Microfinance

Earlier this week, when President of MFIN Vijay Mahajan tipped off that "some MFIs may have to shut shop as early as 1st Jan 2011, as Banks refuse to lend", of all things, Karna from Mahabharata came to my mind...

Bankers may only be proving the stereotypical notion that they are, after all, fair weather friends; or may be right in their judgment in not putting any more good money behind bad. But, much like the Karna's story, many factors beyond the new loans from Banks may have contributed to the death of such MFIs.

Here is my take on what some of those factors are:

1. While the interest rates of MFIs are lower than what a local money lender charges, the fact that the rates hardly came down in so many years of MFI existence implies that the sector hasn't innovated enough. Whoever survived without innovation for long?

2. Actually, at the heart of MFI value proposition are two other complementary services viz. (a) improving income generating capability of the borrowers - beyond their cost of borrowing - through several Business Development Services, including collectives for scales of economy and (b) social mobilisation for improving credit repayment culture and taking up activities that benefit the community as a whole, eg anti-liquor campaigns. Along the way, as MFIs proliferated many of them focused on transaction efficiency, and lost sight of these two pillars that defined the original business logic.

3. That politicians cutting across party lines are egging the borrowers not to repay their loans, likening the MFIs to Loan Sharks, suggests that the industry hasn't built any political capital either, in all these years! A wide range of motivations were attributed though, such as opportunistic political gains and selfish interest of some politicians who are money lenders themselves hence anti-MFI.

4. What's even more surprising is the lack of overt support (in this hour of crisis) from the very beneficiaries themselves - the borrowers - even after knowing fully well that the MFIs would close and they may have to resort to higher cost borrowings again. The absence of social capital in the operations of many MFIs (described in 2 above) meant that the borrowers didn't see the long term benefits of continued engagement with those MFIs, instead were happy extracting the short term transactional benefits (escape from repaying their loans). In contrast, when the middlemen struck work at mandis in 2004 to stop ITC eChoupal from making the agri markets transparent, thousands of farmers came on to the streets spontaneously to support eChoupal.

5. Appropriate regulations did not evolve along with the growth of the MF sector.

6. The MF market got distorted, with Government also acting as a lender through SHGs in many States. In fact, competition with Government (who is also a regulator) in a distorted market, is a big threat for the sustainability of many social enterprises. People at BoP are the common target, by definition.

7. Wrong choices of scaling models by many MFIs is another factor. Any organisation can choose from four scaling models - scaling up, scaling deep, scaling out or scaling through. Up requires standardisation of processes for efficient replication of a demonstrated unit. Prerequisite of deep is a capability to orchestrate an ecosystem to deliver multiple products & services to the same customer group. Out is replication of the same model in a different domain. And, through is a typical franchising approach with the attendant conditions. Some MFIs attempted crossing from one model to the other or even blending different models without building the requisite capabilities, obviously leading to trouble.

8. Large sums of money was pumped in through Private Equity, IPO etc. before the sector geared itself for scaling. These sources of money demanded rapid growth, which in turn meant diluted quality of execution (multiple loans to the same borrower, coercion in recovery etc). Coupled with 7 above, this is a recipe for disaster.

9. Not enough manpower was trained in conjunction with the growth of the sector, unlike what was done in other manpower intensive large scale businesses, such as Software, Green Revolution and Operation Flood. It is estimated that some 100,000 people are employed in MFIs. Again, whoever succeeded without quality manpower.

10. In many places, the group leaders (of borrower groups) started their own bridge loan businesses, thus "ever-greening" the loans, making the ground reality opaque to MFI staff.

11. Many people question the ethics of some MFI promoters for using the growth & profits from the highly leveraged soft loans (originally given for a social cause) for private gain. In businesses at BoP, it is important for the lead players not to lose the strength of morality to be able to push Government towards reform.

What Next?

Notwithstanding all the above factors, the business case for MFIs still exists. By virtue of the crisis wrought by the Ordinance in Andhra Pradesh, good MFIs are suffering as badly as the bad.

Instead of trying in vain to revive the sector after it is dead, all the stakeholders need to kick-off a consultation process to determine the right way forward in each of these and such other factors, with the future of the borrower in mind. Karna did die due to many curses, but mythology tells us that every curse can be lifted too!

