Brief industry outlook
There are highly developed and strong infrastructure and milk collection network in all parts of Sri Lanka to source milk from rural producers. This infrastructure has paved the way for meaningful and sustainable livelihood in the dairy sector. Sri Lanka imports significant percentage of its milk in powder form overseas at a substantially higher prices than the cost of production locally. There are large scale dairy sector players in Sri Lanka, however, Nestle is by far the biggest operator.
Overall, the local milk production is far short of the country’s requirement.
Human capacity and skill levels of the target beneficiaries
A large number of people are in desperate need of jobs in their local areas. They are mostly widows and carry deep war related physical injuries and mental trauma, but have to care for their children. These female breadwinners have considerable knowledge of dairy milk production, however, it relates to traditional practices using local cattle.
Introduction of new breeds, whether from other parts of Sri Lanka or from abroad, into war affected regions would attract start up of far effective and profitable ventures. However, it would carry the risk normally associated with any pioneering intervention. In addition, there will be a need for capacity building of the local beneficiaries.
Initially, only members of active, self-help, small groups will be targeted. They already enjoy the benefits from group dynamics. Various commercially savvy financial institutions have given micro credit loans to these women at interest rates of well over 40% per annum and they are currently greatly burdened by this and suffering serious hardship.
Engagement model- A concept
There are various modalities that these people could engage in. However, IRDG wishes to promote the following “Social Enterprise” model.
- Form a private company to own the cattle (Project) on behalf of the beneficiary;
- Beneficiary “maintains” the cattle for three to four years for a monthly salary, while at the same time another amount is deposited, on his/her behalf, into a savings account;
- Revenue raised from milk sale is used to pay salary & beneficiary savings, feeding the cattle, insurance, veterinary care, field staff and other overhead;
- Accrued monthly surpluses and the beneficiary savings are used to pay off the capital invested
- Once the entire capital is paid off, the ownership of the cattle is transferred to the beneficiary;
- Initial financial model indicates the capital could be paid off in three to five years (its more toward three years). This model is being road-tested with focus groups and specialists;
- IRDG will provide all business support services (transparency and accountability), including field supervision.
It is advisable to enter the market without making too many changes to the existing practices and gradually decide on further improvements during the progress of the project to suit the levels of involvement.
This model seeks capital that would be intact at the end of the project and returned or reinvested in new initiatives.
Financial requirements for developing such micro businesses need to be sought from donor community, multilateral agencies and development loans from commercial financial institutions.
IRDG will make concept proposals for funding and technical expertise to financing partners as its next phase of implementation of micro business development for community restoration.