Livestock rearing is central to the livelihoods and survival of small marginal farmers and landless agricultural laborers across the country. As livestock related activities help to maintain a daily inflow of income for these households, livestock economy is a source of self-insurance for farmers. It provides a diversified source of income and mitigates the uncertainties of seasonal income from their traditional sources like agriculture.
In line with the mission to serve this target group of remote rural customers in Thanjavur district, Pudhuaaru KGFS (PKGFS) launched its ‘Livestock Loan’ product to fund customers who are interested in pursuing dairying activity.
Some of the salient features of this product are:
- Single loan to buy two cattle and two staged disbursements aligned with the lactation cycle to ensure continuous income from dairying activity to the customer.
- Repayment management– Seamless repayment management enables customers to supply milk to a designated milk vendor and the milk vendor remits amount earned by the respective customer to PKGFS. The installment amount will be deducted and the excess amount would be invested in respective customer’s MMMF folio, which can be redeemed as per customer needs.
- Anywhere disbursement – Based on the customer’s convenience, loan can be disbursed either at the branch or in the field (cattle seller’s place) after the necessary due diligence.
First Livestock loan disbursement. From left: Rohit Mukkawar (IFMR Rural Finance product and process team), Manikandan (Wealth Manger), Ravi (Asst Regional Manager – PKGFS ) handing over the loan amount to customer Poongothai & her husband Rajenthiran
The first loan was disbursed at Veeramangudi branch on 25th May, 2010, after the mandatory health checkup and valuation by Dr. Gangadharan, DNE’s veterinarian on the field. The second loan was disbursed shortly afterwards to customer Malarkodi after completing the necessary ground procedures.
Rohit Mukkawar says “The product & process were designed after taking inputs from various sources. Interested & eligible customers are being identified by our wealth managers. ARMs along with the veterinarian will conduct the mandatory health check up & valuation process before disbursing the loan. We look forward for a smooth piloting phase and hope to see the product reach the scale-up stage at the earliest”.
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Bharathi Kannamma of IFMR Rural Finance (presently known as Dvara KGFS) contributed to this post.
17 Responses
This is exciting. I am eager to understand how the repayment management exactly happens. How does the vendor remit to customer account?
Congrats to the team
Congratulations !
It really encouraging to see such innovative products coming in the market.
Can you tell more about the criteria for selecting the worthy clients other than the KYC documents ?
I mean there might be 10 people who would want the loan but you would not give it to all. How do you sort/select ?
@ Bindu – Milk vendor would remit the amount to KGFS' bank a/c. KGFS in turn would deduct the repayment amounts from that and invest excess amount in respective customer's MMMF folio which he/she can withdraw using redemption slip as per the need.
@ Rahul – All the enrolled members of KGFS having sufficient experience of livestock rearing and access to authorized milk collection centers are eligible for this loan. Feel free to mail me for more details.
My congratulations. I know that the joint Dairy Network Enterprise and the IFMR Rural Finance team has been working on this quite hard. Dairy is one of the important growth engines for Thanjavur and Thiruvarur and I am glad that we making steady progress in rolling it out.
Happy to see this…Good luck to the PKGFS and DNE teams!
Good work Rohit… We are also planning to launch dairy loan next month in western U.P area.
Thiru from Mimo Finance, Dehradun.
@Chetan: Hi! You can claim partial IP for this 🙂
@Thiru: Would love to hear more about your product design and experience as you roll out at Mimo. Maybe you can do a guest post for us?
Congratulations!
Cattle loans is a key for the rural livelihood. It helps the rural labor to meet their daily needs in a very sustainable way.
However if the system fails to monitor the end use of the loan the purpose is not served. I am interested how PKGFS is handling this? Does it's local stand as an MFI has any advantage over banks ?
@Bindu: Sure Bindu.. would share once it implemented.. we have a seperate vertical Meso loans for handling all this individual loan products..
@ Rohit: if i can know, about the pricing?
Great job Rohit. Really appreciate the effort of you and your team for launching this scheme for benefit of the needy.
Dear Rohit,
It is a great step forward for increasing the financial well being of our customers. I strongly believe that diary initiative can enhance the economical condition of our customers effectively as they already have an affinity to keep cows and especially they have the basic knowledge infra for the same. However, how are you going to ensure the following:-
1. The quality of the animal alongwith the cost.
2. Effective training is given to the villagers.
3. All the support services reach them in good quality and timely manner.
We have found that the above aspects are not very effective in Ganjam District. Looking forward to your inputs.
