Breaking News

Friday, October 26, 2018

ENTREPRENEURSHIP DEVELOPMENT NOTES: SHGs, EDPs AND LEADERSHIP


Unit – 3: SHGs, EDPs and Leadership
Concept of Self Help Group (SHGs)
A self help group is defined as a group consisting of people who have personal experience of a similar issue or life situation, either directly or through their family and friends. Sharing experiences enables them to give each other a unique quality of mutual support and to pool practical information and ways of coping.
Self help groups are small informal association of the poor created at the grass root level for the purpose of enabling members to reap economic benefits out of mutual help solidarity and joint responsibility. Self help groups are formed voluntarily by the rural and urban poor to save and contribute to a common fund to be lent to its members as per group decision and for working together for social and economic uplift of their families and community.
A self help group is defined as a "self governed, peer controlled information group of people with similar socio-economic background and having a desire to collectively perform common purpose."
Characteristics of SHG
Some of the important characteristics of SHGs as per the Govt. of India stipulation are as follows:
1.       As SHG may consist of 10-20 members.
2.       Social affinity of the members is a common characteristic. This means to say that each SHG is a group of homogeneous masses.
3.       All members of the group should belong to families below poverty line.
4.       The group shall not consist of more than one member from the same family.
5.       A person shall not be a member of more than one group.
6.       Group members create a common fund by contributing their small savings on regular basis.
7.       The groups evolve flexible systems of working and manage polled resources in a democratic manner.
8.       Groups consider the loan requirements of members in periodic meetings and competing claims on limited resources are settled by consensus.
9.       Loans are given on trust with minimum documentation and without any security.
10.   The loans are of small amount, issued frequently for short duration.
11.   The rate of interest varies from group to group and the purpose of the loan. It is higher than that of banks but lower than that of moneylenders.
12.   At periodic meetings, besides collecting money, social and economic issued are also discussed.
Objectives of SHGs
The concept of Self Help Group is initiated towards fulfillment of the following social objectives:
1.       To support economic freedom of the rural people living Below Poverty Line: The rural people are mostly poor and a large section of them lives Below Poverty Line (BPL). They lack adequate disposable income in their hands. As such, it is hoped, if these people are given adequate support to work and develop their own ventures through the creation of SHGs, a time will come when they will be able to change their economic conditions.
2.       To encourage poor rural folk in developing their habit of working in groups: Building of rural community with homogeneous groups of vulnerable sections of the society becomes essential to give them mental strength through the spirit of group work.
3.       To develop Entrepreneurial Culture among poor rural people: Entrepreneurial culture is grossly absent in our rural areas due to variety of causes. Introduction of the concept of SHG helps poor rural people to undertake income generating projects both at the individual level and at the group level. Thus, Entrepreneurial Culture is developed among poor rural people.
4.       To Help the vulnerable section of the society, who does not have access to institutional finance: Due to lack of collateral securities; most of the vulnerable sections of our society like women, SC, ST etc fail to get loans from financial institutions in doing any kind of business. Therefore, the SHGs are created to help such people in taking up small business ventures through micro-credit and government support.
5.       To develop the habit of thrift and saving among the poor rural people: Self help Groups are initially started through personal savings of the members in a pool of fund. This fund is used to help each member through the grant of small loans. Thus, the members are made to realize that it is their individual small savings which is helping them to prosper. This develops the habit of thrift and saving among the rural people.
6.       To empower the rural people both economically and socially: The rural people of India, more particularly the women and the other weaker sections like SC, ST are poor not only economically, but also socially. Once their economic status improves, they become strong socially also and working through GHGs considerably helps them in this direction.
7.       To develop the sense of social responsibility among the rural people: As SHGs are formed by the people of a particular village or its vicinity, these social groups serve the purpose of a platform to discuss about local problems and they voluntarily contribute to solve such problems as per their capacities. There are instances that the SHGs constructed rural roads contributing both physically and financially.
Need and Importance for SHGs
Self help groups are necessary to overcome exploitation, create confidence for the economic self-reliance of rural people, particularly among women who are mostly invisible in the social structure. These groups enable them to come together for common objective and gain strength from each other to deal with exploitation, which they are facing in several forms. A group becomes the basis for action and change. It also helps buildings of relationship for mutual trust between the promoting organization and the rural poor through constant contact and genuine efforts. Self help groups plays an important role in differentiating between consumer credit and production credit, analyzing the credit system for its implication and changes in economy, culture and social position of the target groups, providing easy access to credit and facilitating group/organization for effective control, ensuring repayments and continuity through group dynamics; setting visible norms for interest rates, repayment schedules, gestation period, extension, writing of bad debts; and assisting group members in getting access to the formal credit institutions. There are needs for SHGs which is specific terms are as under:
a)      To mobilize the resources of the individual members for their collective economic development.