India: FDI in Retail

Here are the notes I had prepared as Aide Memoire for myself, for yesterday's Panel Discussion on FDI in Retail at the India Retail Forum 2010

With AT Kearney's Global Retail Attractiveness Index placing India at the very top since the mid 2000s, many MNCs and the Foreign Governments have been advocating liberalised FDI inflows into the sector for a while now. Their primary argument is that the FDI is a powerful catalyst to spur competition, especially in the retail industry which is characterised by low competition and poor productivity along the whole supply chain...

Some benefits are clear, while some are arguable! And, there are some genuine concerns too... A very calibrated reform process adopted by the Indian Government, to date, made sense. As the pressure mounts to open up the FDI in the hitherto reserved multi-brand retail, what should the Government do? Here is my analysis of the pros & cons. And the recommendations follow!

A. Clear Benefits:

1. More competition leads to more choice. And, more choice leads to greater value to the consumer.
2. Interactive engagement between the product and the consumer on the modern retail shelf leads to higher consumption. This means faster GDP growth at macro level, and better quality of life for the people at micro level

B. Arguable Benefits:

1. Retail sector generates large employment opportunities. Or, are they actually the jobs from the informal sector getting recognised as employment in the formal sector? Is there a metric such as "Relative Employment Intensity per Rupee of Sales" that resolves this argument?
2. Price paid to the small farmers will increase. Higher share of organised trade, the argument goes, results in higher farm gate prices. Or, will the small farmers actually get squeezed further, to pass the benefits on to the consumer in a hyper competitive market?

C. The Concerns:

1. Modern Retail will displace small retailers. In a nation of shopkeepers, is this justified? The counter-argument is that the small retailers are very savvy, they will find their own niches and co-exist; it's not as if modern retail will take 100% market share. Empirical studies prove that the small retailers in the vicinity of newly set up modern stores do suffer badly...
2. Big Box modern retail has adverse side effects on the environment. Huge energy consumption through ACs & lighting, besides large concrete constructions that skew the green ratios.

D. Some Related Issues:

1. When domestic large companies can invest in modern retail, what's the big deal in allowing FDI? On the other hand, is it not that every firm - however globally spread it is - has a dominant home nation orientation? What are the implications of such orientation on the gross value captured within the boundaries of a "market nation" for its people & economy?
2. FDI was allowed in cold chains some time ago, but no investment has come into cold chain! What's the reason? Does India really need large investments in cold chain, given that most perishable products are grown within a small vicinity of consumption geographies, taking advantage of its conducive agro-climatic conditions? Are we better-off with investments in information infrastructure and farmer-market linkages that enable rapid response by the production system to demand signals? Isn't that a more viable means to cut wastage than the expensive cold chains? Actually, where the cold chains are required (eg. for exports of perishables, for products that can be grown in some corner of the country), the investments (whether FDI or domestic) are not happening because of regressive Agricultural Laws (eg Essential Commodities Act, Agricultural Produce Marketing Act, Forward Contracts Regulation Act).

So, how do we gain from the positive outcomes listed in these arguments, and neutralise the negative outcomes?

Is a gradual 24, 49, 74% FDI permission the good route, taking stock of the outcomes at each stage? Or should we place some specific conditions? In a world where the flag-bearer of free markets - USA - advocates "Be American & Buy American", I believe, some conditions are apt! Otherwise, the benefits could remain "kehuni-pe-gur"!

E. My Recommendations:

1. Mandate that a proportion of the investments must be made in the back-end. Say 30% in logistics and another 30% in farm level infrastructure (including agricultural extension services). In today's world of specialisation, instead of insisting that the mandate be executed by the Retailers directly, let them decide which of these legs they would like to execute themselves, or which they would like to outsource to domain specialists.
2. Impose a special surcharge (say 1%) on the Sales Value of the modern retail that can be built into a "Displaced Small Retailer Rehabilitation Fund". Somewhat along the lines of the Universal Service Obligation Fund in telecom.
3. Reform Essential Commodities Act, Agricultural Produce Marketing Act, Forward Contracts Regulation Act while permitting FDI in multi-brand retail.
4. Leave the rest to the market.

