386 - DOC by sofiaie



                      Prof. B.P. Pethiya, PGDM (IIMA), Ph D
                     Indian Institute of Forest Management,
                             Bhopal 462 003, INDIA.
                 Email: pethiya@iifm.ac.in, bppethiya@gmail.com

Key words :   Community Self-Help Groups (CSHG), Microfinance, Non-Government
              Organizations (NGOs) Non-Timber Forest products (NTFP), Forest dweller,

There is an urgent need to look for strategies for eradication of poverty
particularly with reference to poor people, who traditionally been dependant on
forests for livelihoods. The experience from India could give us some alternatives
to form Strategies for poverty alleviation through dove-tailing potential of
Microfinance Practices with value addition options for Non-Timber Forest
Products. These options have to be created at local level to increase the share of
NTFP collectors for produce collected from forests in ultimate consumer's
payments. This would require institutional and financial inputs. The formation of
Community Self Help Groups (CSHG) amongst the NTFP collectors within exiting
Joint Forest Management Committees (JFMC) and getting the recognition from
formal banking sector for extending financial services, based on only social
collateral, departure from traditionally physical collateral based financing has
been very successful in alleviating poverty . The provision of accessibility to credit
for poor NTFP collectors has enabled them to adapt value addition options
through adoption of appropriate technology. The bank linkage program with
smaller group of the poor such as CSHG is a major revolution for poverty
alleviation and has also been proved to be very effective.

The paper observes that in India, the NTFP collectors largely depend on Non
Timber Forest Products (NTFP) for their survival and growth where as revenue
from timber goes to states. The very seasonality of NTFPs and un-accessibility to
formal lending system earlier use to force them to take help from local
moneylenders. The exploitation was not only limited to exorbitantly very high
interest rate but also used to force the NTFP collectors to part the collected NTFPs
at un-remunerative prices, many a time without any value addition immediately
after harvest(to the local traders/ money lenders). It was also experienced that
microfinance along with proper institutional support has lead to adopt appropriate
technologies. Many developed appropriate technologies are just confined to
research laboratories, merely as demonstration units due lack of proper
dissemination and accessibility to hassle free credit. The experience of India by
providing accessibility to financial services to NTFP collectors under micro finance
through CSHGs - Bank linkages, is an innovative approach for getting rid of
exploitations and thus ultimately leading to alleviate poverty.
Paper to be presented in International Conference on Poverty Reduction and Forests:
Tenure, Market and Policy Reforms, organized by the Regional Community Forestry
Training Center for Asia and the Pacific (RECOFTC) at Bangkok, September 3-7, 2007.
Abbreviations & Acronyms and Notes

JFMC Joint Forest Management Committees
NTFP(s) Non-Timber Forest Products
CSHGs Community Self-Help Groups
NABARD National Bank for Agriculture and Rural Development

Conversion rate : Rupees 40 = 1 US$
Select NTFP local name and Botanical name

Local name         Botanical name

Aonla              Emblica officinalis
Mahua              Madhuca indica
Tamarind (Imli)    Tamarindus indica
Chironjee (Achar) Buchanania lanzan
Bel                Aegle marmelos
Van-Tulsi          Hyptis spp.
Jamón              Syzygium cumini
Chirayata          Swartia chirayta
Mango              Mangifera indica

Poverty alleviation is buzz word in the present days. The poor differs from
country to country but in the present context of India, we are concerned with the
definition given by the Government of India (GoI). The GoI defines the poverty
line by way of income and said that income below Rs.10/- per day per person
(approximately Rs.3600/- equivalent to US$ 90, per year per person) considered
as below poverty line. As per GoI, this amount would be sufficient for the people
to buy the food equivalent to 2200 calories per day per person. However, here
we are not questioning the definition of poverty line, but for our reference, we are
referring to that target group of NTFP collectors, who do not have accessibility
with the formal lending system, money to buy the enough food to meet their
calories’ requirement for survival.       These NTFP collectors do not have
options/choices and also the opportunities for having the healthy, free and self
esteemed life of their own.

