The Emergence of Entrepreneurial Ecosystem

There is a need to build a conducive social and economic environment in rural India, more commonly known as an ‘entrepreneurial ecosystem’. The aim of such an ecosystem is to enable aspiring individuals to take up entrepreneurship opportunities. This ecosystem comprises actors such as government institutions, grassroots implementation agencies, private entities, innovators, and businesses, having different attributes, decision principles, and beliefs that bring together specialised yet complementary resources for orchestrated efforts to make setting up and running successful enterprises easier. They are responsible for building bridges between a large number of entrepreneurs active at the microlevel and influential, resource-rich macro-level agencies. This necessitates the need to build a new kind of shared ‘institutional infrastructure’ that can understand local socio-economic imperatives, share relevant insights, and support multi-stakeholder action to co-create strategies for long-term resilience in the economy along with an intense focus on empowerment, livelihood security, and entrepreneurship.

Through initiatives led by Development Alternatives such as the Work4Progress programme, human-centred tools and prototypes have been co-created with rural communities to 'poke' the ecosystem into removing barriers to entrepreneurship in regions of their operation. One such prototype is the District Entrepreneurship Coalition (DEC). It is designed with the objective to establish linkages amongst actors, working in the space of entrepreneurship, and channelise and optimise the efforts and resources of multiple stakeholders towards the common goal of job creation through enterprise development. The key stakeholders of this initiative include government agencies such as the District Industries Centre, National Rural Livelihood Mission, Agriculture Department, Department of Horticulture; financial institutes including the National Bank for Agriculture and Rural Development, banks, NGOs, microfinance institutions; market aggregators; training institutes including Rural Self Employment Training Institutes; universities; and, most importantly, entrepreneurs.

A Pathway for Two-way Communication

What started as informal meetings in 2017 to facilitate pathways of cooperation eventually grew into a robust platform in the Mirzapur district of Uttar Pradesh by the end of 2022. Development Alternatives, along with its implementation partners SVSS and MDSS, facilitated the initial coalition meetings to take the conversations beyond individualistic challenges, journeys, projects, and schemes, and foster a sense of collaboration among the members. Over the next two years, the discourse changed from its initial suggestive or advisory tone about what an entrepreneurship development agency such as Development Alternatives should do, to action-oriented discussions about the role that coalition members should play, collaboratively, in making entrepreneurship more accessible in Mirzapur.

The transitions in stakeholder behaviour that emerged in Mirzapur took years of manoeuvring for it to become a means for two-way communication and eventually take the shape of a ‘model coalition’, with 25 stakeholders forming the core committee. The resultant ecosystem has enabled the establishment of 909 enterprises in four years, which lead to the creation of 3418 jobs across a small area of only 50 villages in Mirzapur. Additionally, the interconnectedness between different actors of the ecosystem led to a reduction in the average time to set up an enterprise from three months to just three weeks, ergo significantly boosting the rate of setting up enterprises.

Advantages of Systemic Prototypes

Systemic prototypes such as the DEC have proved to be a breakthrough for influencing behaviour and driving policy-level shifts. Some of the most significant changes have been on account of improved access to credit, information, market exposure, and other critical inputs for entrepreneurial success. With multiple microfinance institutions, non-banking financial companies, and banks providing timely credit support at competitive interest rates, the negotiating power has shifted into the hands of entrepreneurs. They now have a plethora of choices to make use of credit support. The changing credit landscape has led to a five-fold increase in access to credit support in the last three years across seven districts, with credit worth INR 40 million leveraged by 1000+ entrepreneurs. The solidarity developed among local financial stakeholders has also influenced change in the norms of microfinance institutions and mainstream banks, either in the form of reducing interest rates or in increasing the loan duration.

Similar breakthroughs have been seen in enhanced access to business information and market exposure. Based on the survey by Development Intelligence Unit (DIU) and Development Alternatives in 2022, only 8.1% of 2061 entrepreneurs surveyed reported access to business information. Over the last five years, the DEC platform has attained a status of an information hub by bringing together information from more than 15 sectors on the table. It has also enabled entrepreneurs to expand their reach way beyond the boundaries of their villages through trade fairs, exports, and e-commerce platforms.

The effectiveness of the DEC prototype compares favourably with linear top-down enterprise development programmes, which, more often than not, lack comprehensiveness in response to a potential entrepreneur’s needs, creating major gaps within institutional support structures and mechanisms for entrepreneurship. The results of the ‘ecosystem-building’ approach are evident in a 90% reduction in the cost of setting up each enterprise to INR 11,500 for external support agencies such as Development Alternatives in the last five years. It also offers an alternative to the aggregator approach in which, most commonly, a social entrepreneur or government agency provides ‘market linkages’, thus creating a long-term dependency on the aggregator.

As an enabler of systemic change, the DEC prototype underlines the need for innovation in ‘collaborative institutional ecosystems’ to bring about shifts in the behaviour exhibited by various actors, as a means for building synergies between initiatives, stakeholders, and entrepreneurs themselves. It is now ready for replication and has been introduced to stakeholders by Development Alternatives and Transforming Rural India Foundation (TRIF) as part of the Uttar Pradesh State Rural Livelihoods Mission’s initiatives in three blocks of Basti, Bahraich, and Lakhimpur districts.

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