One of the vexing issues in Agriculture has been how to successfully ensure the last mile connection with the Small Holding Farmers (SHF). Evidence points to the fact that by not being able to connect with the Last Mile Agripreneurs (LMA), all the players are actually contributing to low productivity, increased Post-Harvest Loss (PHL) and increased poverty. In addition, the SHF face acute problems in getting short-term loans from financial institutions as they lack the requisite financial collateral. The following note describes a way forward that tackles the twin concerns of how to correctly identify the farmer who has the entrepreneurial ability and is also creditworthy.

The private sectors engaged in agriculture input markets are facing the following constraints

  • SHF is poorly organized and sparsely populated leading to scale failure.
  • Living in remote and marginal areas having poor connectivity and enabling infrastructure results in high transaction costs to outreach.
  • The cost of new customer acquisition (among SHF) is prohibitively high
  •  Standard Dealer- Retailer network partners are reluctant to service these markets as there are insignificant economies of scale
  • Extremely difficult for companies to have full sight of the products & services in such disadvantaged regions

The Public Extension system in most countries is suffering from the lack of resources (human resources & financial) to reach out to these distant ecosystems. The NGO-led extension systems often lack the motivation to develop commercially feasible sustainable systems. Various innovations using ICT-led solutions have been tried to impart knowledge and information including financial inclusion as the last mile connect to smallholder farmers. But the challenges to developing the brick-and-mortar mechanism to deliver the goods still remain largely unsolved.

There are attempts to deploy local entrepreneurs living in the same ecosystems as smallholder farmers and utilize them as ‘last mile connects’. But the performance of these channel partners is far from satisfactory as there is a high drop-out among the local micro-entrepreneurs leaving them out of the sales and distribution network. 

Successful commercial input supply has to move beyond just delivering physical products to providing information and support on their safe and effective use. Publicly funded extension systems are under-resourced and are not designed to serve the specialized needs of input supply companies. The dilemma for input supply companies is how to reach thousands of widely dispersed smallholder farmers that are often poorly organized.

One solution is to capitalize on local entrepreneurs to carry out the input supply and extension function – Proxy Sales Force. Proxy Sales Agents require training and support but field experience with such approaches is disappointing as there is a high drop-out rate making this a costly approach. Business Excellence Index (BXI) is a tool to identify the right people to become proxy sales agents through a systematic approach.

The Approach: 

As stated earlier, BXI is a tool to identify the right leaders to become proxy sales agents in the village ecosystem. Business Excellence Index (BXI) is one such relevant innovation that develops a cost-effective, sustainable and scalable model of a ‘Proxy Sales Force’ using existing customer and/ or local micro-enterprises/businesses and rural enterprising youth belonging to smallholder communities by enhancing their entrepreneurial expertise. The Business Excellence Index (BXI) is used to assess the existing Technical, Entrepreneurial and Behavioural capabilities of the entrepreneurs (intended to be Proxy Sales forces) against a defined benchmark measure of capabilities required to perform their tasks. The BXI has a direct correlation to the ROI of the business enterprise.

The entire process of identifying and mentoring entrepreneurs involves the following phases viz., Learning Phase, Implementation Phase and Governance Phase.

The Learning Phase has the following elements:

Step 1: Assessment of current knowledge and skill share

The initial plan involves three stages namely (i)setting standards, (ii) Development and (iii) Nesting.

a. Setting Standards

  • Roll Out of BXI: Psychometric assessment of entrepreneurial capabilities Standardization of Market Relevant Business metrics and Roll Out of Entrepreneur led Learning Plans

b. Development

  • Training & mentoring on improvement areas
  • Sensitization on Scale-up of Mentoring Journey.

c. Nesting

Skill Labs to share peer entrepreneur success stories and nest best practices for market-relevant sales/ business practices /applications.

Step 2: Impact on Market Share

At this stage, the Go to Market (GTM) plan is firmed up. Entrepreneurs carry out a market plan implementation project for the incubation of the business plan.

Step 3: Detailed Evaluation of the demand creation on the market share

This step consists of two stages viz., Audits and Accreditation

In the Audit stage, the incubated business plans are reviewed by a third party and audited.

In the Accreditation stage post audits, the entrepreneurs go through an external certifications process to add sustainability to the project.

The Results:

The success of using local entrepreneurs as a last-mile delivery conduit largely depends on his/ her entrepreneurial abilities. BXI adopts a set of psychometric tools to estimate the entrepreneurial capabilities quantitatively that would provide a score to the traits such as the ability to identify opportunities and to take calculated risks, a high degree of need to excel, higher level skills of seamlessly forming a network of contacts, belief in his/her own efforts. Two different sets of tools are applied followed by Group Exercise; 

Based on the scores the entrepreneurs are classified in the following manner;

CHAMPION

Champions have scored the highest on Technical, Entrepreneurial & Behavioural skills. Thus, equipped and efficient to demonstrate confidently the product & services to customers and have the ability to penetrate the addressable market 

Outcome: Business outcome evaluation, convert to sales & Retention (ensuring repeat footfall, Demand customer loyalty

MASTER

Masters have strong Technical Knowledge and skills, and relatively low Entrepreneurial & Behavioural skills. Having the ability to effortlessly reach out to customers, facilitate discussions & educate the customers