The percentage of population below poverty though has a decline trend in India
as per the poverty estimates carried out by the Planning Commission from 1973-
74 to1999-00 (Table- 1) and still about 27% rural population is still below poverty

Table – 1:Percentage of Population below Poverty Line in India

                                 Rural    Urban        Total
                          1         2         3           4
                       1973-74   56.44    49.01        54.88
                       1977-78   53.07    45.24        51.32
                       1983-84   45.65    40.79        44.48
                       1987-88   39.09    38.20        38.36
                       1993-94   37.27    32.36        35.97
                       1999-00   27.09    23.62        26.10
                   Source: Planning Commission, Govt. of India

Poverty Statistics in Major States of India
Barring Punjab, Haryana and Gujarat, all other states are having population below
poverty line is above 10 percent of population. The repeated natural calamities
like droughts, floods and cyclones, further increases the poverty of poor people,
particularly small and marginal farmers, forest dwellers and landless laborers, as
they are neither equipped to fight such uncertainties nor they have financial
capacity to augment the required resources. Table-2 elaborates poverty statistics
in major states of India.

Table – 2: Incidence of Poverty in Major States of India during 1999-00
                 Sl.         State        People Below Poverty
                 No.                            Line (%)
                  1               2                 3
                  1       Andhra                  15.77
                  2       Bihar                      42.6
                  3       Gujarat                    14.07
                  4       Haryana                    8.74
                  5       Karnataka                  20.04
                  6       Kerala                     12.72
                  7       Madhya                     37.43
                  8       Maharashtra                25.02
                  9       Orissa                     47.15
                 10       Punjab                      6.16
                 11       Rajasthan                  15.28
                 12       Tamil Nadu                 21.12
                 13       Uttar Pradesh              31.15
                 14       West Bengal                27.02
                          All India                  26.10
             Source:   Planning Commission, Govt.   of India
Lack of Physical Collateral, Exploitation and scope for Microfinance
This is also a proven fact that the bottom lined poor including majority of Non
Timber Forest Products (NTFP) collectors, who do not have any worth while
physical assets in India, could not get the accessibility to the formal financial
systems for the want of collateral. In such circumstances, in order to meet their
credit requirements, they are dependant on money lenders/ large farmers who
exploited them by advancing micro loans on very exploitative terms. The
exploitation is not only limited to exorbitantly high interest rate but also forces
the poor to part the collected NTFPs at un-remunerative prices. It was observed
that many times even without any value addition, immediately after harvest,
these poor were forced by the circumstances to opt for distress sale to the local
traders/money lenders. The concept of microfinance has emerged as a solution to
check these exploitations, which is based on social collateral rather then physical
collateral for providing access to the credit and using the community concept with
proper group dynamics for creating the peer pressure to enforce the financial
discipline. The poor can become bankable if financial services are made easy,
their social capital is given more value than physical assets and credit terms like
repayment of loan made small installments, suitable to their cash in flow.

JFMCs and Microfinance :

The JFMCs in India have already under gone through the various stages of group
formation, storming, stabilization and have been in performing stage since
number of years. Taking the advantages of the culture evolved of taking
participatory decisions in JFMCs and to do own problem analysis in the groups to
arrive options available to overcome such problems like enhancing income
through income generating activities, the JFMC are best suited platform for
forming number of small groups within JFMC, without affecting the normal JFMC
functioning. These groups, with a maximum size of twenty members, known as
Community Self-Help Groups (CSHGs) can have a access to the micro finance
without physical security through Bank linkage program of National Bank for
Agriculture and Rural Development (NABARD). This bank linkage program has
brought a major revolution in India for enhancing forest’s role in rural
development through offering NTFP value addition options, leading to ultimate
poverty alleviation by utilizing opportunities through microfinance interventions.

Value addition options for JFMC Members in India :

