India has seen a rapid growth in the last few years. This growth cannot be called inclusive as it has not been able to bring about development at the grassroot levels. It is important that any economy developmental activity in today's world takes into account emergent issues, especially to do with the underserved population at all levels, i.e., individual, organisation and community.
This write-up aims at giving a peek into my understanding of the same.
Individual Level
There is a lot of traction on the individual level with a lot of focus by Min. of Rural Development and special agencies like National Skill Development Corporation (NSDC) coming into the forefront, and adding gusto to the existing set of efforts being made by various Not-For-Profit organisations to help the socio-economic fabric in the underserved areas of the country.
NSDC (
http://www.nsdcindia.org/):
excerpt
The National Skill Development Corporation India (NSDC) is a one of its kind, Public Private Partnership in India. It aims to promote skill development by catalyzing creation of large, quality, for-profit vocational institutions. It provides viability gap funding to build scalable, for-profit vocational training initiatives. Its mandate is also to enable support systems such as quality assurance, information systems and train the trainer academies either directly or through partnerships.
The NSDC was set up as part of a national skill development mission to fulfill the growing need in India for skilled manpower across sectors and narrow the existing gap between the demand and supply of skills.
The Finance Minister of India announced the formation of the National Skill Development Corporation (NSDC) in his Budget Speech (2008-09):
"...There is a compelling need to launch a world class skill development programme in Mission mode that will address the challenge of imparting the skills required by a growing economy. Both the structure and the leadership of the Mission must be such that the programme can be scaled up quickly to cover the whole country."
Its objective is to contribute significantly (about 30 per cent) to the overall target of skilling / upskilling 500 million people in India by 2022, mainly by fostering private sector initiatives in skill development programmes and providing viability gap funding.
NSDC is also working very aggressively on setting skill-standards in India and am sure are researching and contacting skill-standard bodies in other countries as well. Setting skill-standards and then working towards a metricised approach to building competencies is the way forward. Do look at the skill-gap analysis available with them. Other apex bodies have established active workgroups to build a focus on skill-building (www.cii-skillsdevelopment.in/ and http://www.ficciskillforum.org/) and help establish Sector Skills Council (SSC) like the ones established in developed economies, like UK (http://www.sscalliance.org/)
There are a lot of organisations & individuals who are now preparing themselves or have already got into the fray of skill-building at the grassroot level, and that is commendable. In fact there is a clear business opportunity in this area and those who have the understanding of skill development and have the will to move out of their environmentally controlled cubicles, would see the scope. Organisations like Work Skills India (a Bharti venture), NIS Sparta (a part of Reliance Telecom), and IndiaCan (a JV between Pearson & Educomp) have already gotten themselves in this space, and like many other individuals & organisations are striving to help the country achieve their target. International agencies from all over the world are making their pitch to get into this next big wave of 'creating employable individuals'.
Organisation Level
The next level is that of helping organisations build at the small enterprise level and this is one area in which a lot of work has happened, and there are a plethora of organisations who are helping these organisations to establish themselves. The Indian government has a special ministry called the Min. of Micro, Small & Medium Enterprises (MSME) to aid the effort. Policy makers view MSME sector, which is the second largest employer after agriculture, as a critical vehicle for creating jobs and eradicating poverty. Accordingly, many MSME public support programmes have been in vogue in India for a long time. Such programmes have met with varying degree of success. Lately, to enhance outreach and efficacy of such programmes further, public schemes increasingly focus on MSME associations for tasks ranging from enhancing awareness to implementation to creation of support institutions in Public-Private-Partnerships (PPP). The issue of capabilities of MSME associations in design and execution of such schemes, has assumed critical importance.
Banks & Lending Institutions are also working on helping these organisations grow. Infact the Reserve Bank of India has announced the availability of loans upto INR 500,000 without any collateral guarantee (
http://www.fisme.org.in/RBICircular.pdf). There is also Small Industries Development Bank of India (SIDBI) which is actively working with to empower MSME sector with a view to contributing to the process of economic growth, employment generation and balanced regional development.
SIDBI Foundation for Micro Credit (SFMC) was launched by the Bank in January 1999 for channelising funds to the poor in line with the success of pilot phase of Micro Credit Scheme. SFMC's mission is to create a national network of strong, viable and sustainable Micro Finance Institutions (MFIs) from the informal and formal financial sector to provide micro finance services to the poor, especially women.
SFMC is the apex wholesaler for micro finance in India providing a complete range of financial and non-financial services such as loan funds, grant support, equity and institution building support to the retailing Micro Finance Institutions (MFIs) including two-tier MFIs so as to facilitate their development into financially sustainable entities, besides developing a network of service providers for the sector. SFMC is also playing significant role in advocating appropriate policies and regulations and to act as a platform for exchange of information across the sector. The launch of SFMC by SIDBI has been with a clear focus and strategy to make it as the main purveyor of micro finance in the country. Operations of SFMC in the coming years, are not only expected to contribute significantly towards development of a more formal, extensive and effective micro finance sector serving the poor in India, but also ensure sustainability at all levels viz. at the apex level (SFMC), at the MFI level and at the client level to ensure continuance of such arrangement. Most importantly, SFMC has strived to create a mechanism in which there should be no barriers to growth. Under the dispensation, there is focus on innovation and action research.
