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Role of rural business incubators in translating micro finance to sustainable micro enterprises

Koshy, Perumal (2010): Role of rural business incubators in translating micro finance to sustainable micro enterprises.


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Present paper looks at how Rural Business Incubators (RBIs) & Enterprise Resource Centers (ERCs) together with Micro Finance Institutions (MFIs) can contribute to inclusive growth.

India’s informal sector has a very powerful presence of brilliant entrepreneurs, who can potentially contribute to India’s fight against poverty and have the potential for much more employment & income generation, if appropriate institutional mechanisms are created to provide needed & timely assistance. Here comes the role of RBIs & ERCs and MFIs.

Approximately 93 percent of the enterprises are in the informal sector in India. Together with Micro, Small & Medium Enterprises (MSMEs), informal sector contributes close to 60 percent to GDP and 40 percent or more to export trade. They create 95 percent of non-farm jobs. Informal enterprises are set-up by owners to alleviate their poverty condition. They could be termed as poverty alleviating enterprises (PAEs). Micro finance institutions need to reach out to such PAEs and empower them. Through the institutional mechanism called RBIs & ERCs, micro financiers can reach out to PAEs.

Empowering PAEs and enabling their growth is indeed a challenging task. An institutional mechanism like RBI & ERC is a probable solution to poverty and unemployment. If an incubator & ERC can come up in each of the 6000 block panchayats, that would enable the creation of new enterprises in the formal sector as well as can contribute to empower PAEs in their growth & expansion. This would help create new jobs and alleviate poverty and generate employment. The paper ends with a model RBI & ERC. with a detailed description of service mix that can be delivered through this institutional mechanism.

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