The Value addition options in India generally consists of primary processing of
NTFPs, which usually done at Primary collector level (consisting of removal of
unwanted parts like leaves, stems twigs etc., cleaning, shaping, bundling, drying,
grading, storing, boiling, peeling, pulping). However it has been observed in the
field that in India, the option of increasing in earnings through value addition by
way of Pre and Post harvest care of NTFP production system at primary collector
level is yet to be popularized amongst the NTFP collectors.
For meeting the immediate consumption needs, the NTFP collectors generally
finance their needs by way of advance trading of NTFP with traders and thus
submit themselves for exploitation, as they have no other options. The
moneylenders are also an easy option for NTFP collectors especially at the places
where either, the volume of NTFP is low or the absence of NTFP traders. Thus
compulsions of meeting requirements of their utmost basic needs, the NTFP
collectors at the time when they are in real financial crisis, are exploited by the
traders. These traders offer to take NTFPs against the advances given by them to
the collectors, at much lower value than the market value. It was also observed
that the trader have accessibility to the market, information and infrastructure
which otherwise is not availability to the NTFP collectors. Due to the advances
taken from the traders they are bound to sell their collections immediately with
little value addition or even without value addition. Has not been forced by the
circumstances, the same NTFP collections would have fetched more price. Hence,
there is great potential for micro finance sector to play a pivotal role to safe
guard the interest of the NTFP collectors and promote the livelihood enhancement
by combining NTFP value addition options with micro finance. This will relive them
from the clutches of money lender/ NTFP traders on one side and will provide
number of options for taking up of NTFP primary value additions and
infrastructure at local level on the other hand.

Poverty Alleviation and Contribution of NTFPs :

The following facts regarding contribution of NTFP to India reveal their importance

   1. Nearly five hundred million people living in and around forests in India
      depend on NTFP for their sustenance and supplemental income (Tewari,

   2. Studies in Orissa, Madhya Pradesh, Himachal Pradesh and Bihar indicate
      that over 80% of NTFP collectorsdepend entirely on NTFP, 17% landless
      depend on daily wage labour mainly on collection of NTFP and 39% people
      are involved in NTFP collection as a subsidiary occupation (Negi, 1993).

   3. It has been estimated that many village communities derive as much as
      17-35% of their annual household income from sale of the NTFP (Tewari,

   4. NTFP provide 50% of the income to about 30% rural people. (Gupta &
      Guleria, 1982).

   5. After processing of NTFP, value added products are obtained which
      increase the employment opportunities and income to the people eg., fore-
      based small scale enterprises, many of the based on NTFP, provide up to
      50% 50% of income for 20 to 30 times of the rural labour force in India
      (Campbell, 1993).
   6. An estimate made in West Bengal indicated that an average return of Rs.
      2720 ha/year is obtained from NTFP which is 25% more than the polewood
      harvest which fetches Rs. 16,000 per hectare after 10 years (Malhotra et

   7. Over 50% of the revenues earned by the forest Department comes from
      NTFP. Growth of revenues from NTFP have generally been 40% higher than
      timber e.g., compound growth rates in revenues from NTFP and timber
      during 1968-69 to 1976-77 period were respectively 15.1% and 10.8%,
      the former being 40% higher than the latter one (Gupta Guleria, 1982).

   8. It has been found that the share of export earnings from NTFP has been
      ranging from 56.5% to 75% out of the total exports of forest produce
      including both the timber and NTFP during 1959-91 (Gupta & Guleria,

Thus on prima facie, it can be said that the distress sale and lack of value
addition options are leading for exploitations of poor NTFP collectors. The
exploitation further gets aggravated due to lack of value addition skills,
awareness and/or appropriate technology for value addition. Though in rare
cases, when such technology is available, the financial resources required to
acquire the technology is missing.

Destructive harvesting practices adopted by NTFP collectors:

It was observed that the continuous shrinking of the NTFP production sources is
leading to an undue competition amongst the NTFP collectors for premature and
unsustainable harvest of NTFP for immediate financial gains by way of increasing
the quantity of collection. The thirst for maximizing quantity, has resorted to
destructive harvesting practices and thus also resulting in damaging the natural
forests which ultimately degrading the environment too. For maximizing the
volume of harvested NTFP, eventually resorting to removal/damaging of the basic
production system to have the one time maximum harvest and loosing/
destructing the production system for ever. Hence, one of the basic problems of
NTFP collectors is sustainable livelihood options which can be addressed by
providing micro finance. Women's employment in forest based enterprises is
estimated to be approximately 571.533 million days annually of which 90 percent
is in small scale enterprises using NTFP (Khare, 1987).

