Loans to encourage entrepreneurship? You must be joking Mr. Jaitly

March 28, 2016

When I read the news of “Stand up India” program, first thought that came to my mind was “entrepreneurship can not be thrust upon anyone by giving money in hand”. On the contrary entrepreneurship is all about brining your ideas to life despite having all the odds stacked against you. Second thought that went thru my mind was why government wants to encourage only one section of the society to be entrepreneur. Entrepreneurship should be encouraged for anyone who has deserving ideas irrespective of caste, religion and gender.

Lets take the first case. 
What is entrepreneurship? First of all entrepreneurship is a mindset. It is about developing new ideas, being creative, being innovative in every aspect of the business. These aspects include raising money for starting the business. If one is really serious about his / her business, he/she would find ways to start it and develop into big one. If you go and ask any successful entrepreneur he/she would tell how despite having the problem of raising capital for the business, he /she became successful. Real entrepreneurs thrive more when the odds are higher.

In my experience, no country has been able to develop entrepreneurship by throwing money at people. I have seen how Singapore, a very rich country, flush with money, is trying very hard to create successful entrepreneurs. Government has in last 8 years ( that I have seen) created many schemes, incentives, programs, infrastructure for encouraging people take up entrepreneurship. Some aspects have worked, some have not. But there is no scheme through which Banks are told to give loans for entrepreneurship. There are other implications of ‘loan’ that I would discuss further in this article.

Even in the silicon valley there are no government backed loans by the banks that entrepreneurs are given. Here it is strict meritocracy and based on your ability to bring about innovation.

I am not saying that entrepreneurs don’t need access to funds. But giving loans through banks and that too based on caste, defeats the whole purpose of entrepreneurship. While I have no issue in providing support system for weaker sections of the society for entrepreneurship, but not at the cost of people. This support system can be developed from within the society itself. For example, Dalit Indian Chamber of Commerce is an excellent initiative. It provides platform for aspiring and budding entrepreneurs of Dalit society. It also helps create a network and support system.

I have the first hand experience of running a network for entrepreneurs in Singapore. I am personally going through this journey of entrepreneurship since 2009. So, I know that the support system, networking etc are crucial aspect for encouraging entrepreneurship. Access to funds is definitely important part of it. But it has to be based on strength of your ideas, ability to execute and building and running business successfully.

Money doled out in the form of loan and an affirmative action most often fail to deliver the result and it is painfully true for entrepreneurship. You can not build the mindset by doling out money. You are only developing crutches that are so detrimental in entrepreneurship.

Second aspect is about extending these loans based on caste. It is a laughable thought that access to  money (or lack of it) was a reason for not developing entrepreneurship in a particular section of the society. I understand the affirmative action that we have in place for education and jobs. I support that completely. But there is no logic nor any historical reason to extend these actions in the field of entrepreneurship. If India wants more entrepreneurs, if India wants more ideas and innovation, it should remove all discrimination in extending such help.

I have no problem if private institutions or chamber of commerce etc have plans to extend money to groups of society.  It is their private issue. But when Government is getting into the business of extending the loan through government owned bank, it is giving away money of all the citizens. Especially in the field of entrepreneurship we don’t need any discrimination. There is no historical reason that exists for lack of entrepreneurship in a particular society for lack of access to funds. ( the argument that is used for reservation in education was that historically Dalits and large section of the society were deprived of it because of their caste) Actually this challenge (funding) is faced by everyone who aspires to be an entrepreneur.

Government can create entrepreneurship development cells, special incentives for innovation ( I have seen them in many parts of the world) through various bodies that can work closely with industry bodies. But extending loans through banks have a serious ramifications. Lets look at them.

Typically banks give loan against collateral (which is a good business practice). If anyone has an asset worth Rs. 1Cr to pledge and take a loan you don’t need a separate scheme for them.  Since this is not the case, then government, it seems, want to treat these loans against the business idea? Does that mean banks would become angle investors? Do you think banks have a mechanism to access the intangibles and decide to invest in startups? When the success ratio of thorough professionals in this field is not more than 10%, what is the likelihood that banks would be able to recover money?
In all likelihood it would become a way to doling out money without any assurance of getting it back. Very soon it would turn into similar thing as ‘loans to farmers’ and then degenerate into ‘loan waiver’ program.

When the banks are crumbling under mounting NPAs do you think they need another potentially NPA developing scheme? Just think about the enormity of possible NPAs. Rs 1Cr given to a modest number of 1 lakh people would mean Rs 1Lakh Cr money down the drain?

The last part that comes to my mind is a pure political angle. Since I believe that this government has good intentions and is really working hard for the development of the country, I do not want to think deeper in the possible dirty political game that could be associated with this move.

To conclude, my points are :
– You can not develop entrepreneurship by giving government money through loan. You need incentives and schemes against innovation and measurable deliverables.
– By giving loans for entrepreneurship for a particular section of the society, government is discriminating against deserving ideas. There is no proof that only a particular society needs money for entrepreneurship; on the contrary anyone with good idea and ability to execute needs to be supported.
– To support upliftment of a particular society or entrepreneurship within that society, there are private institutions such as Dalit Indian Chamber of Commerce who are doing a good job. Government can help strengthen such initiative.
– By giving the loans through banks, government is potentially creating huge NPAs.

