Value Chain Finance"Reducing poverty bystrengthening the sal leafchain in India"

Presented By Group : 3• Amit Ranjan(152010001)• Mohammad Sultan(15201013)• Panchali Chakraborty(15201014)• Rishi Raj(15201018)• Subhasmita Pradhan(15201028)• Netra Manjhi(15201036)

Sal leaves cups and plates• In India the use of disposable cups and plates in all types of

functions,party and especially in wedding.• Unlike their plastic or coated paper equivalents in the West, in India these

are often made of leaves. They are cheap, disposable and biodegradable.• They are also used in festivals and ceremonies, and to make offerings to

Hindu gods.• These cups and plates are made from the leaves of the "SAL TREE"

(Shorea robusta) – a tall timber tree common in eastern and central India. The oval leaves are 10–25 cm long and 5–15 cm wide – too small to hold more than a morsel of food, so they must be sewn together and then pressed into shape to make a rigid plate or cup.

• These items are made by some of poorest: tribal women in the states of Orissa, West Bengal and Jarkhand.

• We are talking a lot about these leaves cups and plates as Collecting leaves and making plates and cups is a major source of income for thousands of people who live in this region’s forests, as well as for hundreds of traders which is much important for their livelihood.

Location of the sal leaf industryin India

Stages in sal leaf production

Sal Leaf Value Chain

COLLECTORS• Most of these are tribal women. They collect sal leaves in the forest• for about 8 months of the year, dry them and stitch them together into dwipatris• (twin leaves) or khalis (raw plates). These stitched leaves become the raw material• for making sal leaf plates and cups. They bundle them and sell them to local• agents, earning about $0.24 to $0.30 per day.

LOCAL AGENTS• Agents, also called “cycle wallahs”, are men who go door-to-door• buying the stitched leaves from collectors, paying them in cash. They sell bundles• of leaves on the local market or directly to processors who convert them into cups• and plates.They are better off than the collectors, earning US$90–100 per month.

PROCESSORS• Processors are women who work at home to make cups and plates• from the leaves. Sometimes their teenage daughters stay home to help out. They• operate one or two electric pressing machines. They buy stitched leaves from• the local agents or local markets, press them and sell them to traders.They earn

$20–30 a month if they use family labour.

TRADERS• Traders are men who buy the cups and plates from the processors.• Some also process leaves themselves. They hold a license to operate as a sal• trader and a transit permit to transport the finished product to wholesalers and• retailers.The average annual turnover of a processor–trader is $20,000 to $30,000.

Problems in the value chain For Collectors:• Inappropriate credit.• Inappropriate use of loans.• Lack of business skills.• Reduced availability of sal leaves..• Lack of market information..

For Processors:• No access to credit.• Low productivity due to outdated technology.• Reduced income in the low season.

• For Traders:• No access to credit.• Competition from substitute products.

The sal leaf value chain

The sal leaf value chain after UNIDO’s intervention

Financial innovationsPrimary collectors• Training on credit and business management : UNIDO counselled the

self-help groups on good financial practices, including savings, internal lending and trained its own field staff

• Federation loans : The Ahari Federation, composed of six self-help groups, was formed to improve the management of loans among the collectors.The Federation uses this capital to give small, short-term loans to individual selfhelp groups to enable collectors to stockpile leaves and wait for market prices to rise before selling them.

• Bank loans : UNIDO sensitized the banks about collectors’ credit needs and how the chain works.after seeing the success of the Federation loans, the banks realized that collectors need small amounts of credit for short periods – around $10–20 for up to 6 months.

• These were production loans, intended for collectors to develop their sal businesses and to develop an alternative livelihood during the low season for sal leaf. Sabai, a type of grass used to make rope, is another forest product found in the region which could serve this purpose.

Cont...• Access to market information : The collectors used to rely entirely on the

local agents to sell their products to processors.They had no access to market or to information, so the agents could get away with paying below-market rates.The Ahari Federation also started an information and communication centre at its offices where collectors can get such information.

