Partnership to nurture SME entrepreneurs

In what could be a significant boost to the Rural BPO industry in the Indian state of Tamil Nadu, Cisco Systems is partnering with the Small Industries Development Bank of India (SIDBI) and Tiruchirappalli Regional Engineering College – Science and Technology Entrepreneurs Park (TREC-STEP) to nurture and support ICT entrepreneurs in the country [via Economic Times]:

In the three-way partnership, SIDBI will provide financial support, Cisco would aid in technology and the incubator TREC-STEP would help in mentoring. The partnership is targeted at the micro, small and medium enterprises segment. It has been rolled out on a pilot basis in India.

TREC-STEP is an award winning small-business incubator local in the south Indian city of Trichy. Since its establishment in 1986, it has excelled in promoting technology entrepreneurship in the region. Given the broadening focus on small and medium enterprises (SMEs), it would be worthwhile to consider setting up well-functioning business incubators in every district in India.

TC-I Tidbits

Your daily dose of headlines:

  • Technology: reports that a DesiWiki will help Indian start ups to increase their knowledge base on the technical aspects of starting a new venture.
  • Education: In order to encourage students to stay in school, the government approved a merit scholarship that will award deserving students of lower income sections with Rs 6,000 annually.
  • SMEs: Indo American Chamber of Commerce (IACC), in association with the World Trade Centre (WTC), aims to host the fifth Indo-US economic summit in September 2008 to strengthen links between small and medium enterprises (SMEs) in India and USA and create opportunities for them to work with each other in areas of mutual interest, access technologies, form joint ventures and sign trading arrangements. [Source: Business Standard]

SMEs adaptability = ideal conduit to BoP

In a post on yesterday, Derek Newberry, wrote a great piece on how SMEs serve as an ideal player in modifying technologies and products to reach the BoP. He starts off by recognizing the recent interest by large multinational corporations (MNCs) in serving the bottom billion, but then pushes forth the inquiry about the role of SMEs in this process. Interestingly, instead of viewing MNCs and SMEs as antagonistic in this space, as they most often are vis a vis each other in traditional markets, Newberry recognizes the potential for cooperative coordination between these two players to better serve the poor:

Their competitive advantage is an ability to quickly and efficiently innovate new technologies and services that meet the specific needs of BoP markets in different regions. New Ventures enterprise Big Tree Farms is an example of this in reverse, where they are offering Whole Foods value as a partner by supplying exclusive access to authentic Indonesian foods. In other words, SMEs are a perfect channel for MNCs based in Europe and the US to intelligently connect with new markets and producers in emerging economies.

In essence, this approach leverages larger organization’s capital and innovative capabilities with the contextual knowledge of local SMEs to accelerate delivery of innovative ways to address poverty. Pulling from data collected by an informal survey done by the WBSCD, Newberry notes that the more pleasantly surprising statistic is that this partnership is already commonly utilized by both parties.

The results of the survey indicate that many companies already understand this – with 44% saying at least half their suppliers worldwide are SMEs. Still, as with any business relationship, particularly across regions and populations with differing resources and business practices, these engagements are never perfect.

However, the survey also recognized the challenges. From the MNC perspective, reliability of the SME distributors appeared to be a major concern, while for the SMEs they were unappreciative of the bureaucracy that hindered their ability to do business.

Taking a step back as well, one must be careful to ensure that such relationships are not merely facades to reintegrate colonialism type mechanisms where the instead of the focus being on providing better products for the poor, it becomes the desire to utilize such relationships to extract and eploit indigenous knowledge or products to then be sold in the first world markets.

SME News Portal

TradeIndia launched a news portal targeted for small and medium enterprises (SMEs) that will be a “one-stop information library” for the sector.

The entire business module of Tradeindia revolves around the pledge to help SMEs build a self-reliant India. To keep SMEs informed on the recent policy changes, international trends and how these changes could affect their businesses, Tradeindia comes out with its weekly newsletter, conducts online surveys and organises panel discussions and hosts a Discussion Forum aimed at creating a platform for the business community to exchange business ideas and issues.

We will definitely keep ThinkChange India readers updated on relevant news from this site that focuses on the hot topic of SMEs.

(Source: Avashya and Exchange4Media)

Op-Ed: Microfinance revisited and its role in reaching the missing middle

Two weeks ago I wrote about James Surowiecki’s article in the New Yorker that brought forward the inherent limitations of microfinance to actually generate a substantial number of jobs in a developing country. Since then it seems as if I was not the only one (surprise surprise) to take notice of Surowieki’s conclusions and it has even brought pioneers like Acumen Fund‘s CEO

Novogratz gave some credit to Surowiecki’s argument that not everyone in society is an entrepreneur and that in fact most people simply want a predictable, stable job with defined roles. Novogratz, however, distinguished her stance through her anectdotal experience with women’s access to credit and how throughout her experience they have overwhelmingly been favorable towards it. She says that this desire for credit provides the rest of us with critical lessons on how to address poverty.