The Federation of Indian Micro and Small and Medium Enterprises (
http://www.fisme.org.in/) has been working to integrate the efforts. After opening up of Indian economy, close to the heels of establishment of WTO, eight state-level SME associations gave birth to FISME in 1995 to gear up the Indian SMEs at the national level to the challenges thrown open by changed economic realities. Today as umbrella organization of SMEs, FISME has associated associations in all the progressive states of the country.
A program called 'Capable' is being launched with the larger overall goal of improvement in MSME associations' awareness capacity and capability to facilitate MSME competitiveness enhancement. The objectives of the program are two-fold:
- Capability Development of MSME associations to improve their a) efficacy & sustainability, and b) Implementation capability of MSME development programs and schemes.
- Facilitating better designing, management and effective implementation of various Government sponsored schemes intended for MSMEs and associations.
Lately the entrance of the concept of Social Enterprise has also seen a lot of work. There are a multitude of people wanting to fund these. While venture capital an private equity funds have been helping start-ups build the foundation of some great ideas, there is now a new breed of organisations that are focused on building the social enterprise structure in the country. PE Funds like Acumen Fund are in the constant search for ideas that are exciting, and those which could be seeded to build as successful organisations.
Community Level
An economic community as I see it are of two types, basis their composition, however, emerging from the same concept of 'organisation':
- Community of Small Enterprises
- Community of Micro Enterprises
I have intentionally kept Medium Enterpises as they may possibly have the ability to handle themselves in terms of their growth in the perpsective that I am about to share. The challenge with most organisations in this sector are two folds:
- Unavailability of managerial competence
- Unavailability of reckonable brand
My thought around both are that there is considerable business opportunity around the two.
The right competence is something that I would like to see beforehand in case I want to invest in an organisation (running/start-up), as I want to be sure that the monies would be used properly and that I should have a decent return on equity. Having said that, the lag is the unavailibility of managerial competence in these organisations that take loans to build and/or run. Financial institutions should look a the way in which their funds are being put to use. One could be content that the money being given is a 'loan', so, how does it matter whether the managerial competence is available or not till such time the money is returned along with interest and that the proposition doesn't become a NPA. Here is the difference.
A usual lending agency would have this philosophy, however, lending organisations who are in the business of lending to high risk enterprises of considerably small size should be in a position to offer services which would help build the managerial competence, as this would aid in assuring assured and timely return on the money lent.
Can private agencies look at this as a business opportunity where SMSEs are trained and coached on increasing their own effectiveness as managers hence bolstering the chances of increased efficiency of their organisation. This will not only ensure that the return on investment is secured, but an efficient organisation would ensure that it takes more lending as the 'efficient & effective' organisation now starts to grow. The growth will also ensure better payout to workers and hence increasing consumption... and that's how the cycle moves on an upward spiral. This model could be adopted by lending agencies or they could get into a partnership with organisations which can build such competencies.
I visited some villages and what came out strongly is that there are three specific activities that happen in a village. And one need not be an economist to understand the same; production, consumption and sale of excesses. The interesting component is 'sale of excesses'. The excesses are sold in nearby towns (accumulation centres) and from there it goes to distribution centres from where it comes to your and my house. The inefficiencies in this system is not something unknown to anyone.
However, in this environment we have the example of successful cooperatives such as Amul which went ahead and collected milk from everywhere and packaged it and retailed it. The model was so successful that it was replicated by some private enterprises too.
The business opportunity lurking in mind takes off from here. Let's look at an average MSME industrial belt. There are hundreds who manufacture various goods and they are sold across to those who need it which essentially are larger organisations or in larger markets. Let's take the case of the products that are designated to be sold to the market. The inefficiencies of marketing, branding and quality hound them; with every manufacturer having their own benchmark. On the other hand, one could look at a scenario where all the products are pooled together by a cooperative society for the cluster, quality checked against decided norms, and then packaged with a common brand.
For example, if I pick up all the goods produced in the industrial area at Kalyani (70kms from Kolkata) and brand all of the goods with 'Kalyani' as the brand. The cooperative that does it, is owned and funded by partnering manufacturers, but run by professionals. The benefits are that the brand establishes itself as a mark of certain level of quality, uses the 'pooled' funds to mobilise markets and uses economies of scale in distribution system; and hence becoming an efficient system and returning more value to the manufacturers. The manufacturers get to retain their identity and continue to sell to their existing customers as well. As we move on the cooperative could actually revive the organisations that have perished (bankrupt) by sensing the need of the market and getting the same produced. Everyone is a shareholder, so everyone benefits.
The same could work in the micro-industrial sector in another form. Let's say, a similar cooperative is created by a tribal village, and all of their excess produce and handicrafts could be branded by the name of their village and retailed to larger stores in big cities or fed to the same people who were earlier purchasing from individuals. Everyone is a shareholder, so everyone benefits.
This is an idea that I have been toiling with for sometime, and I spoke to a few stakeholders and prospective end users, but they have shown a mixed response towards it. The apprehension lies into venturing in the unknown and someone as the good shephard who takes the onus.
I urge all in the learning and development space to pay attention; the time has come to focus on things that will help the country grow and make it a superpower, and it is in your hands.
Please feel free to comment on this article. The pursuit is to become better.
