Understanding the origin, purpose, and impact of Dhani on India's micro-enterprise ecosystem
The Union Budget presented by the Hon'ble Finance Minister Shri Arun Jaitley, for FY 2015-16, announced the formation of Dhani Bank. Accordingly Dhani was registered as a Company in March 2015 under the Companies Act 2013 and as a Non Banking Finance Institution with the RBI on 07 April 2015. Dhani was launched by the Hon'ble Prime Minister Shri Narendra Modi on 08 April 2015 at a function held at Vigyan Bhawan, New Delhi.
The Hon'ble Finance Minister Shri Arun Jaitley announced the formation of Dhani Bank in the Union Budget for FY 2015-16, marking the beginning of a new era for micro-enterprise financing in India.
Dhani was registered as a Company under the Companies Act 2013 and subsequently as a Non-Banking Financial Institution with the Reserve Bank of India on 07 April 2015.
Legal Status: Registered as NBFC with RBI, enabling it to provide refinance support to micro-enterprise lenders.
The Hon'ble Prime Minister Shri Narendra Modi officially launched Dhani at Vigyan Bhawan, New Delhi, inaugurating a new chapter in financial inclusion for India's micro-entrepreneurs.
Vision: To be an integrated financial and support services provider for the bottom of the pyramid universe.
Micro enterprises constitute a major economic segment in our country and provides large employment after agriculture. This segment include micro units engaged in manufacturing, processing, trading and services sector.
Many of these units are proprietary/ single ownership or Own Account enterprises and many a time referred as Non Corporate Small Business sector. They form the economic foundation of India, sustaining livelihoods across the nation.
This sector provides employment to nearly 10 crore people, making it a critical component of India's economic and social fabric. It represents the entrepreneurial spirit at the grassroots level.
Non-Corporate Small Business Sector (NCSBS) is the economic foundation of India. It is perhaps one of the largest disaggregated business ecosystems in the world sustaining around 50 crore lives.
The sector comprises of myriad of small manufacturing units, shopkeepers, fruits / vegetable vendors, truck & taxi operators, food-service units, repair shops, machine operators, small industries, artisans, food processors, street vendors and many others.
Small business is big business. According to NSSO Survey (2013), there are 5.77 crore small business units, mostly individual proprietorship. Most of these 'own account enterprises' (OAE) are owned by people belonging to Scheduled Caste, Scheduled Tribe or Other Backward Classes. They get very little credit, and that too mostly from non formal lenders, or friends and relatives. Providing access to institutional finance to such micro/small business units would turn them into strong instruments of GDP growth and also employment.
The Non Corporate Small Business Sector (NCSBS) accounts for a large share of industrial units. They feed large local and international value chains as well as domestic consumer markets as suppliers, manufacturers, contractors, distributors, retailers and service providers. The gross value addition of this sector is 6.28 lakh crore annually.
Mainstreaming these enterprises will not only help in improving the quality of life of these entrepreneurs but will also contribute substantially to job creation in the economy thereby achieving higher GDP growth.
The major constraints faced by the myriad of the micro enterprises along the length and breadth of the country include a range of challenges that limit their growth potential and sustainability.
Limited access to formal credit and banking services
Inadequate physical and digital infrastructure
Limited business expansion mindset and planning
Inadequate training and capacity building
Limited representation in policy making
Limited market access and marketing capabilities
Limited business and financial literacy
Unequal access to market and business information
Limited access to modern technology and tools
The biggest bottleneck to the growth of entrepreneurship in the NCSBS is lack of financial support to this sector. The support from the Banks to this sector is meagre, with less than 15% of bank credit going to Micro, Small and Medium Enterprises (MSMEs).
A vast part of the non-corporate sector operates as unregistered enterprises. They do not maintain proper Books of Accounts and are not formally covered under taxation areas. Therefore, the banks find it difficult to lend to them. Majority of this sector does not access outside sources of finance.