Swimming through Blue Ocean - The ITC eChoupal Story

Over the years, ITC eChoupal story has been told from many perspectives. On the occasion of the launch of India Blue Ocean Strategy Research Centre by TAPMI, I was requested to share the story using the Blue Ocean Strategy framework. Following is a summary of that talk. The ppt I used is here.

If you are unfamiliar with the Blue Ocean Strategy (BOS), or would like to refresh, this presentation by the BOS authors provides a quick overview.

In essence, the aim of BOS is not to out-perform the competition in the existing industry (a bloody battle akin to a red ocean), but to create new market space (a blue ocean), thereby making the competition irrelevant. BOS framework includes 'formulation' & 'execution' principles to minimise risks and maximise opportunities while creating blue oceans. A 'visual strategy canvas' frames the context, and a 'new value curve' with 'four actions framework' offers the tool kit to craft the strategy. 'Six paths' to BOS pull you out of a mindset of "competing within" to "creating across" the dimensions of industry, offering, orientation, time etc

The eChoupal story is written in normal font and the references to BOS framework are in italics.

Am using rural marketing as the scene of my story today. Feature stripped products at low prices, or single serve packs at unit prices, are the most common strategies adopted by companies, while targeting rural consumers in India. These efforts did succeed to some extent, but growth & profitability are limited, because everyone is competing for a larger share of the same small wallet. The outcome is a bloody red ocean! Many companies, in fact, started wondering if there indeed is a fortune at the bottom of the pyramid, or just some small change...

Comes along ITC eChoupal, and says "why not raise the incomes of rural people and then get a larger share of their expanding wallets?" "And if we can raise their incomes profitably, that becomes a unique business opportunity in itself, and will also create a virtuous cycle; more profits to ITC --> higher incomes to rural producers --> more spends by the rural consumers --> more profits to ITC -->" In other words, fortune "for" the bottom of the pyramid as a route to discover fortune "at" the bottom of the pyramid!

Thus, instead of following the conventional logic of outpacing the competition on the same counts by offering a better solution (lower prices) to the given problem (low incomes), ITC eChoupal redefined the problem itself and offered a blue ocean solution that made the competition irrelevant. This 'reconstructed' the market boundaries and eliminated the 'search risk'.

BOS recommends a sequence in which the strategy must be created to ensure a win-win in the new market terrain, viz. 'utility' of the offering to the customer, 'price' that is relevant to the customer, a target 'cost' that leaves sufficient profit for the company at the relevant price, and finally make certain that the customer 'adopts' the offering... In fact, ITC eChoupal can be called a "deep blue ocean strategy" because this sequence itself was made redundant by "raising incomes, at no charge to the customer; the questions on pricing and adoption didn't even arise"!

In the language we use internally, "raising incomes" was only an "opportunity insight". We still needed a "solution insight" that could actually seize that opportunity...

In fact, our solution insight actually killed five birds with one stroke, much like the Hungarian Bus Company (NABI) example cited in the BOS book. So, I fancied the title "Five Birds with One Stroke" for my next section :)

Before coming to that, let me describe another red ocean in the context of rural producers. I illustrate this by using the example of farmers. Most of you know that farmers receive only a small share of the consumer price; this is because of an institution called "mandi" (an auction centre) in the value chain between a farmer and a consumer. Farmers take their produce to a "mandi", typically some thirty kilometres away from their village, to sell. Representatives of Agri Business Companies or their agents look at the produce to assess the quality and bid a price. At the end of such a bidding, the farmer is under pressure to sell the produce even if he is not happy with the price because of the sunk cost of transportation. Taking the produce back and bringing it again would mean twice the cost, with no guarantee of a better price the next time around. The total transaction costs also multiply because the produce is first taken from the village to the mandi from where it is brought to the Buyer's warehouse. Since mandis became monopolies, cartelisation to bid lower prices, higher commission charges and malpractices (eg under-weighment of the produce) etc became common. But there was no better option than a mandi, because the farmers were small, the quality of their produce was heterogeneous and they lived in dispersed geographies.

