Strategies for poverty alleviation through dovetailing the potential of microfinance practices with non-timber forest products from dipterocarps: Lessons from India

B.P. Pethiya,

Indian Institute of Forest Management, Bhopal 462 003, India. E-mail:,


Forests are generally considered a major environmental asset and also a secondary economic asset, particularly with reference to poor people, who traditionally depend on forests for livelihoods. In order to promote the socio-economic role of forests, particularly to address the subsistence economic needs of the poor, who are dependant on collecting non-timber forest products (NTFPs), the experience from India could give us some alternatives to form strategies for poverty alleviation. One such alternative is the dovetailing of the potential of microfinance practices with value-addition options for NTFPs from dipterocarps. The experience not only tells us about formulation of strategies but its effective implementation too with all the means that are within reach. The Indian experiment can certainly solve the problem of limited capital and appropriate technology dissemination. The development of appropriate value-addition technologies as important as providing the conducive environment for their adoption by providing all pre-requisites like awareness, creating willingness to adopt and required horizontal (microfinance) and vertical linkages (accessibility to up-country markets). Thus the dovetailing of value-addition options with availability of microfinance and appropriate technology has become an important part of strategy formulation in eradicating the poverty amongst the forest dwellers. In addition to augmenting livelihood options, the dovetailing of microfinance will also arrest the undue competition amongst poor forest dwellers leading to premature and unsustainable harvest of NTFPs from dipterocarps.

Key words : Microfinance, Self-Help Groups (SHGs), non-timber forest products (NTFP), forest dweller


Forests are generally considered a major environmental asset and also a secondary economic asset, particularly with reference to poor people, who traditionally depend on forests for livelihoods. The recent concerns about carbon trading, biodiversity conservation, recreation values, protection of primitive culture, etc. have pushed the very important aspect of meeting the economic needs of the poor people to last priority. Although funds are required along with appropriate technology to address the concern of the poor but at the same time, livelihood options for forest dwellers should also be given due attention and cannot be neglected.

Like any other South Asian countries, poverty in India is one of the persisting problems. The Indian Government, as well as, its provincial (state) governments had developed various strategies to alleviate poverty. A variety of welfare strategic programmes, like state prompted Integrated Rural Development Programmes (IRDP), have been activated to address the problem. These programmes did not deliver the desired results. However, the Central Government and other associated organizations continue to search for alternatives to alleviate poverty. Creating value-addition options at local level for rural poor in order to increase their share in ultimate payments for the produce collected by them from the forests was one such viable option. However this required financial services including credit and environment conducive for disseminations and adoption of appropriate technology. The non-accessibility to the formal financial systems for the want of physical security and continuous exploitation by money lenders had prompted the creation of microfinance based on social security rather then physical security. The extension of microfinancial services has been successful in alleviating the poverty of forest dwellers by providing credit accessibility to the poor forest dwellers and enabling them to adapt value-addition options through adoption of appropriate technology.

This paper attempts to highlight the various important elements for formulating alternative strategies for poverty alleviation through dovetailing the potential of microfinance practices with NTFPs from dipterocarps based on the experience from India.

NTFPs from dipterocarps in India

In the last half of the twentieth century timber has become the most important economic product from dipterocarps, but it does not have much impact on rural communities. Instead, the NTFPs from dipterocarps, such as nuts, dammar, resin and camphor, have a larger impact on the economies of the rural people and forest dwellers. In the past several decades, synthetic materials have diminished the value of some dipterocarp NTFPs but at the same time others are beginning to gain value. Researchers have paid little attention to NTFPs and there is little detailed information on them. The advantages of managing NTFPs are often ignored. Unlike timber, they are available at more frequent intervals and their harvesting is usually less destructive to the tree. Much of the knowledge on the use of dipterocarp NTFPs is concentrated in two main regions, South Asia and Southeast Asia. The Shorea robusta (locally known as sal) tree yields many of these products. Its leaves are a good source of income to the tribal people in India who make them into plates and cups, or use them as wrappers for homemade cigars. They are also used for thatching huts in the villages and as a medium to poor grade fodder containing 0.94% nitrogen and 2.97% ash. Sal leaves are one of the primary hosts of tassar silkworm (Antheraea mylitta) (Shiva & Jantan 1998).

