occasional backward flow of the produce) Diagram 1: Flow of Mahua in the value chan
The Primary Collectors collects mahua which are normally delivered to the next level of value chain at the village level, i.e., to the agent of the trader or to the kuchia, who act as a middleman in between the trader and the primary collectors. The traders employ agents to collect the produces from different villages, but the kuchia operates within the same village. Traders, next in the value chain, operate at the nodal level. This is the point where most of the produces are routed out through to the next level of value chain. There are as many as 7 (seven) nodal traders operating at the Balam node for mahua business. The nodal trader has a license of specific volume of trade which is required to be obtained from the excise department as per the policy framed by the Government every year.
4.2.1.2 Value chain players in Mahua trade
There are many value chain players found in the trade of Mahua at different levels like Primary Collectors, Kuchia at village level, agents in a cluster of villages, People’s institutions for collective trading (cooperatives, SHGs) at GP level, Nodal trader s, trader in other districts, and out‐state
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traders. Other players who often influence the value chain include direct consumers of mahua, Government departments like Excise, Sales Tax and Financial institutions (Banks, MFIs etc.).
4.2.1.3 Mahua trade linked credit
Data revealed that agriculture is placed at the first place in terms of occupation and income of the households in the study area, following dependency on NTFP.
The credit need related to NTFP is found in small trace at the primary producer level. It is found that in most of the cases the credit, whichever observed, is found at the beginning of the season of Mahua. Data shows that only three (3) households out of thirty (30) are found to have taken credit just at the beginning of the season. The demand for credit at the household level has been decreased drastically over the years. Data revealed that there is an increase in employability of people in the advent of provision of guaranteed wage work under NREGS and other schemes launched by the Government. From wage works executed under NREGS in the rural areas, the people are able to earn money during the lean season, which ultimately reduces the NTFP linked credit need of people having come up with a capacity to hold up the produces.
The credit linked with NTFP is found at the traders’ level, mostly at the nodal stage. It is noteworthy that most of the traders manage their credit needs from friends and relatives. The nodal level traders do not find any institutional financial linkage to meet their credit needs. The traders at the intermediate level (i.e. end point within the State) hardly need any credit to manage their business and are found to have good capital base. They would normally prefer credit for NTFP business from banks on cash credit mode. Credit also prevails at the traders’ level in form of holding back of produces and by deferred payment to the lower chain. The agents of the traders usually are not engaged in direct trading but most often act as an interface between the traders and primary collectors. In few cases, the agents procure the produces on behalf of the traders. Normally, they are not directly engaged in providing credit to the primary collectors. The Kuchia plays at the village level. The kuchia, when required takes loan from the traders for one or two days. The kuchia also channelize the loan to the primary collectors from the trader. Normally, one agent is affiliated to only one trader whereas, in few cases, one kuchia gets engaged with more than one trader. The trend of engagement of Kuchia is changing fast. The role of Kuchia in channelization of credit and trader’s business partner is diluting day‐by‐day. There have been increased instances of nodal trader being dealing with primary collectors directly and role of local agents getting reduced or replaced with direct purchase by the nodal level trader.
It seems that involvement of local agents on a larger scale earlier (4‐5 yrs back) was to ‘book’ the produce through provision of credit to collectors channelized through agents and then to monitor such investment and ensure return particularly in terms of produce. Now‐a‐days with improved income from wages (as illustrated above) & reduced need for NTFP related credit, there does not exist need for local agents as well. On the issue of NTFP linked credit, traders had a common opinion that in current times, one may not get the produce even if they have given advances to collectors. In recent years, the number of players in the mahua trade also has increased manifold. This has put the primary collectors in a bargaining position.
Though there is a need of financial linkage at the trader level, no financial institutions are providing credit to the traders in regards to NTFP trade, including banks and Microfinance Institutions. The
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dominant trend of the current situation reveal that there is hardly any credit need at primary collector level linked to NTFP trade. There is also a fast emerging trend of reduced dependency of primary collectors on credit linked to NTFP.
