Bridging the Gap - G Plus

Friday, 24 January 2020



Bridging the Gap

Debashish Goswami | May 01, 2019 13:25 hrs

The states in the northeast (NE) of India have always been considered step-children by mainland India. Even in 2019, commercial ventures would rather concentrate in the mainland metropolises despite the hyper-saturated markets and competition than the virgin territories in northeast India. A simple survey of the job boards across the top employment portals showcase the actual investment of any commercial venture in this location. Barely a handful of AVP’s and senior managers, manage operations, sales and reluctant regional officers manage sluggish outposts. The only industries which seek benefit from the region are insurance, banks and the odd dotcom start-up or two. The primary focus of business is construction and real estate with secondary sectors like retail outlets, food franchises and some hospitality and a new emerging trend of medical outreach. We have hardly any industrial focus and barely move the needle on manufacturing, logistics or any of the traditional established sectors which earn larger revenues. 

How then do we grow forward?

The main engine for growth of any given location in the world is its people and their entrepreneurship. People who earn money push communities and grow economies. In the NE, entrepreneurship is severely restricted by location and mainly by ignorance; ignorance of every hue and variety, from negative images of business feasibility in areas well known for militant civil strife to lack of knowledge of actual market demographics. Our political masters don’t contribute much and would rather fight over existing scraps than increasing the size of the pie. 

In this climate, one of the most important aspects of encouraging entrepreneurs is to create visible access between entrepreneurs and funding bodies like banks, essentially bridging the “gap” between the banks (loan products & services offered by the banks/ other funding bodies) and the “expectation” of the entrepreneurs from said bodies/banks. In the regional context, banks have a huge role in educating 1st and 2nd generation entrepreneurs as well as proactively providing need-based finance across the region. In a region where SBI has a pervasive presence with its established lack of customer-focus and unhelpful attitude towards entrepreneurs, other banks need to consider the available customer base which can be converted into sizeable potential productive assets. 

Even basic knowledge about current accounts and the significance of maintaining the same for a business has massive ramifications for most micro-entrepreneurs/operators but lack of financial literacy and unhelpful bank employees create minor bottlenecks which devolve into massive losses for the system as a whole. A small example would be the mistakenly held belief by small/micro-business owners about the large minimum balances required for operating business accounts. This results in these micro-entrepreneurs maintaining only savings account in their name, the transactions of which are not reckoned while appraising the financial needs of the applicant as savings account is a household account. During an earlier project, while conducting detailed surveys across small towns/cities of India, most micro-entrepreneurs used to carry out initial business based on personal capital or upon investment by friends and family or worse, at usurious rates by low-level money-lenders. Most small business owners did not feel the need for starting a banking relationship other than having a basic savings account.

Most micro enterprises are of the belief that they need to approach a bank only when they are in need of funds. This is fundamentally wrong. If a small business owner or micro-enterprise owner approaches a bank, say after 3 years of starting a business, they will necessarily have to prove and establish before the bank their business status with all documentary evidence for the last three years which may include balance sheet, profit & loss account statements, tax returns etc. The entrepreneur at that stage feels harassed and complains that bank formalities are very cumbersome and they drift away looking for funds elsewhere. If the banking relationship had been on record for these 3 years, the formalities would have been cut down to a minimum as most of the vital information would already be on record. This then would provide the bank the necessary information about the business growth as well as provide confidence/security from regulatory accountability in taking credit decisions to extending finance with a minimum of formalities.

Usually, most banks would do cursory outreach programmes and rather concentrate on growing larger businesses as it’s commercially more viable. It’s usually not in their list of priorities – hence, the mandate to seek out such financial information and convert it into useful knowledge is our responsibility. We, the local business owners/micro-entrepreneurs, need to establish and create such access. We need to “bridge the gap” which benefits everyone. 

The nuts and bolts of an economy are exactly that – small functionaries which hold up the towering edifices of both community and the economy. The NE of India needs a rapid outreach programme for its people to take advantage of what is available and to build from such resources. In this equation, information which can be moulded into knowledge is always power to those who can acquire such information. As a people, we can either whine about how we have no “growth” in our area or we can do something about it. 

(The author was a senior advisor to the government of India and served under various ministries on diverse digital initiatives in the past 15 years)

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