Sal is also an important producer of oleoresin in India. It yields an oleoresin known as sal dammar or lal dhuma. A good mature tree yields about 5 kg of resin annually. Dipterocarpus bourdilloni, a species from Kerala, India, yields an opaque, straw yellow, viscid oleoresin which on standing deposits a crystalline unsaturated hydroxy ketone. Dipterocarpus indicus, from the west coast tropical evergreen forests of India, produces an oleoresin, which is used in the preparation of spirit, oil varnishes and lithographic inks. Dipterocarpus macrocarpus of India produces oleoresin that is used as a lubricant and in soap making. The camphor from Cinnamomum camphora found in northeast India is used in the chemical industry and camphor can be synthesized more cheaply from pinene. The leaves and bark of several dipterocarps are a source of tannin. A few dipterocarps are known to host the lac insect (Lacifer lacca), a source of lacquer. Shorea roxburghii, a species found in India, is a valuable host. A number of minor products derived from the wood also worth mentioning. Wood of sal is extensively used as firewood and for making charcoal. However, fuelwood should only be harvested at the time of clear felling at fixed rotations when unsuitable wood for timber can be utilized for firewood and charcoal making. The branches and thick twigs can be converted into charcoal in a specially designed kiln for supplementing the energy requirements after converting charcoal into briquettes. Briquetted charcoal and sawdust are good fuels for domestic and industrial purposes (Shiva & Jantan 1998)

Poverty alleviation through NTFP value-addition

Value-addition options for NTFPs are generally practised by the poor during and immediately after collection of NTFPs. These options are based on traditional knowledge and it includes activities like cleaning, shaping, bundling, drying, grading or removal of unwanted parts like leaves, stems, twigs, etc. Some of them also carry out storing, boiling, peeling, and pulping. In addition, there is enough scope to augment the value-addition by improving the efficiency and productivity of NTFP produce through pre-harvest care for current production and post harvest care for future production.

Lack of choices for microfinancial assistance

The very seasonality of NTFPs and un-accessibility to formal lending system forces them to take help from local moneylenders. The exploitation is not only limited to exorbitantly high interest rate but also forces the forest dwellers to part the collected NTFPs at un-remunerative prices many a time without any value-addition immediately after harvest. The experiment of providing microfinance advances and allow them to repay these advances in small affordable installments, has resulted in saving them from exploitation. The assessment of the impact of microfinance as a tool for adoption of appropriate technology and conserving the environment (with specific reference to NTFP) at Indian Institute of Forest Management (IIFM), Bhopal, India, shows that some forest dwellers wanted to be relieved from the vicious circle of exploiters who takes advantage of their poor bargaining power. They were unable to do so due to lack of choices. Moreover, the very compulsions of seasonality of NTFP forces poor forest dependants to source their microfinance requirements from the prevailing exploitery money landing system (Pethiya & Teki, 2003).

Low share in trade of plates made from sal (Dipterocarp spp.) leaves

In India, especially in the eastern part, the leaves of sal are being used for making plates and cigar wrappers. Barks of some species of dipterocarps trees are used for medicinal purposes. Satapathy (2001) observed that the poor forest dwellers who slog it out the whole day in the forest collecting the leaves of sal get not more than 20 to 25 paise (one US cent) per plate, while the traders get a mind-boggling profit of 7 700%. A bundle of 50 sal leaf plates which is procured at source in Orissa, India, at less than Rs.12 (USD 0.25), is exported from Kolkata at Rs.932 (USD 22). Orissa produces sal leaf plates and cups worth more than Rs.3 billion every year. Since Orissa’s products are of better quality than those available from other states, there is a high demand for these leaf plates. Export of sal leaf plates to countries like the USA, UK, France and Germany is rising steadily because they are eco-friendly, hygienic and biodegradable. Mohanty () in a recently conducted survey found that the bulk of the profit from the sale of most minor forest produce is actually cornered by the traders. In case of wood resin (jhuna) the profit margin ranges from 400 to 700%. Jhuna is procured at Rs.20 (USD 0.50) per kg and sold at Rs.80 (USD 2.00) per kg.

