How will you aggregate demand and supply?
If you were to do a segmentation of microfinance clients, you will find that 20% of them are landless labourers, 20% are goat/ sheep farmers, 15% are cow/buffalo owners, 25% are kirana shop owners and the remaining 20% are small business owners.
We plan to aggregate the demand from each of these customer segments to achieve economies of scale. For example, demand for inputs from dairy customers will be aggregated to develop procurement contracts with suppliers. Similarly, in retail, we will aggregate requirements of kirana shop outlets to negotiate procurement agreement with retailers.
We will aggregate supply by partnering with product/service providers across verticals.
Any problems you envisage as you build the supply chain?
The supply chain would be built from the customer perspective and not from the view of the product/service providers. Our warehousing infrastructure would be strategically located, in that, it would optimize movement and storage of raw materials, work-in-progress inventories and finished goods from our franchises and rural clients to product/service providers.
We anticipate problems in terms of transport/ telecom/ internet connectivity which will increase cost of servicing clients. This could impact our margins.
What kind of infrastructure do you hope to build vis’-a-vis’ dairy farming and healthcare?
We would be setting up primary health clinics and dairy farming units (a farm of 10 milch animals) and franchising the same to rural households. We would also set up warehouses, which would support the inventory requirements of our franchises and its customers.
Is the dairy sector plagued by low productivity? Where does the problem lie?
Poor diet provided to the animals due to low quality of dry/ green fodder; low water intake; poor animal husbandry practices; lower yielding animal mix; lack of marketing and processing infrastructure (chilling plants, collection points etc) contribute to lower yields and productivity.
You want to generate demand via Self Help Groups. What will be the concept/process for it? Will it be on the lines followed by HLL’s Shakti which used to provide its own products to SHGs?
No, it will not be similar to HLL’s model. We are looking at the rural poor as a production base and not just as a consumer base. That’s where we will be different from the HLL model.
Several organizations are adopting this concept and turning it into a business venture. Your take on it.
Microfinance network as a distribution channel is a fundamentally flawed business model. It assumes that the field officers have the bandwidth to sell non-microfinance services too. MFIs operate on low margins and their focus is on increasing the productivity of the loan officer. Hence, I don’t see any scaleable business, which can successfully capitalize on microfinance as a distribution channel.
Will India be able to replicate what Nobel Laureate Mohd Yonus did in Bangladesh?