mission mangalam - gujarat livelihood promotion · pdf filemission 01 vision 02 ... objective:...

Mission MangalamInnovative livelihood initiativesA for-profit model to integrate self help groups in the corporate value chain

Gujarat Livelihood Promotion Company Ltd

ContentsMission 01

Vision 02

Strategy: Business process innovation Integrating self help groups in the corporate value chain 03

Action plan Mechanism of the scheme 04

Leveraging upon Vibrant Gujarat Summit, 2011 05

Core benefits for corporate 06

Existing models integrating rural India into the corporate value chain 07

Transaction costs in choupal chain: Soyabean example 08

Existing models integrating rural India into the corporate value chain 09

Focus sectors for investment MoUs during VGS 2011 under Innovative Livelihood Initiatives 11

1 Mission Mangalam Mega livelihood initiatives

Mission

Gujarat witnessed 11.05% growth rate for five years ending March 2009. Along with the remarkable economic progress, the state is well aware of the importance of inclusive growth. The State Government through Mission Mangalam proposes to develop a model of inclusive development through social business enterprise. The concept envisages integration of Self Help Groups and their federations into the value chain of investors. Thus, Gujarat Livelihood Promotion Company (GLPC) was formed with a two fold objective: to organize the poor though Sakhi Mandals and empower them by linking to sustainable livelihoods.

Around 24 lakh women are currently active under 2 lakh Sakhi Mandals/Self Help Groups (SHG) in the State managing funds to the tune of Rs 1000 crores through bank linkage.

“Good governance is treating development as a mass movement in order to see that fruits of development reach the poor and the downtrodden”

Gujarat Livelihood Promotion Company Ltd, a company registered under The Companies Act, 1956 is the implementing agency for livelihood projects. GLPC would have

• Sensitive institutional structure at State, District, Taluka and Village level• Total of about 3000 domain experts upto field level

• Convergence Plaltform of multiple partners• Banks, Industries, Cooperatives, Research Institutions, Skill Training

Institutions, Funding Agencies and Spot Exchanges

2A for-profit model to integrate self help groups in the corporate value chain

Vision

Creative Capitalism that combines the pursuit of profits with the desire to serve the needy. The desire to help others can be smart business, as it can motivate both customers and employeesBill Gates- Founder Microsoft

Social Business Enterprise whereby the enterprise is owned by the poor and is a cause-driven business. The revenue and profits work towards improving the livelihoods of poor.Mohammad Yunus- Nobel Laureate

Fortune at the Bottom of the Pyramid: Business and governments should stop thinking the poor as victims and instead start seeing them as resilient and creative entrepreneurs as well as value-demanding consumers. There are tremendous benefits to Businesses who choose to serve these markets in ways responsive to their needs. Eradicating Poverty through Profits C K Prahlad- Management Thinker


Strategy: Business process innovation Integrating self help groups in the corporate value chain

Mission Mangalam envisages a strategic partnership between large industries and the Sakhi Mandals/Self Help Groups/Producer Groups/Service Groups/Collectives of the poor, into big ventures which can be outsourced through decentralized Micro Enterprise Ventures. The promoting companies/entrepreneurs could Rearchitecture the Process where intensive tasks as job-works can be undertaken by Sakhi Mandals/Self Help Groups in their respective homes or villages as self-employment activities.

The initiative could commence with the following sectors• Animal Husbandry, Agro Processing, Food Processing• Tourism• Processing of Forest Products like Honey, Lac etc.,• Garments, Handlooms, Hosiery• Diamond Cutting, Agarbatti, Bamboo & Timber Products• Rural Micro Marketing, Packaging, Assembling of

Products, Organic Products etc.

Other sectors could gradually incorporate this rearchitectured process.

There are 5 basic principles of the rearchitectured process.

• The Firm goes to the community rather than people migrating to the Firm.

• Improving Demand is intrinsic to this architecture• Modern technology and process has resulted in

inversing the economies of scale that has assisted in disaggregating functions

• One of the key philosophies of this architecture is that local initiatives are linked to international markets

• Empowerment is at the core of this architecture. Ownership of the assets – the means of production- is with the producers

GLPC envisages that there is a case for corporate sector to integrate Self Help Groups/Producer Groups into their production value chain. The advantages for a corporate would be:

(a) Substantial cost-saving since Self Help Groups receive both Revolving Fund and Capital Subsidy from the Central Government for undertaking economic activities.