The rural communities in the Keonjhar district of Orissa State have been stitching leaves of the sal and siali (Bauhinia Vahlii, a perennial woody climber) into plates and cups and sell them to the local brokers who in turn sell through different channels, for so many years. The bottom line is that the producers earn the lowest of all benefit. To maximize the benefit and profit to the producers, the Orissa Rural Development and Marketing Society (ORMAS) and the District Supply and Marketing Society (DSMS) have identified advanced leaf-cup-plate machine that not only improves the earnings of minimum Rs.2000 (USD 47) per month but also enables them to form their groups for economic empowerment and sustainability. ORMAS has also made marketing tie-up with outside agencies for marketing these leaf cup-plates to maximize profit to the producers. DSMS, Keonjhar has already supplied these leaf cup-plates to the agencies in Hyderabad and to other districts, and has other groups to be assisted under a new scheme, the Swarnajayanthi Grama Swarozgar Yogana (SGSY), a silver jubilee village-based self employment scheme (

Prospects for value-addition options

It was also noted by Pethiya and Teki (2003) that forest dependant poverty stricken people do not have hoarding capacity for NTFP produce collected by them. Most of them are living a hand-to-mouth life and do not have capital to hold the produce long enough to get better prices or add value to increase profit. Their immediate gain was in direct proportion to the quantity collected, hence to enhance earning they nee to increase the quantity collected, mostly not bothering about future reduction in productivity. There is a big scope for enhancing value simply by minimizing the wastage during NTFP harvesting/collection, transportation and storage, by proper extension work from the developmental agencies. The poor gathers, in fact, take advance from the NTFP traders for meeting their needs with a future contract for the sale of NTFP, yet to be collected at a pre-determined price, which generally very low. It has also been observed that the NTFP traders have access to the market, information and infrastructure which is not accessible by the poor. If microfinance could be extended to the poor forest dependants to meet their basic needs, then there is a very good prospect to exercise various value-addition options to further improve their livelihood.

Strategic options through potential of dovetailing microfinance with dipterocarp NTFP value-addition

There is a great potential for microfinance to play a pivotal role to safeguard the interests of the poor dependant on forests. This will relieve them from the clutches of money lender/NTFP trader on one side and will provide value-addition options and infrastructure at local level on the other hand. The basic need of the poor is sustainable livelihood options, which can be very well tackled by dovetailing delivery of microfinance with proper NTFP-based livelihood options. The provision of microfinance may safeguard the poor from the exploitation of local money lenders and NTFP traders, in addition to generation of self employment opportunities. This will also check the destructive harvesting of NTFP and facilitate the adoption of appropriate technology for value-addition. The following strategic options through potential of dovetailing microfinance with dipterocarps NTFP value-addition are suggested based on Indian experience:

Providing microfinance based on social collateral instead of physical collateral by formation and linking Self Help Groups (SHGs) to commercial banks

Microfinance includes the entire range of financial services involving very small sums by which poor people are given the opportunities to save, take loan, remit money and get insurance, etc. In India, about one-third of rural people are not serviced by banks. In traditional banking sense evolving around cost of lending and collateral, the poor persons are considered individually as ‘unbankable’. In India, commercial banks are encouraged by the National Agriculture Bank for Rural Development (NABARD), a public sector development bank of Government of India to finance the SHGs without collateral. NABARD has also simplified the guidelines for commercial banks lending to the SHGs and this encourages the poor to form such groups .