If we figured a way to "discover the price in the village" despite these constraints, we could eliminate substantial part of these non-value-adding transaction costs and split that saving between the farmer and ITC. That was our "solution insight" to raise farmers' incomes. We did this by using the Internet for disseminating the generic price, and a lead farmer (Choupal Sanchalak) to assess the quality in the village itself. Once the price was discovered, the farmer could decide - with no pressure of sunk cost on him - when and where to sell his produce for best price realisation. If he decided to sell his produce to ITC, he brought it to ITC's factory or warehouse (typically at a similar distance as a mandi) to realise a higher net revenue, because he paid no commissions nor incurred any labour charges. Electronic weighing ensured correct weighment. Since the material is delivered at ITC's warehouse, ITC saved on transport costs. The savings are different for different commodities and geographies, depending on the levels of non-value-adding costs in those chains.

This is the first bird, and in a sense, is like "Eliminate", one of the four actions to design a new value curve under BOS; eliminate some of the factors that the industry takes for granted!

But, 'inefficiency elimination' as a source of value becomes obsolescent with the passage of time, as the market efficiency improves once many competitors imitate the model. So we needed to discover more sources of value. And, we did not need to go far! The same price discovery solution became the source of another value, the second bird :)

The case study of ITC's Aashirvaad Atta is the best illustration of this idea. Indian consumer living in different parts of the country seeks different traits in Atta (wheat flour) based on the cooking habits in those geographies, viz. colour, texture, water absorption capacity etc. But the traditional mandi system did not allow this value to be offered to the consumer! The different varieties of wheat that could deliver these traits got mixed up at the mandi before moving to the wheat mill. As a result, the consumer did not see value in buying packaged atta and preferred buying select wheat and getting it ground in a neighbourhood chakki, however inconvenient it was. With farmers bringing their produce to ITC eChoupal hubs themselves without any comingling of varieties as happened at mandis, ITC could preserve the identity of the varieties & grades through its supply chain and produce discrete blends of atta for different markets of India based on consumer demand. And, Aashirvaad became a market leader with over 50% share in under two years of its launch. And the market itself has doubled since then, as the consumer is now finding the traits she wanted in atta itself! The farmer now received a larger share of a higher value delivered to the consumer; and ITC built a premium brand...

This is another idea described in the four action framework, as "raising" a factor of the value curve well above the industry standard!

The third bird was a revelation for us when we went to the farmers for feedback during our first season. The higher price and the lower costs were only second and third benefits on the farmers list. To our surprise, the first was the restoration of their pride through dignity of choice! Many farmers said that they felt humiliated by the system of "auctioning" their produce at mandis, as they had no way to set their own price for their months of toil & risk as any other business person did. Nilaami of someone's property was a disgrace in villages, as this happened only to the insolvent... But, in farm produce there was no other choice.

It occurred to us that the traditional functional orientation of the industry (a strictly price based transaction), suddenly got transformed into an emotional orientation. This is one of the six conventional boundaries of competition described in the book, when broken through would lay a new path to Blue Ocean Strategy. And this revelation also reinforced our tagline "Kisanon ke Hith mein, Kisanon ka Apna". A simple and compelling tagline is a key attribute of a sound BOS, along with two other complementing characteristics viz. must have an undiffused focus on some key competitive factors, and the shape of the value curve must diverge from that of other players in the industry.

This re-orientation of the relationship helped with the fourth bird! The trust reposed by the farmers in the ITC eChoupal brand enabled us to create a rural marketing platform that could endorse products & services on offer to rural consumers helping deeper penetration. In turn these products & services filtered by ITC through its knowledge and bargaining power raised the quality of life in rural India finding better destination for the higher incomes. The same digital (access to Internet), human (Sanchalaks & Samyojaks - more on this later) and physical infrastructure of eChoupal was leveraged for the reverse flow, reducing the effective cost of reach into rural India. Today more than 160 organisations ride on this platform creating an "increasing returns model". More partner companies bring more customers, and more customers attract more partner companies!

This fourth bird is like another method of the four actions framework i.e. "create" some factors that the industry has never offered before, to craft a new value curve.

