Community Based Support System For Micro Enterprise Development

Micro-Enterprise Consultant Project

Kudumbashree – National Resource Organization National Rural Livelihood Mission

Micro Enterprise Consultants

Enterprises of first-generation, rural entrepreneurs supported under NRLM, need appropriate and effective business management support

Wide range of services needed:

• Opportunity identification• Entrepreneur orientation and training• Business planning• Credit linkages• Enterprise setting-up and market linkages• Performance tracking and advisory• Growth diagnostics and problem solving

Experiences from Kerala suggests creation of the support system within the SHG-Federation structure, with adequately trained local women and men

Self Employment - Context

Micro Enterprise Consultants (MEC) are drawn from the community, trained and placed locally to provide handholding support to existing and potential entrepreneurs on a chargeable basis.

MEC Firms are registered partnership firms offering business consulting services, leveraging the different skill sets of its members in the interest of providing quality services to targeted clients.

Micro Enterprise Consultants

Start Date State No. of Districts No. of MECs No. of MEC Groups

Jan 2013 Bihar 2 93 11

Sep 2013 Jharkhand 3 110 8

Aug 2014 Karnataka 3 125 10

Aug 2014 Maharashtra 3 107 8

May 2015 Gujarat 3 104 9

Nov 2015 Rajasthan 3 63 8

17 602 52

Coverage of the MEC Project

Bihar

Gaya

Muzaffarpur

Karnataka

Gadag

Hassan

Mysore

Maharashtra

Osmanabad

Ratnagiri

Wardha

Gujarat

Narmada

Patan

Tapi

Rajasthan

Bhilwara

Kota

Udaipur

Jharkhand

Pakur

Ranchi

WestSinghbhum

• Individual MECs pool in their capabilities as a consulting enterprise to offer wide range of services to SHG entrepreneurs

Micro Enterprise Consultant Firms

• IT-enabled real-time information system for micro-enterprise accounting and performance tracking; with potential to grow into a ME ERP system

Performance Tracking System

• The SHG-Federation network built by NRLM owns the enterprise development process in the village; uses the MEC Group as a technical support agency

Community Institutions

Driving Enterprise Development

• Viable and sustainable enterprises of rural entrepreneurs, in line with market conditions

Sustainable Rural Enterprises

4 Pillars of the MEC Project

Economic empowerment has been one of the core objectives of Kudumbashree

Emergence of Idea (1/2)

Activity groups of entrepreneurs formed.

– 55,000 enterprises; 1.5 lakh families

– Extensive Training and Financial support, Value Chain Intervention, Market Development Support

Besides, the usual financial, technical, and market related problems –regular and continuous handholding support was identified as one of the limitations

– Poor entrepreneurs left to fend for themselves

– No social or community support for counseling

MEC concept started in 2004

– Men and women from families of Kudumbashree members

Emergence of Idea (2/2)

Trained to be business consultants and provide services for new and existing entrepreneurs

Institutional tie ups for training & hand-holding

– EDI, Tradecraft UK, CREAM, TEAM

From Individual MEC to MEC Groups in 2010

Financial, technical and facilitation support from Kudumbashree Mission

Implementation Process

MEC Training and

Benchmarking

Identification and Selection of

MECs

Training in Entrepreneurship

Development

CREAM Training

TEAM Training

ME Benchmarking

MEC Placement

Zoning and MEC

Grouping

Market Assessment

Demand Assessment

MEC Group Formalisation and

Registration

Accreditation of MEC groups by

SRLM

MEC Group as an Agency of

CBO

MECs as Service Providers to CBOs, through Contract

Setting Service Quality Standards

and Norms

Building MEC and CBO Capabilities to work with

each other

Feasibility and Design of ME

Understand Market Demand, Gaps and Available Resources

Identify Feasible Businesses and Develop

Business Design

Mobilisation and Training of Entrepreneurs

Motivation, Business Orientation and Skill Training for Potential

Entrepreneurs

Diagnostics, Gap Analysis and Training of Existing

Entrepreneurs

Capacity Building of CBO

Formation and Operation of

ME

Business Plan for new

MEs

Business Growth Plan for existing

ME

Establishing Avenues for Backward and Forward

Linkages

Book Keeping for

ME

Performance Tracking and

Support

Regular Monitoring of an Enterprise using Real-

time Data

Calculation of Financial Statements

and Comparison

Identifying Issues and Plugging the

Gaps

PTS as a tool for Monitoring MEC

Group Performance

1

2

3

4

5

6

7

Implementation Phases

Entrepreneur

National Resource

Organization

State Rural Livelihood

Mission

RSETI, Banks and Line Depts.