b)      To uplift the living conditions of the poor.
c)       To create a habit of savings, utilization of local resources.
d)      To mobilize individual skills for group's interest.
e)      To create awareness about right.
f)       To assist the members financial at the rime of need.
g)      To identify problems, analyzing and finding solutions in the groups.
h)      To act as a media for socio-economic development of village.
i)        To develop linkage with institution of NGOs.
j)        To organize training for skill development.
k)      To help in recovery of loans.
l)        To gain mutual understanding, develop trust and self-confidence.
m)    To build up teamwork.
n)      To develop leadership qualities.
o)      To use it as an effective delivery channel for rural credit.
Functions of SHGs: The important functions of SHG are the following:
a)      Enabling members to become self-reliant and self-dependent.
b)      Providing a forum for members for discussing their social and economic problems.
c)       Enhancing the social status of members by virtue of their being members of the group.
d)      Providing a platform for members for exchange of idea.
e)      Developing and encouraging the decision making capacity of members.
f)       Fostering a spirit of mutual help and cooperation among members.
g)      Instilling in members a sense of strength and confidence which they need for solving their problems.
h)      Providing organizational strength to members.
i)        Providing literacy and increasing general awareness among members, and
j)        Promoting numerically and equipping the poor with basic skills required for understanding monetary transactions.
Provisions relating to Formation of SHGs
Following are the important points in the formation of SHG:
1.       Voluntary formation: As SHG is generally an economically and socially homogeneous group formed through a process of self election ideally with membership ranging between 10 and 20. Thus, villagers may volunteer to form the group with some common goal to be mutually benefitted.
2.       Homogeneity: They are homogeneous in the sense that a group may be formed of all women or all the members may belong to Scheduled Caste/Scheduled Tribe Community or a group of Physically Challenged persons or may be with members of any Minority Community.
3.       Proximity of Members: The members of a group are known to each other and live in the same village or in its vicinity.
4.       Registration not compulsory: As SHG may be a registered or an un registered group. However, the group can register itself either under the Societies Registration Act or under the State Cooperative Act or even under the Partnership Act.
5.       Managing Committee: Members of the group select a Managing Committee of 5 members which includes a President, a person responsible for Saving Administration, a person responsible for Loan Administration, a person responsible for Cash Book and a Controller.
6.       Formation by third party: SHGs can also be formed by Banks, NGOs or other social / charitable organizations. NABARD has given some guidelines in this regard and some important of them are pointed out below:
                     i.            Preliminary Survey: To understand the need of each family, such a survey of the households under the targeted village is very essential. The survey helps the SHG promoters to identify the families with homogeneous socio-economic status which can come together in SHGs.
                   ii.            Preliminary Meeting: Before formations of SHGs, a meeting with the community leaders and elders of the village should be convened. In this meeting, plan to form SHG with the purpose should clearly be explained. Support of these people is considered very essential to ensure community participation. Moreover, their support virtually gives acceptance to the project in the village.
                  iii.            Selection of Members to a group: For the purpose of selecting members to an SHG, the NABARD has developed 11 questions. Accordingly, before accepting as a member of a group, each prospective member is asked the following questions:
a)      Does the family have only one family member?
b)      Does the family bring drinking water from faraway place?

c)       Are the women compelled to go for in the open due to absence of latrine?
d)      Are there old illiterate members in the family?
e)      Is there any permanently ill member in the family?
f)       Are there children in the family who do not go to school?
g)      Is there a drug addict or a drunkard in the family?
h)      Is their house made of kaccha materials?
i)        Do they regularly borrow from moneylenders?
j)        Do they eat less than two meals a day?
k)      Do they belong to Scheduled Caste / Tribe?
After putting all these questions to the rural people, if the answer is affirmative (i.e. “yes”) to at least three or four of these questions, the family can be considered as poor and a person from that family can be accepted as a member of an SHG.
                 iv.            Start-up Meeting: After meeting with the community leaders and elders of the village, one member from each of the identified families should be invited in a meeting convened for the purpose on a separate date. The gathering should clearly be given detailed information regarding the purpose / benefits of a group, the working procedure, etc.
Working Procedure of SHGs
The SHGs follow certain specific working procedure. The procedure is developed in such a way that the villagers do not face any complicacy and the system makes them empowered as they learn while doing. Moreover, transparency and democratic values are given due weight age. Some important points in this score as follows:
1) Formation of Simple rule for operation: For smooth functioning of an SHG, certain simple basic rules and regulations are required. This should contain the following aspects:
a)      Common agreement of the members about formation of SHG and its functioning through the adoption of basic rules and regulations.
b)      Decision on time and place of meetings.
c)       Agreed penalties for non-attendance of meetings by any member.
d)      Agreement on amount of savings by the members.
e)      Giving small loans to the members.
f)       Taking loans from bank.
g)      Procedure for repayment of loans taken by members, etc.