Primary Collector
Trader at nodal level
Investment of own fund/ loan
from Bank / help from Friends or
relatives
Working capital provided by trader
Apex trader Within the state
Local Consumption (Bhati)
Sometimes differed payment by the trader to primary collectors:
for15-30 days
Trader outside state
Investment of own fund
Agents of the Trader/ Kuchia
No need of NTFP linked credit
Diagram 2: Linkage of finance at different levels of Value Chain of Mahua
Data reveal that one of the influencing factors related to the current scenario of the credit linked with mahua trade is income of the households from sources other than NTFP. Data also find that the income from labour has increased in the rural area where as income from NTFP has decreased. People’s perception reflects that this trend seems to continue in the future. It is obvious that the contribution of NTFP to the rural livelihoods is decreasing day‐by‐day.
The value chain players including primary collectors and traders expressed that the Vasundhara‐facilitated cooperatives should not provide credit as a service to its members looking into the degree of dependency of credit linked to NTFP by the primary collectors.
4.2.1.4 Case studies
The following three cases can substantiate the findings of the study as discussed above. These three cases are selected randomly on the basis of dependency ratio of the household on NTFP. One case is selected where the contribution of income for the household from NTFP to the total income is higher; another is at a lower level and the third household having an average dependency on NTFP.
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Case I: No need of credit vis‐à‐vis higher dependency on NTFP for livelihood
Damayanti Nayak of Chakulia is landless and highly dependent on NTFP to run her household. NTFP contributes 42.98% to the total income of her household. She did not have any credit linked with Mahua trade, though she had an outstanding loan amount of Rs.8, 000/‐ for other income generation activity. She denies of advance pledging of mahua to any trader.
Case II: No need of credit vis‐à‐vis an average dependency on NTFP for livelihood
Rukmini Nayak of Budhabahal has primary dependency on agriculture for the livelihoods of her family. NTFP contributes 22.73% to the total income of the household. She feels that the income is decreasing from NTFP day by day, whereas the income from wage labour is increasing. With the increased income from labour work, there is no need to pledge the NTFP produces in advance to the trader. Even if the household has an outstanding loan amount of Rs.17500/‐, it does not need any credit that is linked with NTFP trade.
Case III: No need of credit vis‐à‐vis low dependency on NTFP for livelihood
The household of Nali Banichul of Budhabahal is less dependent on NTFP for their livelihood. NTFP contributes 4.56% to the total income of the family. Though her family has an outstanding loan amount of Rs. 5000/‐, it did not depend on the credit linked to NTFP trade.
4.2.1.5 Major findings in Mahua value chain study
• Demand for credit at the primary collector level is declining.
• Supply of credit is higher than the demand side.
• There is no role of MFIs or SHGs in supply of credit
• Because of supply of credit , price of mahua is competitive
• There is an opportunity for providing working capital for the traders
• There is a decreasing trend of income from NTFP
4.2.2.0 Siali Leaf
Siali leaf is the greatest contributor to the economy of forest dependents next to mahua, among all other NTFPs. Siali leaves are found in abundance in the study area with a good market. Rourkela happens to be one of the major trade centres for Siali leaves in the north western part of Orissa and most of the produce is exported to Andhra Pradesh, Karnataka and Tamilnadu. In the study area the leaves are sold in raw form, i.e., rudimentary, non‐processed or no value added to it.
But the trade of Siali leaves is different from mahua with less number of value players in the trade in the study area. The value chain players include primary collectors at village level, supply agents, nodal traders and the apex trader at the state level.
Trader at the nodal level covers several clusters where procurement is made directly from the primary collectors. Trader at the apex level, i.e., the end point within the state at Rourkela arranges lifting of produce from the nodal point to be delivered outside Orissa. It is also observed that few truckloads are directly sold to south Indian traders by the nodal traders.
