Making Market Work for MSMEs-Cluster Centric Approach Suitable for Microfinance/Micro Enterprises

Globally, Poverty alleviation and inclusive growth are crucial tenets in the strategy of most economies. Be it unorganised microfinance to Micro Enterprises (Mes) to Small and Medium Enterprises (SMEs) the inclusive growth agenda form integral part of their strategy. The unorganised and small size nature coupled with inability to leverage on inherent strength impacts the growth of enterprise. Even if an entrepreneur knows that these are necessary to improve their competitiveness and performance however it does not venture into it for the fear of unknown. As one grows and particularly in the present ever changing business atmosphere one needs to handle the complexities by sourcing the right services in right doses at right time. Access to Finance and Business Development Services is very crucial. Further clustering is one widespread acceptable solution for such Micro and Small Enterprises (MSEs).

Institutions supporting ME development have largely targeted their attention at access to financial services. Slowly they have realised that non-financial aspects particularly the access to strategic services also deserve attention. This is an answer for shift from comparative to competitive turf.

This paper presents the experience of SIDBI in attending to poverty alleviation through enterprise development. It adopted 19 clusters across the country for BDS market development through intensive intervention. During the process of implementation, it could realise that it equally benefits the enterprises at the bottom of pyramid. While the project called MSME Financing and Development Project (MSMEFDP) was MSME centric however at many cluster level it was largely ME oriented. The story from field level involving examples on theme basis from Kanpur and Shantiniketan (Leather), Ganjam (cashew), Alapuzha (coir) etc. (targeted more at micro enterprises) are illustrative models . The learning's amply indicated their potential for being replicated at the bottom of pyramid, i.e., in MF/ ME domain.

MSMEFDP adopted a robust monitoring methodology which included baseline and impact evaluation of indicators aimed at tracking the achievements from the supply side i.e. BDS. This approach is a drift from traditional transaction or subsidy led support and lays thrust on participation&ownership and thus enabling market to function on its own. The bouquet of offerings which was customised as per the cluster profile included a wide range of offerings to include awareness, handholding/ mentoring, training. The thrust was on developing local expertise by strengthening the existing BDS or bringing in new ones, where ever felt essential by the stakeholders. The learning, evolution and consolidation phases involved several tests and filter mechanism thus evolving customised best practices.

SIDBI's experience in strategising and setting up an example of 'Making Market Work for MSMEs' has worked. It has won appreciation from many quarters including few international awards and recognitions.

The models depicts inherent resilience and sustainability traits which can be tried out for the entire MSME value chain - right from bottom of pyramid to the top.