Understanding Factors Influencing Economic Viability of Farmer Producer Organizations: Empirical Evidence From India

Farmer producer organizations (FPOs) play a crucial role in smallholder‐dominated agrarian economies by addressing challenges of access to markets, credit, and information faced by individual farmers. Nevertheless, their long‐term economic viability and sustainability remain a complex issue. Factors such as their organizational structure, member participation, enterprise diversification, access to finances, and policy support can significantly influence their performance. However, our understanding of these factors is limited. This study undertakes a comprehensive analysis of approximately 1069 FPOs in India to identify the factors influencing their economic viability. Findings indicate that their economic viability is positively associated with the maturity level, membership size, geographical scope, and access to finance. Conversely, their larger top management and high proportion of economically and socially disadvantaged members present significant challenges in improving their economic performance. Moreover, this investigation determines the optimal levels of key factors underlying the economic performance of FPOs, which indicate that by attaining an optimal scale of operations, enhancing financial stability, and streamlining governance structures, FPOs can potentially improve their long‐term economic viability while more effectively serving their members.