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The nodal level traders mostly work on their own capital. The apex trader within the state finances around five nodal traders with an amount of Rs 1.00 lakh to Rs. 5.00 lakh. Siali leaf linked credit is almost non‐existent. It is observed that the income from siali leaves is decreasing from the previous years. Reasons for decreasing income from Siali may include reduced collection and non‐increase of sale price. Reduced collection may also be attributed to availability of other relatively better work/wage opportunities for primary collectors like work under NREGA. It is observed that around 5 years back even, there have been instances of pre‐season advances (cash or kind) which have now completely stopped in the study area.
The current trend of siali leaf trade shows that the kuchia at the village level is replaced by the operators of the traders, otherwise called as agents or the traders themselves. The traders are directly engaged with the primary collectors at the village level.
There is little presence of credit need at the primary collector level. Data reveals that only two (2) households have taken an advance amount of Rs.100/‐ each from the trader just before the beginning of the siali trade season. The dominant finding shows that there is no prevalence of credit. The demand for credit at the primary collector level is placed at the lower side. The NTFP based primary cooperatives that are facilitated by Vasundhara are replacing second level of value chain players, i.e., kuchia. It is observed that there is a need for credit for ‘trade function’, but not for primary collectors.
4.2.2.1 Flow of Siali leaves (Bulk trading)
10 truck/annum
Primary collector (Gurindia area)
Primary Collector (Loimura/ Dantaribahal)
Ibrahim (Tainsar) (supply agent for Sallauddin)
Laxmidhar(Kandhal) (supply agent for Sallauddin)
Primary Collectors from Orissa & bordering areas of Jharkhand
Maksood (Jareikela) (supply agent for Sallauddin)
Procurement directly from villages. Mostly spot payment, sometimes on credit
Sahid (brokering flow & arranging negotiations and logistics on behalf of Sallauddin)
Sallauddin at Rourkela (around 20 intermediaries under him)
Traders in AP, TN & Karnataka
5‐10% of total business
Pradeep Agarwal, Rajgangpur
TekuMian, Trader at Rengalbeda
Diagram 5: Flow of Siali Leaf in the value chain
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4.2.2.2 Case studies
Case I: No need of credit vis‐à‐vis higher dependency on NTFP for livelihood
Timacharan Horo of Tamparkela has a higher dependency on NTFP for his livelihood, contributing 52.33% to the total income of the household. But his family do not have any credit need linked with NTFP trade, although they have an outstanding loan amount of Rs. 8000/‐ for other purposes.
Case II: No need of credit vis‐à‐vis an average dependency on NTFP for livelihood
NTFP has a little share in the income of Ranjit Kisan’s household of Tamparkela, i.e., 8.78% and do not need any credit linked to NTFP sale.
4.2.3.0 Sal seed
Sal seed also contribute to the income of rural poor in the study area along with income from other NTFPs like mahua, siali leaf etc. Sal seed was deregulated in 2005 and since then the market is open for sal seed trade. As they have experienced, the people have an apprehension that sal seed may not be sold as easily as other NTFPs, as this produce can not be stored for a longer period. Value addition through storage is not possible for this item.
The value chain players for sal seed trade include primary collectors at the village level, agents and shopkeeper at village level, nodal trader, apex trader within the state and trader outside the state. The primary collectors deliver the produces to the agent of the trader or the trader at the village level. The next chain is of nodal trader and the apex trader. Sometimes the nodal trader sells the produce directly to the trader outside the state.
4.2.3.1 Flow of Sal seed:
Primary collector
Shopkeeper in the village
Village level NTFP Trader/ Agent
Trader at Node
Trader at Raipur
Trader at upper level in Orissa
(Note: The dotted line represents occasional flow of produce)
Diagram 4: Flow of Sal Seed in the value chain
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There is a minor element of credit linked with sal seed business observed in comparison to Mahua and Siali business. Data shows that only one household out of 30 has taken credit from the trader just before the start of the business season. One household also has taken credit from the cooperative at the onset of the business season. It is also observed that the traders do business with deferred payment to the primary collectors in the study area.