CLF, VO and SHGs

Mentor MECs

Micro Enterprise

Consultants

Stakeholders Involved

Capacity Building of MEC (1/2)

Modules developed by Kudumbashree NRO; delivered by trainers from Kerala

Training in Enterprise Development (TED)

• Soft-skills and team building• Entrepreneurship Orientation• Understanding markets, financial institutions

TED for CREAM

Enterprise, Entrepreneurship and Entrepreneur, Business Accounting, Principles of Management, etc.

TED 3

What is Entrepreneurship, Competencies of an entrepreneur, Principles of Management, Business Accounting

TED 1

What is an enterprise, types of enterprises, business framework, opportunity identification

TED 2

Who is an entrepreneur, characteristics of an entrepreneur, business profitability and strategy, risk taking behaviour

TED 5

Familiarise with RSETI and Banks

TED 4

Effective Business Communication, Understanding Market

TED Modules

Capacity Building of MEC (2/2)

CREAM – Certificate in Rural Enterprise Administration and Management

• Compressed MBA (35 days over 6 months) with clear focus on small rural enterprises

• Training of Trainer approach to expand coverage in a cost-effective manner

TEAM – Training in Rural Enterprise Administration and Management

• Application oriented (22 days over 3 months)

• Module developed by CREAM faculty; Delivered by CREAM trained trainer MEC

• Market and demand assessment exercises for hands-on practice of concepts

• Exposure Visits for ‘seeing and learning’

1. Overview and Business Finance

What is a business, its objectives, its functions, how to look at its viability etc. Math prep covers proportions, fractions, percentages etc.

4. Financial Management

Understanding profit and loss, Cash management, Initial and Working capital management, Balance sheet, Breakeven analysis, etc.

2. Sales and Marketing

Product / service attribute and customer segments, Pricing, marketing communication, Credit policies, Sales and distribution etc.

3. Operations Management

Basic flows of operations, Inventory, Working capital management, Quality, Production planning, etc.

6. How to teach TEAM

Walkthrough of the TEAM material, teaching process & aids, teaching manual, hints/tips on teaching, etc.

5. Strategy

Steps for creating a Business plan for a new business, Strategic framework for diagnosing problems in a business, collecting, etc.

CREAM Modules

2. Business overview What is business, risk & reward, Objectives, Steps for starting a business, etc.

3. Understanding customersWho are customers, Their needs & segments, Product* design and marketing, etc.

5. Pricing productsWhat is pricing, two methods of pricing, Steps for setting prices, etc.

4. Making productsBasic flows of operations, Scheduling, Quality, Inventory, etc.

10. Starting a businessBusiness plan template, steps to create a business plan

6. Selling productsEffective sales visit, long-term customer relationship, giving credit and discounts, etc.

12. How to consultWhat is consulting, clients and their needs, building trust, services to offer, pricing etc.

11. Improving a businessDiagnosing problems, identifying solutions, implementing them etc.

*All modules discuss services as well

1. Math prep Why we teach math, percentages, averages, and simple equations

7. Working capital mgmtWhat is working capital (WC), WC needs of a business, Credit policies, managing WC, etc.

8. Profits & profitabilityUnderstanding revenues, costs, profits, and profitability, Profit & Loss statement, etc.

9. Other fin. conceptsHow cash and profits are different, Cashflow, Balance sheet, break-even, etc.

TEAM Modules

Performance Tracking System (PTS) is a method of systematic collection and analysis of business information, to understand and measure business performance