PS : I must say that these thoughts are based on the news item that appeared in all national newspapers. I did not have a chance to look at the intended mechanism of the scheme. 
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Report of Report Cards on Modi Government – corporate style

May 26, 2015

Yesterday one of my school friends sent me an article for my comments that gave one year report card of BJP government. And this is what I wrote to him.

Dear Vivek, Yes, I have read this article.
Like the author and as she herself has mentioned, hundreds have written a report card on Narendra Modiji’s government. In a democracy everyone has the rights to comment and it is a sign of healthy democracy that everyone’s views are heard and criticism is taken into its stride. ( isn’t that also speaks well for the govt?)

I think, democratic process is not like a school system, where we enter for 5 years and every year we are evaluated whether we have passed or failed. There are many decisions that are taken for long term impact and strategic direction – specially foreign policy, defence preparedness, education policy and infrastructure. Impact of some decisions are felt after 5 years, some after 10 years and some after one generation.

You and me work in corporate sector, we have annual review against our annual targets and plans. We are evaluated on set parameters on how much have we achieved.

But as we go up in the hierarchy we realise that many of these parameters are lagging indicators. We find people’s performance after they have achieved or have failed to achieve. If they have failed to achieve we give them feedback, we might put them on some ‘plan’ – euphemism for putting them ‘under watch’ – or some jobs are made redundant (again an euphemism for retrenching non performers). However the damage was done in terms of non achievement. We have to work extra hard to repair it and achieve next year’s ( or quarter’s) targets. At that stage we learn to focus on leading indicators – focussing on actions that would give desired results. Because we now know that if right actions are not taken at the right time we won’t get the results and in the end we would be only doing postmortem.

Also we are given responsibility to make a 3 years plan, 5 years plan, a strategic plan and an operational plan. As we start executing it, we focus on key decisions keeping an eye on long term impact. Many times a lower level manager doesn’t realise the importance of certain decisions or recruitment of certain skills, as he or she is not aware of the strategic plan. But we know that to achieve these long term goals we need to prepare in advance – need to get right systems in place, right people in place and start working towards it.

I feel that in the nation’s planning and progress, there is a much more complexity than corporate planning.  Though there is no harm in taking stock of the situation annually and evaluate the progress, I feel we should use the leading indicators to understand the government’s progress. Because we should be concerned about long term impact as much as we should be about short term decisions.

My leading indicators for a government’s performance are :

Intent : It is obvious that if the intent is not right all the decisions would lead to downhill path as we saw under UPA. If the intent is to serve the country well, then automatically corruption and corrupt practices vanishes at the top and then it slowly percolates down. We all have seen a corruption free India in last 1 year.

Vision and Plan : Intent drives the vision. What do you want to make a country as eg. Swaccha Bharat, Make in India, Digital India, Financial inclusion etc are part of the the vision. And putting together a plan for it. Constructing toilets, cleaning of Ganga, connecting roads, opening of bank accounts for hundreds of thousands of people,  etc are part of the plan behind the vision

Policy framework : Putting policy framework in line with the vision e.g.. putting together Digital policy, putting together policy of water ways, ‘Act East’ policy etc are the examples.

Team : Having a competent and capable team that would work together is important. Along with the competence what is needed is clarity and cohesiveness of intent among the team. If that is in place then even if there are differences of opinion they can be managed ( Actually healthy amount of dissent is needed for robustness of decisions making) “Matbhed hona galat nahi hai, Manbhed nahi hone chahiye” ( मतभेद होना गलत नही है, मनभेद नही होने चाहिए ।)

Leadership : Strong leadership is most important. We all are experiencing how a good leader can channelise the energy of the nation.

Connectedness with the masses : It is important to check how well the ministers and policymakers are in touch with the people of the country. Very often power and aura of Delhi makes the ministers lose touch with the reality and decisions are taken for the benefits of the creamy layer of the society. It is great to see many ministers are regularly going back to their constituencies and are appraised on their connectedness.

Engagement with all stakeholders : It is important for the government to connects well with all the pillars of the democracy and establish very good relationship with them for the smooth functioning – judiciary, bureaucracy, financial institutions such as RBI etc. Also being the federal structure not just having good relationship with the state government but also working to strengthen them is most important. We have have seen how Modiji’s government has acted on finance commission report and increased the fund allocation to the states and how the funds generated through coal auction have gone to the states- mostly to the non BJP states and how states are being made stakeholder in the growth of the country.

If you would like to create your report card, please go ahead and do so. Make sure that you are focussing on the leading indicator to get a true picture of the progress.


