The major business activities of FPOs include bulk purchase of inputs for distribution among members, produce aggregation, value addition and/or marketing, besides delivering a range of agri-related services to members. These activities offer benefit of economies of scale to the farmer members of FPOs. Typically, the business model of a new FPO begins with collective procurement and supply of inputs to its members and aggregation of produce for marketing. As the FPOs gain business skills and become financially stronger, they tend to move towards more capital intensive business activities like value addition (primary or secondary processing), setting up of post-harvest facilities including storage, packaging, branding, etc. and effective marketing through bulk or retail sales, etc. Many of these have also initiated parallel income earning activities like establishment of agro service centers for custom hiring of equipment and other services, storage facilities on rental basis and primary processing centers for grading and standardization, advisory services, etc.
FPO members, being mainly small and marginal farmers, are unable to make initial contribution of large sum towards equity, thus, leading to weak financials and limited resources for undertaking business activities. The access to credit is also limited mainly due to poor borrowing capacity and collateral requirements. More than 75% of the credit needs of start-up FPOs are mainly in the form of working capital loans ranging from Rs. 30 lakh to as much as Rs. 100 lakh for undertaking bulk purchase of inputs for members, procurement and marketing of agri. produce and meeting other overheads, depending on the nature and size of business.