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[Guest Post]: It’s Not All Bull: Mainstream Business Can Fight Poverty

28th Jul 2009
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It is a dusty, sun-baked road that takes us to Singampet village in Mahbubnagar district, over a hundred kilometers away from Hyderabad, the capital of the southern state of Andhra Pradesh, India. The surrounding fields are bare, waiting for the first monsoon rains to begin before the summer crop season starts. Yet economic activity here has not come to a standstill as it would have in the past. The reason for that change can be found in Damodar Reddy’s house. It is here that Damodar, an agent for a leading Indian retail company, runs a milk collection point for his village.

The collection point provided by the company is a simple setup, with jerry cans for milk collection and computerized instruments for measuring fat content and milk density. The collection process is turn key: farmers milk their cows twice a day and bring the fresh milk to the collection point. The computerized instruments generate a receipt based on the weight and fat content of the milk provided by each farmer. At the end of a fortnight, each farmer gets paid by the company directly. Damodar gets a commission for managing the center and ensuring its smooth functioning.

It is centers such as these that are allowing farmers to break away from dependence on rain-fed agriculture through the creation of alternative sources of income. Interacting with some farmers at the collection point, our team hears their stories of how they were forced to sell their milk to local shops at a loss, and how at times they had to pay for the “privilege” of doing so. The stories of difficulties narrated by the farmers in Singampet are not unique; they are a variation on a theme heard in villages across India.

The difference lies in what they have to say now – they have been able to increase the number of cattle they own and their incomes because the collection point gives them an assured market and an attractive price.

Stories such as that of Singampet and of the other villages where such collection points are operating, highlight the vast untapped potential of mainstream business to have an impact on rural areas. The key is in creating interventions where commercial interests of mainstream businesses and the interests of the community align, without the need for forced fits.

Praveen Reddy, one of the farmers with whom we interacted would endorse such an alignment. A former executive with a large mainstream bank in Hyderabad, he left his suit and tie behind to take advantage of the opportunity made possible through a new collection point in his village. With the creation of more Singampets, Reddy believes that many more people like him as well as other poor migrants can leave their city jobs to return to their villages.

For more information on creating such alignments between mainstream businesses and local communities, take a look at Business Fights Poverty, where, for the past seven months, there have been many engaging discussions about the topic. Intellecap, too, is working towards creating such alignments for the mainstream businesses with which we work. Here’s hoping we can create more Praveens.

Editor’s Note: Guest blogger Sagar Shankar is a Senior Associate with the Business Advisory Team at Intellecap. Intelleca (published of Beyond Profit) is a for-profit development firm with a focus on intermediating capital and advisory solutions for small and medium enterprise development.

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