Achieving Local Economic Development

Local economic development - the process in which partnerships between local governments, community-based organisations (CBOs) and the private sector are established to manage existing local resources to create jobs and stimulate the economy of a well-defined territory - is an important tool for addressing poverty. Increasingly, institutions of the poor such CBOs and Self-Help Groups are also being recognized as necessary for poverty alleviation programmes. Effective partnership of the private sector/ non-governmental organisations with both Panchayats and CBOs completes the framework for local economic development. 

Local Economic Development Society (LEDS) is based in Kochi, and partners with local governments and CBOs in helping small producers and entrepreneurs build successful enterprises and collectives. Despite a robust framework for local economic development in Kerala, most projects established as a part of this have not produced desired results. An important factor has been inadequate access to end-to-end and addressing these issues is critical in improving the success rate of enterprises and their earning capacities. 

LEDS functions as an agency that ‘nurtures’ and ‘incubates’ enterprises through a process of mentoring and handholding in specialised functions related to planning, operations and capacity building. LEDS comprises of professional managers with experience in diverse managerial functions; and in varied sectors such as government, NGO, Cooperative and Corporate. 

Towards achieving its objectives, LEDS is currently working on establishing local production-marketing-consumption value chains (christened ‘Homeshop’ value chains) in several districts of Kerala, in partnership with Kudumbashree (CBO) and Panchayats. The Homeshop value chain creates a virtuous, self-sustaining cluster of interdependent production, marketing and management enterprises within a locality that link local enterprises to the local consumers. This system provides livelihood opportunities to poor women producers and sellers, fresh & pure products for the consumers, and strengthens local economic development in the process. 

The Homeshop model differs qualitatively in the value chain approach that it employs to link producers to consumers, and in the management system that it brings in. The model may be detailed in terms of its component systems, as below:

a) Production System: The production system comprises of small producers/ microenterprises that make available local products, like milk, eggs, fruits, vegetables and value added products like flour and curry products with a clear ‘right to win’. A ’right to win’ in local markets refers to various advantageous factors such as a shorter supply chain, lower logistics costs, higher quality and reliability due to shorter delivery periods and adherence to local tastes and preferences. 

b) Sales and Distribution System: The Sales and distribution system comprises of a wide network of women sales personnel that engage in direct selling to households. Such women sellers source their products from the production enterprises and sell them to 100-150 households in their neighbourhood as per a weekly coverage plan. Alternatively, consumers would also be able to purchase goods from her home. 

c) Management System: The entire gamut of operational activities under the local value chain project would be led and managed by a management team comprising of professionals with an aptitude and leadership qualities to run social enterprises. 

All players in the value chain derive their revenues from sales commissions (that vary from 5-25% markup). The initiative is now fully operational in six districts, and has so far positioned 1200 Homeshops, 110 microenterprises and 6 management teams. During the current phase, LEDS is focused on consolidating gains already made. However, it also plans to expand the initiative to other territories within Kerala as well as neighbouring states, during the next 2-3 years.

(By Anup Nair. Anup is an Ashoka Fellow elected in 2011 for his innovations in Rural and Local Development)