Using this rural marketing platform to deliver agri inputs together with agri extension, raised farm productivity and quality of the farm produce. This was the one more way of raising the farm incomes, while creating another new business opportunity for ITC!

The shot not only delivered the fifth bird, but also broke another of the conventional boundaries of the competition by expanding the scope of offering through a complementary service (extension bundled with input) to chart another BOS!

Before I close, let me illustrate a couple of "execution principles" of BOS by sharing what I consider the real breakthrough innovations of ITC eChoupal. Both of these are similar to having your cake and eating it too, the hallmark of value innovation under BOS!

First of these is the co-option of the traditional middlemen into the eChoupal model as Samyojaks. These middlemen added value to the agri chains by making up for the lack of infrastructure; especially in the areas of physical transmission of goods, handling cash and managing counterparty risk. But they spun exploitative cycles of dependency around farmers and extracted value for themselves, by blocking information flow and market signals. ITC eChoupal co-opted them as service providers to handle physical jobs, yet bypassed them in the information chain by using Internet. In this manner, who could have been potential detractors of the new strategy were converted into friends. The devil is silenced, per BOS language!

Even more interesting is the creation of a new institution called Sanchalaks, lead farmers from within the village. Through a "fair process" of selection and work practices, the Sanchalaks were evolved into nano-enterprises who are equi-distant from the farmers as well as the companies riding on the platform at the same time. Both of them considered a Sanchalak a reliable trustee of their interests. The angel is leveraged, per BOS language!

With these execution risks managed effectively, ITC eChoupal initiative is now scaled to serve 5 million farmers (or 20 million consumers) spread across 50,000 villages of rural India.

Thank you...

PS: ITC eChoupal story is narrated using the BOS framework with a hope to trigger more innovation for the benefit of society, but the initiative itself precedes the BOS book by five years!

Corporate Social Responsibility (CSR) - A socially responsible investment?

Yesterday, the Net Impact Club of ISB hosted a Panel discussion on "Corporate Social Responsibility (CSR) - A socially responsible investment?" PS Narayan (Wipro), Janet Geddes (KPMG), Unmesh Brahme (formerly with HSBC), Mudit Kapoor (ISB) were my co-panelists.

I was the first speaker; this is what I said in my opening remarks. Highlights from what other panelists said in their remarks, as well as the questions & comments by the audience are mentioned in italics, integrated into the text of my remarks for the sake of seamless reading thematically...

Is CSR good, bad or ugly? Actually, it is not one CSR and therefore there can't be one view. I see four steps in the CSR ladder. Pick your step and stick your label :)

Step 1 in the CSR Ladder: Earn Profits. Pay Taxes. Leave the rest to Governments.

Traditionalists argue that the focus of business enterprises should be strictly on satisfying the shareholder desire for a return on their financial investment to the exclusion of other non-financial stakeholders.

Are Corporates economic citizens? Or socio-economic citizens?

Corporates as artificial entities should have no social responsibility, real individual people must have a social responsibility.

Generating profit by servicing consumers in a competitive environment is the most socially responsible act of a Corporate.

Is CSR a way circumvent the society's perception that profits are bad?

Step 2 in the CSR Ladder: Implementation of Core business activities with broader responsibility towards all the stakeholders.

Demonstrate positive economic, environmental and social performance over long term. Triple Bottom Line Reporting along these lines. Since these activities are cost / investment intensive in the short run, these are typically supported by the market mechanisms such as Green Taxes, Emission Trading etc. Many times there also conflicts in trading-off interests of one stakeholder vs another. At a threshold level, typically such responsibility is driven by statutes too. Many companies go beyond those threshold voluntarily and adopt higher standards.

Are the three bottom lines mutually exclusive or reinforcing?

Most ethical companies are also the most profitable, per a global survey...

Corporates must look at all their spheres of influence viz. workplace, local communities, environment and supply chain & marketplace

Step 3 in the CSR Ladder: Poverty and environment focused social investment and philanthropy programmes.

Approaches vary from a simple Write-a-Cheque, to Venture Philanthropy, to Strategic Philanthropy. While write-a-cheque simply brings financial resources from Corporates, Venture & Strategic Philanthropy approaches bring other corporate resources such as management & entrepreneurial skills multiplying the impact. Any which way, scale & sustainability of charity is limited. Most typically

How do you decide how much money you put into CSR programmes?

