Kuldip Maity

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair...

Charles Dickens' words, written in 1859, keep getting quoted even during moments of despair. However, right now it’s difficult to subscribe to the positives in the quote. With the coronavirus pandemic threatening to scythe through the world's population, nation after nation is trying to fight it with all that they have.

The containment strategy's prime weapon is the isolation of people—from the family and household level to entire communities and cities with "lock-downs". Every nation is trying to minimise human contacts between citizens, and one is at times reminded of the famous scenes from the Hollywood epic Ben Hur, based on Lew Wallace's book, considered the most influential Christian novel.

The story, set in Christ's time, shows how Ben Hur's mother and sister are afflicted by leprosy, and the attitude of people towards leprosy. Hounded and thrown out of cities, they created their own sad and at times violent "isolation wards" in caves and jungles shunned by people.

The situation for us is not this bad. However, it may not be much better as well. The isolation route, though important, has already started to hurt the economy. And this impact will soon be felt in the rural and rurban sector the hardest. According to the 2011 Census, India then had a workforce of 47.41 crore of which 33.69 crore were rural. Of the total rural workforce 35.3 per cent were casual. Which implies that if economic activity comes to a grinding halt, a huge population will be without any source of earning for a long time.

Given the fact that working in agriculture and related areas requires an intense degree of physical interaction— something the government is trying to prevent—their earnings will be jeopardised as of course by quantum, this sector will be the hardest hit. However, these would be the case for many others across India. These are early days and a guesstimate will not be proper now. But one thing is for sure: the coming days will be unprecedentedly tough — a time of hardship that our generation hasn’t experienced. One hopes that this anxiety is belied by the events in the coming days.

Stay safe and united in this crisis. Let’s fight it out together and abide by the advice put out by the government from time to time.

The business ecosystem in India has been going through major changes brought about by digitalization. With a mobile phone in every second hand, no business can ignore the way digital technology has become a major driver in business decision-making.As we start using mature technologies for business, the skill requirements in the organization get more diverse and may not always be found in-house.

If we assume that outsourcing core business competencies is not the best idea, and an organization is left with no other option but to upgrade skills, the big question that stares at us is whether we should train our existing team or hire pre-skilled resources.

The decision is never easy as there are many other aspects that we need to look at. An old associate is already in sync with the culture of the organization and has gone through the test of establishing credibility. Budget permitting, training seems the obvious path to making the associate conversant with technological advances. It is much easier to relate the technology training to the core competency.

But retrained associates have to go through a learning curve and take time to deliver at peak performance, while a new recruit with the required skills might be able to implement the technology faster (though some training might also be needed here on the core competency and culture of the organization). It also needs to be borne in mind that not all existing associates can be trained. Unlearning is the toughest part of any learning process and sometimes is the biggest constraint. For example, an associate with a feature phone might not be able to pick up the operations of a smartphone application.

To sum it up, while there is no ready trade-off between training and fresh recruit, there is one aspect that can never be denied. Change is the only constant part of any business and we must embrace it readily.

For a long time now, the issue of empowerment has been at the heart of the strategy in the fight against poverty. The underprivileged live at the margin, eking out their daily sustenance. As has been repeatedly pointed out by various researches, including the one by Prof Abhijit Banerjee, who won his Nobel for his work in the field of issues related to poverty, the struggle at this level is to generate a surplus.

The ability to generate a surplus marks the difference between the one who is caught in the vicious cycle of poverty from the one who has moved on into the prosperity cycle. How does one generate a surplus? The simple logic is that she who has something left after taking care of daily needs—saving, in other words--is in a position to generate a surplus. The crux of the issue, therefore, lies in the answer to the question as to how this can be achieved by someone who barely makes her daily sustenance.

The only way to make the poor generate a surplus – to produce enough to create a marketable surplus – is to provide access to capital. The logic that has been missed for a very long time is the self-sustaining nature of poverty. This has been the major reason why poverty dogs the Indian economy.

A way out of the issue was sought through the subsidy route. It was thought that if the basic consumption needs of the poor are subsidised, they would probably be able to generate the needed surplus to free themselves from the grip of poverty. But the outcome has not been measurably satisfactory.

The other innovative route was seen in microloans through joint liability groups. I have discussed the merits of this route many a time in my previous blogs. But as it bears repetition, I will just add that this route creates a joint responsibility for creating a surplus. The members of the group are jointly responsible for paying the loan back and a failure by one will not be benignly tolerated by others as the onus, then, will devolve on the group.

It's now an accepted fact that this route--by creating access to funds and creating awareness about the productive deployment of funds--is proving to be more fruitful than others in fighting poverty. At the forefront, as an instrument of this fight, is the microfinance industry. Compared with other financial channels, this is a relatively new industry that saw a structured birth in India after 2011. Customer addition was at 16 per cent CAGR in September 2019, according to the MFIN industry data published in the 31st Micrometer, an MFIN industry publication.

The success says all. To get the poor come out of the dilemma of whether to sell their produce and starve or not starve and thereby stay in the perpetual vicious cycle of poverty, we need to include all of them in the microloan map.

The journey from micro-finance to small enterprise while keeping the growth momentum alive is not an easy path to travel. The challenge starts with the entrepreneur herself. In micro-enterprises, almost without exception, the entrepreneur is the owner, labour and accountant ̶ all rolled into one person. As the business grows, so does the workload.

The paradox of growth and growth itself becoming a hurdle sets in immediately. As the earning stream starts, the need to appropriate the entire earning for consumption increases. From my experience of working with micro- and small-enterprises, I have seen that this is the first critical juncture that decides the future of such enterprises.

The paradox of growth for a micro-enterprise lies in balancing personal needs against business needs. A micro-entrepreneur starts her enterprise at an earning level that is barely sustainable. Therefore, any earning growth at that stage has a high propensity to get appropriated into consumption. At times, the appropriation may be so intense as to even defy the first principle of business – "meet your cost obligations before dipping your fingers into the cashbox".

This has two consequences: a) the entrepreneur concerned cannot save up for expansion and b) her inability to balance the two forces sinks her into debt.

From the outside, it might sound trivial yet, trust me, this is a crucial differentiator between success and failure at this stage.

Sometimes, growth itself becomes another hurdle. This also is an interesting issue as the micro-enterprise sets on the growth path that could take it to the next level—a small-scale unit.

When an entrepreneur starts off at that level she gets ‘married’ to her business. As the tasks grow, she tends to absorb all tasks. At the initial stages, there is hardly any option. Without the money to hire people, an entrepreneur is forced to multitask and micro-manage.

However, with growth, in most cases, the entrepreneur keeps micro-managing the growing business the same way. Her inability to delegate, a habit that sticks, creates inflexibility in the business. It becomes so dependent on the entrepreneur that even the smallest decision can be held up if she falls ill.

Entrepreneurs often don’t realise how critical this can be to the business as it grows from micro to small. From strategy to production line, if an entrepreneur controls all decisions, she adds a big risk factor to the usual mix of business risks. Growth itself becomes a threat to business in all such cases. My advice to such entrepreneurs is to learn how to delegate from the early stages. Share decision responsibilities while retaining the reins.