Scaling Up Rural Returns (Gte) Ltd's Impact Across Sri Lanka - Then The World

Rural Returns has proven a scalable model with strong Product, Market & Social Impact. Now needs access to capital to scale up & serve more

Photo of Charitha Ratwatte
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I confirm that I am fully aware of the eligibility criteria, and based on its description, I am eligible to apply to the CSV Prize 2017.

  • Yes, I'm eligible

Preferred language

  • English

Organization name

Rural Returns (Gte) Ltd

Year founded

2009

Initiative stage

  • Established (the solution has passed the previous stages and demonstrated success)

Annual budget in 2017 (USD)

  • $100k - $250k

Number of beneficiaries impacted so far

  • 250 - 500

Organization type

  • Nonprofit, NGO, or citizen sector

Secondary Focus Area

  • Water
  • Nutrition

Headquarters location: Country

  • Sri Lanka

Headquarters location: City

Colombo

Location(s) of impact

Sri Lanka: Vavuniya, Puttalam, Weli Oya, Kakkapalliya, Pannala

Website

http://www.rualreturns.org

Facebook URL

http://www.facebook.com/RuralReturnsLtd

Twitter URL

http://www.twitter.com/ruralreturns

Problem: What problem is this initiative trying to address?

A poverty trap condemns generations of rural smallholders to subsistence farming. The majority of Sri Lanka’s 80% rural citizens follow an unsustainable smallholder farming model. Politicians exploit their readiness to auction their votes for higher subsidies & government buy-back guarantees. Resulting economic distortions cyclically sabotage market functions, absent price signals create alternating gluts & shortages, & hurt farmers & consumers

Solution Summary: What is the proposed solution? What do you see as its most promising aspects for creating shared value?

Rural Returns has bootstrapped itself partnering rural communities to sustainably escape poverty. With disciplined execution we use Comparative Advantage to take farmers away from a losing game to a sustainable model.
Most smallholdings are incompatible with the geographically focused national food security imperative. Smallholders lose money even as they drive down profits for farmers in the “high-potential” districts that feed the nation. I identified niche varieties better-suited to smallholders, 2x more profitable outside “high-potential” conditions; and more attractive to consumers gladly playing 3x the price. We thus identify appropriate products; give farmers know-how and the security of a guaranteed buyer at an agreed minimum price; and assume all the financial risk, aggregating quantities to achieve viable, sustainable relationships with large retailers and discerning consumers

Impact: What is the impact of the work to date? Specify both the social and the environmental impact of your work

We have worked with around 300 farm families since inception, currently focusing on around 250 families in the post-conflict North and North-Western Provinces, with around 80,100 CHF annually directly paid to farmers. Each farmer tests our model with minimum risk: not allowed to sow more than half an acre in the first season. At season’s end my team compares the test plot’s crop P&L with a standard plot. Farmers usually manage a 2x Net Profit and never look back. What we introduce are pre-Green Revolution heirloom varieties. They do not respond to chemical inputs, resist common pests and diseases, and compete with weeds by simply out-growing them; up to 7 feet, and, in flooding, up to 25 feet, allowing some economic activity even in flood-prone fields. Saline- and drought tolerant, requiring far less water, they give farmers valuable leeway in increasingly uncertain weather conditions

Financial sustainability plan: How is this initiative financially supported? How will you ensure its financial sustainability long-term?

A non-stock, non-profit, mission driven Company, Rural Returns was set up under the Stanford Social Innovation Fellowship which funded its initial years. The Company budget has doubled or tripled every year, funded by sales, individual loans, primarily from its founder, and bank debt. The Company is also at the end of a USAID business expansion grant where USAID contributed capital assets matched by a doubling of the Company’s operational budget

Unique value proposition: What makes your initiative innovative? How does your project differ from other organizations working in the same field?

Disciplined execution, mission-driven model that farmers trust, breakthrough scale to sustain & grow

Founding story: Share a story about the "Aha!" moment that sparked the beginning of this initiative.

My beloved Great Aunt treated me to heirloom rice just before I left Sri Lanka to study at Stanford Business School. In California I saw the niche, premium, provenance-based marketing of coffee etc.
I thought of farmers’ struggles back home, with alternating supply gluts or famine laying waste to crops – both accompanied by indebted farmers’ suicides. I thought I must find a way to connect discerning consumers with Sri Lanka’s amazing, healthful food diversity, benefiting both farmers and consumers. The announcement of the inaugural Stanford Social Innovation Fellowship focused my thoughts. After some back of the envelope calculations, a lot of research and thinking I pitched for it and won, graduated, flew straight back home & got started

Where did you hear about the Nestlé Creating Shared Value Prize?

  • Social media

Attachments (1)

Rural Returns (Gte) Ltd Strategy (lo-res).pdf

Description of the problems Rural Returns (Gte) Ltd was set up to solve, and how it is solving them. I leverage Scale, Organization, Capital, Access to markets, and focus on the most promising Products to make the model work. Scale and Organization are necessary to overcome the challenges of diffuse production. Capital is the missing ingredient holding farmers back. Access to markets paying the right premium make it possible, and winning, highly marketable Products are essential to the formula.

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Photo of Charitha

Thanks for the kind comment and interest Corina Murafa . In my experience all farmers have a decent idea of where they would start spending their next dollar if they were able to move beyond basic expenses and income insecurity. With our very first group of farmers I saw this happening much sooner than I expected. I was preparing an ambitious proposal where the farmer society itself would have a chance to own "sweat equity" in a joint venture to process our rice, thus extending ourselves further down the value chain. Even despite the short time we had been working together at the time, the farmers quickly grasped what I was proposing, and handed me a letter of support for the application, in which they went so far as to propose an up-front investment in the project, despite their humble means.

More generally I have seen families first invest in education for their kids; then in diversifying their income streams be it with other crops, livestock, or other businesses; or investing in machinery or expanding their cultivation extents with hired labour.

One major aim when starting out was to prove that there was a viable business working with these farmers, attracting more competition at the farm gate so that they could capture more of the profit. That certainly did happen, as we saw several new entrants who gave us too reasons to focus on raising our game in aspects other than just funneling the maximum value back to farmers, pushing us to improve our packaging, focus more on our (very loyal) customers, etc. Therefore in one sense we can declare "mission accomplished" in fostering more competition at the farm gate, and choice for customers, with competitors whose product mixes and approaches cater to different segments.

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