Case Study - Apna Bazaar
Nellore, the southernmost district of Andhra Pradesh abutting Tamil Nadu, is famous for rice cultivation. 'Nellore rice' is famous in different parts of south India. In the recent past, prawn culture has become very popular and the district is also called the 'Prawn Capital of India'. Nellore is also famous for the entrepreneurial capacity of its people in the area of construction. Several big construction firms with their base here operate in countries like Afghanistan, Iraq and beyond. The skill of construction labour from Nellore is legendary and construction companies usually operate with integrated crews from the district wherever in the world they undertake projects.
Kasmuru, a small village about 20 kms. from Nellore town has become famous because of a dargah of a local Sufi saint by name Hazrat Sayyad Karimulla Shah Kadri Auliya who is revered by people of all faiths. It is believed that people suffering from chronic ailments who visit the dargah are miraculously healed. While the pilgrim traffic is mostly during the weekends and on special days, there are always some people, especially sick who take accommodation and stay for considerable period in anticipation of being healed from their chronic diseases.
Nellore is also famous for being a pioneer in the Self Help Group movement in Andhra Pradesh. In fact the state-wide anti-arrack campaign erupted from remote Dubaguta village of Nellore district, led by a widow by name Rosamma, which many believe culminated in the change of the State Government. It is believed that the Self Help Group (SHG) movement in Andhra Pradesh gained substantial momentum because it rode on the women's mobilization achieved by the anti-arrack movement.
The Dharani Self Help Group in Kasmuru village was promoted by District Rural Development Agency (DRDA), Nellore and consisted of 14 members, all belonging to socially and economically disadvantaged section of society. The group was considered a showcase group and many VIPs and visitors were brought to the village to interact with the group. By the year 2000, the group had accumulated a corpus of around Rs. 50,000 (including matching grant from DRDA) which was utilised for internal lending mostly for life cycle and consumption requirements.
The DRDA was keen to upscale operations of Self Help Groups and graduate them to undertaking group and micro enterprise activities for their own development and creating new livelihood opportunities. Also, as this was a pet programme of the then Chief minister who reviewed achievements at a weekly statewide video conference, there was competition among the District Collectors and Project Directors DRDA of the districts to outshine the others. In 2000, the Project Director, DRDA suggested to the group to take up an Apna Bazaar (a departmental chain store) in their village at a cost of Rs. two lakhs, of which Rs. one lakh would be subsidy from DRDA and the rest, a loan from the Pinakini Gramin Bank, the local RRB under whose service area this village came. The Project Director told the group that they had been considered for the scheme out of the thousands of groups in the district due to their excellent working. The group took time to respond, as they were hesitant to take up what in their view was a big project. The RRB also expressed concern about the size of the project and the loan burden that it would put upon the group. However, such doubts were allayed by the Project Director, DRDA who assured that the entire project would be got executed by them through Apna Bazaar, Hyderabad and there would be no difficulty.
As there was no suitable building in the village, the group constructed a building by investing Rs. 40,000 on a plot of land belonging to two of the group members.
After this, the ‘Apna Bazaar’ (the parent unit which owns the brand and franchise) got the racks and furniture costing Rs. 1 lakh installed and gave stocks worth Rs. 1 lakh. The super market was inaugurated with much fanfare with local political leaders and government officials attending the event and complimenting DRDA and the group for undertaking a novel enterprise instead of just doing internal lending of small sums and purchasing milch buffaloes like most other groups. The group employed two of their members to man the shop.
The group began defaulting on their loan instalment to the bank and this rang an alarm bell for the RRB. The branch manager was aware that the group was cohesive and sincere in their working and there could be genuine reasons for falling back in repayment. Based on a visit and interaction with the group leaders and members he gathered the following information:
The daily sales were Rs. 800 on weekdays and Rs. 1400 on weekends, when some pilgrim traffic is there to the village. The average daily sale was Rs. 1200. Their average margin was 8%. The daily surplus was just enough to meet the wages and electricity charges of the shop. The group did not anticipate significant increase in volumes and revenue, although they were stocking goods as per their movement. The group leader and members felt embarrassed that they had not been able to meet their interest payment and loan repayment obligation and for not having shared their problems with the Branch Managers earlier.
How they were going to meet the interest and repayment obligations worried them. Considering their genuine difficulties, the Branch Manager was willing to explore options but he and the group realised that cash flows from the shop were too meager to service the debt. Further, what of the money put by them in the building? They had a reduced fund of Rs. 30000 which they were utilising for internal lending. The other members (other than group leaders and members employed in the shop) were asking question about how the activity had benefited them and were not be willing to spare money from their corpus and weekly savings and repayments to service the super market loan.
The group leader felt helpless. “We were sold a dream by the DRDA. We got sold to the dream. What do we do now?” she also thought aloud.
The leaders thought that it was appropriate to bring the DRDA officials into the picture, considering that they were the ones who planted the seed, the idea of a supermarket in their village. By this time, the Project Director DRDA who had received accolades for his good work had been rewarded with posting as Project Director, Drought Prone Area Programme (DPAP) in an adjoining district.
As the new Project Director, DRDA, Nellore district, how would you address this case?
Prepared by EV.Murray,Faculty Member, Reserve Bank of India, College of Agricultural Banking, Pune, based on field work done in 2002 for NABARD, Andhra Pradesh Regional Office, as a part of the Potential Assessment Survey for Non-farm Sector in Nellore District.
Note: Case Studies are intended for classroom discussion to highlight the approach to be taken and techniques to be used rather than arrive at a right or wrong decision.
Apna Bazaar - Case Study , By: EV Murray