Sal seed business in Orissa has a deride history before its deregulation in 2005. There are many instances that the collected sal seeds could not be sold by the people with a faulty Government‐controlled faulty marketing system. This has put people in a state of suspicion on the marketability of sal seed even after its deregulation.
There is an influx of lot many traders in the sal seed business since 2007. With the increase in number of value chain players, the supply side overweighs the demand side in case of sal seed business. It is observed that in sal seed trade, there is hardly any credit need at the primary collector level rather the need is observed at the nodal trader level.
5.0 SWOT analysis of the primary cooperatives vis‐à‐vis value chain finance
Strength:
• The primary cooperatives have emerged as a collective strength against the traditional form of exploitation by the middlemen. With the process of collectivization the primary cooperatives have formed the secondary cooperatives and could be able to link with wider range of value chain players, from local to apex level.
• The primary cooperatives are more of a function of a kuchia/ trader at the village level. Weakness:
• There is a need for working capital for the cooperatives to manage their business. The cooperatives use two types of funds, one is their own fund and another is the external fund. The institutional finance is required for NTFP trade which is not available at present.
• There is need of a stream of institutional finance support for the producer cooperatives.
• There is a need for graduation of cooperatives for which some fund is required as working capital, along with capital mobilization for own fund and link with banks etc.
Opportunities:
• There can be a capital mobilization strategy at the cooperative/ their federation level.
• The link for trade fund can be explored with MFIs than banks as the MFIs have a presence in almost all villages.
Threat:
• Any diversion from present services offered to the members of the primary cooperatives like provision of credit as a service, might later on dilute the present focus of collective trade with NTFP.
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6.0 Summary of findings and conclusion
Followings are the key finding of the study on credit‐linked value chain finance of Non Timber Forest Produces.
• The demand for the credit is declining at the primary collector level.
• The supply of credit vis‐à‐vis current demand is higher. It is also noteworthy that the current trend of supply of credit is decreasing.
• The microfinance institutions and the SHGs remain aloof from the NTFP‐linked credit.
• The linkage of people with the MFIs is not contributing directly to the NTFP‐linked credit chain.
• There is no gap at primary collector level in regards to the demand and supply of credit.
• There is an opportunity available for supply of credit at the trader level. The traders are looking for institutional credit.
7.0 Recommendations
• With the above discussion, it is evident that there is no need of credit linked with NTFP at the primary collector level. So there is no need for the Primary cooperatives facilitated by Vasundhara to include credit as a service in their agenda.
• There is a need for institutional finance for working capital to run the business of the primary cooperatives. Capital mobilization is required by linking the primary cooperatives with financial institutions like banks and MFIs, along with their own fund.
• There is an opportunity for financial linkage at the trader level. The Micro Finance Institutions, with their wider presence, have a better scope to deal with the NTFP traders. The banks can also think of investing in the NTFP trade sector at the trader level.
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Annexure I
Study on Credit Linked Value Chain Finance of Non Timber Forest Produces
Household Schedule
Name of the Village/Hamlet: Node:
NTFP Produce Name:
1.0 Household Profile:
1.1 Head of the Household: ______________________________________________
1.2 Name of the Respondents: _____________________________________________
1.3 Profile of Income of the Household during last year:
Sources Amount –Rs.
Proportion to Total Income
Trend in Income:
Mention 1 for Increasing; 2 for Decreasing 3 for Fluctuating
Total NA
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1.4 NTFP produces with which household is associated (in order of contribution to family income):
a. ______________________ b._______________________ c. _____________________
1.5 Overall Income from NTFPs during last year: Rs. _________________
Trend in Income: Increasing/ Decreasing/ Fluctuating
1.6 Income from NTFP under Study during last year: Rs. _______________
Trend in Income: Increasing/ Decreasing/ Fluctuating
1.7 Whether Member of the Cooperative promoted by Vasundhara: Yes/No
If Yes; Name of the Coop ________________________________________________
Since when – Year _________
2.0 Sale of NTFP (under study) during last year:
Buyers Qty (specify unit) Avg. Rate offered (specify Rs. Per Unit)
Total NA
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3.0 Credit Linkage linked Sale of NTFP (under study) during last year:
Buyers Advance amount received prior to start of season – Rs.