What are the metrics of success of a CSR programme?

CSR is a social license to operate in backward districts, especially if you are in industries that extract from community resources, such as mining.

Is CSR a license to kill? As in extractive industries harming the environment!

Corporates have an ability to do good. They should see this as a responsibility to do good, because society is in dire need of good deeds.

Trying to solve world's problems, just because we have capability is arrogance! Patronising!

Isn't the best way to deploy CSR funds through supporting Social Entrepreneurs?

How many CSR initiatives are really scaled? To make any meaningful impact?

Doesn't a lot of employee volunteer work end up as a picnic, without any real work on the ground?

Even a picnic is good; better than not doing any good at all...

CSR funds are no more than a "tax" by Corporates on the market - by raising consumer price, paying lower salaries to employees, lower dividends to the shareholders or lower prices to vendors. This is more true in non-competitive markets, where corporate have such pricing freedom.

Focus of my talk today is to share ITC's experiences in adding the Fourth Step to this CSR Ladder: I refer to ITC's innovative business models, wherein our need for creating shareholder value is enmeshed with that of local communities in a mutually supportive, interlocking and interdependent partnership… ITC's eChoupal, Farm Forestry are in this league. Agarbattis is another business on similar lines!

Emerging economies, in particular, offer a low hanging opportunities to create such enmeshed models. Typically small producers have constrained access to markets, whether for information or knowledge, for inputs or output. As a result issues like low productivity, low share of consumer price, high transaction costs limit the incomes of these producers. Demand signals also aren't transmitted to these producers effectively, for them to be able to respond to changing consumer needs. On the other hand, corporates who source from these small producers suffer too, from high transaction costs, poor quality and delivery schedules, lack of traceability to product source point and so on... Corporates can invest in R&D, appropriate infrastructure and integrate these producers into their value chains to improve coordination, cut transaction costs, enhance quality, increase productivity to create win more - win more relationships. Higher the Corporate efforts to increase incomes of the poor, more the profits for Corporates themselves from such relationships. As a result scalability ans sustainability of such models is never a strategic challenge. Value chain integration can effectively deal with several environmental aspects too.

In ITC's eChoupal and farm forestry examples, the social impact is through better livelihoods to small farmers and poor tribals. Conservation Agriculture and Carbon Sequestration deliver environmental benefits, while competitive sourcing of high quality farm / forest produce bring the economic benefits to ITC.

While executing such initiatives, it is very important that the communities themselves are fully co-opted into the design and execution of the business models. This ensures relevance of the solutions as well as lower costs. On the other hand, one has to work closely with Governments to ensure that subsidies do not unduly distort the markets.

Typical drivers of CSR: Enhanced Reputation, Employee Motivation, Economic Advantage, Risk Management, Innovation & Learning, Statutory Compliance

Consultants help in CSR strategy formulation, due diligence, monitoring & evaluation, organisational development

If companies are indeed genuine about CSR, they shouldn't be part of Corporate Communications or Corporate HR...

CSR strategy gets formulated by corporates based on their perspective of themselves; whether they are Pure Capitalists (markets will deal with all issues), Social Contractors (explicit & implicit expectations from society) or Ecologists (we are but one of the species on this planet living at a point of time)

Mobius strip can be seen as a metaphor for the complex global challenges

Push factors for CSR: Environmental Conflict & Climate Change; Pull factors for CSR: Opportunity for inclusive business growth

Is regulation the path go down in India? Or leave to the discretion of Corporates?

How do we rope SMEs in to CSR mindset? Even workplace fairness, to start with...

Is India ready to buy green products at higher prices?

How to bring CSR & sustainability thinking into B-schools?

Is bringing affordable consumer goods to BoP CSR?

Isn't dealing with Naxalism a business agenda? How many CEOs want to have a serious action plan for this?