It involves

• Micro-Enterprise Consultants (MEC) ensuring that the entrepreneur maintains basic books of accounts for the business

• MEC collecting the transaction information for the business, and generating financial statements

• The financials statements allowing for comparison with

– same enterprise over a period of time

– similar businesses in the same marketplace

Micro Enterprise - Performance Tracking System

Components of PTS

• This captures the basic information of an enterprise at the onset of MEC intervention

Enterprise Registration

• MEC trains the entrepreneur to maintain daily record of transactions

Maintenance of Books of Accounts

• MEC consolidates the daily records kept by the entrepreneur to generate a trial balance

Intermediary Calculations

• MEC uses the trial balance to compute Cash Flow statement, Profit and Loss statement and Balance Sheet of the enterprise

Financial Statements as Outputs

• Using financial statements, the MEC compares the performance of the enterprise over time and with other enterprises in the same time period

Comparative Analysis

• Based on the analysis, MEC offers advice to the entrepreneur for improving business performanceAdvisory Services

Records Business Information Frequency Maintained

One-time Format

First-time information about business such as name, location, type, capital invested etc.

Start of Intervention

MEC

Capital Register

Periodic changes in what business owns (assets) and what it owes others (liabilities)

Occasionally MEC

Day-bookDaily transactions of business including income and expenditure

Daily Entrepreneur

Stock Register

Daily changes in stock quantity and value Daily Entrepreneur

PTS Sheet Aggregate value of transactions for a period of time Periodically MEC

FinancialStatements

Generate Profit and Loss statement, Cash Flow statement and Balance Sheet.Periodic Information related to profit/loss, cash position and current financial state of the business

Periodically MEC

Consultation Slip

Note to entrepreneur to report business performance and advise suitable course corrections

Periodically MEC

Process of Record Keeping

Daybook for February 2016

Sample of Paper-Based PTS

Saraswatidas Kukutpalan (Poultry), Khadki GP, Ashti, WardhaDaybook Maintained by Entrepreneur

PTS Sheet

Sample of Paper-Based PTS

Saraswatidas Kukutpalan (Poultry), Khadki GP, Ashti, WardhaPTS Sheet Maintained by MEC

Profit and Loss Statement

Sample of Paper-Based PTS

Saraswatidas Kukutpalan (Poultry), Khadki GP, Ashti, WardhaFinancial Statement developed by MEC

Cash-flow StatementSample of Paper-Based PTS

Balance Sheet

Saraswatidas Kukutpalan (Poultry), Khadki GP, Ashti, WardhaFinancial Statement developed by MEC

Consultation Report

Sample of Paper-Based PTS

Saraswatidas Kukutpalan (Poultry), Khadki GP, Ashti, WardhaConsultation Report by MEC

“The MEC suggested that I should maintain accounts of my business earnings and costs every day. Since I am not very comfortable with numbers, MEC suggested that I maintainaccounts by drawing symbols instead of numbers.”

Suru Tiu, Snack Stall Owner, Dopai Gram Panchayat, Khuntpani Block, West SinghbhumDistrict, Jharkhand

Voices from the Field

Mobile App for PTS

PTS Mobile application to be used by all MECs on smartphones

Entrepreneurs will continue to maintain manual day-books

Some functions of the application

• Entrepreneur / MEC to enter day-book data through smartphone

• MEC to get access to financial statements of the ME based on the entered records

PTS App currently being rolled out in Jharkhand

Aadhar ID used as Identification for each

entrepreneur

One-time PTS (1/2)

One-time PTS (2/2)

Regular PTS

Day-book Capital Register

Stock Register

Profit and Loss Account

Cash Flow Statement

Emerging Results

State No. of Enterprises Supported

Bihar 1768

Jharkhand 1703

Karnataka 1434

Maharashtra 1454

Gujarat In Progress

Rajasthan 130

Profile of Enterprises Supported by MEC Firms (1/3)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bihar Jharkhand Karnataka Maharashtra Rajasthan

Mixed

Trading

Service

Production

Business Type Wise

Profile of Enterprises Supported by MEC Firms (2/3)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bihar Jharkhand Karnataka Maharashtra Rajasthan