3 Key areas to address : Countering the Land Acquisition Bill disinformation

April 4, 2015

Further to my article on the need for BJP to take it message to the farmers through BJP’s organisational mechanism than just the government mechanism, it was great to see BJP’s national executive meet in Bengaluru decided to take the disinformation campaign head-on and mobilise its cadre to spread right message. (I am in no way suggesting that BJP people read or took note of my article)

“All party members would be going out to explain the public on the contents of the land bill. The intention of the government is to help farmers,” Union minister Nirmala Sitharaman told reporter.

There is need to articulate this campaign by addressing three key areas :

Reinforce the positive intentions : I think with the past experience of land acquisition attempts and land not being put to proper use or corruption involved, there is a large scale apprehensions. And PM Modi ji talked about he ‘Niyat’ in his public meeting in Bengaluru, it needs to be reinforced with positive message such as : राष्ट्रनिर्माण के लिए धरती मॉ को सिंचना है, इस धरती की रक्षा करते हुए उसका सदुपयोग करने के लिए नए कानून को लाना है। आजतकके राज्यकर्ताओने इस जमिन को, जिसे हम धरती मॉ कहते है, जिसकी हम पुजा करते है, उस जमिन को केवल एक टुकडे के रूप मे देखा, उसे जैसे मन चाहा वैसे अपने सगे संबंधियोमें, परिवारवाले मे बांट दिया। हम इस जमिनकी रक्षा करना चाहते है, हम आपके हककी, आपके जीवनकी, आनेवाली generation की रक्षा करना चाहते है।

You can not ally the fears, but can only create hope : One of the important things in communication is that the more you talk about ‘removing the fear’ more it gets reinforced. Only way you can overcome the fear is by offering something positive. I think it would be important to talk about what the farmers would be getting than by what they would be losing. It would be important to talk about not just the one time compensation, but more importantly, how they and their next generation would be taken care of ( though I have not read all the provisions of the bill and farmers compensation, I am sure there must be enough financial compensation – such as insurance policies, re-employability, etc  that need to highlighted ). The fear in farmer’s mind is questions  about honourable livelihood for next generation and about the status in the society without a land ownership. These needs to be addressed through the provisions of the act. Give them a hope of better life without taking away the status.

Set a positive example as early as possible :  Nothing succeeds like success. A successful example of a large project coming up on a land acquired by the government.  And the project that would have all the elements such as non irrigation land being acquired, farmers getting much more than market valuation, farmers getting honourable livelihood and next generation is assured of good lifestyle, would change the whole atmosphere. It would take away opposition’s claims and it would also restore confidence in farmers and in people of India in general.


BJP needs a new Abhiyaan – ‘Maati Se Moti’ (माटी से मोती)

March 23, 2015

In view of the hue and cry being made by the opposition parties on land bill reforms, I feel it is important that BJP should take the fight head on and not depend only on PM Modi ji to reach out to the farmers. Let me explain why I say so.

I think the Indian politics has changed for better and changed forever from the days when government could take it for granted that only time they have to face the people is only after 5 years. Governments of the day are not even getting one full year as its honeymoon period, people are in a hurry to demand the changes (that they waited for 60 years). The modes of communication in the 24×7 TV reporting, social media etc have set the governments on its toes and hence if there is any (real or perceived) disquiet in the country about Government’s decision, it should immediately reach out to the people.

But I think that to reach out to the people only government mechanism is not good enough. Number one, government mechanism is busy implementing policies and it takes time to show results. Number two, government mechanism (bureaucracy ), largely, is not geared up to communicate. And lastly, bureaucracy itself needs to be educated about Government’s message.

In the face of it, the mantle falls  on the political arm of the government to communicate and be in touch with the people all the time. There are other benefits of doing this :

What was the biggest strength of BJP when it won 2014 elections? It was the support of aam aadmi, it was the support from BJP’s non traditional vote bank i.e. the rural India, it was the votes of the financially weaker section of the society. Today, opposition along with some media is creating a perception that farmers and aam aadmi is unhappy with the Government. If BJP (not government machinery and ministers only) reaches out to these people and communicate directly, opposition which is sitting only in Delhi would have nothing to talk about.

Secondly, with the last 10 years of corruption and 60 years of Congress party rule, people have become weary of governments in general and they embrace the ‘Andolan’ more readily than the government’s narrative. Though, in case of land reforms bill, opposition has not been able to mobilise any protests, it has been successful in creating a perception that people (aam aadmi / farmers) are not happy with the bill.

Modiji’s ‘Mann Ki Baat’ on 22nd March was an excellent talk and it tried to dispel many myths, it tried to give positive side of the bill and it also communicated government’s resolve and sincerity to work in the interest of farmers. But now, I feel, people would view his talk more as a government’s position, still doubting its intentions and may not embrace it fully.

Instead of waiting for something (protests) to happen (opposition it likely to manufacture some form of protests and amplify it) and then go out explaining government’s stand, I think it would be better for the BJP to create its own Abhiyaan and I am suggesting a name – “Maati Se Moti” ( माटी से मोती). The narrative could be to establish connects with the farmer and discuss how to make most out of the farming land, how we can make better India through agriculture produce, what all government is doing for farmers etc. This way the discussion is more positive, it is about their welfare and BJP / Govt is not defending its position.


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