South Asia Agriculture and Rural Growth Discussion Note Series March 2020 6 Transforming Rural Non-Farm Livelihoods: The NRLM Journey Context Rural India is primarily an agri-based economy. Agriculture and allied sectors employ 64% of the India’s total rural population, while their contribution towards rural GDP is only 39%. Over-dependence on agriculture has meant declining per- capita rural income which has gradually initiated a shift towards the non-farm sector. According to the Sixth Economic Census released by the Ministry of Statistics and Programme Implementation, there are 3.48 crore (34.8 million) rural enterprises in India, of which 66%, 2.28 crore (22.8 million) are non-agricultural enterprises. income. Anecdotal evidence suggests that Even though, NRLM is more than a decade This transition from agriculture to non-farm approximately 5% of the total households old, enterprise development programmes sectors is considered an important source mobilized under DAY-NRLM (300,000 have been initiated only in the last five of economic growth. households) increased their investments in years. These initiatives are expected to existing micro enterprises or became first- gain pace and momentum through National DAY-NRLM, which has been instrumental generation entrepreneurs over the past few Rural Economic Transformation Project in reaching out to 6.80 crore (68 million) years. This trend encouraged DAY-NRLM (NRETP). rural poor women, witnessed a similar to adopt dedicated entrepreneurship shift towards non-agricultural sources of promotion measures. Intervention Entrepreneurship Development Initiatives Prior to DAY- NRLM Much before DAY-NRLM adopted Maharashtra, and Rajasthan – to management skills and made their services entrepreneurship promotion as a encourage Self Help Group households available to the rural poor to set up and cornerstone intervention, states such as (SHG HHs) to set up micro-enterprises. run their enterprises. While adapting its Andhra Pradesh (AP) and Kerala had made Under the MEC Project, 580 MECs were model in partner-states, Kudumbashree significant progress in this field. trained and deployed across 17 districts placed seasoned MECs from Kerala as in the five partner-states. These MECs mentors to provide continuous training and Kerala - Micro Enterprise supported 20,118 enterprises over a handholding support to newly identified Consultants (MECs) period of 5 years. MECs in partner-states. Kudumbashree – the Kerala State Poverty These states recognized a need for building These MECs provide a Eradication Mission - has been promoting a local pool of trained consultants to bridge range of services including local enterprises by providing business the gap between business development identification of business planning and advisory support through needs of the entrepreneurs and existing opportunities, preparation of trained community professionals (known business management knowledge. They business plans, providing basic as Micro Enterprise Consultants or MECs) recognized the need for sustained training business management training since 2004. In 2013, NRLM designated and handholding support, and leveraging to entrepreneurs, liaising Kudumbashree as a National Resource technology to boost entrepreneurship with financial institutions for Organization (NRO) to implement the promotion. enterprise loans, facilitating model in other parts of the country. backward and forward market Kudumbashree partnered with five The MEC project provided rigorous training linkages, conducting surveys states – Bihar, Jharkhand, Karnataka, to local resource persons in business and studies - as required. 1. Micro-Enterprises (as per Ministry of Micro, Small, and Medium Enterprises, Govt. of India): Owned by one or more individuals such enterprises would significantly contribute to value chain, investment, and employment. The investments of these enterprises be upto INR 25 lakh (approximately USD 33,000). The project pioneered a practice of instating The model piloted by OMPLIS aimed to a digital performance tracking system create stable non-farm livelihoods that can (PTS) to encourage entrepreneurs to meet the aspirations of the entrepreneurs maintain books of records. With regular and reduce their risk of being exposed to record keeping, MECs were able to prepare unmanageable debt. financial statements for enterprises to track business performance at regular intervals. In OMPLIS identified BDMs through a addition to PTS, the project also pioneered rigorous selection process and trained calculation of sector specific benchmarks them in business management skills, for rural enterprises to enable comparison to promote local enterprises. These with similar enterprises across geographies. BDMs were assisted by an IT platform Use of benchmarks along with performance that enabled them to identify business tracking enabled MECs to grasp and delve opportunities by conducting market deeper into business performance issues. surveys, asses credit worthiness of entrepreneurs, and monitor ANDHRA PRADESH - Technology businesses to extend assistance in Driven Entrepreneurship Promotion times of need. In AP, a mandal federation by the name OMPLIS also created a repository of of Orvakal Mandal Podhupu Lakshmi Ikya videos, which identified fundamental Sangam (OMPLIS), under the Society for business issues and best practices, Elimination of Rural Poverty (SERP), piloted as tools for building capacities in an entrepreneurship promotion model in entrepreneurs. The videos helped trigger a need-based funding ecosystem to fit the Kurnool district. Together with business interest amongst potential entrepreneurs, needs of rural micro-enterprises. advisory services provided through trained who were subsequently screened community professionals (Business using assessment tests to judge their Financial products such as cash credit limit Development Managers or BDMs), OMPLIS entrepreneurship potential. and quasi-equity products were developed used technology to conduct credit and to meet the cash flow needs and risk income appraisals of entrepreneurs and To bridge the systemic gap in enterprise appetite of rural entrepreneurs. supported them with loans. financing, the mandal federation developed Entrepreneurship Development Initiatives, the NRLM Experience Start-up