More than Rs. 50,000

Rs. 10000 - Rs. 50000

Less than Rs. 10000

Investment Wise

Profile of Enterprises Supported by MEC Firms (3/3)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bihar Jharkhand Karnataka Maharashtra Rajasthan

Other Sources

Bank Loan

SHG Loan

Own Contribution

Capital Source Wise

Case Studies (1/4)

Mojammel Hoque (right),Micro-Enterprise Consultant(MEC) in Pakur District,Jharkhand generates afinancial statement from thenewly launched PerformanceTracking System (PTS)mobile application for SHGentrepreneur Jinnath Praveen(centre) who runs a kiranastore in Pakur.

Mentor MEC from Kerala, Bindhu Udayan(left) monitors the process.

Case Studies (2/4)

“Our MEC group MECMA,formed by 13 MECs in 2013,has supported 245 enterprisestill date. Working in a grouphelps. Individual MEC cannotpossess all knowledge andskills. In a group, every MECbrings their skill sets and therisk of making mistakes isreduced.”

Deepak Kumar is aMicro-Enterprise Consultantin Muzzafarpur District, Biharsince 2013

Case Studies (3/4)

“In my community, womenaren’t educated or literate. Asa MEC, I derive satisfactionfrom the happiness ofthe SHG women whom Ihave supported in startingenterprises.”Shimla Banra is a Micro-Enterprise Consultant inWest Singhbhum District,Jharkhand since 2013. She isalso MEC trainer involved inthe MEC project in Ra jasthan

Case Studies (4/4)

“When the MEC, ShabanaBegum came to our SHG meeting, I was looking for livelihood options.

The MEC suggested I start avegetable shop in the villagesince there wasn’t one.

I took a loan of Rs 5,000 from my SHG to start my own vegetable shop. I earn an average of Rs. 200 a day.”

Mehrun NisaAmrit Kua Gram PanchayatSangod BlockKota DistrictRajasthan

Initiatives (1/2)

Local markets provide first time woman entrepreneurs, visible, accessible marketsfor their products. It brings markets closer to the villages - saves time and effort for the buyers

The MEC Group identifies locations to hold markets, liaised with administrationfor resources and approval, motivated SHG entrepreneurs to participate andconducted promotion activities topopularise the markets

Local markets in Jharkhand, Karnataka and Maharashtra

Initiatives (2/2)In Maharashtra, 80 SHG entrepreneurs and 150 non-SHG entrepreneurs participate in 10 local marketsevery week. Local markets are being conducted forthe past 7 months. The total revenue generated bySHG entrepreneurs is approximately Rs. 16 lakhs ason May 2016.

In Osmanabad, MECs also organized women goat farmers to set up fair trade goat market.

9 local markets have been initiated in Karnatakasince February 2015. 139 entrepreneurs participateof which 85 are first time entrepreneurs. Revenuegenerated during the past four months isapproximately Rs. 11. 94 lakhs.

In Jharkhand, 4 local markets have been revived,3 in West Singhbhum and 1 in Pakur District.380 SHG entrepreneurs participate regularly.Approximately Rs. 12 lakhs of revenue has beengenerated since November 2015.

Sustainability / AdaptabilityFeatures

Key Features

MEC services as a business

– MEC are not paid fixed remuneration

– They earn income from providing services

– MECs work together as a partnership firm

– Provide services to the community institution, SRLM and banks

Micro Enterprise Performance Tracking System

– Enterprise accounting and financial performance tracking mechanism

– Introduced as paper-based system; Android App rolled out in Jharkhand now

Challenges

• Ability of SRLM systems to measure and value outputs of MEC

o By design, MEC cannot be a cadre on fixed payment mode. Confidence of entrepreneur in MEC comes from shared understanding of business risks

o Other cadre in NRLM (CRP, Book-keeper etc.) are on fixed payment terms. Issues with comparison between cadre

• Ability of SRLM to devise norms for functioning of such groups

o MEC Groups (partnership firms) as service provider enterprises

o Designing and operationalizing contracts between MEC Groups and SHG Federations

