Wednesday, September 10, 2008

A201 Chilli Powder Unit with woman entrepreneur through NGO NEEDS, Nukapur, Haveri District, Karnataka

Project Dates:

Implementation Start: September 2008

Project Details:

This project involves investment in a 1HP chili pounding machine for an entrepreneur, Ms. Channabasamma Somanakatti, in the village of Nukapur in Haveri District. The project was identified by the NGO NEEDS (Navodaya Educational and Environment Development Service) in Ranebennur, Haveri District. The project will be implemented and monitored jointly by S3IDF and NEEDS.

The Entrepreneur is a member of Sri Krishnadeveray SHG, which was formed in 2006. She does weekly savings of Rs. 10/-. She has completed SSLC, is the first representative of her SHG, and has an active interest in taking up this micro enterprise. She approached NEEDS with her request earlier this year and NEEDS has connected her with S3IDF for business development support.

The entrepreneur is deeply familiar with the village of Nukapur and surrounding villages of Hnaumapur, Kuragund, and Madavarayapur, an area which is home to approximately 1500 families. Through informal surveys, the entrepreneur has determined that there is a lack of chili powder grinding infrastructure in the local area. Villagers who grow or purchase chilis must travel relatively long distances to have those chilis ground into powder. Thus, as a primary line of business, she plans to provide chili pounding services to local households. Households will bring their raw material, and she will provide grinding services at a rate of Rs. 10/kg. She will be able to work six hours in a day and can process 15 to 20 kgs per day.

As a secondary line of business, the entrepreneur will process and market her own branded chili powder. She plans to purchase chilis in wholesale from Ranebennur and/or Byadgi and grind powder to market to local schools as well as shops and hotels in the village and nearby Ranebennur. Initially, she will market 200kgs of her own chili powder per month at Rs. 80/kg, a competitive retail price.

Project Financials:

http://spreadsheets.google.com/pub?key=pwRdPi0mYDcKvgmcfOIibQA

Project Size Details:

The chili pounding enterprise will service the approximately 1500 families living in the area of Nukapur and surrounding villages. 15 to 20 kgs will be ground per day. Additionally, the entrepreneur will manufacture and market approximately 200kgs of branded chili powder per month.

Project Impact Details:

The project will benefit the entrepreneur, as well as families in the local area who will now have the convenience of producing chili powder from their own chilis locally for a reasonable service fee. .

Estimated Pre-investment Costs:

Total Costs- Rs. 9785

S3IDF costs

Personnel Costs – Rs. 9185

Other costs - Rs. 600

Total S3IDF costs – Rs. 9785

Returns for S3IDF Revolving Fund:

12% returns on a reducing balance basis

(By mutual agreement, 8% of the total project cost will go to NEEDS to cover their preinvestment and monitoring work for this particular project and to cement a positive relationship with S3IDF.)

Project Indicators:

Investment Indicators

Investment size – Rs. 34,265

Revolving fund – Rs. 27,412

RF to investment size – 80%

Cost Indicators

Total pre investment cost – Rs.9785

Pre investment cost/Investment Ratio – 29%

Impact indicators

Number of direct beneficiaries – 1

Investment size/no. of beneficiaries – Rs.27,412

Project Risks:

Project owner/operator risk

Ms. Somanakatti is a new entrepreneur and is establishing a brand-new business, rather than expanding on an existing one. However, she has been recommended after a rigorous selection process from NEEDS (i.e., of the 60+ SHG groups that NEEDS works with, she is one of the most active and responsible members of one of the best-performing SHG groups). She is active and consistent in her savings and is the first representative of her SHG group. After conducting the necessary market survey, Ms. Somanakatti came to NEEDS herself seeking support for the new business, and was intent on establishing the enterprise in any way possible, demonstrating her ambition to make the enterprise a success. For those reasons, we believe the entrepreneur risk is minimized.

Market risk

The entrepreneur is highly familiar with the local market of Nukapur and surrounding villages. She has identified a latent demand for local chili grinding services, as most families must travel a minimum of 15 km to Ranebennur town to grind the chillis they purchase in markets or grow locally. Risk is that demand is either overestimated or highly seasonal, leading to inconsistency in revenues. However, the risk of overestimated demand is mitigated by the fact that the entrepreneur knows the market so well, and the risk of seasonality is mitigated by the fact that the entrepreneur has a secondary line of business in the marketing of her own branded chili powder.

Technology risk

Required machinery for the enterprise is a standard 1HP chili pounding machine, a tried-and-true technology. Machinery will be provided by a reputable technology supplier offering reliable servicing. The machine does require routine maintenance, but the entrepreneur will be instructed on maintenance practices and monitored closely in this regard. Thus, technology risk is low.

Portfolio risk

This is a very small investment, meant to be a trial project to explore potential future collaborations with NEEDS, so portfolio risk is low.

Mission risk

This is without a doubt a pro-poor project, so there is no mission risk.

Partners:

The entrepreneur, Ms. Somanakatti, and NEEDS NGO in Ranebennur.

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