Vicious Cycle of Low Income amongst NTFP Collectors :

The NTFP collectors get trapped in to the vicious cycle of low income, further
aggravating the cause for poverty. Therefore, it is necessary that for improving
the economic position of the forest dwellers, residing in and around the forest by
providing them livelihood options consistent with conservation of forest and its
sustainable management.
                                    Figure- 1

           Vicious Cycle of Low Income amongst NTFP Collectors

                                   No or very Less

          Get trapped in                                    Inadequate income
        vicious debt cycle                                       to meet
                                                            consumption needs

                                  Loan from Money

The poverty amongst the NTFP collectors, who are generally at socially and
economically disadvantaged situation, can be over come in sustainable way only
by exploring the options of engaging them in economic activities, which can give
them continuous stream of income in cash or kind. Though engaging them in
sustainable economic activity is a complex reality due to various marketing
forces. However such economic activities has to become a way of life for them,
using their capabilities, for meeting their own and family needs..          Hence
encouragement of setting up micro-enterprises, whether forest based (NTFP
processing) or otherwise, will also effectively increase the income for them but it
requires composite planning and project management.

Micro Finance: Breaking the Cycle of No or Low Income of NTFP

The long term income, especially in the context of reducing pressure on forests,
necessitates peoples’ ability to make choices on their own and engage in NTFP
value addition option for their own benefit, on a continued basis. Most of the NTFP
collectors are the members of JFM Committees formed for the better forest
management and protection.          Therefore, horizontal intervention, including
providing Micro Finance will not only help in increasing income, but also empower
them to make choices.
                                     Figure- 2
           Micro Finance: Breaking the Cycle of No or Low Income

    Micro Finance
    based on Social
                                    Gradual Investment
                                   First in Consumption
                                   then for NTFP value
                                      addition group
               Surplus re-                                  Though not
            invested to break                              adequate But
            the vicious circle                             some income


            Repayments of

Building economic confidence amongst NTFP collectors by encouraging
A CSHG has an average size of about 15 members (11-20) but we have to make
sure that they should be from a homogeneous class amongst the JFMC members.
They come together for addressing their common problems of livelihoods. They
should be encouraged to make voluntary thrift on a regular basis to start with.
Thrift means savings generated by cutting down on current expanses which is not
necessary for survival. They use this pooled savings to make small interest
bearing loans to the needy members. This process will lead to imbibe the process
of financial intermediation, prioritization of financial needs and accounts keeping.
This process will gradually build financial discipline amongst NTFP collectors (now
CSHG members). Gradually, they will also learn to handle large transactions.
The CSHG members will start to appreciate that the financial resources are
limited and have a cost. Once the CSHG groups show this mature financial
behavior, banks will be eager to make loans to the CSHG in certain multiples of
their accumulated savings. The bank loans are given without any collateral and
at market interest rates. The CSHG members themselves have to decide the
terms of loans to their own members. The members own accumulated savings
are part of the aggregate loans made to the members, peer pressure ensures
timely repayments. The formation of CSHG, will in addition to financial help at
the time of need, provide social security to the NTFP collectors.
Dove-tailing of potential of value addition of        NTFP    and Micro-finance
amongst JFMC members :

The involvement of the community participation through group approach has
been a very successful model in India for achieving the objectives mentioned.
Small groups have been formed amongst the JFMC members themselves or with
their family members with a maximum size of twenty members known as
Community Self-Help Groups (CSHGs). These CSHGs have been provided access
to the microfinance without physical security through Bank linkage program. The
CSHG-bank linkage program is a major revolution for poverty alleviation and
proved to be very effective including. The people living below poverty line usually
need small financial assistance initially for subsistence, health etc and as credit
requirement gets graduated, they need more microfinance to opt for NTFP value
additions options.

NTFPs have features which are attractive from the gathering and processing point
of view, they may not necessarily be strengths in marketing the products, but
rather the contrary. For instance, the following have been listed as advantages of
NTFPs gathering and processing activities:

      Small in size and often household-based
      Often involve diversity of a product
      Frequently seasonal in nature
      Labour intensive and use simple technologies
      Provide direct benefits to the local economy
      Accessible to low income and socially disadvantaged groups and are most
      often managed by women (Sekhar et al., 1993).

As observed from the field that the gap between supply and demand for micro
finance has led the NTFP collectors to go for distress sale (e.g. at very minimal
price generally for mahua flower (Madhuca Indica), between Rupees 4–6 per
Kilogram (1 US dollar equals to 40 Indian Rupees) to the middlemen or petty
traders of NTFP collected by them, to meet their immediate subsistence needs.

