Muthu Velayutham

Ashoka Fellow
Fellow since 2005
This description of Muthu Velayutham's work was prepared when Muthu Velayutham was elected to the Ashoka Fellowship in 2005 .


Muthu Velayutham orchestrates a diverse, integrated suite of development programs in rural India that enable poor communities to build wealth through coordinated business ventures and the stewardship of natural resources.

The New Idea

While debates rage on how best to build the economic power of rural communities in the developing world, Muthu Velayutham quietly leads a network of community-based business ventures and financial institutions that make sustainable economic growth possible for India’s rural poor. He organizes federations of rural dry land farmers into producer companies that enable them to compete in large regional markets and to create savings and credit programs needed to sustain their growth. After one and a half decades of operation, his programs have resulted in four registered community based financial institutions employing almost 10,000 women. These community businesses market and sell medicinal plants, energy products, and traditional crop resources.

Realizing that economies cannot ultimately succeed without effectively addressing the pressing issues of health, education and infrastructure, Muthu Velayutham builds solutions for all three into his model of rural development. He helps communities fund and run schools, Common Facility Centers (CFCs), and hospitals where none have existed before. He is encouraging the environmentally responsible use of bio-gas and bio-diesel, reducing the carbon emissions of some farming villages by more than 80 percent. With his support, communities become capable stewards of their economic and social growth, building their capacity to produce and consume in concert with their natural and human resources.

The Problem

In the areas where Muthu Velayutham works—primarily the southern districts of Tamil Nadu—severe drought and economic stagnation drive people from rural communities to urban centers, fueling a massive wave of immigration. The increasing strength and influence of multinational corporations, combined with a thirst for natural resources, has paved the way for projects of extraction and development that allow economic gain to trump community need. Cases of pesticide poisoning abound and increasing populations of landless families suffer from acute poverty and hunger. The farming villages of these districts entertain some of the highest migration rates in the country. Despite the severity ofthese problems, the government remains apathetic about providing basic services like health care, education and core infrastructure.

Earlier efforts of passing on the return on land to the poor—or return on entrepreneurship or on capital—have shown limited effects on the livelihoods of the poor. The great majority of rural development programs fail to channel local resources, i.e., traditional skills, and wealth back into the rural economy. Such programs generally focus on linking the rural economy to urban market forces, which may produce gains in the short run, but which eventually result in the destruction of the value systems and trade relationships that have sustained rural communities for centuries. The few programs that seek to foster independent rural markets face the problem of convincing people who have been exposed to decades of urban-focused advertising that rural producers can meet the needs of rural consumers. The prevailing value system in Tamil Nadu—which holds high-tech mass production in fanatical favor—makes this problem particularly stubborn.

This value system directly limits the economic potential and general well-being of rural India. Large tracts of fertile land untouched by chemical fertilizers produce pure organic crops throughout the region, but villagers rarely buy them. Organically produced vegetables and grain are cheaper and healthier, but rural consumers consistently buy chemical and pesticide ridden produce instead. Drawn to the color and size of the mass produced goods, they spend more money for a nutritionally inferior product. Further, the economic benefits of high-priced, organically grown foods sold to urban markets are rarely reaching the rural farmers that grew the food.

The Strategy

Muthu Velayutham builds chains of production and consumption that result in sustainable value for rural communities. His umbrella organization, the Covenant Center for Development, has helped found farmer producer companies. These companies use the biodiversity of the grasslands, wetlands, and dry land tracts of rural India as a huge and untapped reservoir of saleable products. Through such companies, Muthu Velayutham has trained hundreds of rural residents to gather, process, and market local medicinal plants. His programs now operate a nursery of nearly 200,000 saplings representing over 300 species of medicinal plants, which are purchased by local traditional medicine practitioners, schools, and government departments.

To coordinate the new economic activity spawned by his farmer producers, Muthu Velayutham set up the first cooperative company in the region for the production and marketing of medicinal plant products. The company, Gram Mooligai Company Limited (GMCL), currently involves more than 1,000 families in the collection, processing, cultivation, and marketing of medicinal plants. Seeking to address the most pressing treatable problems of rural health care on a large scale, GMCL has recently partnered with a network of community-based organizations to produce remedies for fever, arthritis, cough, and wounds.