2) Meeting of the Group: Meeting of the group members on regular intervals is very essential to get up-to-date information about the working of the group, make the members active, keep the group in working condition, and resolve the issues pertaining to the members and the group.
3) Mandatory participation of members in Meetings: Participation of all members in the group meetings is compulsory and absence attracts penalty of an agreed amount.
4) Frequency of the Meeting: Ideally, every group should meet once in a week on routine basis. In addition to this, there may be need based meetings of the group.
5) Agenda of the meeting: In each of the weekly meetings there are some mandatory items of the agenda. These relate to collection of members’ savings, repayment of loans by the borrowers, payment of penalties for defaults by the members and grant of fresh loans. In addition to these, the group discusses and tries to find solutions to the problems faced by the members of the group. The up-to-date financial condition of the group is also presented in the meeting.
6) Maintenance of proper accounts: Books and accounts are maintained to promote transparency and accountability within the SHG and the external world. For this purpose, competent group members are entrusted. If no member is able to maintain the books, someone should be engaged by the group for the purpose.
7) Books of accounts and Registers to be maintained: Simple and clear books for all transactions should be maintained. The following books are records are usually maintained by an SHG:
a)      Minute Book: Proceedings of the meetings, rules of the group, names of the members, etc are recorded in this book.
b)      Savings and Loan Register: This register shows the savings of the members separately and of the group as whole. Details of the individual loans, repayments, interest collected, balance, etc are recorded here.
c)       Weekly Register: This register presents summery of the receipts and payment on weekly basis. This is up-dated in every weekly meeting.
d)      Cash Book: A cash book records all the receipts and payments of the fund which reflects the total amount available in the fund on a particular date.
8)      Opening of Bank Account: Soon after the SHG is formed and one or two meetings held, where the savings are collected, a saving bank account is opened in the name of the SHG. Reserve Bank of India has issued instructions to all commercial banks and Regional Rural Banks, permitting them to open Saving Bank Accounts of registered or un-registered SHGs.  For opening bank accounts the following documents are required to be submitted to the bank
a)      Resolution of the SHG: The SHG has to pass a resolution in its group meeting, signed by all members, indicating their decision to open a Saving Bank A/C with the bank branch. The resolution should be filed with the bank in a manner so required.
b)      Authorization from the SHG: The SHG should authorize at least three members, only two of whom to jointly operate upon their account. The resolution along with the filled in application form duly introduced by the promoter may be filled with the bank branch.
c)       Copy of the Rules and Regulations of the SHG: This is not a must. If the group has not formulated such rules and regulations, loans can be sanctioned even without them.
9)      Conduct of Internal lending by the SHG: After saving for a minimum period of 2 to 3 months, the common saving fund shall be used by the SHG for lending to its own members. Lending can be for any purpose. However, productive use of borrowed fund, more particularly for investment in income generating project is encouraged.
Funding Procedure of SHGs
The fund is owned by the group and consists of savings of the members. The fund is used to make short-term loans with interest to the members. The profit of the fund (i.e. interest on loan plus fines) is divided to the members of the group at the end of the year. Apart from the fund generated by an SHG through the small savings of its members on regular basis, it acquires funds through other sources as follows:
a)      Bank Linkage: The NABARD initiated three models under the Bank-SHG linkage programme. There are:
Model I: SHGs formed and financed by banks. In this model banks themselves take up the work of forming and nurturing the groups, opening their saving accounts and providing them bank loans.
Model II: SHGs formed by formal agencies (NGOs/Voluntary Associations) other than banks, but directly financed by banks.
Model III: SHGs financed by banks, using NGOs and other agencies as financial intermediaries. In areas where the formal banking system faces constraints, the NGOs are encouraged to approach a suitable bank for bulk loan assistance. This in turn, is used by the NGO for lending to the SHGs.