Regards,
Ashit
I work with DNE. I would try to answer a few of the queries. Bear with me, this would be a long one.
@Raghu: You are right. Off course, Pudhuaaru KGFS is trying to ensure that good quality cattle is purchased and that is where, I feel, that the product is more meaningful. Otherwise, a cattle loan product on paper is pretty simple. It is the delivery of the product that is crucial. The involvement of the DNE vet in valuing the animal is one of the ways of ensuring that only good quality cattle is purchased.(For more, read 1. below)
Please note here that Pudhuaaru KGFS does NOT force the customers to buy the cattle from a particular location.The customers are free to decide. It is here that the logistics of disbursal of the loan becomes important. Different modes of purchase (purchase from local trader, acquaintance, market) are currently being tried to develop a repeatable process.
It is clear that a deeper involvement with the product has been made possible because of the local presence of KGFS. They are not just issuing the loan the loan as per the convenience of the customer but with the help of different partners (DNE, Milk Buyer, etc) they are able to make sure that the dairy farmers live in an ecosystem where the risk (both production risk and marketing risk) in dairy business is reduced through purchase of right kind of cattle, provision of preventive healthcare and market linkage.
Another very important aspect is that Cash handling and payment disbursal is a major pain point for the milk buyers. Pudhuaaru KGFS has taken care of the disbursals and enabled the milk vendor to focus more on milk collection. This is a win-win for either side.
@Ashit:
1.In every geography there would be some location where it is possible to get good quality cattle.There is a necessity to identify multiple such "dependable" entities from which such cattle can be purchased.The local vet or progressive farmers can point out such sources. In Pudhuaaru KGFS's case, there are two major channels, the local cattle traders and cattle traders known to the milk buyer.
2.For training, best source is to leverage Govt/co-operative support (If it is available). According to me, training is more about brushing up the existing knowledge that the farmers already have. (High value cattle is anyways meant for farmers who have been practising dairy farming for sometime.) For training, a good way is to identify some enthusiatic farmers in each cluster and train them so that they can spread the message of atleast some of the good practices amongst the other dairy farmers.
3.DNE is trying to ensure delivery of support services. But in order to ensure that services reach farmers in a timely manner, we have to take a three pronged approach. Identify the services that are easily available from the govt infrastructure, identify enthusiatic farmers as contact points within villages to form a network through which the other services are provided and also identify local partners who might be interested to provide one/more of the support services as a part of their mandate.
Just sharing of information that a particular service X can surely be obtained from entity Y is a major help for the farmers. They would find their own way of making the best use of it.
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We do understand that the model that we can follow would vary from place to place. We need to decide upon a set of non-negotiables and based on the local conditions we have to adjust our processes. Off course, all this is easier said than done and the challenge lies there.
This is commendable and the timely scaling up of this integrated initiative, has huge potential to change the lives of the people.
This is really a great initiative. I want to know about the maximum number of livestock that can be financed for a single farmer through this scheme. This query rolled out because I have realized that sometimes having single cattle is not profitable for the owner. As the number is increased, it brings down the cost of business in this case.
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It also refreshes my recent experience during my summer internship with Advocacy team, IFMR Trust. During my field visit to Satara District Cooperative Bank, I found that bank helps its clients in purchase of high breed livestock. The bank supports with loan as well as assistance in the purchase. The expert team of bank, along with the farmer, consults some agency at Bangalore, which has the information about variety and seller of the livestock throughout the state. The agency charges some commission (based on the amount of purchase) bear by farmer but bank doesn’t charge anything for this assistance.
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The repayment scheme of your model somewhat matches with what the bank follows in case of sugarcane loans. Bank gives loan to farmers but receives payment directly from the sugar mills. They call it ‘linked payment’. This helps the bank in recovering 100% loan money without putting any effort for recovery.
So for me your model, in itself, is 'hybrid' innovation and I wish every success for this great initiative.
Jayanta Kumar
PGDM-DSF (2009-11)
IFMR, Chennai.
Thanks for the encouragement Jayanta. Our product is designed to fund purchase of 2 high-yield cattle at an interval of 6 months. This takes care of the Lactation cycle and ensures that dairy farmer has regular and steady flow of income from dairying activity.
We too assist our customers in purchase of good quality cattle through our partners.
Would be happy to take a look at your report on experiences with Satara District Cooperative bank.
Im curious if alternatives to livestock rearing znd dairy farming were at all considered to improve the livelihood of these farmers? Given the global warming linkage Shld we not move away from treating animals as property/slaves to be owned/traded?