Although rapid growth is observed over the last decade since 2004, the growth in the rural sector is sluggish. The rural youth are not benefited from the rapid growth as the formal sector employment opportunities are shrinking and growth is concentrated in urban areas. It resulted in large-scale distress migration of rural youth to urban areas which is beyond the absorbing capacity of these urban centres. Most of the migrants from rural areas live in urban slums without any basic facilities. Migrants work as casual labourers in unhygienic and unsafe conditions resulted in deterioration of health within a few years of work, this leads to their premature withdrawal from the labour force and reduced life expectancy.
Hence, it is high time to show alternative development pathways for the rural youth alongside good work and living conditions within rural areas. This is possible through the creation of self-employment business opportunities by taking advantage of pan-India flagship programmes like start-up India. Both state and central governments are implementing many self-employment and start-up schemes like MUDRA scheme of government of India and T-HUB of Telangana, but they are mostly successful in urban areas with little penetration into rural areas. All these schemes are stuck up due to lack of implementation capabilities, outdated bureaucratic procedures, licenses and clearances, lack of skills with rural youth. It is the time to analyse the problems behind the low performance and learn lessons from past mistakes to promote vibrant start-up culture in rural areas. This article examined the recent findings of some studies including CAG report on the performance of the bank-linked self-employment schemes and start-ups to suggest ways to overcome the problems faced by them.
Bank-linked self-employment scheme
Bank-linked self-employment schemes are widely adopted by many state governments as well as central government in various names, which assists the beneficiaries to set up business units through a combination of loan and subsidy. Under these, Historically Swarnajayanti Gram Swarozgar Yojana (SGSY), Sampoorna Grameen Rozgar Yojana (SGRY) and recently Deendayal Antayodaya Yojana (DAY)-National Rural Livelihood Mission(DAY-NRLM), Start-up Village Entrepreneurship Programme (SVEP) and MUDRA schemes are prominent. All these schemes are generally financing self-employment businesses and start-ups by the rural entrepreneurs with a significant subsidy component.
Gaps in implementation
As per guideline, these agencies have to prepare Annual Action Plans (AAPs) through the bottom to top approach, while the actual practice is they prepare AAPs without obtaining inputs from the districts/branch offices. AAPs were approved by the governments with a significant delay ranging from six months to one year of commencement of the financial year. The actual budget release further delayed by another 4-5 months. There is a huge gap between the amount of budget approved and released every year, many times up to 50 per cent. The actual expenditure incurred was generally below 85 per cent of the released amount.
Identification of beneficiaries
Identification of the right beneficiaries is crucial for the success of these self-employment schemes. Applications received from interested individuals will be registered into the online database for transparency. The feasible self-employment business units are to be explained to the identified beneficiaries on the basis of local needs, market feasibility and socio-economic viability. For many schemes, as per the scheme guidelines, beneficiaries are to be identified by Gram Sabha with the help of local bank branch by using a set of criteria like a business proposal, economic viability, Below Poverty Line (BPL) card holder etc. Beneficiaries have to be given sufficient freedom to choose their favoured type of business units. However, in actual practice, the database of rural poor was not maintained by the Gram Sabha, if they maintain, it was not used in most of the districts to identify the beneficiaries
Subsidy and loan disbursement
All these schemes have some common procedures prescribed in the release of subsidy and loan amount. With the wider adoption of internet banking, they are also using web-based solutions for concurrent monitoring of these schemes. After identification of beneficiary, type of business and cost estimates, subsidy amount will be transferred to the beneficiary bank account(non-operational), then the bank will release loan amount along with subsidy amount to a third party (input supplier) to install business units/ instruments/ equipment to start a business by the beneficiary. Then the bank will submit evidence that the business has been started by uploading photograph of the business unit along with utilisation certificate in the web portal. Under these schemes, the share of subsidy is ranged from 30 to 40 per cent of the unit cost of business units. Some anomalies like reporting the higher unit cost of establishing business compared to AAPs and wide variability in unit costs for a similar type of units in same locations are observed, which hints at some malpractices in exaggerating costs to get higher subsidies and loan.
Banks apathy in schemes
Banks are reluctant to actively participate in these subsidy-driven self-employment business schemes promoted by the government. Banks insist on term deposits as surety for the release of the loan component, providing term deposit is a hard task for the poorest of the poor and young entrepreneurs. If the beneficiary is unable to show term deposit, banks releases only subsidy amount and the loan component was treated as a fixed term deposit. Insisting of term deposit goes against the principle of the schemes which is developing entrepreneurship among the poorest of the poor and young entrepreneurs.
Poor monitoring and evaluation
In most of the schemes, Online Beneficiary & Management System (OBMMS) software’s were developed to link beneficiary database with bank database and to increase transparency in planning, monitoring and administering the scheme. It was found that the software was not able to detect duplicate beneficiaries and incidences of repetition of Aadhaar numbers. Many blank (zero) Aadhaar and bank accounts were reported frequently in these software databases.
Delay in release of subsidy
Most of the schemes put ambitious targets in terms of timeline from submission of the application for setting up business to release of subsidy, loan and final start of the business. As against the stipulated 15 days to one month maximum gap between receipt of application from the beneficiary and date of sanction of the subsidy, the actual gap may vary between six months to one year in case of about 80 per cent of business units. Although stipulated one month or 15 days is too short a period, the delay beyond six months is not acceptable.
Handholding to evolve and grow
Business environment and opportunities are complex and changing fast. Although, identifying right beneficiary and business opportunity is important, helping beneficiaries to withstand business risks should be the key to increasing success rate among start-ups. Identifying location specific/sector specific business models and learning from mistakes is important to evolve best models which fit in local conditions. Schemes need to be modified based on experience and it needs adjustment time, hence after commencing the business, the government should support and incubate start-ups at least up to three years.
By A Amarender Reddy
(The author is the Director (Monitoring and Evaluation), National Institute of Agricultural Extension Management (MANAGE), Hyderabad. He can be contacted at firstname.lastname@example.org)