• Integrating the value chain : The self-help groups applied for a licence to trade in sal leaves. Licensing is required by the government because of over-exploitation of the forest.The self-help groups applied for a licence to trade in sal leaves. Licensing is required by the government because of over-exploitation of the forest.

• Emergency loans : The Ahari Federation started offering emergency loans to cover sudden expenses such as illness. The Federation keeps cash at its offices so it can provide such loans immediately.

Processors• Financing production facilities :- demonstrating new processing technology, and

for training processors how to improve their productivity, reduce their costs, conserve energy and developnew products from the sal leaves.

•

• Bank loans:- UNIDO organized workshops with bankers to explain how the value chain works, the opportunities and strengths of the chain.One major improvement was a thermostatic cut-out to prevent overheating, re-duce electricity consumption and improve safety.

• New product development :-In an effort to reduce leaf consumption and over-exploitation of the forest, UNIDO started motivating processors and traders to develop new products. A trader came up with the idea of using glossy paper for the bottom layer of sal leaf cups, rather than using two layers of sal leaves.

• Traders :-banks refused to lend to traders was their lack of financial records such as balance sheets and income statements. Initially the traders were sceptical and did not want to disclose their business turnover. But UNIDO arranged meetings with bankers, took the traders on an exposure visits, and helped the traders prepare basic financial data so the bankers could appraise their businesses and lend them money.

Social and environmental innovationsInsuranceHealth trainingForest conservation

Engaging banks with the sal leaf chain• In the past, there was a total mismatch between the sal leaf value chain and

the financial system.• Collectors received overly large loans and got into deep debt as they were

unable to repay, while traders and processors had no access to bank loans and were unable to invest in their businesses.

Cont...

Dumapada self-help group taking its unusedloan back to the bank

Intervention of UNIDO:

• In 2007, a self-help group from the village of Dumapada applied for a new bank loan. In November that year it received $600 from the regional rural bank Baitarni Grameen.UNIDO organized a meeting with the group and found most of them do not know the purpose of using the loan Some replied that since they had no business plan, they would keep it in their savings account.

• That is when UNIDO decided to provide financial counselling to help the members develop a business plan and direct the loan towards production. A half-day training on business plans and financial management was organized in which member learned to calculate their loan needs, the best use of the loan and a repayment plan.

• They decided to divide $400 among the members and return the rest to the bank. All the members invested their loan money in their sal leaf businesses and have decided on a repayment schedule of 10 months. Five months later, they were repaying their instalments regularly and earning more from their businesses.

• Collectors – Ahari federation – bank• Processors – Betnoti federation – bank

Benefits

1) Collectors - At the start of the programme, the collectors earned about $0.30 per day, or $10 a month. By selling directly to the Federation and not using the services of agents, they were able to increase their incomes to $14 a month.

2) Processors-The Betnoti Federation supports processors by giving them access to raw materials in the low season. It gives them loans to install better technology and energy-saving devices. It also provides employment to many people.

3) Traders-Thirty traders received loans from banks and increased the scale of their business.

4) Banks-Banks now experience better loan recovery: the repayment rate increased by 55%.

UNIDO’s pro-gramme established two triangles of value chain finance:

• Some 1,560 primary collectors and 120 processors now have personal accident insurance.

• The introduction of paper into cup-making cut the use of sal leaves by half, supporting conservation efforts. The growth of the Joint Forest Protection Committee from 7 village members to 95, and its renewed activities has also had an impact: llegal tree felling has stopped in 47 villages because of the patrol squad.

• The social impacts on the chain have also been significant. Most processors are women. Once they gained access to working capital, they could upgrade their equipment, buy cheaper raw materials, and earn more. Better technology has reduced their physical burden. Because they are earning more in less time, they now have more time for their families.

• Once their mothers started earning more, the children had a better chance of getting an education and breaking out of vicious cycle as children were often involved in processing, meaning they missed school.

Social and environmental impacts

Challenges and Lessons• Length of intervantions

• Local agents

• Credit

• Multiple approach

• Importance of grassroots institutions • Local adaptation

• Multiple approach