Kamatan

LocationIndia
SectorAgriculture and Livelihoods
Type of investmentEquity investment
Project stageTest & Transition

Based in India, Kamatan works with farmer produce organisations (FPOs) to source produce for direct supply to agricultural enterprises, processors and retailers. Kamatan helps these FPOs in procuring, storing, quality control and logistics. Separately, it also services large buyers of produce with supply, bulk volumes, and factory gate delivery.

Kamatan also assists farmers with the implementation of best practices in grading and sorting as well as value adding activities like drying, cleaning and packaging, which can help reduce wastage and match the demands of institutional buyers to enable farmers to realise a significantly higher value for their produce.

The development problem.

The supply chain from the farmgate to the point of consumption for agriproduct – whether consumption, processing, retail or export- is fragmented, disorganised and often has between 3-7 intermediaries, most of whom work informally. The result is a sub-optimal and inefficient marketplace on either end of the supply chain – the first mile dealing with the farmer producers and the last mile with retailers, food processors and other small and large institutional buyers. Selling in small lots at local market yards or to the informal traders provides little premium for quality and there is no incentive for bringing in best practices such as sorting and grading. The unorganised nature of the trading can also lead to delayed payments and other inefficiencies associated with informal markets, including predominant cash transactions and no records of accounts. On the buyer’s side, dealing with multiple informal traders reduces process efficiency and increases logistics overheads. This results in challenges with reliable and stable supply, visibility of production output, traceability of produce, and standardisation and quality. All of this informality increases the supply chain risks and disincentivises investment into midstream and downstream sectors such as food processing.

The innovation.

A possible solution to these challenges lies in aggregating the small producers and organising their activities towards value added marketing while creating access to market their produce directly to organised institutional buyers.

The channel identified by Kamatan to implement this model is through Farmer Producer Organisations/Companies (FPOs) - farmer collectives setup by government agencies like the National Bank for Agriculture and Rural Development (NABARD), the Small Farmer Agriculture Consortium (SFAC) and other agencies.

Kamatan ties up with food processors, millers, retailers and other market operators to create a diversified pan-India aggregated demand base. Simultaneously, Kamatan partners with the FPOs, or directly with farmers, to create an enabling ecosystem for producers to efficiently market their produce. Besides disintermediation i.e.linking the farmgate directly to markets, the key value-added services offered by Kamatan to the producers as well as buyers are: technology integration; access to credit; sorting, grading and quality standardisation; and and access to warehouses and logistics.

Kamatan’s business model is based on trading margins from the procurement of output as well as sale of inputs as well as service fee for the digital technologies and value-added services offered by it.

GIF's investment.

Kamatan will use GIF investment to:

Expand their operations, bring in value added services for the farmers/FPOs - such as financial linkages, technology solutions for production, storage and quality management, beside input supplies and continue to develop their technology stack to enable supply chains.

Investment objective(s).

GIFs investment in Kamatan can help build an organized backend marketplace and supply chain for procurement of agriculture produce and bring in best practices in sorting, grading, quality assurance and traceability which are essential ingredients for building further farm infrastructure and investment in value added services.

Why we invested

The main channel of impact on GIF target beneficiaries is through the increased income received by farmers who are members of Farmer Producer Organizations (FPO) as a result of above market access efficiencies. However, our investment thesis has a broader perspective: that formalization of agricultural markets and supply chains can unlock benefits for all stakeholders in the supply chain, i.e. the producer, downstream buyers such as food processing, retail and food services, as well as supply chain infrastructure providers (warehouse, cold-storage, logistics). In fact, such standardisation and disintermediation are the bedrock on which the entire formalised value-chain of agriculture develops.

Click here to read Kamatan’s Impact Brief.

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