(b) The risks involved in the process of production are transferred onto the SHGs/Producer Groups and thus provide substantial benefit to the engaging business entity.


GLPC could facilitate investments by large Industries/MNCs in Micro Enterprises ventures by linking them to Sakhi Mandals and Producer Groups.

GLPC would strategically position and market the two key strengths of Sakhi Mandals

• Readily organized manpower network comprising of more than 2 lakh SHGs and 25 lakh members• Huge Credit Mobilization Potential of these Sakhi Mandals of more than Rs. 10,000 Crores

Action plan Mechanism of the scheme

There are various national and state schemes with available capital and interest subsidies. Some of these schemes have training and development linkages funded by government. The schemes proposed for integrating the SHGs/Producers Group into the corporate value chain with capital and interest subsidies would function as a 360 degrees Public Private Partnership (PPP) model where preparation of project proposal, skill training content, forward and backward market linkages and quality control is the responsibility of the private party.

Market survey

Managing the production activity

Imparting of skill training

Ensuring quality standards

Product designLinkage with

domestic/foreign markets

SHG/producer group identification

Buy-back guarantee


Corporate and Self Help Groups/Producer Groups are at the core of this Innovative Livelihood Initiative. Preliminary Project Structures have been designed by GLPC in partnership with over 40 corporates to generate over 12,00,000 livelihood over the next 3-5 years. The Memorandum of Understanding (MoU)s with the corporates for generating above Livelihoods would be signed during Vibrant Gujarat Summit 2011.

To trigger its role as the convergence platform GLPC is entering into Financial MoUs with banks and Institutional MoUs with Agricultural Universities, Spot Exchanges, Skill Training Agencies etc during Vibrant Gujarat Summit 2011.

Livelihood potential under Mission Mangalam

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Rural BPL households in Gujarat Livelihood potential to be explored during VGS 2011

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Leveraging upon Vibrant Gujarat Summit, 2011


Core benefits for corporate There are core benefits for the corporate that integrates the SHG/Producer Group into their production process and they are as follows.

• The concept could be incorporated into the brand. There is a premium for brands that communicate such concepts such as Mission Shakti or Mission Mangalam.

• The Cost of Capital for this element of the value chain with the available subsidies could be as low as 3%.

• The debt would be on the books of the small entrepreneurs/SHGs/Producer Groups, therefore the corporate headroom for debt would not be reduced

Core benefits for corporate

• The credit guarantee as required would be provided by the bank or the small entrepreneurs

• Facilitation from the Government of Gujarat for fast track approvals and clearances

• The small entrepreneurs/SHGs/Producer Groups would be provided marketable skills funded by the GOG/GOI and this could possibly be a strong corporate communication

• This is a “for profit” proposal and not a Corporate Social Responsibility (CSR) activity. However the benefits of CSR such as upskilling people and providing entrepreneurial and employment opportunities could be communicated by the corporate


Existing models integrating rural India into the corporate value chain

Case 1: e-Choupale-Choupal, the unique web based initiative of ITC’s Agri Business Division, offers the Farmers of India all the information, products and services they need to enhance farm productivity, improve farm-gate price realization and cut transaction costs, thus enhancing their competitiveness in the global market.

How it works• ‘e-Choupal’ leverages Information Technology to

virtually cluster all the value chain participants, delivering the same benefits as vertical integration does in mature agricultural economies like the USA.

• ‘e-Choupal’ makes use of the physical transmission capabilities of current intermediaries - aggregation, logistics, counter-party risk and bridge financing -while disintermediating them from the chain of information flow and market signals.

• Village internet kiosks managed by farmers called sanchalaks themselves, enable the agricultural community access ready information in their local language on the weather & market prices, disseminate knowledge on scientific farm practices & risk management, facilitate the sale of farm inputs and purchase farm produce from the farmers’ doorsteps.

E-Choupal

ITC Limited (Corporate)

Farmers (SHGs)


Transaction costs in choupal chain: Soyabean example

Costs in Traditional Chain

Costs in eChoupal Chain

Farmer Incurs (Rs. per MT)

Trolley Freight to ITC Hub 120 120

Labour 50

Kacchha Adat 150

Handling Loss 50

370 120

Processor Incurs

Commission to Sanchalak 100 50

Cost of Gunny Bags (net) 75 75

Freight to Factory 120

Storage & Handling at Hub 40 40

Cash Disbursement Costs 50 50

335 215

Total cost 705 335

Benefits: To SHGs

• Real-time information and customised knowledge provided by ‘e-Choupal’ enhance the ability of farmers to take decisions and align their farm output with market demand and secure quality & productivity.