b)      Revolving Fund: Every SHG which is in existence at least for a period of six months and which has demonstrated the potential of a viable group through regular savings and active participation of members, pass through a scanning to be qualified for first grading to kick-start lending activity by bank, gets Revolving Fund of Rs. 25,000 from bank as cash-credit facility. Of this, a sum of Rs. 15,000 is given to the bank by the District Rural Development Agency (DRDA). Bank may charge interest only on the sum exceeding Rs. 15,000.  The Revolving Fund is provided to the group for augmenting their group corpus so as to enable larger number of members to avail loan and also to facilitate increase in the per capita loan available to the members.
c)       Bank Loan for Economic Activities: Once an SHG receives Revolving Fund, its activities are closely monitored by the bank with regard to usage of the fund, financial discipline, account keeping; and once again graded. This second grading revolves around financial management of the funds provided. The concerned bank and the DRDA take active part in grading exercise of the SHG. After the second grading, the successful groups become eligible for bank financing for undertaking economic activities. The bank loan is generally payable as per the project cost; in addition to other considerations like the size of internal resource generated by the SHG, activities of the members, type of project taken up by the group and its members, etc.
d)      Capital Subsidy: The Govt. of India, through the Ministry of Rural Development, grants Capital Subsidy of Rs. 15,000 to each of the members of a group belonging to the general category and Rs. 20,000 to ST/SC and people with disabilities. In addition to this, each of the SHG groups gets Rs. 20,000 per capital subject to a maximum of Rs. 2.5 lakh, whichever is less.
e)      Interest Subsidy: This is another mode of funding SHGs. This was announced under the Government of India’s National Rural Livelihood Mission (NRLM) in 2011. Under this scheme, subsidy on interest rate above 7%, per annum charged by the bank is given for all SHG loans availed from banks, based on prompt payment. This subsidy is provided to individual beneficiary or SHG member till he/she has availed a bank loan up to an amount of Rs. 1 lakh. However, this subsidy is not available on such occasions when the SHG is availing Capital Subsidy.
Problems of SHGs movement in India and measures to improve it
Problems of SHGs: Though the SHG movement in India has gained momentum in some parts of the country and has become successful particularly in the southern states, has failed miserably in most of the other states. Several studies have identified a host of problems; some are localized, while some others are general for the country as a whole. A few important general problems which stand in the way of efficient functioning of the SHG are as follows:
1.       Limited Financial strength hence limited Borrowing Capacity: The financial corpus generated by the SHGs out of the meager contribution of the members is generally small. This considerably limits the borrowing capacity of the groups. As a result, the volume of business also considerably limited.
2.       Marketing of products poses a major challenge for SHGs: A serious problem of the SHGs is that there is lack of innovation among members; most of the SHG members are the followers of what others do. As a result, too many units of similar type crop up in the same area. This results in marketing disadvantage for most of the groups and their members.
3.       Consumers’ reluctance to buy SHG products when the products produced by MNCs are available in the market: Another serious challenge faced by the SHGs is the competition from Multi-National Companies (MNCs). When products of MNCs are available in the market, even sometime at cheaper cost, people in general discard the products of SHGs.
4.       Lack of Professionalism as the members are less qualified: Poor academic attainment of the SHG members also stands heavily in the way of efficient working of the groups in most cases. When an income generating project is operated, the SHG members are entrepreneurs and as such, they are expected to behave with professional attitude. Such trait is grossly missing with most of the SHG members.
Measures for improvement: A few suggestions for improvement in the working of SHGs are noted as follows:
1.       Selecting right products: If SHGs are to survive in the long-run, selecting the right type of products which have high market demand should be produced. The situation may even call for changing the products mix, colour, packaging, etc from time-to-time depending upon the changing market needs.
2.       Need for Cluster Approach: To withstand competition with the products of MNCs, SHGs producing similar products may resort to cluster approach and sell their products under a common brand name. This will considerably help them to gain marketing strength by expanding the market to distant places in urban areas where traditional products are highly welcomed by some section of consumers.
3.       Include qualified persons in Management: Where the SHG members lack adequate academic qualification to do with their business in right earnest, one qualified person to take care of the matters may be hired when the business takes a good shape. This will considerably help to augment the business.
4.       Undergoing proper training in Business Management: The SHG members, wherever possible, should undergo proper training in Business Management with the intervention of the NGOs and banks.
ENTREPRENEURIAL DEVELOPMENT PROGRAMME (EDP)
Entrepreneurial Development Programme (EDP) can be defined as a programme, formally designed to help an individual in strengthening his/her entrepreneurial motive and in acquiring skill and capabilities necessary for playing entrepreneurial role effectively. In fact, it is an academic exercise to build up human resources by including them to take up entrepreneurial activities through motivation and developing the required entrepreneurial skills through exposure creation to effectively manage their enterprises. According to N.P. Singh, EDP is not merely a training programme. It is a process of:
a)      Enhancing and motivation, knowledge and skills of the potential entrepreneurs;
b)      Arousing and reforming the entrepreneurial behavior in their day-to-day activities; and
c)       Assisting them develop their own ventures or enterprise as a sequel to entrepreneurial action.
