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FPOs with a business mindset: A method for farmer cooperatives to succeed commercially

Credit and finance for MSMEs: It’s time to take a close look at the present FPO ecosystem, in which farmer collectives must begin to act like entrepreneurs in order to successfully traverse the always shifting market.

Credit and financing for MSMEs: Entrepreneurship and FPOs (farmer-producer organisations) may not initially appear to be related ideas. However, a closer examination reveals that they are related in a number of subtle ways, some of which are covered in this article. Being risk-tolerant, having a big vision, exploring unexplored territory to generate new ideas, and developing a strong sense of resilience without the fear of failure and with perseverance are all characteristics of an entrepreneurial personality. To live, prosper, and develop into a financially successful business enterprise, an FPO needs all of these things.

In order to understand why FPOs should think like entrepreneurs, it is necessary to first comprehend the notion of FPOs. The concept of FPOs was developed as a result of the rise of smallholder and landless farmers over the past 40 years, which highlighted the need for better negotiating power through collectivization. The government has introduced a number of programmes to improve the smallholder farmers’ insecure lives, such as the Formation and Promotion of 10000 FPOs. FPOs can play a crucial role in giving farmers a place to gather, share knowledge, and work together on farming.

However, due to their scarce collateral, poor equity basis, lack of credit history, and the high risks (weather, price, etc.) connected with agriculture, FPOs do face a number of challenges when trying to acquire capital from traditional financial institutions like banks. There are approximately 15,000 FPOs registered in India, which are supported by numerous governmental and non-governmental organisations, according to publicly available sources. However, careful examination reveals that most FPOs fail because of the aforementioned issues, whereas a small minority succeed in surviving and developing into financially successful enterprises. The successful people, on the other hand, display the characteristics referred to as “entrepreneurial thinking,” as stated below.

One of the most crucial conditions for success is having a business mindset that prioritises the demands of the client. FPOs can gain from understanding their customers’ needs (B2B and B2C) and working to address those demands, much like successful entrepreneurs who are committed to serving their customers’ wants. Entrepreneurs are driven to expand their firms and have a business attitude. Similar to this, FPOs must adopt a business mentality and concentrate on making money, cutting expenses, and improving productivity.

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Continuously searching the market for fresh opportunities and recognising unmet requirements are key components of entrepreneurial thinking. FPOs can uncover new markets for their goods, investigate new product lines, and even discover new methods to work with other organisations to expand their reach by adopting this mentality. For instance, several FPOs in Tamil Nadu that deal with pulses, millets, and unique types of rice established primary and secondary processing and packaging operations in response to the rising demand for processed and packaged foods. A few of them began their own brands in addition to servicing significant food manufacturing firms. Similar to this, a group of FPOs in Andhra Pradesh invested in investigating the B2B supply opportunity after sensing the demand for organic coffee in a region where the tribal population predominated. The FPOs are now providing services to one of the well-known international coffee chains and increasing the income of the farmers that make up its membership.

Entrepreneurs don’t mind taking calculated chances. Similarly, FPOs can profit from this way of thinking by being prepared to take calculated risks when experimenting with new crops or farming methods, making investments in new equipment, or going after untapped markets. However, given the low member support and lack of financial assistance, this is easier said than done. Here, the ecosystem participants’ roles become crucial since timely working capital availability and financial access can assist an FPO in taking prudent risks and making the leap of faith.

Openness to novel concepts, experimentation with novel procedures, and testing novel goods are all aspects of entrepreneurial thinking. For instance, FPOs can gain by digitising their business processes to take advantage of data’s capacity to support better decision-making. Similar changes include the introduction of new kinds, new farming techniques, investigating new technology, and broadening their product lines (for instance, an FPO in South Tamil Nadu is collaborating with a major food firm on a buyback arrangement for a special variety of chilli).

Entrepreneurs must be masters at dealing with others, networking, and establishing connections. To increase their market reach and negotiating strength, FPOs must establish ties with their suppliers, future customers, and their peers, including FPOs in other States and in their own State. Entrepreneurs frequently work with others to accomplish their objectives. By using this strategy, FPOs can collaborate with other organisations and/or other groups to take use of each other’s strengths and accomplish shared objectives. Working with regional governments, NGOs, or even for-profit businesses could fall under this category.

It’s time to take a close look at the present FPO ecosystem, in which farmer collectives need to adopt an entrepreneurial mindset in order to survive in the cutthroat marketplace. To do this, it is crucial to improve their access to the three factors that are most important—capital, markets, and technology—through an efficient and supportive governmental framework. FPOs may increase their profitability and improve the quality of life for their members by having better access to these enablers and by taking prudent risks, innovating, and working with others.

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