Evolution of the MEC Project

MEC Projects in Bihar and Jharkhand were leaps of faith

• Concept unproven outside Kerala

• Uncertainty with the market conditions, especially in

Jharkhand

• Uncertainty about availability of suitable MEC

• Lack of experience of Kudumbashree-NRO team

Experience of 3 years testifies to positive (remarkable) results

Project design and execution evolves and improves

Learning by Doing

Time taken for activities reduce substantially, between Bihar-Jharkhand and recent pilots

ActivityDuration in Bihar /

JharkhandDuration in Gujarat

/ Rajasthan

Identification and Training Months 1 - 14 Months 1 - 6

Integration of MEC with CBO System

Month 15 onwards Month 1 onwards

Mobilisation and Training of Entrepreneurs

Month 15 onwards Month 6 onwards

Formation and Operation of Enterprises

Month 15 onwards Month 6 onwards

Performance Tracking and Support Month 20 onwards Month 6 onwards

Doing as Learning

• MEC Master Trainers from Bihar and Jharkhand

o Training MEC in Gujarat and Rajasthan, in lieu of trainers from Kerala

o First pool of Master Trainers for SVEP (Hindi-speaking States)

• Business Management Training for Rajasthan MEC Project (March – July 2016) by Master Trainers

• Kudumbashree-NRO is developing business skill training syllabus, pedagogy and materials for SVEP

Scaling up Process

• No need for pilots

o Confidence to scale-up in a universal manner

o SVEP design, substantially based on the experiences of MEC Project pilots

• Business skill development programme

o Training curriculum relevant and appropriate for rural, poor entrepreneurs

o Pool of capable business trainers

o Hindi, Marathi, Kannada, and Gujarati languages

• PTS design and software

o First-of-its-kind Micro Enterprise accounting and near-ERP application

Costs Involved – Mission, Community, and Individual Costs

Financial benefits in five years (Present Value)

• Incremental Income to new enterprises: Rs.2,35,081

• Increase in income for existing units: Rs.80,020

• Weighted average benefit per family: Rs.1,96,316

150 MECs trained, 1 MEC supporting 320 MEs across 5 years

Total cost in supporting one enterprise: Rs.20,369– MEC Cost per Enterprise – Rs. 938

– Skill Building – Rs.11,617; Professional Support – Rs.7,814

Benefit : Cost ratio is 9.6:1

Culture of entrepreneurship and innovation is being encouraged

Accurate estimation of credit worthiness due to timely monitoring and support

Expected creation of employment and local economic prosperity through increased economic activities

Increased chances of success in the micro enterprise areas and there by reduction in business mortality

Benefit to Local Economy

Better income prospect in local area will reduce distress migration

Local economic development by catering to local needs

Key Learning for other SRLMs

Capacity building of MECs, with handholding support by the Mentor MECs

What worked and why?

MECs engagement with CBO structure, and access to SHG finance

Systematic maintenance of enterprise daybook, and generating financial statements

Leveraging on existing skills of potential entrepreneurs, and standardisation of steps for ME formation and support

MEC selection process - not geographically efficient

What did not work and why?

MEC program yet to be mainstreamed to CBO institutional structure

Inadequate clarity amongst MECs on their scope of work, because of absence of MEC group business plans

Limited orientation of district and block team of SRLM to MEC program

Lack of access to working capital for MEC group business

Who has benefitted and how?

Handholding support to entrepreneurs, with accurate financial information about the business and advisory services.

Technical agency of the CLF and accredited wing of the SRLM –providing business development services

Potential to be part of RSETIs trainee identification & post-training follow-up support team

With Performance Tracking System, banks have financial information of the business; improved credit-worthiness of the enterprise.

• Cannot push businesses like projects

– Market circumstances need to be understood and responded to

– Entrepreneur has to be at the centre; targets should be her’s, not the project manager’s

Key Lessons

• Cannot build ‘Rome’ in a day

– Doing-learning-growing approach needed

– Take-off will happen slowly; growth beyond the threshold level will be exponential

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