Thus, EDPs endeavous to change educate and equip a person to become a successful entrepreneur. The whole process envisages developing the participant’s latent qualities and skills as also equipping him with other capabilities. By the end of the programme, the participant is expected to be in a position to crystalise his vision in to action and launch and manage his enterprise with competence. The system involves a selection procedure and only those who prove to have certain minimum initial traits are selected as potential entrepreneurs to be trained up to develop the other required traits through interventions.
Objectives of EDP: The major objectives of the Entrepreneurship Development Programmes (EDPs) are to:
a)      Develop and strengthen the entrepreneurial quality, i.e. motivation or need for achievement.
b)      Analyse environmental set up relating to small industry and small business.
c)       Select the product.
d)      Formulate proposal for the product.
e)      Understand the process and procedure involved in setting up a small enterprise.
f)       Know the sources of help and support available for starting a small scale industry.
g)      Acquire the necessary managerial skills required to run a small-scale industry.
h)      Know the pros and cons in becoming an entrepreneur.
i)        Appreciate the needed entrepreneurial discipline.
j)        Besides, some of the other important objectives of the EDPs are to:
k)      Let the entrepreneur himself / herself set or reset objectives for his / her enterprise and strive for their realization.
l)        Prepare him / her to accept the uncertainty in running a business.
m)    Enable him / her to take decisions.
n)      Enable to communicate clearly and effectively.
o)      Develop a broad vision about the business.
p)      Make him subscribe to the industrial democracy.
q)      Develop passion for integrity and honesty.
r)       Make him learn compliance with law.
Need and Importance of EDP
Importance of entrepreneurship development programme (EDP) is to enable entrepreneurs initiating and sustaining the process of economic development in the following ways:
1.Creation of Employment Opportunities: Unemployment is one of the most important problems confronting developing and underdevelopment countries, EDP’s enable prospective entrepreneurs in the setting up of their own units, thus enabling them to get self employment. With the setting up of more and more units by entrepreneurs, both on small and large scale, numerous job opportunities are created for the others.
2. Capital Formation: It is not possible to set up an enterprise without adequate funds. Entrepreneur as an organizer of factors of production employs his own as well as borrowed resources for the setting up of his enterprise. Entrepreneur mobilizes idle savings of the public and put them to productive use. In this way he helps in capital formation, which is so essential for the industrial and economic development of a country. Various development banks like ICICI, IFCI, IDBI; SFCs, SIDCs take initiative in promoting entrepreneurship through assistance to various agencies involved in EDP and by providing financial assistance to new entrepreneurs.
3.Balanced Regional Development: Small scale units can be set up in industrially backward and remote areas with limited financial resources. Successful EDP’s assisted in accelerating the pace of industrialization in the backward areas and reduces the concentration of economic power in the hands of a few. Setting up of more units leads to more development of backward areas and balanced regional development.
4. Use of Local Resources: In the absence of any initiative local resources are likely to remain unutilized. Proper use of these resources can result in the progress or development of the area and that too at lower cost. Effective EDPs can help in the proper use of local resources by providing guidance, assistance, education and training to the prospective entrepreneurs.
5.Improvement in per Capital Income: Entrepreneurs are always on the lookout for opportunities. They explore and exploit the opportunities. Entrepreneurs take lead in organizing various factors of production by putting them into productive use through the setting up of enterprises. More enterprises will lead to more production, employment and generation of wealth in the form of goods and services. It will result in the increase in the overall productivity and per capita income in the country. EDPs play a positive role in the setting of more units and thus help in generation of more employment and income.
6.Improvement in the Standard of Living: Entrepreneurs by adopting latest innovations help in the production of wide variety of goods & services. By making efficient use of the resources, they start producing more of better quality and that too at lower costs. This enable them to ensure easy availability of better quality products at lower prices to the consumers which result in the improvement in the standard of living of the people.
7.Economic Independence: Entrepreneurs enable a country to produce wide variety of better quality goods & services and that too at competitive prices. They develop substitutes of the goods being imported and thus prevent over-dependence on foreign countries and at the same time help in the saving of precious foreign exchange. Through sale of their surplus products in foreign market entrepreneurs enable a country to earn foreign exchange, which is so essential for meeting developmental needs of the economy. Export promotion and import substitution thus help in promoting economic independence of the economy.
8.Preventing Industrial Slums: Industrially developed areas are faced with problem of industrial slums, which result in over burdening of civic amenities and adverse impact on the health of people. Dispersal of industries can help in the overcoming of this grave problem. EDPs can help in preventing spread of industrial slums by providing various incentives, subsidies and infrastructural support to entrepreneurs for setting up their enterprises in industrially backward areas. This will also help in reducing pollution and overtaxing of civic amenities.