Realizing that no curative health care solution can be effective without preventive care, Muthu Velayutham educates and motivates villagers to make the most of the healthy organic foods produced in their areas. He created Aahaaram, the region’s first community health food company, to create and market a suite of goods supporting a nutritious diet steeped in the traditions of the region. Through organized groups of farmers and marketers similar to those employed by GMCL, Aahaaram deals in more than 40 products based on traditional recipes, including health foods, ethnic foods, spices, and hygiene products.

Biodiversity is the fuel that drives Muthu Velayutham’s program of economic growth and he makes sure to protect that biodiversity. He balances traditional business development with the stewardship and protection of India’s natural resources. He founded an arboretum in Tamil Nadu, the Ethno Medicinal forest, and complemented it with a training organization for the Conservation Education program. About 5,000 visitors, including school and college students, villagers, and folk healers, visit the garden each year for research and training in the identification, protection, and use of medicinal plants. A national assessment conducted in 2005 concluded that Muthu Velayutham’s ecofriendly programs had reduced carbon emissions in the agricultural communities they serve by nearly 80 percent. Pollution is reduced in part by the introduction of bio-mass stoves that use pellets manufactured from agro waste. He is currently partnering with British Petroleum (BP) to spread these advances throughout India.

Muthu Velayutham adapts strategies from his work with farming families to suit the needs and skills of fishing communities in coastal areas affected by the 2004 tsunami. He works with local artisans to construct repairs that go beyond simple restoration of property destroyed by the water, adding value to boats and buildings throughout the region. He helps seasonal migrants start new dry land farming ventures that expand the range of available goods rather than competing with full time fishermen for depleted stocks. Drawing from his experience with GMCL, he helps fishing villagers organize self-help groups that identify local resources and prepare them for sale.

As these self-help groups grow and mature, Muthu Velayutham helps them create federations that pool market power and share business strategies. The federations have developed a vibrant exchange in best practices and they have written training manuals in Tamil and English to maintain consistently high standards of quality. With Muthu Velayutham’s guidance, they have initiated direct trade among self-help groups, reducing dependency on cash and avoiding the flood of unhealthy and unnecessary products promoted by the industry-dominated market. The Community Enterprise Forum in India is an extension of his work with the self-help federations, bringing together 160 community-based organizations across the country. Drawing members from the forum, he has helped create an herbal enterprise promotion organization called the Medicinal and Aromatic Plants Stakeholder Consortium as well as an artisan training center called Karmakshetra.

With so many business ventures taking off at once, Muthu Velayutham has made it a priority to establish a robust financial infrastructure that can provide adequate support. His main instruments in this effort are community-based financial institutions. These institutions help federations of self-help groups offer low-interest loans and high-interest savings to their members. He has also introduced credit cards for SHG members that enable hundreds of families to maintain their purchasing power during the lean season, raising sales and keeping rural nutrition stable. His efforts are being replicated by coalitions of community-based organizations in nine other states.

The Person

The fourth among five siblings, Muthu Velayutham is a first generation literate from a farming community in Tamil Nadu. He was involved social change organizations from his earliest years, joining the Young Farmers Association when he was still in grade school. He pursued his education with intensity, concentrating on rural development studies in his college years and earning a master’s degree in social work.

Upon graduation, Muthu Velayutham began his career serving runaway children. He developed a study of their characteristics and origins (as part of his course requirements in social work) and discovered that a great majority of these children came from migrant families. He then began working with nomadic shepherd children, helping communities of migrant workers form self-help groups long before the self-help movement took root in India. His model was replicated by hundreds of community-based organizations in South India.

As he grew closer to the rural and migrant families with which he worked, Muthu Velayutham learned that health services were eating up a massive portion of their economic resources, taking almost 30 percent of community savings. Since government health services hardly reach the rural areas, Muthu Velayutham began to work with the people who could, partnering with traditional healers and bone setters to coordinate and extend medical services throughout the region. The partnership laid the foundation for his work with Gram Mooligai Company Limited and Aahaaram Traditional Crop Producer Company Limited.