SOCIAL ENTREPRENEURSHIP BLOG SERIES ISSUE NO. 11: Converting Agro Produce into Cash: The Story of R&D Innovation

By Bikas Udhyami (Lokmani Subedi)
January 30, 2018

We call ourselves an agriculture-based country, because according to the Ministry of Agricultural Development more than 65.7 percent of the total population earn their livelihood from this sector. Despite of that, farmers are facing a lot of challenges. They are short of subsidies, required information and market facilities. Sunita Nhemaphuki, founder of 'R&D Innovative', is trying to solve this problem and is making an effort to convert agro-products into cash. Bikas Udhyami talked to her about her motivation and the journey of her success.

How did 'R&D Innovative' start?

I was a communication student and was running an advertisement agency. Then I went Bangladesh for my study. I was interested in doing my thesis in the area of public service, but talking with friends I decided to focus on agriculture. One of my friends had started a cattle farm. But he was not getting any information. So, he came to us and told us why don’t we do something in this field. While doing research, I found that agricultural news was getting a lot of attention in newspapers, but there was no source to find practical information about this field. Most of the articles were not informative in the sense that they could not cover the needs of small farmers. News of earnings in Lakh was published, but small farmers were not getting profit due to the lack of information. Journalists are eager to report news, but they do not care about that information gap. They don’t even know what type of information is needed for farmers. Information on a business plan, insects, seeds, methods were lacking. Some research articles was published, but this was mainly in English and very difficult to understand. That encouraged us to do something on this.

We primarily thought of starting with a mobile application, but later decided to go with a magazine because is more easily accessible to farmers and they can learn from the pictures and associate themselves with the articles. People who are really in agriculture don’t know how to use smartphones properly. Delivering messages through simple communication methods works better. We published our first magazine in 2002 AD and provided the farmers with the contents relevant to them and the phone numbers where they could call and ask. That worked really well, because we Nepalese love to talk in person and get information.

What were the early challenges? How did you cope with those? After establishment, we encountered a distribution problem. Reaching the farmers was difficult. To solve this problem, we started a club of people, who were interested in agriculture. We used to invite experts and moderate the discussion. It was only in Kathmandu at that time, but the crowd was huge. After one year when we did a business review, we found that though we successfully ran the discussion series and connected thousands of people, the actual work was not properly done. We reached the same people time and time again. Then we abandoned that idea and started a consulting service named Krishi Udhyamsala. We provided ideas on what to start, how to start, how to make a business plan etc. and we also provided this information in our magazine. We started to write articles on how to start animal husbandry, or hatchery etc. including the estimated cost calculation, wages, operation cost etc. That went really well and this is continuing till date. We have a consulting wing as well. Now we have 2 Chartered Accountants and other MBA graduates working for us. In collaboration with other NGOs and INGOs, we organize financial literacy training.

Why is your business unique in comparison to other businesses in this field? Our business is aimed at solving the problems of a particular society. through innovation. After three years, people who started their business after consulting us, found it difficult to sell their products.

To solve this problem, we established small outlets around Kathmandu Valley where they can sell their products to us while we take care of searching for the market. They can choose if they want to sell themselves or sell through our company. There were 24 outlets, but due to the earthquake and the blockade these are now reduced to 6. The major problem with agriculture nowadays is that activities are scattered. It is not easy to collect things. And there is an inconsistent supply in agricultural products as well. We found that unless we have our own regular farmers, they cannot follow our business plan. Even though if we come up with an innovative solution, if is not sustainable it won’t work.

From last year, we started something new. by producing goods from a particular pocket area. We started this from Bhaktapur Gundu and we want to convert every farmer into an entrepreneur by reaching their locality. We provide capital to the farmers not in cash, but in the form of infrastructure investment. We help them build farms, where labor and land will be his/her responsibility. They will invest 20% and for the rest we provide an interest-free loan. but they do not get cash in hand. When the production begins, we buy a guaranteed 35 percent of the production. We provide them the wholesale price of Kalimati. This is how we are working. After they pay back the loan, after two or three years, the whole farm will be their own. Now we are targeting 500 such agriculture entrepreneurs. We are also investing in a cold room for the storage facility of unsold vegetables. While we are focusing on agriculture now, we are also working to recognize other pocket areas.

Are there more things that R&D is doing?

We have established a promotion center. After working with farmers, what we learned is that not all farmers can produce in the long term. They will have small-scale production and they need a place to sell this as well. In this promotion center, they can come with their product and sell from there. To benefit the rural farmers, we have also given them storage facility here where they can store their product and search the market. There is one farmer from Jumla, who is taking our service now. He had a problem with minimum scale sell, where people won’t pay in time etc. He was storing his goods in a paid room. We provide that opportunity free of cost. He also can’t find the place to sell and potential buyers may not find him. Our center works as the meeting platform of these two interests. We have 6 stores here that farmers can use for free for 6 months. If they want to sell by themselves that is ok, if not we sell through our channel partner. We even help them in branding their products. We do this through our AgriNepal. This way we are helping the economic activities of agriculture farmers.

You already talked about some of the challenges earlier. What were the economic challenges in setting up the entire systems and what has been your investment? How does it function?

The economic problem arises when you start something at a large scale. I began these things only with 50,000 rupees. That was my scholarship amount. Then we grew gradually so the foundation was strong enough to sustain. The main problem for women entrepreneurs is to persuade their families, especially fathers. I am so lucky that my husband works for me. However, this is not the case for many other women who want to be entrepreneurs but simply couldn’t convince their families.