Village Entrepreneurship project addresses a missing ‘incubation states. This includes a basic assessment of Programme ecosystem’ by providing customized business the blocks in terms of existing and potential development, advisory, and mentorship enterprises, training Community Resource The DAY-NRLM rural entrepreneurship services; a missing ‘knowledge ecosystem’ by Persons-Enterprise Promotion (CRPs-EP), platform was boosted by the budget providing rural entrepreneurs with exposure and mentoring CRPs-EP in the support of speech (FY 2014-15) when the Finance to new ideas, markets, and domain skills; rural enterprises. Minister designated INR 100 crore (~USD and a missing ‘financial ecosystem’ by 14 million) towards the ‘Start-up Village giving them access to affordable finance for As on Jan 2020, SVEP has trained and Entrepreneurship Programme’ (SVEP). The enterprise development. deployed over 1,400 CRPs-EP, who have SVEP design elements were inspired by the supported 85,000 enterprises in 108 blocks, two entrepreneurship promotion projects Kudumbashree along with Entrepreneurship across 19 states. The project has disbursed from Kerala and Andhra Pradesh. Development Institute of India (EDII) approximately 66,000 enterprise loans was designated as a National Resource (through Community Enterprise Fund2) SVEP has been instrumental in bridging Organisation (NRO) under DAY-NRLM, for amounting to INR 204.41 crore (~USD 28.3 gaps in the entrepreneurial ecosystem in implementation of SVEP in the identified million), averaging IINR 31,000 (~USD 430) rural areas. Evidence suggests that the blocks, to provide technical support to other per enterprise. . 2. Community Enterprise Fund (CEF) is fund in perpetuity housed with a mature NRLM-promoted women’s federation in a block with the sole purpose of providing loans for enterprises under SVEP. Key Lessons and the Way Forward Experiences from Kerala, Andhra Pradesh, promotion. The novel need-based funding and SVEP reaffirm the importance of mechanism developed by OMPLIS and deploying trained extension workers CEF piloted by SVEP were instrumental in (MECs, BDMs, or CRPs), who are high uptake of enterprise activities amongst essential catalysts or change-makers rural population. in the entire process. Besides providing basic technical services to entrepreneurs, While developing a cadre of extension this strategy ensures that access to such workers and financial products were well services remains a call away for many thought out elements of project design, NRETP also seeks to recognize and years even after the culmination of the other elements were introduced by way provide financial and acceleration support to project. of sporadic experimentation. Conscious women-owned enterprises that have scaled- decisions will need to be taken to include up through their own initiative and have the A few states, as part of SVEP such successful experiments as parts of potential to create local employment. The implementation, developed a pool of project design to ensure lucrativeness project will partner with existing incubators local mentors and professional support and sustainability of enterprise promotion to provide intensive customized professional providers to provide deeper technical initiatives. services to transform such rural enterprises. assistance to enterprises. This pool, along with extension workers, directly contribute Building on the experiences of SVEP, the To support these enterprises, NRETP will to the sustainability of the enterprise and next phase of World Bank investment adopt the tested methodology of recruiting enterprise promotion initiatives. with the Ministry of Rural Development – community resource persons and mentors, National Rural Economic Transformation and instating dedicated funds for enabling Convergence with local governance Project (NRETP) – aims to identify access to affordable and timely loans. structures plays a key role in providing existing enterprises with growth potential These efforts will be augmented through regular market access to enterprises and provide dedicated services to help the use of various web-based platforms, even in remote areas. Several MEC and them scale-up. While SVEP will continue interactive mobile applications, and access SVEP blocks liaised with local government to encourage SHG households to set to business-specific financial products. The departments to organize weekly and festival up new enterprises, NRETP will deploy project also aims to develop partnerships haats (markets), which created sales resources to expand existing initiatives. with players in the private and government opportunities for local entrepreneurs in The project plans to establish One-Stop sector to access growth avenues for their blocks. To illustrate, weekly markets Facility (OSF) centres to provide last-mile entrepreneurs. initiated by MECs in several blocks of incubation support to identified enterprises Gadag district of Karnataka are held as per through trained community professionals. Though these measures, NRETP schedule even after three years of project The project will also develop customized completion. financial products, a resource pool of aims to support about 50,000 experienced entrepreneurs and other existing SHG member-owned Access to timely and affordable finance professionals to provide sector-specific enterprises during the project is a critical element of rural enterprise technical services. period. About the discussion note series This note is part of the South Asia Agriculture and Rural Growth Discussion Note Series, that seeks to disseminate operational learnings and implementation experiences from World Bank financed rural, agriculture and food systems programs in South Asia. Author(s): Arshia Gupta, Vinod Nair Series editors: Alreena Renita Pinto, Deepti Kakkar Publication design & illustrations: Satwik Gade We are grateful for the generous support from the Ministry of Rural Development, The Bill & Melinda Gates Foundation, The Department for International Development, and various State Rural Development departments. Disclaimer: The findings, interpretations, and conclusions expressed in this note are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations or to members of its Board of Executive Directors or the countries they represent.