The provision of micro finance may lead to the accruing following benefits to the
forest dwellers:

      Freeing from the exploitation of money lenders and NTFP traders
      Generation of self employment opportunities in form of value additions to
      Checking the destructive harvesting of NTFP
      Conserving the forest and environment
      Facilitation of adoption appropriate technology for value addition.
Micro Enterprise for NTFPs and other local produce from allied activities :

The Micro Finance, exclusively for setting-up of micro enterprise for forestry
products may not be feasible until and unless we also take in to account micro
enterprises based on allied sectors like, agriculture to make this approach viable.
The Micro-enterprise to be taken-up by NTFO collectors be forest based or
otherwise could be either at individual basis or could be household basis or it may
even be at CSHG level micro enterprise. Most of these enterprises employ/use
the family labour or the labour of friends/ relatives. However, in case when the
CSHG takes-up the micro-enterprise, then it is necessary to follow a system to
reward the members for the labour put in by them. .

The NTFP value addition options at local level gives an opportunity to NTFP
collectors to generate cash income while remaining at their native places and
enjoying their traditional customs. However such options have some dis-
advantages too like related to the shortage of technical and practical information
about NTFPs. During entire value addition chain process i.e. from management
and cultivation to marketing, harvesting, and processing, the poor NTFP collectors
are facing uncertainties. Marketing information is also scarce for most NTFPs.
Information such as price, the volume required by the market and quality
standards for the product is difficult to access. If at all information is available, it
may be difficult to apply to a new set of circumstances. Even after NTFPs are
successfully harvested, they may not be marketable.

Institutional requirements for delivering the micro-finance effectively
and efficiently, along with promotion of small micro enterprises.

A CSHG is a registered or unregistered group of either JFMC members themselves
or their family members having homogenous social and economic background,
voluntarily coming together to save small amounts regularly, to mutually agree to
contribute to a common fund and to meet their emergency needs on mutual help
basis. The group members use collective wisdom and peer pressure to ensure
proper end-use of credit and timely repayment thereof. In fact, peer pressure has
been recognized as an effective substitute for collaterals. With the growing
importance of the micro-credit through CSHG-bank linkage in India, the Reserve
Bank of India (RBI) in 1996 included financing to CSHGs as a mainstream activity
of banks under their priority sector lending.

Initially CSHGs are formed, developed and strengthened to evolve into self-
managed people's organisations at the grassroots level. There after, CSHG gets
stabilized through thrift and credit activity among the members and building their
own corpus — the CSHG takes up internal loaning to the members from the
corpus. The CSHG corpus is supplemented with Revolving Fund sanctioned as
cash credit limit by the banks to take livelihood. Then comes the micro enterprise
phase, where, the CSHG takes up economic activity, of its choice for income-
Solidarity and cohesiveness amongst JFMC members
It has been the experienced that there exists solidarity and cohesiveness
amongst the JFMC members. Hence the group formation and stabilization culture
already exits. Therefore, for formation of new CSHGs, office bearers of JFMCs
along with representatives from Gram Panchayat, and the Forest Department
(FD) local officials, in association with the local NGO (if genuine NGO is present)
can conduct meetings. This would lead to form number of CSHGs, involving family
members of JFMC. In such meetings office bears of CSHGs can be elected to
initiate the working of CSHGs. To start with, CSHGs can form oral by-laws, which
can later on, can be modified and converted in to written forms..

Different Models of CSHG linkages with banks for enhancing Credit :

Banks have been given freedom to formulate their own lending norms to give
credit to CSHGs, keeping in view ground realities. They have been asked to
devise appropriate loan and savings products and the related terms and
conditions including size of the loan, unit cost, maturity period, grace period,
margins, etc. Such credit covers not only consumption and production loans for
various farm and non-farm activities of the poor but also include their other credit
needs such as housing and shelter improvements.

Model I: CSHGs formed and financed by banks
In this model, it is envisaged that the Banks will act as the promoters of forming
and nurturing the CSHGs themselves, which slightly a new kind of additional
developmental role expected, departure from traditionally banking role. This
model will require forest department official to approach the local branches or
banks in JFM area for taking their help in forming CSHGs amongst JFMC
members. However, the success of this model has been observed to be very
limited. It has been observed that Banks prefer the organization like NGOs or
Forest department to act as catalyst before Bank’s advancement to CSHGs.

