Samunnati Intervention in Dairy Value Chain

Samunnati currently works in 34 value chains providing customised financial and non-financial solutions like dairy farm loans to various value chain players involved in each of them. This note explains Samunnati’s AMLA (Aggregation, Market Linkages, Advisor) intervention in the dairy value chain for cattle farmers, milk aggregators, and dairy unit.

An NGO focused on Community Development & Farmer Mobilisation
A Tamil Nadu based NGO, it has organized more than 2,00,000 women into Farmer Producer Organisations (FPOs) in the last five decades. The NGO has set up 3 dairy plants for procuring milk from its FPOs in three locations. There was a lack of funds for on-lending to its members and other services became difficult. The Dairy Unit was unable to mobilise credit from formal institutions. By Sep 2017, its 30,000 litres/day milk procurement had fallen to 2,500 litres.

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Samunnati’s Intervention
Samunnati analysed the entire value chain and offered the following solutions to the stakeholders of NGO:

Cattle loan to Milk Farmers
Samunnati sanctioned credit facility to the Dairy for financing the cattle farmers supplying milk. Farmer members having transaction history with the Dairy were eligible for the loan. This facility impacted by increasing milk supply from a larger number of cattle in the region.

Catalytic Infrastructure loan to Aggregators
Samunnati linked the Dairy unit to a Gujarat-based vendor for supplying BMCs (Bulk Milk Chilling Centres) to its aggregators based at the village level. The BMCs were bought through the credit facility provided by Samunnati. The repayment was through deduction at the Dairy unit level for the payment being made on behalf of the Aggregators.

Receivable Funding to Dairy
The Dairy unit supplies milk and milk-based products to prominent HoReCa (Hotels, Restaurants, and Canteens) in Chennai. Buyers were typically paying in 30 to 60 days credit period. This was blocking the working capital for the Dairy. Samunnati offered it receivable financing by discounting all the receivables from the buyers.

Market Linkage
Dairy was linked to Samunnati’s Agri Enterprise customer, an NGO founded in 2000 that provides mid-day meals to eliminate classroom hunger via the Mid-Day Meal Scheme. The entity serves more than 1.7 million children from 14,314 schools across 12 states of India.