• The aggregation of the demand for farm inputs from individual farmers gives them access to high quality inputs from established and reputed manufacturers at fair prices.

• As a direct marketing channel, virtually linked to the ‘mandi’ system for price discovery, ‘e-Choupal’ eliminates wasteful intermediation and multiple handling. Thereby it significantly reduces transaction costs.

To the company

• Cutting down net cost of procurement, despite offering better prices to the farmers by eliminating non-value adding costs in the value chain

• Creating new business opportunities e.g. marketing several goods & services to the rural consumers, linking non-farm skill based services of rural origin with the global markets

Source: ITC Agri Business Divison


Existing models integrating rural India into the corporate value chain

Case 2: Project Shakti – Hindustan Unilever Limited (HUL)Project Shakti was started in 2001 with the aim of increasing the company’s rural distribution reach as well as providing rural women with income-generating opportunities. This is a case where the social goals are helping achieve business goals.

How it works

• Villages with a population of about 2000–3000 are selected

• Personnel from HUL approach SHGs• Each group consists of usually 15 members• Selection of a Shakti Entrepreneur or Shakti Amma

through representative of the company meeting the panchayat and the village head

• One Shakti Amma is appointed for one village & villages that are about 2 kilometers apart from her village (satellite villages)

• After training by rural sales promoter she is asked to put up Rs 20,000 as investment which is used to buy products for selling

• Finance: Self + SHG + Micro Credit. HUL vouches for Shakti Ammas with banks for credit

• The products are then sold door-to-door or through petty shops at home

• The Shakti dealer organizes, a ‘‘Shakti Day’’ in the village (display of products & free gifts)

Benefits: To SHGs

• On an average a Shakti Amma makes a 10% margin on the products she sells

To the company

• This model has been the growth driver for HUL and presently about half of HUL’s FMCG sales come from rural markets

• The Shakti network at the end of 2008 was 45,000 Ammas covering above 1 lakh villages across 15 states reaching 30 lakh homes

• The long term aim of the company is to have 1 lakh Ammas covering 5 lakh villages and reaching 150 lakh homes

• HUL has been successful in maintaining its distribution reach advantage over its competitors

• This programme will help provide HUL with a growing customer base which will benefit the company for years to come

Source: HUL Project Shakti


Case 3: Jaipur RugsJaipur rugs produces handmade area rugs, including the hand knotted, hand tufted and flat woven styles. The company directly employs only 300 people but engages around 40,000 artisans who act as entrepreneurs and contractors.

How it worksJaipur Rugs functions on a business model focused on converting fixed costs into variable costs, allowing flexibility. This is mainly done by decentralization of work and investment where rug production is done on ‘pay for performance’ basis with contractors bringing in the capital. The weaver can engage with Jaipur Rugs directly or indirectly – via entrepreneurs. A simplification of process is as follows:

• Jaipur Rugs undertakes a global sourcing of raw material – primarily wool and silk

• The steps involved in preparing raw wool to be put on the looms of weaving are highly decentralized and span across various parts of the country.

• After coming off the loom, all rugs are transported to one of four finishing centers in Jaipur, each of which is an independent entity but exclusively services Jaipur Rugs

• The finished rug is then sent for a worldwide distribution.

Benefits: To company

• Company’s largest costs – labor and raw material – are variable as rug production is done on a ‘pay for performance’ basis

• Jaipur Rugs reduces its capital needs by not owning the key manufacturing assets

To weavers

• Steady year-round income, in addition to income from seasonal agricultural work

• Mostly, artisans work in their own villages, either in their own home or in a neighboring home

• Capacity building initiatives for weavers as well as focus on leadership and entrepreneurship provides the participants of the networks and upward path in career and life.

Source: Jaipur Rugs Company


Focus sectors for investment MoUs during VGS 2011 under Large Livelihood Initiatives

Handloom & handicrafts

Tourism

Fisheries

Agriculture & agri-processing


Gems and jewellary

Non-timber forest products

Textiles and garments

Animal husbandry

For further details contact us at:Managing DirectorGujarat Livelihood Promotion Company Ltd3rd Floor, Block 18, Udyog BhavanSector -11, Gandhinagar 382017, Gujarat IndiaPhone: 079-23248514Email: [email protected]

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