How can we make farmer producer companies both financially and socially empowering?

Farmer producer companies show big gains in Bihar, India, but implementation hurdles remain

Written By Pooja Sengupta and Stuti Tripathi

The state rural livelihood mission of Bihar, JEEViKA, has earned itself an envious reputation of being an early-mover to bring new opportunities to the nearly 13 million women it has mobilised into Self Help Groups (SHGs). JEEViKA has centred the role of SHG women as key agents for delivering multi-sectoral interventions in the state, including in historically male-dominated domains like agriculture. In doing so, it has advanced the narrative on women’s empowerment. JEEViKA demonstrates how SHG membership can open the gateway to opportunities that challenge traditional beliefs that exclude women from having a voice in household decision making, especially in financial matters.

To enhance women’s participation in agriculture, JEEViKA began promoting member-owned and member-governed farmer producer organisations of women to effectively engage in economic activities at scale, in compliance with the National Rural Livelihood Mission guidelines issued in December 2017. In a country where small and marginal farmers make up 86 per cent of total operational landholdings, collectivisation has long been the policy response to address the structural constraints that farmers face given their small scale of operations. The idea of farmer collectives gained fresh impetus in the light of an amendment to the Companies Act in 2002 allowing farmer collectives to operate as companies, and hence allowing greater market integration.

However, the euphoria surrounding farmer producer companies (FPCs) has been tempered with the sobering reality of their limited success at fulfilling their stated mandate. Earlier this year 3ie published a brief that summarised research findings about the collectives, highlighting barriers to their effective implementation.

JEEViKA was quick to realise and respond to these limitations. With support from the Gates Foundation, it brought TechnoServe on board to provide technical assistance to help transform FPCs into business entities. Its approach is to build scalable agriculture-based value chains that link farmers to markets for better profits and higher agricultural income. Called the Women Advancement in Rural Development and Agriculture (WARDA), the programme was rolled out in several districts of Bihar, including Purnea and Muzaffarpur. In those districts, 3ie conducted a study to understand which approaches worked to revive JEEViKA-promoted FPCs, which were either defunct or struggling, lacking clear mandates, human resources and well-crafted business plans.

The study found that WARDA procured more crops each year, demonstrating the willingness among farmers to participate in the programme, and that it offered them fair prices. However, a complete transition remains distant, as farmers continue to depend heavily upon traders for credit during the sowing season.

Furthermore, the research showed how each crop’s value chain is unique. Commodities that have a shorter shelf life can be more challenging to market. Even with signed agreements with big retailers, ensuring a regular supply of high-quality produce proved difficult for crops like litchi and vegetables. Where storage was possible, WARDA connected maize farmers to institutions like National Commodity and Derivatives Exchange Limited that store produce for a fee.

The evaluation also revealed how human-resource intensive the WARDA model is, preventing FPCs from turning around quickly, even if they have a thorough business plan. To reach around 5,000 farmers (the total number of farmers registered with an FPC), the model draws on JEEViKA’s 200-strong community cadre, combined with significant support from Techno Serve and the JEEViKA staff. Working capital shortages further prevent companies from scaling rapidly and becoming financially sustainable.

Producing both financial and social benefits remains an elusive goal. It requires a longer-term investment from stakeholders committed to the vision of promoting women-managed and controlled FPCs, thereby leading to women’s empowerment. WARDA-supported FPCs are a long way from putting the reins of the company in the hands of the community, not for lack of intent but rather due to the very slow nature of social change. One final research finding is that there are real constraints to implementing agency capacity, especially for agencies like JEEViKA that are delivering multi-sectoral interventions as opposed to for-profit agencies, which are set-up to do business. Frequent staff turnover and competing work demands also affect the functioning of FPCs, which require constant support and oversight, especially in the first few years.

FPCs in India may not have triggered the changes that their champions anticipated, but they have demonstrated the immense potential of the idea, if executed well, through experiments like WARDA. Despite its challenges, the programme made significant strides in rejuvenating the FPCs and fostering community interest in formal business organisations. In a very short time, WARDA’s disruption of the traditional value chain can be considered phenomenal, given how embedded intermediaries have been in rural economies since times immemorial. That said, there remain important structural constraints that inhibit women’s meaningful participation. This research on farmer producer companies brings to light the complexity of gender relations that require a multi-dimensional approach to implement change.

The writers are with the International Initiative for Impact Evaluation (3ie)

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