Need of the hour is knowledge and good human resource
Originally posted on the Economic Times’ India Emerging page
Harold Rosen founded the World Bank group’s SME department and led much of the early work in SMEs and microfinance by the International Finance Corporation . In 2008, he established the Grassroots Business Fund , an independent organisation with support from IFC; FMO; OeEB: the Development Bank of Austria; Omidyar Network; and the Netherlands government.
In the last four years, GBF has invested a total of $7 million across 29 businesses globally that provide sustainable economic opportunities to people at the base of the economic pyramid as independent entrepreneurs or as consumers of affordable goods and services. In this exclusive piece written for The Economic Times , he explains the need for capacity building to strengthen Indian social businesses.
WHY SMEs MATTER
With a GDP increasing at an average yearly rate of 7% and a current workforce numbering in the hundreds of millions, India has proved itself an important player on the international economic stage. A driving force within India’s economy is the power of small and medium-sized enterprises (SMEs), many of which also operate with a social mission in mind. SMEs are important drivers of economic growth and innovation in developing countries, accounting for over 30% of employment and generating 16% of aggregate GDP in countries such as India.
These hybrid enterprises, also known as “high impact” or “social” businesses, are founded and managed with both financial expectations as well as missions to provide sustainable economic opportunities and basic affordable services to people at the base of the pyramid. Finding compatible investors for social businesses is one concern. However, once investments are disbursed, one cannot overlook the necessary next steps following for the business to succeed.
A key challenge faced by social businesses today, in India and abroad, is access to valuable human capital and knowledge. This is especially true of social businesses in start-up or early stages of growth, as they are unable to train and pay middle and top management. One such high impact business in India is Servals Automation, founded by managing director P Mukundan in 2002, the company provides energy-efficient and affordable burners and stoves to consumers at the bottom of the economic pyramid.
After the company began to show positive signs of success, chief operating officer Vijaya Ganapathi was hired to help increase the scaling. With increased skilled management and funding from organisations such as Aavishkaar Ventures , ERM-UK and the Grassroots Business Fund, Servals’ sales have grown at a rate of over 700% in the past five years.
Providing further training to these existing entrepreneurs, especially by local consultants with targeted expertise, can help address some of the management challenges faced by social businesses today, as well as prepare them for larger investments in the future. As these social businesses, and in turn, India’s economy, continue to grow in the future, they will be able to reach and economically empower the lives of millions of people in need.