The NTFP collectors can form SHGs for such purpose. The SHGs are groups of people, mostly women, who have felt the urge to come together to tackle socio-economic problems through group action. In India, more than 95% of these SHGs are women SHGs, which are linked to the commercial banks for obtaining microfinance without physical collateral. The “Bank-SHG” route leads to empowerment of the poor people and, therefore, after sometime, the SHGs need no external support to continue with its activities. This change in mindset has already caused and will lead the movement to gain the desired momentum in Bank-SHG linkage programme in future. The medium of SHGs is powerful social collateral having a very high degree of impact on efficiency without much cost to the financial intermediaries. Donor agencies also facilitate the community structures to establish common funds to sustain the benefits of the project even after the end of project period. The membership of SHGs ranges from 10 to 20. The NGOs are to play a catalyst role. The SHG-Bank linkage where bank directly finances SHGs, with NGOs acting as facilitator, is the most popular model of providing microfinance services to the SHGs.

Promoting organizations to develop appropriate technology for dipterocarps NTFPs

Technology Information, Forecasting and Assessment Council (TIFAC) is an autonomous organization under the Department of Science and Technology, Government of India, which aims to keep a technology watch on global trends and formulating preferred technology options for India. It was established with the objectives: (i) undertake technology assessments and forecasting studies in selected areas of national economy; (ii) watch global trends and formulation of preferred options for India; (iii) promotion of key technologies; and (iv) provide information on technologies (

Technology for moulding sal leaf plates and bowls by using biomass as alternative energy source was developed by Indian Institute of Technology, Kharagpur (IITK) and promoted by TIFAC. Moulded leaf plates and bowls even in dehydrated form are excellent replacement for conventional plates and bowls made of stone, clay, glass, plastic or metal. The hitherto known moulding technologies use electricity as a source of heat. IITK, therefore, designed and developed a machine with appropriate moulding technology using abundantly available biomass as energy source. Eight to ten sal leaves collected from the forest are stitched together to form a flat disc of 35 to 40 cm in diameter with small wooden picks manually by forest dwellers. The 4-step moulding operation involves heating and placing flat leaf discs on the lower die of the device follow by exerting pressure on the flat plates with the upper die assembly and taking out the finished moulded product. The salient features of the technology are: simplicity, affordability, portable nature of the device, less drudgery to operators, and uses locally available raw materials. The moulding apparatus consists of three distinct units: press unit, die unit and heating unit. The major components of the machine are made of mild steel and cast iron. The moulding operation starts 10 to 15 min after heating by fire, and takes only 12 to 15 seconds to mould each plate. The temperature of the die is 140 to150°C, quantity of biomass fuel required is 0.8 to 1 kg per hour, and one can make 140 to 150 plates or 170 to 180 bowls per hour. A well equipped Training and Demonstration Centre at IITK in the sal dominated forest areas conducts training to the pontential users of the technology. Test runs have shown that the machine is efficient and economically viable. Basic raw material of the technology is sal leaf. This technology can be used by a person irrespective of gender and age (12 to 72 years) successfully (

Promotion of micro enterprises for dipterocarp NTFPs by horizontal integration of microfinance with adoption of appropriate value-addition technology

The NTFP based micro enterprises are neutral to scale, particularly when restricted to primary processing technology. However, when adopting slightly advanced technology then the principle of economies of scale has to be taken into consideration. The SHGs based model cannot reach the end consumer due to small scale of operation. This necessitates the creation of either a two-tier or three-tier structure by way of forming the clusters or federations of SHGs to benefit from economies of scale. The role of NGOs becomes critical in educating the members of the SHGs about the formation of cluster and federation, along with imparting the proper training for managing the institution.

It was also observed that appropriate technologies developed by various government organizations for NTFP value-additions at primary level targeting the poor also requires horizontal integration with microfinance apart from the institutional support. Many of such technologies are just confined to research laboratories, merely as demonstration units due to lack of proper dissemination and extension, and accessibility to hassle-free credit. The primary processing for value-addition at village level is desirable and feasible as experienced in India. Pethiya and Teki (2003) observed that majority (71%) of the respondents surveyed have shown their willingness to adopt NTFP value-addition technologies, subject to the availability of microfinance.

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