Academic says governments becoming less important

Thursday, December 1, 2005

Understand nature, needs of businesses before calling them “small.” Trading, middlemen no longer factors to be discouraged.
India lags in developing new approaches to enterprise development

KOCHI: The term `small’ used to describe enterprises of a certain size does not help us understand the nature and needs of these businesses, says Malcolm Harper of Cranfield Business School and a long-time researcher on enterprises development and micro-finance.

Prof. Harper was speaking here on Tuesday at the inauguration of a two-day international convention on micro finance and sustainable enterprise development.

He said the businesses of an information technology (IT) start-up and a man hawking fruits could be described as `small.’ That, however, was meaningless in understanding the nature and requirements of the two ventures.

Prof. Harper, who, in his brief speech, dwelt on new academic trends, said the use of the terms manufacture and industry in contrast to trade was becoming less useful as trading or middlemen/women were no longer factors to be discouraged. Trading too generated employment and profit.

Prof. Harper said governments everywhere were becoming less important.

According to him, governments tend to act as the `destroyer of enterprises.’ This was a phenomenon from India through Africa to the U.K.

He said India lagged in adopting new approaches to enterprise development and the best way to help enterprises was to let it be subject to the market. “You must be entrepreneurial to help enterprises,” said Prof. Harper, quoting Alan Gibb of the Durham Business School. According to him, one of the reasons why IT-enabled services, such as business process outsourcing, flourished in India was because there were no directed loans.

On its usefulness, Prof. Harper said micro-finance, in itself, was not capable of ensuring sustainable enterprise development and too much was being expected of it and claimed for it. It could also mean providing more debt to more people if one considered it micro-debt.

At another level, micro-credit meant small loans that might not be sufficient to start an enterprise, and tying it up on group guarantees could hinder enterprise, as entrepreneurs tended to be independent.

Micro-credit often tended to be delivering small loans at a high interest rate even as it did not readily lend itself to financing high-risk start-ups. And, as such, micro-finance had to go a long way to be a generator of sustainable enterprise development.

Prof. Harper released a study report, “India: The State of Development of Small and Medium Enterprise, 2005,” brought out by the organisers of the international convention, the Institute of Small Enterprises and Development, Kochi. The report is the result of efforts by the ISEC Small Enterprises Observatory.

Source: The Hindu (link opens in a new window)