Scaling Up Mechanisms for
enterprises are engines that boost job creation and fuel equitable
economic development. However, despite their crucial role as enablers of
improved local capacities and jobs, their growth is limited owing to
lack of a nurturing ecosystem.
Dialogue with rural
communities and local stakeholders over the past few years, has revealed
the unmet demand of support services for setting up and improving micro
enterprises. Less than 5% of the potential entrepreneurs are aware of
the types of enterprises that can be established. Moreover, only 1 out
of 15 entrepreneurs are able to access formal credit and close to 85%
report restricted access to relevant marketing channels. It is therefore
evident that there is a need to bridge this growing gap between
entrepreneurs and service providers.
Emerging Sectors: Ensuring Environment Sustainability and Enhancing
Quality of Life
Owing to its journey on
the path of economic reforms, India has transformed into one of the
fastest growing economies if the world. It is estimated that with its
large and growing population and exponentially increasing GDP, it shall
soon join the league of developed economies over the next 10 years. This
development is however impossible without the transformation of its
growing population into a major productive workforce. The top five
potential sectors that have emerged in the recent times and are likely
to hold their position in the future are green building materials,
waste, agri and food, rural services and basic need enterprises. Green
building material and agriculture sectors have the highest employment
generation potential in India. Technology innovation for fly ash brick
making machines, C&D waste, eco-concrete, low carbon cement, marble
sludge among others are increasingly becoming popular. 62 million tonnes
of solid waste is produced in the country every year, of which only 12
million tonnes is treated and the rest dumped. This provides a huge
untapped opportunity. Indian waste has big business potential and is set
to become a $13 billion industry by 2025.
Over the past 30 years,
Development Alternatives has supported over 500 enterprises in agri and
paper waste management. In the agriculture sector, on-farm, off-farm and
farming services based business models have been demonstrated on ground
along with women led aggregation platforms for production and marketing.
Sakshi Producer Company,
an aggregator-women based agri business set up in Bundelkhand to nurture
economic development and enhance livelihood security by strengthening
local value chains, has a turnover of INR 20,00,000/year with 500
customers. “102 women invested INR 1000 share capital with 10 board
members. Now we have a turnover of INR.20,00,000”, says Sakshi.
has demonstrated new technology and IT service based innovative
livelihood models in the rural economy developed with young girls such
as printing and downloading centre (Gopalganj, Bihar), computer training
centre (Shravasti, UP) and information and data management centre
(Delhi). Approximately 80% of rural India’s basic needs remain unmet.
Currently at USD 12 billion, consumer goods market in rural India is
expected to grow to USD 100 billion by 2025. Basic need solutions like
water service based enterprises or biomass pellet (cooking fuel)
manufacturing enterprises are the way to fulfil these unmet needs.
Development of Micro Enterprises
The key challenges faced
by MSMEs can be summarised as below:
Lack of business
competence of entrepreneurs and support systems: There is increasing
evidence that despite the presence of entrepreneurial skills, poor
access to training systems and low ability to take risks minimises
entrepreneurship development. For instance, in India only 22% of
aspiring entrepreneurs who plan to start business have access to formal
or informal training in India, against an Asia average of 44%1.
The lack of connect between supporting entities and entrepreneurs
further inhibits the growth of these enterprises.
Poor access to key
business inputs: Over 32% of enterprises have inadequate market linkages2
leading to irregular revenue cycles. In the case of finance, only 5% of
enterprises have access to formal finance3 as banks view
MSMEs as risky investments. The gap in debt finance is accentuated due
to un-served micro and underserved small enterprises which constitute
80% of MSMEs in India.
Lack of a robust and
lucrative ecosystem: There is increasing evidence that poor
infrastructure and inadequate market support systems are among key
factors that limit the growth of the MSME sector in emerging economies.
Transforming the Rural Micro-Enterprise
Against this backdrop,
the Development Alternatives Group is planning to develop a digital
marketplace, which will fulfill the service gap between entrepreneurs
and service providers, and a financial platform that will ensure
continuity of credit support to micro entrepreneurs.
It has operationalised a
self-sustaining business entity to service the needs of entrepreneurs as
well as other key stakeholders in the ecosystem, across geographies and
sectors through its special purpose vehicle - India Micro Enterprise
Development Foundation (IMEDF). IMEDF aims to create a positive
ecosystem for boosting entrepreneurship in India by addressing this gap
and developing itself as the one stop-shop solution for enterprise
development support. This will be achieved in a phased manner, wherein
the first phase will demonstrate micro enterprise development in sectors
like rural services, basic needs provision and agri processing (for
boosting economic development) and green building materials and waste
(for environment sustainability). The second phase will focus on
piloting the financial platform, a catalytic credit support fund that
will mobilise resources from various stakeholders and ensure
acceleration of enterprise development.
It has been
conceptualised in a manner, such that the systems that are set up are
self-propelling. The digital marketplace and the catalytic fund will be
embedded within the self-sustaining special purpose vehicle – IMEDF. By
doing so, these engines will continue to service more businesses with
information and networking support contributing to building local
prosperity and wealth. In addition to this, sustained interactivity
between stakeholders would be ensured through monitoring and information
sharing mechanisms operating on the digital platform.
Moving forward in
subsequent years, this will be scaled out to impact larger areas through
a network of ‘acceleration hubs’ run by civil society organisations.
These network partners will then be supported to provide high quality
enterprise support services through direct handholding and digital
tools. The platforms will converge on the digital market place, which
will facilitate knowledge exchange. Five years down the line, IMEDF aims
to support at least 100 enterprises per day, accelerating enterprise
development across the country.
and Leon Sra
1 Gallup Business Journal, 2012
2 International Finance Cooperation, 2012
3 International Finance Cooperation, 2012
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