By Tamal Sarkar
Ease of Doing Business for MSMEs: Entrepreneurship training is a combination of two basic principles – generic and strategic. Generic inputs include entrepreneurial spirit, risk management, financial management, client management, etc. Strategic (sector-specific) inputs include linkage with other value chain partners – buyers and suppliers, guidance by sectoral mentors on technology, HR, etc. While generic inputs make a person fit for entering into the world of entrepreneurship, strategic inputs guide the generic knowledge into a real-life business venture.
While entrepreneurs can be created, but youngsters from entrepreneur families acquire the generic qualities as they grow up watching their parents. These qualities can be channelized to any product. In fact, in many cases, such youngsters dislike doing the same business as their parents, as those are “less remunerative” or not “dignified” as they prefer to venture out into the unknown. Such gentry of would-be entrepreneurs are mostly in need of strategic guidance. They are candidates for easier success. On the other hand, the ones who come from non-entrepreneurial families and are being asked to enter into entrepreneurship, especially if they have no option for jobs and which are often their first choice, they need loads of inputs on both generic entrepreneurial as well as strategic sectoral inputs.
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Also of importance is the place of entrepreneurship promotion. Each place is differently endowed with respect to degree of industrialization. Broadly the districts can be divided into those having (a) presence of large firms, (b) presence of MSME clusters, (b) presence of artisanal cluster and (c) no presence of cluster. Many a time, though, there is a mix of these three.
Presence of large firms gives the benefit of its cost minimization potential through the creation of its second or third-tier vendors. If there is presence of clusters (industrial or artisanal), one needs to find out its missing links in the value chain both with respect to their presence (breadth) as well as sufficiency (depth). Filling up of missing links is a business need and finds immediate success. Incidentally, it is observed that such gap has the highest chance of getting addressed in the most advanced cluster, which can be a starting point.
Also of importance is partnering in entrepreneurship. Formalization is a cost in the short run and at times too high for a unit to pull through. Thus, creation of Producers Companies of a group of would-be entrepreneurs is a much viable entrepreneurship model, especially for own-account enterprises.
However, for districts without industrial presence, one needs to identify the business potentials in (a) agro-based products as there are mostly agrarian economy or in related support services, which are found in a benchmark district of a state. Often a district has record of various past skilling efforts. One can try to promote those skilled persons into entrepreneurship, as they understand at least some part of the product chain. Also potential are persons who have returned to their native place due to reverse migration, but with skills.
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A challenge in all developmental approach is perennity, that is, development should become a market phenomenon. In this case, it necessitates, among other, the availability of qualified sectoral experts, who can provide strategic guidance. Such sectoral knowledge providers should be approachable and affordable and should therefore be preferably local. As done in many countries, one needs to identify retired sectoral experts and take their support at a locally affordable fee, as their returns to labour gets mostly satisfied by the creations that they generate in this process.
The path for overall successful economic development, especially which are time constrained (for instance, schemes/programmes) is best suited to a “middle-path strategy”. Success attended by highly endowed is considered as exception. Success with least endowed is a challenge with respect to time needed and desired schematic/programmatic returns to “investment in development”, although it may be very deep rooted and can give much bigger success, in the long run but is not scheme/programme suited. The best chance of success for development ideas is to start with moderately endowed persons, which is relatively fast and can be demonstrated to the lesser or least endowed as a feasible route for income enhancement and thereby promoting entrepreneurship in the next round.
Accordingly, a broad strategy for the least cost and quick entrepreneurship development can give preference to (a) would be entrepreneurs from family of entrepreneurs, (b) identifying entrepreneurship possibilities in the creation of value chain partners in industrial areas, (c) attending service/manufacturing need of the district, (d) promote agro/service units in agrarian intensive areas, (d) create a database of affordable, approachable and champion mentors, (e) promote joint entrepreneurship and (e) follow a middle-path strategy to start with during implementation.
Dr Tamal Sarkar is the Senior Adviser at Foundation for MSME Clusters. Views expressed are the author’s own.