New Generation Cooperatives in India

Trip Start Jul 26, 2008
Trip End Sep 27, 2008

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Flag of India  , Andhra Pradesh,
Thursday, August 14, 2008

I am on an overnight trip by train from Hyderabad.  I am visiting Cooperative Development Foundation (CDF).  Mr Rama Reddy, President of the Foundation picked me up at Hyderabad and has been my professor and tutor in introducing me to cooperatives which play a major role in India.   He is also President of the Indian Cooperative Union. 

Cooperative Development Foundation was founded in 1975 and has been funded by $1.5 million of grants from American, Canadian and European Foundations   CDF operations are self sustaining and funded out of the interest received from the money it loans to the cooperatives for infrastructure development.

Cooperatives are owned and manged by their members for their own benefit.

Cooperative Development Foundation in primarily involved with cooperatives in three different areas:

Thrift Cooperatives - this allows members (only) to deposit money, borrow money and share in the surpluses of the coop.  The surplus (interest on loans made minus interest on deposits other than mandatory deposits, cost of administering deposits and loans) is shared equitably among the members. - there is no interest paid on their mandatory deposits.   Borrowers are charged interest from 18% to 12% declining balance depending on how much money has been collectively deposited by the members into the coop. Loans may be used for any cause and range from 12 to 60 months. Each member must save (compulsory savings) and deposit into the co-op $.75 per month.  They may also optionally do fixed deposits, recurring deposits and savings deposits.  Borrowers may borrow for any purpose and may or may not be poor (75% are poor).  Small loans are approved automatically and large loans go through a process that assures that the borrower is capable of utilizing and repaying the loan.  Most of the borrowers (80%) form into solidarity groups which provides greater assurance that loans will be repaid.  Those not in a solidarity group can not get as large a loan.  Currently the Thrift Coops that CDF has facilitated has 150,000 members (100,000 women and 50,000 men in gender only coops) who have deposited $15 million - or an average of $100 each.

CDF was instrumental in organizing and training people who took leadership and formed the Coops - they did not provide initial loans or investments.  Today these coops are quite self sufficient and doing their own expansion.  CDF continues to Audit these coops to provide members greater assurance that their money is being managed well.  Twenty percent of CDF's current resources goes to supporting these coops.

Women's Dairy Cooperatives - CDF has facilitated the formation of two Dairy Cooperatives.  The first Dairy, started in 2002  has a capacity of 20,000 liters per day and 110 local milk collection centers which feed this dairy.  The second Dairy, started in 2006 has a capacity of 30,000 liters and 70 local milk collection centers which feed it. Each collection center receives milk twice a day from the local dairy farmers, test the milk for fat percentage, weigh the milk and determine how much the milk farmer will be paid for the amount they provide each time.  CDF loaned $.9 million to the first dairy who has repaid the loan and is operating at a profit.  The second, newer dairy they loaned $1.2 million and they are in the process of repaying the loan.  Interest rates on these loans are 9 - 12% on declining balances  This dairy is operating only at 10% of capacity and this is due to the government threatening to change the laws which would have adversely effected the dairy farmers and their cooperatives.  CDF spends 70% of its resources working to help the Dairy Coops regain their momentum now that the High Court has ruled in favor of the Dairy Farmers.  When CDF is successful in helping this operation to break even (30% of capacity), they will then move to establish a third Dairy coop in a location that they have already chosen.  Typically a Dairy process starts with milking buffalo (not cows) from 5 to 6, (AM & PM) the dairy farmer brings milk to collection place, the collection place accepts milk from 7 to 8, the pooled milk is then taken to the dairy in the 9 - 10 range and the dairy will fully process the milk (including homogenization, and pasteurization) by 12 - a total of 6 - 7 hours.  This happens both AM and PM.  These dairies support 20,000 dairy farmers.  All of the Board of Directors of the Dairy and all of the Dairy Farmers are women.

Paddy (Non-Husked Rice) Cooperatives - Paddy is the major crop in Andhra Pradesh (this state) which is considered to be the "rice bowl of India."  CDF has facilitated the formation of four Paddy Seed Growers Cooperatives.  They loaned $100,000 to each of these four cooperatives.  These loans, at 9 - 12% interest (declining balance) has been repaid by three of the four coops.  The seed business has low credibility in the country - they are seen as "sharks".  These cooperatives ensure quality of the seed that they produce and market.  At least 30,000 small and marginal farmers are supported by these four coops.

Micro Health Insurance - CDF's next project is to enable women's thrift cooperatives to provide health insurance services to family members of all members of select 20 thrift cooperatives, on a pilot basis, 1st January 2009. The Microinsurance Academy (MIA), New Delhi, is providing all technical support in designing and implementing this pilot project.  Based on the lessons learnt during the piloting stage, the service will be extended to all 275 women's thrift cooperatives, in a phased manner. Both CDF and MIA will be engaged in facilitating the members of the select cooperatives in preparing health insurance packages that will be fully funded by the participating members themselves.

Change of the Guard - After serving CDF in various positions for 37 years(1975-2008), including the last  8 years as President, Rama will leave CDF on 31st August 2008. The board of CDF has chosen a replacement for Rama. Ms Sandhya Rani will succeed him. This will then allow him to spend a couple of months in Princeton, NJ, with his two daughters, participate in an international cooperatives focus group meeting in Washington, DC, and then return to Hyderabad, India, to spend full time as the President of the Indian Cooperative Union, an advocacy group seeking reforms in cooperative legislation.  Rama's replacement is a woman who has been serving on the CDF Board of Trustees and who has planned to seek voluntary retirement from a top management position with the Indian postal service. Sandhya hopes to spend more time carrying on and bringing new energy and perspective to the work of CDF.

I was honored to spend two of Rama's last few days with CDF with him.  He is not only a major person in the Cooperative Movement in India, but he is was a wise, gracious and generous host to this appreciative American.  This was another peak experience on my trip.
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drgandhi on

MARTY's Travelpod blog is very interesting
It is very intersting to read a very good account of Marty's travelpod blog which is highly informative.
I have had a bird's eyeview of the whole gamut of operations of CDF and its activities in different sectors.A good receord for CDF to preserve and to circulate for all those interested in coop.institutional development.

I,as an expert of MicroInsurance,am one who is interested to observe closely the CDF's progress in MI propagation and how it would thrive as a Mutual society for MI utilising the MACs Act of AP state since I'm sure under the able guidance of great leader like RamaReddygaru, it would definetly set a good example of a 'success story to be replicated elsewhere also.

dr.vinod potdar on

I am happy to see Mr. MARTY's blog. Its shows how rural dairy development taking place in India. There are some more pockets in other parts of india like Bangalore Dairy, Gokkul Dairy etc.

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