Business Today

Channelising CSR funds to the growth of micro, small and medium scale enterprises

The first financial year 2014-15 since the introduction of the amendment has seen over 75 per cent amount under CSR being spent (as Finance Minister Arun Jaitley mentioned during the last Parliament session, March 2016).

Sharmistha Ghosh        Last Updated: April 20, 2016  | 19:26 IST

Sharmistha Ghosh
Corporate Social Responsibility took centrestage with the New Companies Act 2013 that mandated CSR spending of 2% of three-year average annual net profits for select companies.

This amendment brought many new companies for the first time into the CSR fold besides creating prospects for building sustainable development solutions, which are also aligned with Sustainable Development Goals (SDG), in the areas that have been defined in Schedule VII of Section 135 - environment sustainability, skill development, education, art & culture, rural sports, healthcare and sanitation, among others.
The first financial year 2014-15 since the introduction of the amendment has seen over 75 per cent amount under CSR being spent (as Finance Minister Arun Jaitley mentioned during the last Parliament session, March 2016). While some large corporates delivered stellar projects, many companies adopted easy solutions to meet the requirement, such as contributing to the Prime Minister's National Relief Fund and Swachh Bharat Abhiyan.

Thus, a key challenge that lies ahead is to identify projects having a programme-based approach that will not just have a positive social impact on the community, but also witness and encourage sustainable growth.

The core principle of CSR implies that every rupee spent needs to be measureable and that the long-term goal of every CSR programme should aim to be self-sustainable within a given timeframe. In the light of this ideology, there is an opportunity to build synergies and making micro, small and medium scale enterprises a key recipient and partners for channelizing CSR funds.

MSMEs are critical growth drivers in the Indian economy and have displayed remarkable progress creating over 100 million jobs across the 49 million units in India, contributing 37% to country's manufacturing unit (Annual Report 2014-15 of the Ministry of MSMEs, Government of India).

The Government in the past few years has undertaken several measures to bolster the MSMEs sector of the country, including extending the benefits of the existing schemes for MSMEs, launching new policy initiatives to overcome the structural problems of this sector and undertaking sector-specific policy measures, so as to provide focused efforts for the development of the key MSMEs sector of the country.  

Besides focusing on the existing schemes like National Manufacturing Competitiveness Programme (NMCP), Credit Guarantee Scheme for Micro and Small Enterprises, Credit Linked Capital Subsidy Scheme (CLCSS), MSE Cluster Development Programme, the Government of India launched various new initiatives including ASPIRE: A Scheme for Promoting Innovation and Rural Entrepreneurship and the Udyog Aadhaar Memorandum (UAM). However, there exists further scope to address the multiple bottlenecks that the sector is facing.
A recent survey conducted by Avian Media and PHD Chamber, Bolstering MSMEs for Make in India: With Special Emphasis on Corporate Social Responsibility, around the MSMEs based in Delhi-NCR has identified various challenges faced by the sector. These include effective management of resources, stringent conditions of raising finance, lack of skilled manpower, lack of technology upgradation, difficulty in procuring raw material from domestic as well as foreign markets, multiple taxes, lack of quality infrastructure, operational challenges and less focus on research and innovation among others.  
In the wake of the current issues, the report recommends Corporate Social Responsibility as a way to address problems of MSMEs. By contributing CSR monies to these core areas, small-scale enterprises will not only improve the overall business environment, but also ensure better job opportunities, better productivity besides high-quality  and sustainable products and services for the end customer, thereby meeting the needs of local and global markets.

Since companies may collaborate or pool resources with others to undertake CSR activities, SMEs can have a better exposure to new methods and processes followed by large corporates, enhance the quality of their processes and mechanisms in response to the benchmarks set by the collaborating agencies as a collective. It will also capacitate them and contribute to their skill enhancement.   

Overall, the process of enhancing associations between large enterprises and SMEs will generate the desired results in the direction of making the Make initiative in India a great success while addressing at least some of the concerns faced by MSMEs today. This will only be a win-win situation, anyways that we look at it.

Sharmistha Ghosh is Director - CSR and Advocacy, Avian Media. Views are personal.

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