9. Helps in searching and exploiting opportunities: There are many opportunities for entrepreneurs in various fields like-Electronics, medicine, engineering, agriculture, food technology and packing, communication etc. EDPs help in searching such opportunities and provide necessary information, guidance and assistance in the search and exploiting these opportunities.
10. Enhancing managerial abilities: Entrepreneur development programmes help the entrepreneurs to enhance their organizing and managerial abilities so that they can run their enterprise efficiently and successfully. This is done through organizing educational, management, training and orientation programmes. Various specialized agencies like National Institute for Entrepreneurship and small Business Development(NIESBUD),New Delhi and Entrepreneurship Development Institute of India(EDII), Ahmadabad are engaged in entrepreneurship programmes.
Weakness and Problems of entrepreneurship development programmes (EDPs) in India
1. No Policy at the National Level. Though Government of India is fully aware about the importance of entrepreneurial development, yet we do not have a national policy on entrepreneurship. It is expected that the government will formulate and enforce a policy aimed at promoting balanced regional development of various areas through promotion of entrepreneurship.
2. Problems at the Pre training Phase. Various problems faced in this phase are — identification of business opportunities, finding & locating target group, selection of trainee & trainers etc.
3. Over Estimation of Trainees. Under EDPs it is assumed that the trainees have aptitude for self employment and training will motivate and enable the trainees in the successful setting up and managing of their enterprises. These agencies thus overestimate the aptitude and capabilities of the educated youth. Thus on one hand the EDPs do not impart sufficient training and on the other financial institutions are not prepared to finance these risky enterprises set up by the not so competent entrepreneurs.
4. Duration of EDPs. An attempt is made during the conduct of EDPs to prepare prospective entrepreneurs thoroughly for the various problems they will be encountering during the setting up and running of their enterprises. Duration of most of these EDPs varies between 4 to 6 weeks, which is too short a period to instill basic managerial skills in the entrepreneurs. Thus the very objective to develop and strengthen entrepreneurial qualities and motivation is defeated.
5. Non Availability of Infrastructural Facilities. No prior planning is done for the conduct of EDPs. EDPs conducted in rural and backward areas lack infrastructural facilities like proper class room suitable guest speakers, boarding and lodging etc.
6. Improper Methodology. The course contents are not standardized and most of the agencies engaged in EDPs are themselves not fully clear about what they are supposed to do for the attainment of pre-determined goals. This puts a question mark on the utility of these programmes.
7. Mode of Selection. There is no uniform procedure adopted by various agencies for the identification of prospective entrepreneurs. Organisations conducting EDPs prefer those persons who have some project ideas of their own and thus this opportunity is not provided to all the interested candidates.
8. Non Availability of Competent Faculty. Firstly there is problem of non availability of competent teachers and even when they are available, they are not prepared to take classes in small towns and backward areas. This naturally creates problems for the agencies conducting EDP.
9. Poor Response of Financial Institutions. Entrepreneurs are not able to offer collateral security for the grant of loans. Banks are not prepared to play with the public money and hence they impose various conditions for the grant of loans. Those entrepreneurs who fail to comply with the conditions are not able to get loan and hence their dream of setting up their own enterprises is shattered. Helpful attitude of lending institutions will go a long way in stimulating entrepreneurial climate.
Skill development programme
Skill development and vocational training programs are conceptualized, executed and monitored by various organizations, working closely with the government of India. There are various plans and schemes that are dedicated to achieve scalable skilling with quality and higher productivity, particularly in the unorganized  or informal sector which accounts for  83% of India’s workforce. The Ministry of Skill Development and Entrepreneurship (MSDE) is responsible for the co-ordination of overall skill development efforts across the country, building the vocational and technical training framework, skill up-gradation, building of new skills, and innovative thinking not only for existing jobs but also jobs that are to be created.
Introduction: Leadership
Leadership is the ability to build up confidence and deal among people and to create an urge in them to be led. To be a successful leader, a manager must possess the qualities of foresight, drive, initiative, self-confidence and personal integrity. Different situations may demand different types of leadership.
Leadership means influencing the behaviour of the people at work towards realizing the specified goals. It is the ability to use non-coercive (no force) influence on the motivation, activities and goals (MAG) of others in order to achieve the objectives of the organisation.
Koontz and 0' Donnel “Leadership is the ability of a manager to induce subordinates to work with confidence and zeal”.
George R Terry “Leadership is the activity of influencing people to strive willingly for group objectives”.
Why Entrepreneurs need Leadership Qualities?
It seems that everyone has their own ideas about what makes a successful entrepreneur. For some, the most important qualities are persistence and a high degree of tolerance for risk. For others, entrepreneurs need to be good communicators above all else, or have excellent financial management skills. Some claim that a solid vision is the most important trait, but regardless of what they believe to be most important, nearly everyone agrees that leadership is a vital skill for all business owners.
