Building Market Linkages

An element of any successful intervention was ensuring that the increased production of a microenterprise’s goods and services could be sold at a price that justifies making the investment in the new devices. Part of the SELCO Foundation’s ecosystem survey was to ascertain that the demand for a particular product was sufficient.

The outputs of microenterprises vary a great deal, but they can be categorized by their target market. Some products and services are directed at a microenterprise’s fellow villagers. These microenterprises sell products and services that become interwoven with the economics of village life. Other goods, such as cash crops, are destined for markets outside the immediate area, often in urban areas in India and beyond.

Village Goods and Services

Village microenterprises play a key part in a local area’s economy. Regular open-air markets are central not only to the economic, but also the social life of rural communities. Farmers and artisans sell their goods in these venues and community relationships are forged and reaffirmed.  

Other microenterprises provide services in their immediate areas. For example, a person operating an electric rice huller not only makes it possible for more efficient processing of their own crop but also can offer the hulling services to other people in nearby areas. Village microenterprises also provide nonagricultural services such as photocopying, cell-phone-charging, or tailoring.

The selling process for such goods and services is simple and based on word-of-mouth recommendations. To gain customers, these enterprises need to introduce their goods or services to their neighbors. This is not an easy task but means that branding and advertising are not necessary. In the case of SF’s interventions, civic organization partners often act as conduits for outreach to new customers, urging residents of surrounding villages to try new services or buy goods from local producers.

Dependent as these microenterprises are on local customers, SF and their civic organization partners take care in the quantity of their initial placements of new devices and techniques, ensuring that each site will have a sufficient market. The danger in making any operation more efficient is that increased goods can reduce prices and limit or eliminate any surplus income generated.

Urban Markets

Artisans and farmers also produced goods destined for markets outside their immediate areas. In the Northeast, these products included commodities such as pineapples and finished goods like silk scarves. Sales of these products provided regions with an important source of funds.

Urban markets were difficult for village farmers and artisans to negotiate. Getting goods to urban markets in the Northeast was especially fraught. The terrain was rugged and prone to flooding. Roads were poorly maintained and hazardous even during periods of calm weather.

To facilitate the movement of goods from the rural areas to the cities, intermediary organizations have arisen. Often, intermediation was provided by larger companies. These companies had inherent advantages in negotiations with small farmers and artisans. They could buy during times when prices were low and sell when prices rose. These intermediaries could also process commodities at scale and brand their products.

An alternative to large companies were co-ops and Farmer Producer Organizations (FPO). These organizations aggregated the output of local farmers and artisans, sometimes providing processing and branding, in order to sell to larger urban markets. The self-governance of co-ops and FPOs meant that farmers and artisans were more likely to get a fair price for their wares (though even these kinds of organizations could suffer from elite capture, if more prosperous members dominated the organization). In many regions of India, co-ops and farmer producer organizations were dominant players in agricultural endeavors. The government had enacted many policies to encourage the development of FPOs and co-ops.

SF had helped co-ops and farmer producer organizations employ DRE devices to make their members’ goods more competitive. For example, SF provided cold storage units to allow the storage and aggregation of perishable goods. Besides the market linkages, these collective organizations had also become a way of gaining outreach to individual microenterprises for the development and deployment of DRE interventions to increase production.

However, the existence of these collective organizations in the Northeast was sparse. SF had contact with many of the ones that existed and had provided support for interventions targeted at improving their ability to operate. However, SF had not incubated new FPOs and co-ops or otherwise build market intermediaries. As the Foundation staff acknowledged, building organizations to intermediate cash crops could expose the Foundation to wide fluctuations in market prices. So, while SF worked with the few existing FPOs, the Foundation leaned toward improving the yield for crops and the promotion of livelihoods with substantial local markets.