Micro-Finance for Micro Enterprise —The Rockefeller Fund Initiative
Subroto Roy :
sroy@sdalt.ernet.in

Extending credit to "micro-entrepreneurs, particularly in new technology areas, is a nightmarish scenario to most bankers. And yet, everyone knows and acknowledges that friendly sources of credit are a must if growth is to take place at this scale of operation. Is there a way out ?

The Market and Enterprise Development Unit at Development Alternatives (DA) thinks there is. Since 1997, this DA team has been managing a revolving fund that is designed specifically to meet the credit needs of micro-entrepreneurs interested in doing business with eco-friendly building materials. With a start-up grant of US $ 50,000 from the Rockefeller Foundation, the fund has supported 22 enterprises, 17 of which have not only setup successful businesses but have re-paid the loans extended to them with interest !

After considering the possible ways in which credit could be provided to pioneering entrepreneurs, the project team decided that leasing of equipment to entrepreneurs would be the best option. It would :

i. Significantly reduce the investment that the entrepreneur would have to make
ii. Enable adequate control over entrepreneurs in terms of ensuring quality in their operations and product

iii

Ensure payback, on the amount invested out of the project funds, in order that it could become a truly revolving fund.

Micro-Concrete Roofing (MCR) technology was chosen as the first technology option, due to its scale, completely debugged production system, fully designed and manufactured kit, well developed training and technical support and most importantly, its proven commercial viability.

Further, success of the financing scheme was achieved by adopting a cluster approach. A total of seven MCR enterprises were established in South Karnataka and by July 2000, a total of 22 MCR enterprises had been set up in MP, UP, Bihar and Karnataka. The repayment were by and large as per schedule with minor deviations during the take off phase and during periods of lean demand.

Achievements

The Rockefeller Revolving Fund has assisted individual entrepreneurs to leverage funds from other sources. It has helped DA in setting up enterprises in a focused geographical region to maximise the visibility of MCR technology and its impact. The Revolving Fund initiative has created a snowball effect in neighbouring districts for enterprise multiplication, as the new product gains a foothold in the market. The emergence of the cluster has resulted in the engagement of a machine dealer in Bangalore to promote MCR technology.

The entrepreneurs themselves have started thinking of increasing the overall market share, apart from their individual markets for future market expansion. After realising that the cluster approach can be beneficial, they have setup a common brand name MYCON Tiles and a common pricing with pre-defined variations, depending upon the local market situations.

While analysing the factors responsible for success of these small businesses, it was realised that they catalyse the process of creation of more enterprises — In Bihar, for example, the entrepreneurs have created more than 10 enterprises in a single district. On one hand, these upcoming enterprises provide competition to the already established enterprises, on the other, they force the pioneer unit to continuously innovate and improve quality. Competition ensures that the end-user always gets value for money.

The Rockefeller Revolving Fund enterprises have been able to provide 88 direct jobs and about 200 indirect jobs in terms of support services provided while constructing roofs. Out of 88 direct jobs, more thank 50% have contributed to employment for women, thereby upgrading the quality of life of their families. Together, these enterprises have upgraded or installed about 2000 roofs every year.

Enterprises setup with the Rockefeller Fund have enabled a significant energy saving and CO2 emission reduction. The end product (i.e. Cement roofing tiles) substitutes locally manufactured clay tiles, which are energy intensive. They are manufactured in a traditional manner using biomass as a fuel, thus contributing to excessive CO2 emissions. At full capacity utilisation, an enterprise saves approximately 55,000 MJ of energy in the production of 60,000 tiles.

The Rockefeller Fund initiative has resulted in consolidating a team within the DA Group. During the process, the team has gathered critical learning in terms of selection of entrepreneurs, choice of technology packages and priorities for management of funds. Now, the team is confident of managing even larger funds and looks forward to deploying them to create more livelihoods. It is also geared to service many upcoming entrepreneurs seeking funds to start up new businesses, based on sustainable building technologies.

This effort dovetails effectively with the delivery of energy saving and renewable energy technologies by the DA Group. For example, the Vertical Shaft Brick Kiln technology, an energy efficient technology, has the potential to save upto 50% of energy by current best practice brick production technologies. Biomass gasifiers for decentralized production of electricity for rural areas, being promoted by DESI Power are another option. Both these technologies have immense energy-saving and livelihood generation potential that can be energized through an extension of micro-finance and technology supports. q


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