In agriculture, it is hard to get any loan at the beginning. When we promise to farmers, we have to buy their goods. Sometimes the market goes down, sometimes a strike happens. Those past years we saw a lot of hardships, but now we are in the position to help farmers strengthen their position. We have another bad habit in thinking that everything comes free. Especially in agriculture, people take things for granted. We had to work hard to sell our magazine. Getting sponsorships was another huge challenge. We used to visit different places to sell our magazine, but people used to demand to get it for free. It was very hard for us to tell people that we are not running any donor-funded project, but are making a business out of that. In discussion programs as well, when we used to tell people to pay for the monthly edition, they used to be surprised. If it has worthy information, then why do people not want to pay for that? If I teach others to do economic transactions, then how can I not follow the same rule? Government too was not very open and we didn’t have good experience. Now, there are many NGOs, which sponsor our magazine and we send it to various villages. We even send it via the post office. When I look back at our journey then yeah, it’s been a long one with many ups and downs. This is what every startup goes through at the beginning. Those who persist, will climb.

There seem to be two problems we are having: one of having to go through middlemen and another is of lack of education to digitize the agriculture sector. You have been trying to solve these problems. Why is that necessary? How hard is it to transform the already established system?

The problems exist, because our country has geographical challenges.

In agriculture, right now it is almost impossible to supply things without a middleman, because banks and governments are not that strong to intervene in the process. Middlemen too may have their own problems. However, what I think is that, regardless of profit or problems, transparency in the process is very important. In other countries, farmers decide the price, but here the middleman does. We pay 67% to farmers and play on the rest 33 percent. That is what everyone should do. If any consumer pays Rs. 100 per kg, then we assure that Rs. 67 goes go to farmers. This is what an ideal system should be. Why we want to digitize this transparency is because of our geography. We cannot travel to every place, but we can reach at least those places with a mobile network. In that way, they can know the price of their goods and selll by themselves, know about plant diseases and solve these etc. But despite that, we cannot work to reach each and every farmer, therefore, we work with lead farmers.

In one of your interview you said that farmers should be independent then only they can earn a profit. What do you mean by this?

In Nepal, one of problems we are seeing is that there are various collection centers, groups and saving cooperatives. These provide various grants, but only certain people apply to these grants. We focus on individuals and are output oriented. If you produce this much amount, then you will get this amount of grant. This model will encourage farmers to invest in the output-oriented areas. Those who are interested can apply and get it. This will sustain the farm as well. If the grant is given to a group, then people wait for someone to do the part. In this way, everything fades out. If we give grants to individuals, they will be motivated to do well and the entire risk also will be their own. But the grant should not be given in the form of money.

Government and NGOs are often blamed for distributing fish rather teaching fishery. What is your view on this? What should be done to solve this?

Dumber (Her husband): NGOs' motive and farmers' needs do not match in Nepal. Farmers agree on everything they get for free and NGOs distribute whatever they have available under their project. The government has one program to increase the productivity and they have a certain thing in their mind in terms of chemicals and fertilizers. Most NGOs are against such fertilizers in the name of organic productivity. I am not against this or supportive of this, but I am talking about the general tendency. These things are confusing the farmers, because there is a clear difference in government and NGO priorities and the priority of the farmers. What should be done is to evaluate all these priorities of the different actors and streamline investments accordingly. The more this conflict expands, the weaker the agriculture field will be. Investment in agriculture should be need-based.

What has social impact R&D Initiative created to date?

The main impact is that we are developing new entrepreneurs in the field of agriculture. Through our work with small farmers we can observe changes in their day to day lives. They are earning a livelihood and as a result of owning their greenhouse, their economic status has changed and they are now investing in education. Through our collection center, we have saved the time of various farmers. In our agro center, people even come to sell their products worth Rs. 20 only so that customers can buy these. This produce used to go to waste before. We welcome everyone and help to convert their product into cash. We have been able to prove that agriculture is itself a business. Hence, we should think about various aspects before investing in it. Our circulation is more thaan 10,000-pieces. Those who can’t buy the magazines from the shop, we send a copy via mail. Government agencies and NGOs are also helping us to spread these pieces through their channels. Till date we have reached up to 650 farmers directly and more than 90 percent of them are women. They are now able to earn small money for their livelihood.

As the new federal system is being implemented, we have been focusing on the adjustment of agriculture in the new system. Since the last 5 editions, we have been publishing things related to these issues. We have been raising issues like digitization, contract farming, seed banks, plant clinics, chemical fertilizer awareness etc. We have been writing content on the things farmers are capable of doing. We have been focusing on how government, we, farmers and consumers collaborate together and solve the problem.

You have been working with various startups. Being the part of Rockstart etc. What are the major problems with agro-based startups of the current time? What do they need?

First, they should not have the feeling that they are the only ones. This field needs a collective effort. I often see startups saying this is my unique and innovative idea. The context of Silicon Valley doesn’t apply here. We need to contextualize our ideas. I would say that there is nothing left to be innovated. It is all about finding compatibility and redefine ideas in our own way. When you leave that I feeling, you start talking with people, mentors and even with your competitors and it actually helps. This reduces the repetition of work and hence helps us to avoid mistakes. People say focus on only one area of work. But I say, focus on one sector, but try multiple ways. That gives you options when you fail in one. This is the problem among startups as well. Their idea is innovative, but when someone incorporates their idea as a small portion in another field they will go out of competition.

Dambar: Talking about agriculture sector, this is not the sector where you will get immediate profit. It takes time. One needs to understand the crux of the business and be able to think and act in real figures. We need to be very strategic while planning. Investment is a crucial thing rather than emotion.

Another mistake is that startups soon lack of capital investment and the one reason why they can’t get bank loans is the lack of documentation. There are banks which can invest in your idea, but you at least should build a strong foundation with proper records and documentation.