Functional Skilling for Micro and Small Enterprises

Medium, Small and Micro Enterprises (MSMEs) have long since been touted to be an impetus to India’s growing economy. They currently contribute 29% of the total GDP, which the government intends to expand to 50% by 2024. With schemes such as Make in India, MUDRA, ASPIRE, CLCSS, CGTSME, so on and so forth, the government is undoubtedly pushing for creation of an entrepreneurial environment in the country. However, despite these efforts, there continue to remain certain gaps in the ecosystem for competitiveness and sustainability of MSMEs. Some of these include lack of, access to finance, awareness about government schemes, digitization, and functional skilling. In this blog, we particularly look at functional skilling, and its importance for the survivability of an enterprise.

It is then pertinent to understand what functional skills entail? Functional skills are all kinds of managerial and technical skills required to smoothly run and administer an enterprise. In the present scenario, they primarily comprise of business and financial management competencies, digital literacy and, communication skills. According to a report of the ILO, one of the instrumental factors that can improve survivability and performances of MSMEs, especially micro and small scale organizations, is enhanced management competency of entrepreneurs. The report further emphasizes the significance of imparting affordable management training and other business development services to Micro and Small Enterprises (MSEs) in particular, since these are the biggest employment creators in emerging economies. In India, the Micro sector alone accounts for more than 99% of total number of estimated MSMEs. Yet, MSEs are strikingly afflicted with lack of easy access to credit and skilling. They often resort to informal sources of lending owing to lack of awareness, extensive documentation required by banks, high processing time and interest rate, collateral, and insufficient loan size. A majority of these problems are entrenched in lack of education, training and skillset mismatch, high opportunity cost of training and ,gender bias. Thus, any sustainable design solution developed to impart functional training to MSEs, must also account for the abovementioned problems else, all endeavours will fail to make these enterprises viable.

For instance, the Mann Deshi Foundation offers loans to rural women without any collateral, and additionally helps women entrepreneurs build business skills and facilitates them with market access. The Goat Trust not only provides handholding support to goat farming communities through technology, infrastructure and, market linkages, but also offers training on certain functional skills such as report writing, communication, micro leasing concepts etc. As a matter of fact, in 2016, niiti consulting conducted trainings in business planning and operations management for small tea farmers in Guwahati, with follow-up sessions in 2018. Bangalore based Ujjvan Financial Services along with Pranaam Foundation, runs the Diksha Financial Literacy Program which aims to ensure financial competency and inclusion of microfinance customers across 18 states in India. Having said this, there still lies a massive potential to tap into the MSE environment. With a rural population of 833 million, and only 6% of these employed in MSMEs ,organizations must think of innovative ways to exploit this underutilized rural labour and ramp up the process of building sustainable and functionally competent enterprises.

What is the potential approach for organizations to address gaps mentioned thus far?
• Identification
Using primary and secondary data, firms can identify highly concentrated clusters of micro and small enterprises.
• Awareness
Organizations can construct training modules on technical, vocational and, financial skills in collaboration with relevant firms. They can also educate employees of NBFCs and fintech firms about their own products and educate MSEs about digital finance and management. Organizations must take heed of the unskilled and uneducated nature of the target segments while familiarizing populations with digital finance. For example, in Sangrur- Punjab, Sa-Dhan, as part of its pilot programme to increase financial inclusion, used Makka Chawal, a card and password game which familiarized the audience with components of digital finance. Awareness also constitutes awareness and competence to apply to government schemes that MSEs are eligible for. In the United States, the U.S. Small Business Administration offers free online training classes that cover how to apply for government contracts and how to apply for a small business loan. Similar trainings must be imparted to Indian MSEs, if not by the government, then by other organizations.
• Finance
Organizations can reach out to smaller fintech firms and NBFCs that can through partnerships or fee based programs, help informal lenders become formal.

These are only certain ways in which organizations can approach functional training. Private, public and ,not for profit organizations can innovate other techniques to instigate business ideas and incubate small groups with skills in communication and business development. If the vision is to increase the number of entrepreneurial ventures, efforts to build business and financial management competency, and, digital literacy within MSMEs must be commensurate with this vision. Not only will these skills make organizations more efficient, but also more profitable and sustainable in the longer run.