General bias of the hall, as sensed by me, at the end of the panel discussion was " Corporate Philanthropy is bad CSR. Making profits is good CSR. Models that enmesh business & community interests is the best CSR! "

Building Leaders

Earlier this evening, I made a presentation at the TAAS - NAARM National Dialogue on "Building Leadership in Agricultural Research Management"

Idea of my presentation is to share ITC's experiences in leadership development, to cross-fertilise practices from the Corporate Sector into the National Research System. The dialogue included similar experience sharing presentations from the Not-for-Profit Sector, Government, Defence, besides the various Units of the National Research System itself.

You can access my presentation at this link

Rainbow Revolution in Indian Agriculture through innovative Agri Extension

Earlier today, I chaired a session on "Agri Business Extension" at the NAARM - IFPRI Workshop on "Redesigning Agricultural Extension in India". Since that was the last technical session of the Workshop, I had an opportunity to include "my take-aways" from the deliberations in all the four previous sessions in my opening remarks. My closing remarks were based on the presentations made in that session and the discussions that followed.

My Opening Remarks:

After the Green Revolution for Grains, White for Milk, Yellow for Oilseeds and Blue for Aquaculture, the phrase 'Rainbow Revolution' has been used in Indian agriculture to describe the growth of the horticulture sector. Today I would like to use that label to signify the revolution we can bring about through innovative agri extension services. For a reason... At the beginning of this workshop, we had a white canvas on which we could paint the future of agri extension. While reflecting on the deliberations of the earlier sessions in my own mind, I visualised seven distinct colours on such a painting, if we were to achieve the revolution we all want. Hence my choice of expression, "Rainbow Revolution"!

The first colour I visualised suggested that our focus must be on the farmer. Not just as a passive recipient of Knowledge, as in the traditional paradigm of 'Last Mile in the Technology Transfer", but as an active Co-creator of Knowledge in a multi-way knowledge exchange paradigm. This would ensure access to personalised solutions to the farmer, besides setting a reality oriented agenda for agri research itself...

The second colour depicted synchronised delivery of information, knowledge and inputs. This takes us beyond just transfer of knowledge to actually applying it on the ground. Inputs here mean credit, seeds, nutrients, crop protection chemicals, access to farm equipment, risk management solutions etc.

The third colour called for an alignment with the Government's flagship agriculture programme RKVY, to be able to create a force multiplier. This in turn means building the capacity for village and district level planning. At the same time, there is also a need for redesigning Government programmes to ensure that they don't unduly distort markets; because at the end of the day, we are relying on a market economy.

The fourth colour sought integration of agri extension into the full value chain of that produce. This approach will figure a way to create value by serving the changing needs of an evolving consumer. This also will consciously extend the role of agri extension into the vital post-harvest arena.

The fifth colour I had visualised demanded accountability of the system to all its stakeholders. An outcome oriented system instead of input or output as the only metrics. Today, by making the extension service free, we may have taken away the farmers' right to demand quality. Even a token payment will work wonders in ensuring accountability!

The sixth colour appealed that we be sensitive to the non-renewable natural resources. Agri Extension must promote Conservation Agriculture as much as possible. All of us know the three dimensions of agriculture vis-à-vis climate change (1) that agriculture is a part of the problem, causing climate change through Green House Gas emissions (methane from flooded paddy fields & ruminants like cows, nitrous oxide from the soils, CO2 from fossil fuels used in farm equipment etc), (2) that agriculture is also one of the most vulnerable sectors impacted by climate change (fall in productivity due to changing weather patterns), and (3) that agriculture can be an important part of the solution to climate change (through emission reductions, carbon sequestration, increasing soil organic matter etc)

Finally, the seventh colour stressed the need for a proactive agenda on gender issues in agri extension. Analyse gender roles in farming systems, enable gender sensitive agri extension methodologies...

To paint these seven colours, the speakers in this session have access to several new brushes.

For example, the leapfrogging developments in communication media, information processing and presentation. The medium must be relevant to the message and the context.

Power of partnerships is another good brush! Define complementary roles, varied resources of different partners, and the shared aspirations. Deal with the challenge of mistrust, as one of the earlier speakers pointed out.

Co-opting social capital resident in the communities for relationship building and group mobilisation.

Then, there are several innovations in aggregation methods, business models and conflict resolution approaches.

