Integrating Poor into Market Systems (IPMAS)

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Integrating Poor into Market Systems (IPMAS)

India
Project Summary
Elevator Pitch

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We provide low-cost micro-irrigation technologies which include water-lifting, water-application and water-storage devices. These products are used for irrigating their agriculture fields and expanding gross irrigated land and growing high-value crops. Our primary clients are poor smallholder farm families who earn less than a-$-a-day. These families are into subsistence agriculture and also depend on a mix of farming and labour to earn a living. Our products are adapted to the needs of the smallholder which include, substituting capital for labour, low-cost, adaptable to differing land-sizes, operable by men and women and are therefore pro-poor in nature. These products are 60-70% cheaper than conventional products, do not cost more than 20% of our client?s annual disposable income and have a one year warrantee. Our products are designed specifically for the smallholder unlike existing products where they have to force-fit. Immediate impacts are income effects; due to increase in production level which in turn is due to increase in cropping intensity and net cultivation area. Social impacts due to increase in income include, migration to nearby towns prevented, Smallholder farm families get to work on their own fields, Integrated with input and output markets and ability to spend more on basic needs like, food, housing, education and health. Environmental impacts include increased efficiencies in use of water and energy.

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Your idea
Sector of activity

Agriculture

Other sector of activity
On the mosaic diagram, which of these factors is the primary focus of your work?
Factor

Limited purchasing power of individual clients

Principle

Change radically the logic behind your business model

Innovation
Description of your products or services:

We provide low-cost micro-irrigation technologies which include water-lifting, water-application and water-storage devices. These products are used for irrigating their agriculture fields and expanding gross irrigated land and growing high-value crops. Our primary clients are poor smallholder farm families who earn less than a-$-a-day. These families are into subsistence agriculture and also depend on a mix of farming and labour to earn a living. Our products are adapted to the needs of the smallholder which include, substituting capital for labour, low-cost, adaptable to differing land-sizes, operable by men and women and are therefore pro-poor in nature. These products are 60-70% cheaper than conventional products, do not cost more than 20% of our client?s annual disposable income and have a one year warrantee. Our products are designed specifically for the smallholder unlike existing products where they have to force-fit. Immediate impacts are income effects; due to increase in production level which in turn is due to increase in cropping intensity and net cultivation area. Social impacts due to increase in income include, migration to nearby towns prevented, Smallholder farm families get to work on their own fields, Integrated with input and output markets and ability to spend more on basic needs like, food, housing, education and health. Environmental impacts include increased efficiencies in use of water and energy.

Description of the operational model:

The commercialization process involves several steps that have been developed and honed during the past fifteen years. IDEI identifies potential manufacturers that are interested in taking up the product and then works with them to develop cost-effective production systems and imbibing quality assurance procedures. Product interest and demand are created in rural areas through live product demonstrations - in village based markets and fairs, mobilizing opinion leaders, demonstration plots, farmer meetings, video shows, farmer?s exposure visits, etc. During these dynamic activities, static promotional elements including handbills, wall paintings, hoardings, banners and dealer signages are used. The promotional strategy is based on framing a Unique Selling Proposition. All products are sold under the KB brand (Krishak Bandhu - meaning farmer?s friend). A private-sector supply chain (manufacturers, distributors, retailers, and installers) is established, equipped, and encouraged by IDEI through research and development, training, quality control, and logistical support. The manufacturing and distribution system is decentralised to make the technology more easily available in remote locations. The technical and business management skills of private-sector partners are strengthened through mentorship and trainings. The process is designed to be sustainable in the long-term by ensuring that the technology satisfies a real need and the distribution chain benefits financially

Impact
Description of the financial model:

Our clients pay for the products directly. IDEI believes that access to finance often becomes a key constraint in allowing the poorest to be integrated into mainstream markets. Therefore the alternative strategies which have been worked out include; Value Chain financing ? whereby procurers of the agriculture produce provide credit; establishing linkages between technology manufacturers and retailers whereby retailers access a line of credit which is used to provide credit for the customers; linking them to Microfinance Institutions which provide credit at more affordable interest rates. This initiative of IDEI is currently recognized by multiple donors who are a mix of bilateral, national and international foundations. A for- profit entity, Global Easy Water Products Private Limited has already been spun-off to carry on the commercialisation of micro-irrigation systems. IDEI support will continue till we reach a critical mass in all areas for all technologies. Currently the for-profit and the supply chain pick up 15% of the costs. As the for- profit starts generating surpluses, they will be ploughed back into IDE India to undertake activities that help fulfill its mission

Client fees represent this approximate percentage of operational budget:

15%

Key operational partnership:

Our partnerships are with Direct Service Providers (DSP) and Co-facilitators (CF). DSP are market actors who deliver products and services to rural poor and consist of private enterprises. CF assist by supporting DSP which takes the form of training, research and development, establishing market and information linkages, awareness raising, demand creation, and policy advocacy. They include organizations that are able to provide facilitation services outside of IDEI?s areas of expertise. The major challenge we have faced with DSP is getting them interested in products which have low margins (in absolute numbers) and the need to service large number of customers as well as adopt non-conventional practises like offering warranty. Another challenge has been to link urban based manufacturers with rural based retailers. The opportunities have been a large presence of the DSP and their linkages with customers. The challenge with CF has been to develop a win-win relation and finding acceptability across various levels in the organisation. The opportunity with CF has been to reach out to larger number of farmers as well as weaker sections of the society.

