December 07, 2016
New Delhi: BRICS has emerged at a time of increasing social unrest in different societies due to economic disparities, development induced displacement and rising unemployment.
Consequently, there appears some orientation in BRICS for sustainable development and employment to eradicate poverty unlike most other multilateral formations like G 8, World Bank and IMF that focus on mega projects, trade and investment. Indeed it is significant that the upcoming 8th BRICS Summit in Goa will also undertake finalisation of a framework for cooperation for promoting MSME Sector.
Challenge of unemployment
The prevailing approach of people and governments predominantly focuses on skill trainings with expectation that businesses and corporates will provide employment.
This has not happened in the last two decades that have seen jobless growth and the most viable solution now seems through MSMEs and the upcoming BRICS Summit can help chart a new course to make them the prime drivers to deal with the problem of unemployment.
In India the MSMEs account for 40% employment and in China it is as high as 80%. But in order to make micro, small and medium enterprises the engines for employment generation, three paradigm shifts seem necessary.
The three paradigm shifts required
The First Paradigm Shift would require transforming the mindset of people from being job seekers to becoming job creators through entrepreneurship. The Second Paradigm Shift would consist of transforming financial architecture to make bank lending to the poor and to MSMEs a business opportunity instead of a social liability. And the Third Paradigm Shift should make people aware of and provide all facilities to enable access of micro and small entrepreneurs to Global Markets.
Each of these Paradigm Shifts could be achieved through specific actions.
Towards Entrepreneurial economy: From job seekers to job creators
There are numerous programs by governments and other organisations to orient people to opportunities for acquiring skills to secure jobs.
But there are very few avenues to introduce people to the possibility and process for becoming entrepreneurs. If more unemployed could be facilitated to become successfully self employed, they themselves can become the solution. People in very large numbers can be oriented to consider entrepreneurship as a career option through:
a) Mass awareness campaigns and counselling centres for exposure to entrepreneurial opportunities
b) Inclusion of courses on entrepreneurship as a career prospect in school and college syllabi.
c) Aptitude Tests to determine entrepreneurial abilities of all those joining skill trainings and professional courses from mobile repairing to medical studies. Those identified with entrepreneurial abilities could be trained in basic principles of management concurrently with their regular course to become successful entrepreneurs
d) Online and On Site trade wise entrepreneurship courses for entrepreneurs already in business could help in success of numerous businesses that could otherwise fail due to lack of appropriate management capabilities.
International studies show that 50% businesses fail in the first year and 95% by the fifth year.
Addressing people’s phobia of banks and banks’ phobia of poor through new banking paradigms
People do not approach banks for loans due to apprehension that loans are generally not sanctioned. Mass Campaigns detailing the provisions in place to enable people to access bank credits can embolden people to demand credit from banks as an entitlement.
Mechanisms must also be evolved to ensure easy loan processing and reduce default in repayment to make bankers breathe easy!
The efforts and cost of lending and recovery can be brought to a minimal by introducing Entrepreneur OD Cards and Mobile Bank Deposit Cards.
Entrepreneur OD Cards can be issued for specific amount limits after a onetime assessment of an entrepreneur and the credit limit can be automatically revised depending on the record of repayments to ease the burden on bankers substantially. Mobile Bank Deposit Cards can enable people to deposit money in their bank accounts by feeding in the code on the Card just like talk time can be topped up through mobile recharge cards.
These can enable people to deposit money even on a daily basis without visiting banks at negligible costs and will also result in automatic and optimal repayment of loans taken. These two Cards together can indeed make lending to the poor and MSMEs a business opportunity for banks.
The third paradigm shift of local access to global markets
E-Market Platforms through interlinked Import and Export Facilitation Centers in all the BRICS countries could enable MSMEs to access local and global clientele. Finally, joint R&D initiatives by BRICS in areas of technology up gradation, process modernization and market outreach can ensure survival and growth.
If the 8th BRICS Summit can devise appropriate policy framework and initiate pilot projects to work towards these Paradigm Shifts, it can perhaps address the issues of unemployment and poverty and set a new trend for other multilaterals.
Mazher Hussain is Director of COVA (Confederation of Voluntary Associations ) and former Board Member of State Bank of Hyderabad.