Our artistes, the business people that they are, have certain unique capabilities.

Consumer centrality is the essence of business. Understanding, designing and delivering consumer-relevant solutions is how businesses thrive.

These businesses are accountable through "choices". Consumers simply vote with their wallets and feet, when they have choices. Businesses become unsustainable if their solutions are redundant.

Governance processes and the management capacity of businesses need not be reminded to this audience.

Before I pass the floor on to our first speaker, let me also share the specific brush strokes I want to see from each of these artistes...

What's the role of agri-business in extension? What are the risks of businesses engaging in extension activity? What are the contours of a new regulation that can mitigate such risks?

Should the role of Government be restricted only to those areas businesses won't go? That is, poor farmers, backward regions, long term challenges, subsistence crops etc. How do we ensure that subsidies do not unduly distort the evolving agri services market?

My Closing Remarks:

So, we now have a colourful painting and a beautiful frame.

The painting portrays a "co-creation platform", if I can call it so. The platform provider could be Government, or a Co-operative or an Agri-Business. The platform operates globally, but enables seam-less local participation of multiple stakeholders who can simply plug & play. Such an orchestrated yet open platform has the ability to produce a rainbow at will...

The frame I see has the character of regulating by fostering competition, rather than by restricting. The subsidies are delivered through coupons, so farmers can exercise choice across multiple platforms!

eAgriculture: Perspective to Practice

Earlier today, I chaired a Panel Discussion on "eAgriculture: Perspective to Practice" at eIndia 2010. The Panel was quite diverse, consisting of the Knowledge & Information Management Officer of FAO Rome, the Director of Kerala IT Mission, the Dean of Bombay Veterinary College, Dean of Raichur Agri University, a Project Manager of C-DAC who is implementing the e-Village project in Arunachal Pradesh and a Director of a Farmers Organisation from Uttarakhand.

I opened the discussion, by saying that the role of 'e' across the whole agricultural value chain has been well visualised. Several models also have been successfully demonstrated. For over a decade now. 'e' played central a role in information generation, information processing and information exchange in those idea. 'e' filled the gaps in the crucial linkages across the value chain starting with research, and moving on to education, extension, crop management, supply chain management and post harvest management in those models. 'e' increased productivity, improved efficiency, reduced risk and delivered value through traceability in the pilot projects. Yet large scale operationalisation of these ideas is far from satisfactory, in the sense that the intended benefits haven't reached even a fraction of the needy farmers. So, the question to the Panel was "What does it take to translate the Perspective to Practice in eAgriculture?"

At the end of the session, I synthesised the experiences and case studies shared by the Panel into a model that I called "Pentagon", named after the five dimensions of what it takes to translate the perspective to practice in eAgri... The acronym of this model turned out to be C-ROSE, taking the first letter of each of the dimensions!

Collaborative Ecosystem of several stakeholders, that can stitch an integrated end-to-end solution for the farmer instead of each player targeting a sliver and increasing the costs of friction. An ecosystem that institutionalises a Knowledge sharing network for collaborative learning to hasten evolution of the practice.

Relevant Technology that is easy to use, in local language; may be a speech interface in addition to the text. A technology that is robust to withstand the challenging physical conditions and make up for the infrastructural deficiencies.

Orientation that doesn't view outreach to the farmer just as a last mile challenge, but more importantly, sees it as a first mile challenge to appreciate the individual needs of all the farmers. This can help in delivering personalised solutions. Given the heterogeneity of farmers' circumstances, such an approach is vital.

Sustainable business models that can be scaled to reach out to "all" the farmers, not just a prototype here or a pilot there. Scale doesn't necessarily mean that one initiative needs to reach "all" the farmers; multiple local enterprises can replicate a proven model and scale out to saturation.

Enabling Environment, most critically the Policy environment that fosters competition and that does not distort markets. The reversal of reforms in APMC Act, Essential Commodities Act or Forward Markets Regulation halted the roll out of 'e' solutions more than, possibly, any other dimension mentioned in the model.

Happy to incorporate any other dimension that any of you would like to add, and change the shape of this model. A Hexagon or even a Septagon? The end goal is to be Bang-on :)