Advance received just before sale of 1st Lot – Rs.
Average Amount outstanding on Buyer during Season ‐ sold on credit – Rs.
Total
4.0 Profile of Loan Received and Amount Outstanding including Loan received from SHG/mFI and Informal Sources (at time of interview):
Sources of Credit
Last Loan Amount (Rs.)
Amount Outstanding ‐ Rs.
Interest Rate
Purpose
Total NA
5.0 Mention discussion points relating to family’s demand for credit and supply in context of overall credit requirement of HH, in context of NTFPs and NTFP under study on the backside of the schedule:
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Annexure II
Study on Credit Linked Value Chain Finance of Non Timber Forest Produces
Checklist for interaction with Value Chain Players
1.0 Profile of the Value Chain Player
• Overall Profile – Activities/Services, Location, etc • Activities in which VC Player is associated – both NTFPs and others • Activities relating to NTFPs, including Name of the NTFPs with which associated • Association in the Value Chain linked to Credit and NTFPs
2.0 Linkages – Backward, Forward and Others
• Profile of organizations and individuals with which you are associated • According to you, what they can do (linking to constraints and opportunities) that can
strengthen your enterprise/activities
3.0 Credit Linkages – relating specific NTFP being studied
• Nature of your association linked to credit and the NTFP • Profile of organizations and individuals from whom you access credit – Both Value Chain
Players and Credit related Institutions • Profile of organizations and individuals to whom you provide credit services – Both Value
Chain Players and Credit related Institutions • Key constraints relating to access to credit services and in providing credit services to
different players in value chain • Your opinion on way forward for strengthening credit services to the NTFP value chain
4.0 Credit Services relating to Primary Collectors/Processors in the NTFP Value Chain
• Your assessment on profile of credit services required by different category of primary collectors/processors – amount, timing, periodicity, interest and other credit product features
• Your understanding on supply credit services to primary collectors/processors – Profile of Service Providers (including informal) and product features
• In case you are aware, your opinion on functioning of NTFP Cooperatives promoted by Vasundhara
• Opinion on involvement of NTFP Cooperatives in providing credit services ‐ direct/along with business, through linkage or savings/credit as add on activity
• Your observation on involvement of SHG/MFI in providing credit services to Primary Collectors/Processors
• Your views on need for enhancing credit services to NTFP Collectors/Processors and potential interventions
***
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Vasundhara (Estd: 1991) is a research and policy advocacy group that works on environment conservation and sustainable livelihood issues with a mission for Sustainable development, having an emphasis on the empowerment of rural poor, social justice and equity. The organization was initially conceived to support and strengthen community-based initiatives to protect and conserve forests in the state of Orissa; and over the years, it has developed a more explicit focus on the sustainable livelihood of the forest dependent communities. The interface of conservation and livelihoods now forms the core of its interventions.
In recent years, in the operational area of cooperatives facilitated by Vasundhara, there is an increasing incidence of Micro Finance activities, through Self Help Groups and Micro Finance Institutions (MFIs). However, there seems to be a mismatch between current requirements of the forest dependent communities and existing microfinance service and practices. This piece of work is guided by a belief that the primary gatherers of NTFP most often fall prey to the vagaries of market and distress sale which limits enhancement of their livelihoods. The need for thrift and credit linked to NTFP trade as a service is also not clear at this juncture. It is also unclear if the organizations associated with thrift and credit services would be able to meet the requirement for thrift/credit services of members of the cooperatives. This is an outcome of the research carried out on “Credit Linked Value Chain Finance of Non Timber Forest Produces” in Orissa.
VASUNDHARA A - 70, Saheed Nagar Bhubaneswar - 751007 Odisha, India Tel / Fax - 0674-2542011 / 12 / 28, Website: www.vasundharaorissa.org