Current outreach:

We are at the <i>Scaling Up</i> stage. We have targeted to reach three million families directly through IDEI programs in India and two million families by extending and scaling-up the IPMAS approach through the actions of other organizations. We aim to reach this figure by 2020. It is clear that other public, private and civil society organizations must be brought on board. IDEI has an important role to play in championing the cause of smallholder market development and rallying broad- based support. There is a need to attract private investment (by input suppliers, wholesalers, exporters and processors) into smallholder agricultural market systems by convincingly demonstrating a bottom-line ?smallholder advantage.? Decision-makers in governments, corporate sector and donor agencies must be convinced to include smallholder market development as a key strategy in their poverty reduction plans.

How many clients have benefited from your product/service in total? Over the last year?:

As on March 2005, 650,000 smallholder farm families (3.2 million people) have purchased, IDEI promoted micro- irrigation technologies. Over the last year, the smallholder farm families reached out to is 60,000 (0.3million). These are direct clients. Besides our direct clients we have an impact on landless labourers who get employment opportunities and better labour rates, due to greater demand for labour. Local entrepreneurs like carpenters, traders, shop-owners also stand to benefit as new wealth is created and circulates in the local economy.

What percentage of your clients is below the poverty line ($2 per day)?

<i>95%</i> 95% of our clients are below 2$-per day income levels. IDEI estimates that a net additional income of at least US$ 200/- per participant per year (at current price) is sufficient to allow a poor smallholder to gradually pull itself out of poverty. To reach this income level, smallholders must increasingly concentrate on sustainable remunerative crops, which typically generate higher returns to both land and labour. The risks involved in sustainable remunerative agricultural crop production (greater market exposure, higher input costs) suggest that intervention strategies leading to market participation must be accompanied by strategies that ensure adequate staple foods production.

What is the order of magnitude of the potential demand for your products or services? Which other low-income groups, countries or regions could benefit from it? Try to quantify (number of clients, market size in currency).

About 430 million people in India exist on less than $1 per day with many suffering from chronic hunger and malnutrition. Three quarters of this total, or about 322 million people, live in rural areas and depend primarily on subsistence farming for survival. Landholdings for these smallholder farmers are typically less than 500- 10,000 m2. The ultimate irrigation potential in India is estimated at 113.3 million hectares (mh). The potential for micro-irrigation in India among smallholders is 30 million hectares, and IDEI estimates to achieve 500,000 hectares covering 5 million smallholder households by 2020. In addition we also plan to cover 50,000 hectares covering 0.5 million smallholders in partnership with other organisations, in other developing countries of South Asia, Sub-Saharan Africa and parts of Latin America.

Scale-up strategy:
How many low-income individuals do you plan to benefit in three years from now? How are you planning to scale up or replicate your solution? What are the major constraints to scale up?

IDEI estimates that 250,000 smallholders farm families or 1.3 million poor people will adopt micro-irrigation over the next three years. Demand side constraints include: Inability to afford Micro-Irrigation (MI) products currently available; Lack of awareness about MI. Supply- side constraints include: financial problems faced by manufacturers, distributors, and dealers of MI; lack of suitable products developed for smallholder farmers, lack of promotional activities leading to adoption of MI products; and insufficient numbers of MI retail outlets in remote rural areas. IDEI will scale-up by; further refining MI products tailored to needs of smallholder farmers; engage in demand creation activities; develop linkages with a network of NGOs; develop a profitable and widespread private sector supply chain to produce, distribute and sell MI; promote business linkages among the supply chain.

Which specific areas - and why - in your field would benefit most from investment by corporations, foundations, and other investors:

Donor funds are used to lay the groundwork for a sustainable free-market system. The creation of a market for a new and innovative technology requires certain high- cost investments up-front: product development, capacity building in the private-sector supply chain, and intensive marketing during the product introduction to build a critical mass of awareness and demand. Donors bear these initial costs, which could never be borne by small-scale entrepreneurs individually. To accelerate the rate of growth of micro-irrigation without a constant need for new infusions of philanthropic donations, it is important to tap in to potential investors who prefer to support for- profits which market socially relevant products. For every dollar raised from donor sources, the private market would contribute 3.6 dollars and farmer investment would be almost 16 dollars.

Sustainability
The organization: How does the initiative fit with your overall organization's strategic goals and priorities? How did the initiative start?

IDEI?s approach to poverty alleviation and rural development is to put income-generating technologies into the hands of the rural poor families. Traditionally, poor farmers have been ill served or ignored as a market segment on the assumption that they have no money to spend. IDEI?s experience, however, has been that even very poor farmers do have a little money to spend but lack appropriate investment opportunities. With the right products?appropriately sized, priced, and marketed?the private sector, arguably the most efficient mechanism to maximise coverage and impact of a technology, can deliver income-generating technologies to small farmers in a sustainable ?win-win? relationship. In 1991, when IDE began working in India, the most important constraint faced by small farmers was a lack of reliable irrigation water and therefore IDEI introduced the treadle pump.

Organization's legal status:

Company

Number of Employees:

150