                                    Figure- 3
                       CSHG BANK LINKAGE MODEL – I

                          FORMING AND NURTURING

     BANK                                                         CSHGs

                         CREDIT LINKED TO SAVINGS

                                                             JFMC MEMBERS/
Model II: CSHGs formed by FD/ NGOs :
This model likely to be more successful model. Here, Forest Department officials
or selected NGOs or other Developmental Agencies (DA) act as facilitators. They
facilitate organizing, forming and nurturing of CSHGs, and train them in thrift and
credit management. Banks give loans directly to these CSHGs.

                                    Figure- 4

                      CSHG BANK LINKAGE MODEL – II

                       FD, FEDERATION
                      OF CSHGs, NGOS, DA                   FORMING, NURTURING

                    CREDIT LINKED TO SAVINGS

BANK                                                               CSHGs


                                                          JFMC MEMBERS/
                                                         FAMILY MEMEBERS
Model III: CSHGs financed by Banks using financial intermediaries like
FD/ NGOs/ other Development Agencies :
 This is the model wherein the FD/Selected NGOs /Federation of CSHG/ other DAs
take on the additional role of financial intermediation. In areas where the formal
banking system is having constraints, then only this model can be tried. This, in
turn, is used by the FD /NGO for onlending to the CSHGs. In areas where a very
large number of CSHGs have been formed, intermediate agencies like
Cluster/Federations of CSHGs can act as links between bank branch and member
CSHGs. It is difficult for FD to act as financial intermediaries, hence
federations/clusters/selected NGOs can be encouraged to act as financial inter-
                                     Figure- 5
                     CSHG BANK LINKAGE MODEL – III

                          NGO, FD,FED OF CSHGS,
                          OTHER DEVT AGENCIES
WHOLESALE                                                           MONITORING

                                     SAVINGS ?

          BANK                                                      CSHGS

                                     SAVINGS ?

                                                               JFMC MEMBERS/
Capacity building of JFMC members in Micro-finance & NTFP based Micro

The NABARD can provide training to the lower hierarchy forest department
officials, who in turn can orient the CSHGs. Based on the training need analysis
on continuation basis CSHG members have to be trained in documentation
processing as well as has to be made aware about the availability and adoption of
appropriate technology based on local resources. In addition to the CSHG bank
linkage, numbers of private banks as well as micro finance institutions exist and
they can also be tapped because of their innovations in building-up of micro
finance. CSHG and Micro-finance initiatives are not the recent concepts. During
the last two decades, substantial work has been done in developing and
experimenting with different concepts and approaches to reach financial services
to the poor, with the initiatives of NGOs. However, in true sense, to reap the
benefit of micro finance, setting up of micro-enterprise requires acceleration.
Though savings are encouraged amongst the CSHGs members but if savings are
not used for inter-loaning, then it means that the credit absorption capacity
among NTFP collectors is yet to be enhanced. Hence, there is an acute need of
identifying and encouraging setting up of micro-enterprises.

In CSHGs, every member of the group is required to have regular savings on
weekly or fortnightly or monthly basis. The frequency of savings and group
meetings may vary but are mandatory. Once these savings are regular, then
depending upon the need of the members and quantum of savings, group gets
into credit activity. In this fashion, the NTFP collectors by forming CSHGs,
manages their own revolving fund to meet their micro finance requirements.
However, catalytic support and guidance by NGO’s and forest department officials
is required for effective functioning. Thus, the NGO remains with the group from
formation stage till it reaches the take-off level, which in case of NTFP collectors
may be bit long. During the field survey, it was observed that NGO’s and CSHG’s
functioning have been able to cater primary micro finance needs of NTFP
collectors on a cost-effective basis.

Setting up NTFP based Micro enterprises:

Before setting up NTFP processing unit, one has to give due consideration for
basic consumption pattern, i.e. how it is consumed (raw/semi-processed/
processed) and how much (quantity/period) it is consumed? The consumption
pattern varies at various socio-economic levels viz. the poor prefers to consume
in raw form and the rich consumer wants it in processed form who is prepared to
pay bit more for it. The following figure depicts various consumption patterns of
                         Figure 6 : NTFP Consumption Pattern

                                     Consumption of

            Raw Form                  Semi-processed Form      Processed Form
         (forest dwellers)           (middle income group)     (middle/higher
                                                               income group)

