Decoding Impact

Decoding Farmer Producer Organisations (FPO) with Emmanuel Murray

Sun Oct 02 2022

Small and marginal farmers make up 85% of all farmers in India, and farmer-producer organizations (FPOs) have the potential to address issues such as bargaining power, credit taxes, and farm inputs.
However, only a small percentage of FPOs are able to generate significant revenue or raise substantial capital within five years, making scaling a critical challenge. Building capabilities of leaders and FPOs is necessary for growing the income of farmers.
The speaker has been involved in the promotion and development of FPOs through consulting, speaking at conferences, and advising. They have also written reports on FPOs for various organizations.
Building institutions like FPOs takes time and effort, and expecting quick results is unfair. FPOs face challenges in transitioning from production to being players in the market due to a lack of networking and experience dealing with formal markets.
Members of FPOs may be hesitant to deal with them on a promise of future benefits if they cannot provide better deals than alternative channels in the present. Despite these challenges, many FPOs have been able to make a difference over time.
Institutions promoting NGO-origin commodities have taken longer to mature due to unrealistic expectations on the time it takes for organizations to mature.
Farmer producer organizations struggle with market negotiations, informality, and a lack of cash flow and security net. Cash flow is a critical challenge for farmers and should not be underestimated.
Inputs in agriculture refer to seeds, fertilizers, growth promoters, and pesticides. While there is potential for profit in the seed and pesticide businesses, challenges such as regulation and working capital make it difficult to make money from inputs overall.
Effective leadership profiles for unlocking global markets and managing relationships may vary depending on the level of the organization. While professional backgrounds may be more suited for leading federations, farmers can also be trained to become leaders of FPOs.
Good quality leaders are hard to find and there may not be a sufficient supply of them today. Building new institutions without challenging societal conventions and power structures will not bring about significant change.
External agencies may be needed to support internal restructuring in rural institutions, as social structures can be difficult to change. The government has invested resources into capacity building for FPOs.
Close to 60% of program budgets are on the ultimate institution, while 30-35% is for FPOs and the rest is for intermediary institutions. Questions arise about the quality of human resources delivering capacity building and whether multinational consulting organizations are best suited for these roles.
Funding and capital resources for FPOs are falling short, and there is a need to strengthen this aspect. The right type of capital can unlock incentives for FPOs to organize effective leaders and mature effectively, but debt capital is scarce and managing debt is a challenge.
Farmer producer organizations (FPOs) can differentiate themselves by identifying niche market opportunities, but a large share of them will likely continue to focus on staple produce with lower margins. However, the presence of an FPO in a market can reset the rules of the game and lead to better value for farmers if transparency, ethics, and timely payment are prioritized.
NGOs are enabling FPOs, but they themselves are not market-facing organizations. Gender plays a significant role in agriculture, and more women-led FPOs should be promoted. Climate change is a cross-cutting trend that needs to be addressed in FPO capability building.
Communities are willing to adopt measures like water conservation if provided with guidance and resources, but enabling structures at the top are missing. Blended capital from impact investors and other sources can be used to bring professionalism from the private sector and advantages from the state and social sector to address these issues.
The need and advantages of an FPO must be clearly understood by the community before building these institutions, or they will not sustain. Building quality and strength is more important than increasing quantity when it comes to FPOs. The conversation covered various perspectives on the problem, including social structures, finance, opportunities on the ground, and policy.