An enterprise irrespective of its size and scale is a small unit of a more complex system. In order to comprehend the challenges faced by these units, a zoomed-out approach to paint a macroeconomic portrait is the first step. The term “business ecosystem” is a network of several actors whose decisions, choices and actions affect enterprises. This becomes a graver challenge, if these enterprises are smaller in scale referring to Micro, Small and Medium Enterprises (MSMEs). There is data to support that these units comprise a huge share of private businesses across the globe accounting for greater part of the employment (Reeg et al., 2015) with the potential of being inclusive and green. This leads to creation of local jobs boosting the economy as a whole. In India alone, MSMEs showed a growth of 13.9% in net jobs created over the last four years (CII, 2019). This data indicates the pivotal role played by MSMEs in generating employment with the capability of being the key to solutions targeting integrated development including resilience building and environmental sustainability¹. In other words, these have the potential to become Local Green Enterprises (LGEs) which are essentially MSMEs which build their models on principles on resource efficiency and circular economy.

In India, there are several structural challenges that these LGEs have to face on a regular basis. To understand these, it is necessary to map out the actors in the business ecosystem for LGEs in India.
Below are the major actors in India with their roles and functions:

1. Government – The Government includes ministries and regulatory bodies. The relevant ministries identified in the LGE ecosystem in India include the Ministry of MSMEs (MoMSMEs), Ministry of Finance (MoF) and the Ministry of Environment, Forest and Climate Change (MoEFCC). The role of the Ministries would be frame and put policies in place. On the other hand, regulatory bodies are mandated to ensure that the policies put in place by the ministries are implemented in a manner that is most effective. The National Small Industries Corporation (NSIC) and the National Institute for MSMEs (NIMSMEs) are relevant regulatory bodies to name a few.

2. Corporations – Industry consists of corporations which provide a platform for networking and building consensus with like-minded enterprises and organisations cross cutting across various sectors which help build an enabling environment for LGEs. The major ones in India include Federation of Indian Chambers of Commerce & Industry (FICCI) and Confederation of Indian Industry (CII). There are also large corporations which have the band-width to make their value chains sustainable. They push demand for sustainably procured products/services top-down towards the extreme end of the value-chain with LGEs as suppliers. A few large corporations in the Indian market currently in the sustainable value chain space include ITC, L&T, TCS etc.

3. Support Organisations – LGEs require support of various kinds. There are organisations with act as Incubators which hand-hold LGEs from the starting point till they mature. A few examples include SFURTI and CDP which fall under the MoMSMEs, FMC, KVIC and IMEDF. Another important type of support organisation includes Aggregators which act at the meso-level bringing several LGEs together to share experiences, learning and find solidarity in coming up with innovative solutions. The Honey Bee Network, udyaMe and core support groups of SEED (DST) are a few examples of LGE aggregators in India. Policy research institutions, think tanks and civil society organisations like SEED-finance, UNIDO and Development Alternatives are a few examples which help analyse the policies of the government, conduct need assessments on ground and study the reasons for the gap and work towards bridging those ensuring that the voices of local entrepreneurs reach the policy makers.

4. Educational Institutions – These include training institutes and universities. Training institutes’ help entrepreneurs develop new skills and provide support in surviving the fast changing market. A few examples in India include MDI, ILO India and MSME Tool Room. In order to nurture the spirit of entrepreneurship, various universities in India offer courses and are also integrating it as an elective in the curriculum. IRMA, Anand and XLRI, Jamshedpur are a few universities in India that fall in this category.

5. Financial Institutions (FIs) are the most crucial actors in the ecosystem for LGEs to start, sustain and flourish.

• Development Finance Institutions (DFIs) are specialised development banks or subsidiaries set up to support private sector development in developing countries. They are usually majority-owned by national governments and source their capital from national or international development funds or benefit from government guarantees. This ensures their creditworthiness, which enables them to raise large amounts of money on international capital markets and provide financing on very competitive terms (OECD). Examples are SIDBI and NABARD.

• Non-Banking Financial Companies (NBFCs) are companies in the business of acquiring shares/stocks/bonds/securities and providing loans, advances to anyone looking for credit including LGEs (RBI). These are alternative lending models which have adopted modern technology for processing of loans and underwriting of credit. Examples are Bajaj Fin Corp, Muthoot Fin Corp, Mahindra Finance

• Public and Private Banks – A bank is an organisition either public or private which provides safety to its customers’ money and is a source of credit for many including LGEs. Examples are SBI, PNB, UCO bank, ICICI, HDFC etc.

• Microfinance Institutions (MFI) are organisations which provide a banking service to individuals and groups (cooperatives etc.) with low-income, lack of collateral or little access to financial services. Examples are Annapurna Microfinance Pvt. Ltd., Arohan Financial Services Pvt. Ltd., Asirvad Microfinance Pvt. Ltd. etc. ■

Endnote:

¹ PEP Working Group on Green Micro and Small Enterprises

Stella George
sgeorge@devalt.org