In any business, whether a small startup or a thriving mid-size company well on its way to becoming a major enterprise, leaders are an integral part of formulating and articulating the company’s direction, setting goals, and motivating employees to work toward the same goals. In other words, a leader’s priorities are the same as any entrepreneur’s priorities.
However, just because being a good leader can help you be a more successful entrepreneur, doesn’t mean that all entrepreneurs are good leaders. In fact, research shows that the majority of entrepreneurs who were able to take their enterprises public actually failed as CEOs, indicating that the leadership skills that were are useful in getting a company off the ground are not always the same as those required to lead the company as it grows. That being said, entrepreneurial leadership is clearly important if a business owner wants to successfully grow and manage their company.
Often, developing entrepreneurial leadership skills first requires investing time in advanced education and additional training, especially formal leadership courses. But however you choose to grow your skills though, it’s important to focus on a few key areas.
Leadership Styles or Types of Leaders
1.       Autocratic or Authoritarian Style leader: An autocratic also known as authoritarian style of leadership implies wielding absolute power. Under this style, the leader expects complete obedience from his subordinates and all decision-making power is centralized in the leader. No suggestions or initiative from subordinates is entertained. The leader forces the subordinates to obey him without questioning. An autocratic leader is, in fact, no leader. He is merely the formal head of the organization and is generally disliked by the subordinates who feel comfortable to depend completely on the leader.
2.       Laissez-faire or Free-rein Style Leader: Under this type of leadership, maximum freedom is allowed to subordinates. They are given free hand in deciding their own policies and methods and to make independent decisions. The leader provides help only when required by his subordinates otherwise he does not interfere in their work. The style of leadership creates self-confidence in the workers and provides them an opportunity to develop their talents. But it may not work under all situations with all the workers, may bring problems of indiscipline. Such leadership can be employed with success where workers are competent, sincere and self-disciplined. Free-rein leadership style is appropriate when:
(1) The goals of an institution have been communicated well and are acceptable to the subordinates.
(2) Subordinates are highly knowledgeable, motivated, well-trained and psycho-socially mature. They are ready to assume responsibility. This style could lead to self-interest among subordinates, chaos and break-down of the system.
Problems with free-rein theory
1.       Not ideal in situations where group members lack the knowledge or experience they need to complete tasks and make decisions.
2.       Some people are not good at setting their own deadlines, managing their own projects and solving problems on their own.
3.       Lack of feedback
4.       Miscommunication among managers and group members
3.       Democratic or Participative Style leader: The democratic or participative style of leadership implies compromise between the two extremes of autocratic and laissez-fair style of leadership. Under this style, the supervisor acts according to the mutual consent and the decisions reached after consulting the subordinates. Subordinates are encouraged to make suggestions and take initiative. It provides necessary motivation to the workers by ensuring their participation and acceptance of work methods. Mutual trust and confidence is also created resulting in job satisfaction and improved morale of workers. It reduces the number of complaints, employee's grievances, industrial unrest and strikes. But this style of leadership may sometimes cause delay in decisions and lead to indiscipline in workers.
4.       Paternalistic Style leader: This style of leadership is based upon sentiments and emotions of people. A paternalistic leader is like a father to these subordinates. He looks after the subordinates like a father looks after his family. He helps guides and protects all of his subordinates but under him no one grows. The subordinates become dependent upon the leader.
Qualities of a Good Leader
1.       Patience: Patience is the capacity to face difficult situations, hardships or inconvenience without making a single complaint. It is the ability to wait calmly for something to happen without complaining or giving up or getting angry. Patience requires Calmness, Self-Control, Willingness or Ability to tolerate delay. A good leader must show patience while waiting for expected results, facing difficult situations and taking important decisions. He must avoid taking hasty decisions and actions.
2.       Good Personality: A good personality is a combination of physical, mental and social qualities. Good personality helps a leader to influence his followers. Attractive physique and good manners add an advantage to the leader's personality.
3.       Self-confidence: A good leader must have self confidence. This quality is necessary for facing challenging situations and for solving problems easily and effectively.
4.       Human Skills: A good leader must have essential social and human skills. That is, he must understand people. This quality is necessary for dealing with different types of persons and social groups.
5.       Judgment skills: A good leader should be able to examine problems in right perspective. His judgment and decision making abilities should be superior to others. He should be able to form opinions and judge based on facts and not be prejudiced
6.       Communication skills: A good leader should be able to communicate the goals and procedures of the organisation clearly, precisely and effectively to the subordinates. Only then will it be possible for him to convince, persuade and stimulate subordinates to action.