       Eg. Aonla, (primary
       collector), Imli, Bel,         Eg. Aonla, Mahua,      Eg. Aonla, Chironjee,
        Van Tulsi, Jamun,             Mango, Chirayata        Jamun, Chirayata
            Chirayata                      (Dried)                (Powdered)

Source: Primary Data
These forms of consumption are directly related to the purchasing power of an
individual. As the one who are primary collector are bound to look for the short
term and immediate gains, as observed in case of Mahua. It was observed that
during the Mahua Season, the primary collectors collects Mahua flower and sell
the same at very minimal price generally between Rs. 4 –6           k.g. to the
middlemen or petty traders. The NTFP collectors do not have the hoarding
capacity for mahua flowers since they do not have sufficient alternatives for
meeting their subsistence during the rainy season, hence, resorting to distress
sale. After the rainy season, they purchase back the same at higher price Rs. 10
– 12 k.g. for their own consumption. The NTFP collectors are neither generally
concerned with the future returns nor sustainable harvesting. Hence, setting up
NTFP based micro enterprises, can contribute substantial to enhance the well-
beings of NTFP collectors on one side and will arrest the un-sustainable NTFP

Role of assured markets for adopting the NTFP value addition technology
In all the study area it was observed that most of the NTFP collectors are
concerned with the assured market for the value added NTFP products. The role
NGOs in the study area was appreciated but the outreach is still limited. Hence,
some of the NTFP collectors still have to depend up on middle man and thus
realizing un-remunerative prices for the their NTFP products. In addition the
general market uncertainties as applicable to other products are also having
bearing on the returns. Due to this uncertainty, the concerned CSHG’s as well as
NGO’s either may loose heavily or even if they earn, the earnings will not be
substantial. The existing channel from collectors to the consumer involves the
middle man as a major link. The CSHGs on their own can not reach to the
consumers until and unless, they form a cluster and federation of their own or the
big NGO makes the marketing interventions to replace the service of the existing

Poverty in India is one of the major problems, as amongst other developing
countries. Number of Government sponsored rural development program were
initiated after the end of colonial rule in India including the famous Integrated
Rural Development Programs (IRDP). It was observed that these programs were
mainly focusing on providing subsidy and could not convert the ―Un-economic
active rural poor ―in to ―Economically active rural people‖. The major reasons
were availability of Economic asset, Microfinance and Institutional support. In the
later years, the socio-economic role of forests had been recognized, particularly
to address the subsistence economic needs of the poor, who are dependant on
collecting NTFPs. This has been done by creating the value addition options at
local level for rural poor in order to increase their share in ultimate consumer’s
payments for the produce collected by them from forests. Thus forests had
started serving as economic asset for poor. But, this was not possible in isolation
until unless, required financial services through Micro-finance programme of India
by innovative approach of setting up NTFP based Micro enterprises by CSHGs and
catering to the need of micro finance and credit plus activities. Hence, the
combine effect of NTFP value addition options with utilization of potential of
Microfinance Practices opened new doors for rural development from forests.

The provision of micro finance through CSHG-Bank linkage programme through
JFMC has a great potential to overcome the problem of distress sale and poverty.
It appears that there is a great potential and the scope of leveraging the micro-
finance for setting up micro-enterprises/income generating activities for forestry
sector with an aim to alleviate policy amongst NTFP collectors. The approach will
certainly reduce the undue pressure on forest for economic gains to the forest
dwellers through microfinance interventions on one side and indirectly
contributing to the forest regeneration and forest productivity augmentation on
the other. The provision of income generation opportunities by exploring the
possibilities of setting up of micro enterprises through leveraging micro-finance
for value addition to NTFPs for forest dwellers and other non-forest based vmicro-
enterprise avenues, will ultimately lead to reduction in illicit removals from the
forest. The need for horizontal interventions, including providing Micro Finance
will not only help in increasing income, but also empower the NTFP collectors to
make choices. The Micro Finance, exclusively for setting-up of micro enterprise
for NTFP value addition may not be feasible until and unless we also take in to
account micro enterprises based on allied sectors like, agriculture to make this
approach viable.

Note: This paper is based on the research project “Assessing the Impact of Microfinance
      as a tool for adoption of appropriate Technology and conserving the Environment
      (with specific reference to NWFP)” sponsored by the Indian Institute of Forest
      Management, Bhopal, INDIA, under taken by the author of the paper with Dr Teki
      S. as Co-investigator in 2003.

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