According to the National Dairy Development Board, India will need to meet a demand of 180 million tonnes of milk production each year by 2021 to feed its burgeoning population. At a current production rate of 2.5 million tonnes per annum, the country could soon face enormous stress if there is a shortage of supply. Now enter Samridhi Agri-Products, a social enterprise that patches up the flaws in milk production to increase milk supply while providing the means to income generation for small-scale farmers and ultra poor households.
The journey for founder Lokesh Kumar Singh started at SKS Microfinance, where he learned that building an entire ecosystem and not just providing money to the poor is what it would take to help them. As he puts it – “Microfinance operates under the belief that every poor person is a natural entrepreneur,” – which is not always the case.
One problem of milk production is that it is highly fragmented. Small-scale farmers scattered across the country drive a significant portion of total milk production, but often sell at lower than market rates because they have limited distribution options and face numerous challenges in milk production, such as a lack of cooling systems to avoid product spoilage and thus waste. As a result, they are constantly being exploited by middlemen and for most, it is their only source of income.
Samridhi was established in 2009 to create steady jobs and fill the gaps of the rural dairy supply chain in Uttar Pradesh, where a large proportion of the population live in extreme poverty.
The company purchases milk from two client groups: Qualifying Ultra Poor Employees and Private Livestock Producers.
Qualifying Ultra Poor Employees are those living under $1.25 per day who are among the poorest of the country and do not own any productive assets. Samridhi identifies who the poorest households are by measuring one’s housing quality, value of household assets, family diet, and current income.
Each qualifying household rears at least one cow or goat. As employees of Samridhi, they receive a guaranteed salary of Rs. 600 per month. A portion of the milk is returned to the company and the employee can choose to keep the remaining milk for consumption or sell it.
Each employee is also responsible for rearing an offspring. The offspring is later returned to Samridhi at which point the original dairy animal becomes the property of the family, along with any subsequent offspring. Eventually, the employee is able to build their own income-generating assets and receive a steady income.
Private Livestock Producers are those earning between $2 – 3 per day. They typically own one to three cows but sell their milk at less than market rates to middlemen. Some own goats, but the lack of a market means that they are unable to generate an income from goat milk production. Samridhi provides these households with an alternative by purchasing their product.
The milk is delivered to Samridhi’s bulk milk chillers (BMC) and sold to Devashish Dairy who sells milk and milk products to retail outlets under the brand “Shuddha”. Samridhi hopes to establish new purchasing partnerships by the early fall of 2012.
Last year, the company received a seed funding of Rs. 32 lakhs from Upaya Social Ventures and are looking for additional capital to scale. Each Samridhi BMC is expected to create 1,500 jobs at full capacity. Given the strain on milk supply and the millions of people in India living below the poverty line, Samridhi is an example of a business idea that has the potential to create real change for many families.
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