However, the desire for credit on its own in no way makes someone an entrepreneur. Every teenager in America has an affinity for credit, but just because they are willing to spend that money somewhere does not make them some sort of innovator. Likewise, Surowieki’s argument highlights that for the most part microloans are not utilized for business expansion, but rather they help tide businesses over during rougher times, a la a bridge financing round. These funds like simple credit cards are used to cover funds that someone has already spent before — not towards future capital investments. It is that ability to reinvest ones funds towards scalability and expansion that is truly entrepreneurial.

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DBS Bank Offers Social Enterprise Products, Expands in India

DBS Bank, which is based in Singapore, is hoping to expand in India. With branches currently in New Delhi and Mumbai, the bank offers Enterprise Banking to support small and medium enterprises (SMEs) in India. An interesting program is the new DBS Social Enterprise Special Package, which is currently available in Singapore:

The `DBS’ Social Enterprise Special Package’ offers social enterprises preferential rates on business loans and unsecured overdrafts, and fee waivers for a slew of services, among other benefits.

In addition, employees of social enterprises will be granted special privileges for a whole range of personal banking services, including mortgage loans, renovation loans, auto loans, credit cards and general insurance.

No indication of offering this in India yet, but with all the entrepreneurial expansion occurring in the country, there may be a market for it. If you are aware of any banks in India offering financial products to assist social enterprises, please leave information in the comments.

Forbes Magazine: Dearth of innovative SMEs not from lack of $, but lack of trained entrepreneurs

Studies have estimated that over $1 billion in possible venture capital financing has been infused into India in 2007. Instead of spurring a wave of innovative startups, however, this influx in capital has remained just that — surplus of capital. Unlike Africa or parts of Eastern Europe, the lack of wide scale SMEs in India is not due to a lack of startup funds. And given the number of qualified IIT and other engineering graduates that are pumped out of the education system annually, they are not the limiting reagent either. So what gives?

According to Sramana Mitra, India’s current engineers and management professionals are ill-exposed to areas beyond back office tasks and so do not have a refined understanding on how to place and market technology products in the market.

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Op-Ed: Microeffect of Microfinance

A recent article in the New Yorker echoed sentiments expressed by many venture capitalists that have begun to shift their focus on the developing world and BoP markets that microfinance, while an amazing concept for enable entrepreneurs, cannot in itself lift countries out of poverty. James Surowiecki writes:

Microloans are often used to “smooth consumption”—tiding a borrower over in times of crisis. They’re also, as Karol Boudreaux and Tyler Cowen point out in a recent paper, often used for non-business expenses, such as a child’s education. It’s less common to find them used to fund major business expansions or to hire new employees … [I]t’s also because most microbusinesses aren’t looking to take on more workers. The vast majority have only one paid employee: the owner.

I agree with this opinion, particularly because I think that the current obsession with the ‘globalizationally’ sexy structure of microfinance tends to ignore the need for the creation of domestic consumption demand in struggling nations to jumpstart development.

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Call for Papers and Special Issue on Entrepreneurship

Inderscience news posted on two things:

Call for papers: Realigning the Innovation-Entrepreneurship Interface

While this blend between entrepreneurship and innovation is achievable at both the corporate enterprise and the small-to-medium enterprise (SME) levels, there are some indications that the cocktail has become poisonous and too dangerous for consumption. This is largely based on the recent practices of enterprises’ stifling innovation at the altar of entrepreneurship and vice versa. The question now is whether the definition of entrepreneurship can be complete without reference to innovation and vice versa.

Special Issue: Entrepreneurship and Moral Progress

One of the topics in this issue is: “Synergising entrepreneurship, incubated business and socioeconomic upliftment in rural India.”

New Service Marketplace for SMEs from creators of LimeWire

LimeExchange is a new service marketplace for SMEs in India that will let them bid for free on service contracts from providers. Lime Spot, the company that also started LimeWire, hopes to leverage its global platform to allow SMEs in India compete for contracts all over the world. writes that

LimeExchange provides buyers with tools to negotiate pricing; award projects; escrow payments; monitor, review, and approve work; and communicate with service providers usingLimeExchange e-mail, instant messaging, message boards.

The service marketplace is huge and apart from incumbents like RentACoder, startups like oDesk has made strong inroads (60K Jobs, 53K providers around the world). also raised concerns that a late entry with a traditional pricing, it is unsure what niche the service hopes to provide.

Google SMEs: Internet search company to provide capital to small and medium size businesses in India

One of the ongoing issues that appears to be hindering development in countries like India is the lack of equity based funding for small and medium sized businesses. These entities, which usually are too large to be benefited from a microloan but too small to have the necessary financials to secure corporate debt or private equity backing, are often left to fend on their own.

No more, as along with two other foundations has announced a fund to help finance such ventures.

From by, Soros Economic Development Fund (SEDF) and Omidyar Network have announced a $17 million Small to Medium Enterprise Investment Company for India to create job opportunities and spur greater economic participation for a larger segment of the population.

This joint Investment Company will provide capital to small and medium businesses in undeserved markets.

SMEs are considered by many as the critical component for poverty alleviation, job creation and the eventual development of a nation as their scalable nature gives them the chance to become a major Fortune 500 player down the road.