Outcome: Consideration, Creating pipelines of customers

ROOKIE

Rookies have the lowest relative score in Technical, Entrepreneurial & Behavioural skills. Having the inclination to do business, and the ability to interact with customers. Adequate ability to create awareness about the product and services and have an understanding of the market

Outcome: Awareness, market intelligence

Each entrepreneur is mentored/ coached based on a well-calibrated development plan. The Business matrix of each individual business is guided by a comprehensive M&E plan. The Key Results Areas of critical success are driven accordingly;

KEY RESULTS AREAS (KRA)

Total Annual Turn Over: Value of business

The margin of Profit: Net worth creation

Number of Customers: Outreach to diverse marginal customer

Degree of Segmentation: Diversity of customer

Degree of Diversification: Addition of complementary products & services to existing portfolio

BXI empowers entrepreneurs to capture and articulate the latent business value in the ecosystem where they operate. 

Creditworthiness Excellence Index (CXI)

Financial institutions the world over have the financial checklist and tools to assess the creditworthiness of the borrower. These tools mainly focus on the borrower’s paying capacity, collateral, credit rating etc. Yet we all know the limitations of such tools as in many cases the default rates have been staggering. It has become an intractable problem as borrowers, for one reason or the other, become defaulters. Credit management, therefore, is posing a major challenge for financial institutions. One reason why the assessment fails is because the profiling of the borrower is heavily dependent on his/her financial health ignoring the psychological make- up of the person. A reliable and comprehensive approach would be to use both the financial tools as well as the psychometric tools to get a complete picture of the motivations, attitudes and financial background of the borrower. A McKinsey report states that Psychometric tests can lower default rates by 25%-40% and without any banker supervision the assessment is 45% of traditional assessment measures.

What is CXI?

Creditworthiness Excellence Index(CXI) is an innovative tool that profiles the borrower on various psychological parameters that influence his borrowing behaviour. Modern research indicates that various traits and attributes influence our spending patterns. These attributes also determine if the borrower has entrepreneurial qualities in him or not. The CXI measures these attributes and comes up with a picture of the borrower with a high degree of accuracy. This coupled with the financial appraisal would make the lending process foolproof.

Some of these attributes and their descriptions are given below:

  • Conscientiousness
  • Business Skills
  • Ethics & Honesty
  • Fluid Intelligence
  •  Extraversion
  • Confidence
  • Need for Achievement
  •  Locus of Control
  •  Passion for Work
  • A brief description of these attributes is given below:

Conscientiousness

Conscientiousness implies being perfect in any assignment. Such individuals do believe in hard work and planning. They are disciplined and organised in various tasks/projects that they undertake. Being cautious is also one of the aspects of conscientiousness. Usually, a credible borrower is a very conscientious one and from that viewpoint, we need to assess the borrower on this attribute of personality.

·Business Skills

To run any enterprise successfully one needs to have few business skills. A few of the important and critical business skills are the ability to plan and set goals, the ability to motivate and network with colleagues and customers, time management, team building and prudent fiscal discipline.

Ethics & Honesty

While Business Skills denote the ability, present or absent in the borrower ethics and honesty represent the willingness element of the personality. Our research indicates that conscientiousness is the most accurate predictor of ethical and honest behaviour.

·Fluid Intelligence

Fluid Intelligence, as opposed to Crystalized Intelligence- a concept proposed by Cattell, is the ability to be flexible, adaptable in solving problems. These are the people who innovate and think out of the box. In the Transactional Analysis framework, they have the “Child” mask. Such fluid intelligence is an attribute of a successful entrepreneur.

·Extroversion

The extroverted person reflects assertiveness, optimism, drive, dominance and leadership. It also indicates that such a profile is more likely to take risks. Now it needs to be determined if this is a moderate risk or a foolhardy risk. Both have serious implications for creditworthiness.

·Confidence

For starting any new venture, the key attribute needed is confidence. Confidence in oneself as well as a strong belief that one can make a difference.

·Need for Achievement

To achieve perfection and success in any enterprise is reflected in the need for achievement. People with a high degree of the need for achievement set for themselves goals that have a stretch in them. Not very easy and also not unrealistic is the pattern for setting the goals. Such people always focus on results – an essential attribute of entrepreneurs.

·Locus of Control

People with an internal locus of control always believe in their efforts to produce results. People with an external locus of control always take solace in factors such as luck or destiny to rationalize their success or failure. People with internal locus of control are more likely to be good at managing a business.

·Passion for Work

Individuals with a high degree of passion for work or self-driven. Their intrinsic motivation is always at its peak. They are also passionate about what they do and they have a healthy dislike for failure.

The Methodology:

The methodology for arriving at creditworthiness consists of the following three steps:

  •  Interview with the borrower and his family and close associates (this helps get a 360-degree perspective)
  •  Administration of the questionnaire (through a tablet or paper pencil test). The test takes around 60 minutes and is culture free. It can be administered to any group and can be easily translated into the local language.
  • Administration of the financial tools

The final result is a numerical score with a clear go or no go for providing the loan.

Conclusion:

Both BXI and CXI are innovative tools that help identify the village-based agripreneurs selection which facilitates the last mile connect. In addition, creditworthiness profiling helps lending financial institutions including micro-finance agencies to give loans that have low risk. We have used these tools successfully in Tanzania, Senegal. Bangladesh and India with stunning results. The tools can be administered in local languages.