micro enterprises and finance in tourism
TRANSCRIPT
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Micro Enterprises and Micro Finance in Tourism
© Ramakrishna Kongalla, Assistant Professor
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Micro Enterprises• In accordance with the provision of Micro, Small & Medium
Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two Classes:
– (a) Manufacturing Enterprises- The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation) Act, 1951). The Manufacturing Enterprise are defined in terms of investment in Plant & Machinery.
– (b) Service Enterprises: The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.
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Manufacturing Sector Enterprises Investment in plant & machinery Micro - Does not exceed twenty five lakh rupees
Small - More than twenty five lakh rupees but does not exceed five crore rupees
Medium - More than five crore rupees but does not exceed ten crore rupees
Service Sector Enterprises Investment in equipments Micro - Does not exceed ten lakh rupees:
Small - More than ten lakh rupees but does not exceed two crore rupees
Medium - More than two crore rupees but does not exceed five core rupees
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The term microenterprise connotes different entities and sectors depending on the country.– in developed countries, microenterprises comprise
the smallest end (by size) of the small business sector, whereas
– in developing countries, microenterprises comprise the vast majority of the small business sector—a result of the relative lack of formal sector jobs available for the poor. These microentrepreneurs operate microenterprises not by choice, but out of necessity.
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• Microenterprises add value to a country's economy by creating jobs, enhancing income, strengthening purchasing power, lowering costs and adding business convenience
• Because microenterprises typically have little to no access to the commercial banking sector, they often rely on "micro-loans" or microcredit in order to be financed.
• Microfinance institutions often finance these small loans, particularly in the Third World.
• Those who found microenterprises are usually referred to as entrepreneurs.• The terms microenterprise and microbusiness have the same meaning,
though traditionally when referring to a small business financed by microcredit the term microenterprise is used.
• Similarly when referring to a small, usually legal business that isn't financed by microcredit, the term microbusiness is used.
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Concept in disability recovery• Utilized as a therapeutic tool within Person centered planning
Microenterprise has become valuable to persons who for many reasons cannot efficiently participate in typically rigid work environments, i.e. 9 to 5 / 40 hours per week.
• Microenterprise gives persons who have a disability flexibility to attend doctor’s appointments or treatments that normally occur in the 9–5 time frame of the day and would eventually conflict with the norm of most typical work environments.
• Microenterprise presents persons with a disability, business networking avenues into the community that differ greatly from the medical or treatment mode that they may have become confined to.
• Persons with a disability who own their own business often report an increased feeling of worth or an emotional equity that becomes an enhancement to their present treatment.
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Micro-loans• Micro-loans are a way for organizations and
entrepreneurs to make small loans to those in poverty often in third world countries. The term "micro-loans" is more commonly referred to as Microcredit.
Microenterprises in developing countries• In developing countries, microenterprises comprise
the vast majority of the small business sector—a result of the relative lack of formal sector jobs available for the poor.
• Microenterprises in developing countries, then, tend to be the most frequent form/size of business.
• Most microcredit clients are not microentrepreneurs by choice.
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• They would gladly take a factory job at reasonable wages if it were available. We should not romanticize the idea of the “poor as entrepreneurs.”
• The International Labour Organization (ILO) uses a more appropriate term for these people: “own-account workers.”
• The enterprises in tourism are generally micro enterprises
• The travel agencies started by individuals are of this kind • They occupy major part of the industry• They generate employment and major finance in
industry
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Micro Finance• Micro Finance is the supply of loans, savings, and other basic financial service to the poor .
- CGAP•To most, micro finance means providing very poor families with very small loans (micro credit) to help them engage in productive activities or grow their tiny businesses. - Financial Gateway
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• Micro finance refers to loans, savings, insurance, transfer services and other financial products targeted at low-income clients.
• Micro credit refers to a small loan to a client made by a bank or other institution. Micro credit can be offered, often without collateral, to an individual or through group lending.
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Evolution of Micro finance in India
Micro finance has been in practice for ages ( though informally).– Legal framework for establishing the co-operative
movement set up in 1904.– Reserve Bank of India Act, 1934 provided for the
establishment of the Agricultural Credit Department.
– Nationalization of banks in 1969– Regional Rural Banks created in 1975.– established as an apex agency for rural finance in
1982.– Passing of Mutually Aided Co-op. Act in AP in 1995.
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The profile of micro finance in india
• Estimated that 350 million people live Below Poverty Line
• This translates to approximately 75 million households.
• Annual credit demand by the poor in the country is estimated to be about Rs. 60,000 crores.
• Cumulative disbursements under all micro finance programmes is only about Rs. 5000 crores.(Mar. 04)
• Total outstanding of all micro finance initiatives in India estimated to be Rs. 1600 crores. (March 04)
• Only about 5 % of rural poor have access to micro finance
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The status of micro finance in India
• Considerable gap between demand and supply for all financial services
• Majority of poor are excluded from financial services. This is due to, inter-Alia, the following reasons• Bankers feel that it is fraught with risks and uncertainties.• High transaction costs• Unfavourable policies like caps on interest rates which effectively limits
the viability of serving the poor.
• While MFIs have shown that serving the poor is not an unviable proposition there are issues that have constrained MFIs while scaling up. These include• Lack of an appropriate legal vehicle• Limited access to equity• Difficulty in accessing low cost on-lending funds (as of now they are
unable to offer savings services in a legitimate
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• Limited access to Capacity Building support which is an important variable in terms of quality of the portfolio, MIS, and the sustainability of operations.
• About 56 % of the poor still borrow from informal sources.
• 70 % of the rural poor do not have a deposit account• 87 % have no access to credit from formal sources.• Less than 15 % of the households have any kind of
insurance.• Negligible numbers have access to health insurance
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Features of Indian MF
• About 60 % of the MFIs are registered as societies.• About 20 % are Trusts• About 65 % of the MFIs follow the operating model of SHGs.• Large concentration in South India• 600 MFI initiatives have a cumulative outreach of 1.25 crore
poor households• NABARD’s bank linkage program has cumulatively reached a
total of 9.4 lakh SHGs with about 1.4 crore households. • Annual growth rate of about 20 % during the next five years.
• 75 % of the total poor households of 80 million (i.e. about 60 million will be reached in the next five years.
• The loan outstanding will consequently grow from the present level of about 1600 crores to about 42000 crores