7.       Listening skills: People tend to avoid a leader who does not listen. Hence a good leader in one who can listen to other peoples problems. He should be able to create a culture whereby people can be frank with him and give him information and also give him feedback about himself, which can help him to improve himself.
8.       Inspiring skills: A good leader should be able to inspire people to deal with the “why” question. He should not just command and control but be able to lead the people and get them involved to work together as a team.
9.       Administrative Skills: A good leader must have an administrative ability. This means, he must be able to get the work done through his followers. He must know how to plan, organize and control the work of his followers.
10.   Discipline: A good leader must be a disciplined person. This means he must have respect for the rule and regulations of the organisation. This is because his followers will follow his example.
11.   Initiative: A good leader must always take an initiative. This means he should do the right thing at the right time without being told by others. He must be able to construct and implement his own plan.
12.   Intelligence: A good leader must be smart and intelligent. That is, he should have a good educational background and sound technical knowledge. He should be more intelligent than his followers. If not, his followers will not respect him. This will have a bad effect on his performance.
13.   Innovative:  A good leader must have an art of innovation. That is, he must have a good imagination and visualization skills. He must develop new ideas and tactics to solve problems. He must combine the new ideas with the old ideas.
Theories of Leadership
The Trait Theory: This approach represents the earliest notions of leadership and until up to three decades ago this approach was very popular. According to this theory, there are certain personal qualities and traits which are essential to be a successful leader. The advocates of this theory are of the opinion that persons who are leaders are psychologically better adjusted to display better judgement and to engage themselves in social activities. Ordway Tead has given a list of ten qualities.
a)      physical and nervous energy
b)      a sense of purpose and direction
c)       enthusiasm
d)      friendliness and affection
e)      integrity
f)       technical mastery
g)      decisiveness
h)      intelligence
i)        teaching skill
j)        faith
According to Hill, "Courage, self-confidence, morale qualities, self sacrifice, paternalism, fairness, initiative, decisiveness, dignity and knowledge of man are all essential qualities of a leader."
Stogdill classified the leadership qualities under six heads: capacity, achievement, responsibility, participation, status and situation.
But the trait theory has many shortcomings, and has been generally criticized on the following grounds:
1.       Various studies prove that the trait theory cannot hold good for all sets of circumstances.
2.       The list of trait is not uniform and different authors have give lists of different traits.
3.       It fails to take into account the influence of other factors on leadership.
4.       The theory fails to indicate the comparative importance of different traits.
5.       There are many persons who have been outstanding leaders in business although they have been humour less, narrow-minded, unjust and authoritarian. In the same manner, there have been many persons who were not good leaders although they had traits as specified for leaders.
The Behavioural Theory: The short comings of the trait theory led to a significant change in the emphasis of leadership approach. This shift in emphasis began to focus an attention on the actual behaviour and actions of leaders as against personal qualities or traits of leaders. According to his approach, leadership involves an interpersonal relationship between a leader and subordinates in which the behaviour of the leader towards the subordinates constitutes the most critical element. The good behaviour of the leader raises the morale, builds up confidence and spirit among the team members and the lack of good behaviour will discard him as a leader.
But the behavioural theories also suffer from certain limitations, e.g., what constitutes the most effective style of leadership behaviour? Moreover, a particular behaviour or action of a leader may be effective at one point of time while the same may be ineffective in some other point of time and in some other circumstances.
The Situational Theories: The situational theories emphasize not on personal qualities or traits of a leader, but upon the situation in which he operates. The advocates of this approach believe that leadership is greatly affected by a situation and maintain that leadership pattern is the product of situation at a particular time. A good leader is one who moulds himself according to the needs of a given situation.
The situational theory of leadership suffers from the drawback that it fails to consider the fact that in the complex process of leadership, individual qualities and traits of the leader also play an important role. In the words of Thomas Gordon, "Situationist has overlooked the possibility that some traits influence their possessors to attain leadership success and some others increase the chances of their becoming leaders.
The Follower Theory: The shortcomings of the Trait Theory, the Behavioural Theory, and the Situational Theory influenced certain researchers to focus their attention on the followers. According to this theory the essence of leadership is follower ship and it is the willingness of people to follow that makes a person a leader. The members of a group tend to follow only those whom they recognize as providing means for achieving their personal desires, wants and needs.
Like all other theories, the Follower Theory also sounds well but it also represents only one sided view. The best ting will be to integrate the various theories to study leadership pattern. To conclude, we can say that effective leadership depends on the traits of the leader, situation and the type of the followers.

No comments:

Post a comment

Kindly give your valuable feedback to improve this website.

Popular Posts for the Day