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Credit disbursements to dalit entrepreneurs drops 33.8% this fiscal by Divya Rajagopal

Lack of adequate credit - the lifeblood for any company is threatening to derail fledgling attempts by hundreds of dalit entrepreneurs to overcome deep socio-economic barriers and break into mainstream business. 

Without credit, such entrepreneurs would also struggle to cash-in on the Rs 7,000-crore business opportunity opened up by the central government's new dalit-friendly sourcing plan, unveiled last month. 

Credit disbursements to dalit entrepreneurs through 20-odd schemes run by the Ministry of Social Justice have dropped 33.8% to Rs1,670 crore between April and October this financial year, according to data released by the Reserve Bank of India. 

The ministry had lent Rs2,524 crore to companies run by members of scheduled castes and tribes during the same period last year. Though data on bank loans to dalit entrepreneurs are not available, evidence suggests the trend may not be any different there too. 

Last month, the Ministry of Micro, Small and Medium Enterprises mandated 4% of government purchases be made from units run by dalits and tribals. 

According to government estimates, central government procurement from small enterprises is expected to be worth Rs35,000 crore annually, of which Rs7,000 crore will go to SCs/STs. (This scheme is similar to the affirmative action in the US where the Federal government procures 30% of its materials from minority communities of Afro Americans and Latinos.) 

The dip in credit availability has marred an otherwise tumultuous year for dalit enterprises. In 2011, about a hundred such men and women running successful businesses formed the Dalit Indian Chamber of Commerce and Industries (DCCI), a lobby to nurture entrepreneurship; the body is growing in recognition and clout and is now putting together a Rs500-crore venture capital fund. 

A series of stories done by The ET earlier this year profiled a dozen such dalit businessmen who had built large companies. But credit problems still continue to haunt dalit entrepreneurs, even more so than other businessmen, members of the community claim. 

"It has become just too difficult to apply for loans from the SC/ST lending organisations," says Milind Kamble, chairman, Dalit Chamber of Commerce and Industries. Delays and stringent collateral norms add to the borrowers' woes, and even if you manage to pass through these hurdles, it takes minimum one year for loan to get cleared, Kamble says. 

"As a businessman I have a certain time limit for my projects, I cannot wait endlessly." "Access to credit for a dalit remains one of the biggest hurdles," adds Kalpana Saroj, managing director, Kamini Tubes and one of the earliest dalit entrepreneurs. 

"It was just too difficult to get a loan, I almost gave up (seven years ago)," she says. It took her six months just to get a certificate that made her eligible to access these loans as a dalit. Things haven't improved much since then. 

Disbursement from many schemes - crafted intentionally to provide credit to dalit businessmen - is slowing down. 'The Special Component' plan floated by the Ministry of Social Justice is one example. Under this scheme, a group of 15 members are eligible to receive a loan up to Rs7 crore. 

The members form a co-operative society and the loan is given to that society. But in the last one year, over 125 applications are pending, because of 'shortage of funds', Kamble claims. 

Similarly, dalit entrepreneurs are entitled to get loans up to Rs30 lakh under the National Schedule Caste Finance and Development Corporation, but only if they get a guarantee from government servants. 

"There is no access to credit for those who have no money," says Arun Khobargade, MD, RAS Frozen Foods, a Rs 20-crore firm. Khobargade, a member of the Dalit Chamber, has been lobbying for easier lending norms and higher credit limits. 

Khobargade says the quantum of loans given by the NSFDC is too low to start a business. And nationalised banks lend to small business only on the basis of credit ratings. And for someone starting a new business, getting a rating is not always possible. 

Swwapnil Bhingardevay, who runs an LPG distribution business in Pune, alleges an inherent bias among the lenders. "They won't say it to your face, but there is an unwritten policy against sanctioning loans of dalit applicants," alleges Bhingardevay. 

"The banks feel what would a dalit know about the business, and this attitude prevails in smaller towns, irrespective of what the policies or guidelines suggest," he claims. He came to this conclusion when a loan request to set up an ethanol factory was turned down by a public sector bank in Pune. 

He finally managed to raise funds from Karad Urban Cooperative Bank. He claims this came through because the bank's head was from his community. Banks typically lend to only those dalit business, which symbolises their caste identity, says Aseem Prakash of Institute of Human Development, a think tank. 

Hence someone who has tanning business might find it easier to get a loan, than an entrepreneur who wants to start a coaching class. PSU banks say that they would never deny loans to any genuine borrower. 

"If the priority sector loans have come down, it's because of the farm loan waivers, but we have never denied loan to the needy," says A A Taj, Executive Director, Andhra Bank. Bureaucrats like Dinesh Waghmare, secretary, Ministry of Social Justice, say that mere improvement of credit access will not solve the problem. 

"There is a need to develop a market for dalit entrepreneurs," says Waghmare. The government's new dalit-friendly sourcing policy is a step in that direction.