Kallie Smith

With Business Training, Lenders Stitch Kashmir’s Private Sector Back Together

This post originally appeared on Mercy Corps’ Global Envision blog.

A need in a community and an enthusiastic entrepreneur make a perfect match, but for many the financial hurdles of starting a business dissolves this relationship.

“Risky, untrustworthy, and unreliable” is how financial backers in the Kashmir region describe most young entrepreneurs, according to research conducted by Mercy Corps, the first stage of its “Start-Up Kashmir Youth Entrepreneur” (SKYE) development project.

Stereotypes about young business people make it hard for them to find enough startup cash to create a viable business plan and launch. Finding a backer to help launch a business in the first place is the No. 1 challenge globally, according to SKYE’s comparative research of entrepreneurs in Europe. Furthermore, the research found 68 percent of young entrepreneurs in the Kashmir region have no clue where to look for funds. But for those who articulate how they can fill a void in the economy, the funds exist—and many banks are beginning to provide tailored products for youth clients.

Complex government regulations present further challenges. Young business people find processes slow, corrupt and inefficient, leaving them disillusioned and leading them to give up, according to SKYE’s 2011 study. But local government is taking steps to streamline the registration process, and providing support to young entrepreneurs through its Entrepreneur Development Institute. The institute provides education and training to build an individual’s ability to qualify for loans, as well as mentors and ongoing support to borrowers. J&K Bank has partnered with the local government and Mercy Corps to develop a “Youth Start-Up Loan Scheme” at a competitive interest rate and worth up to 35 percent of the project’s costs.

To help youth receive a first-time loan despite a lack of credit history, the Small Industries Development Bank of India is providing a collateral guarantee, specifically for businesses in the agriculture or services sector (like IT and tourism). Through J&K Bank, the Jammu and Kashmir government has also started a seed capital fund for youth who are pursuing businesses in sectors deemed priorities for the region.

Arshid Mehraj, a native of Kashmir, used a loan from J&K Bank to create a primary school. Three hundred and fifty students, and 47 employees later, his school is doing well. Mehraj overcame the financial challenge with the help of resources in the region, and he is not the only one. The financial landscape is changing in Kashmir, and new programs are paving the way for youth to find the cash they need to finance their new businesses.

“Entrepreneurship is about chasing your dreams, no matter what it takes and it’s a way to return something back to the society,” said Mehraj. “No doubt it is full of challenges, but remember, persistence wins.”

Download the research, “Youth in Kashmir: Challenges and Opportunities,” here.

Mercy Corps’ SKYE program has launched a regional “Start-up Kashmir” network for young entrepreneurs which will ultimately foster the growth of 200 youth enterprises across the Kashmir Valley. Read more about the program on the Start-up Kashmir website.

financial inclusion