Creating Digital Artisan-Entrepreneurs by Infusing Catalytic Capital
PUBLISHED
July, 2023
WORDS
Abhishek Gupta, Neetika Shree
India is home to diverse, exquisite craft traditions, passed down orally through generations. But the twin problems of access to market and affordable finance have plagued the entrepreneurial development of these artisans.
They are, thus, unable to rise up the value chain both in the domestic and export markets and are engaged in the form of a put-out systems-based work.
Lack of artisan-entrepreneurs in India
A cooperative federation of various artisans does not help derive better value; unlike mass produced goods like dairy products (where such a cooperative movement has been successful), artisan products are unique and cannot be compensated through a cooperative profit-sharing structure. Furthermore, common facility centres provided by the government require bureaucratic interventions which can be sub-optimum and do not offer market-based incentives.
Any catalytic intervention for enhancing the value chain prospects of the artisans has to be rooted in organic solutions emerging from the ground.
The focus has to be on identifying young artisans who can be groomed to become entrepreneurs and flourish as creative economy professionals leveraging digital technologies for promotion (social media), distribution (e-commerce) and financing working capital (Fintechs). Moreover, the support has to extend beyond the siloed approach of individual components like design intervention, inventory management and others, and move towards a more holistic process of entrepreneurship support.
Novel mechanisms like blended finance and catalytic capital allow for market-based solutions that can generate evidence and create a virtuous cycle.
Digital readiness gap currently faced by artisan-entrepreneurs
Ambitious artisan-entrepreneurs who are creatively empowered are unable to attract the right investors owing to the limited size and scale of their enterprise in addition to a massive awareness gap. Among other things, lack of digital skills greatly impedes access to markets for undertaking bulk production.
Catalyst AIC has been extensively researching the digital readiness of the artisan community. The data highlights that while artisans are highly familiar with digital applications like YouTube and WhatsApp, penetration of digital payment applications like Google Pay and PhonePe is abysmally low at 23%. There are negligible or very few artisans (2%) who use e-commerce platforms. Nearly 97% of them received orders through in-person visits by customers. A mere 16% of artisans received orders via social media platforms directly. When it comes to accessing financial services, 78% of artisans had never availed any kind of formal credit.
The information gap, further compounded by a lack of digital preparedness, also prevents them from leveraging any kind of artisan-centric MSME government schemes.
Catalyst AIC’s Digital Readiness Index (DRI) for artisans captures the need for digital upskilling to transition from a low-digital setup like informal non-digitised billing towards an entrepreneurial ecosystem encompassing online marketplaces, digital payments, appropriate inventory management systems, enhanced access to financial capital, and so on.
Access to the right market is key to the success of an entrepreneur’s endeavour. Catalytic capital can aid in risk-taking ability to strike a product-market fit with a critical mass of customers.
Catalytic capital, if injected at each stage of the value chain, will provide a full-stack digital makeover for the artisan entrepreneur’s enterprise to capture opportunities in both the domestic and export markets at appropriate price points. An alternate value chain (see Figure 1) which is digitalised at each touch point across an artisan-led continuum has the potential to transform and galvanise the Creative Manufacturing and Handmade (CMH) sector. Catalytic capital can bring in various specialist agencies for each node in the value chain.
Designing and hosting catalytic capital intervention
While there exist multiple programs focused on entrepreneurship in general, there have been very few focused investments towards formalising artisan-led businesses or towards creating first time entrepreneurs out of artisans to the point where these businesses can breakeven.
Blended finance supports high-risk, high-(social) return ventures.
It combines finances from different channels — public and private — via concessional or non-concessional types. The capital can facilitate the initial step of getting artisans established with registered private labels for their products. By having more artisans as entrepreneurs, the credit risk gets spread across the sector and helps attract more funds in the form of catalytic capital, reminiscent of the microfinance movement which became a safe asset class for global capital markets.
However, to achieve this, we need an anchor ecosystem participant for channelling catalytic capital and hosting the implementation agencies that provide technical support. The need is to direct capital towards artisans who are slightly better on the digital readiness score so as to train them in entrepreneurship and digitally capture a significant portion of the value chain.
The artisan economy is at a crucial inflection point today — poised to benefit from a digital transformation if suitable catalytic interventions are designed.
A flourishing artisan economy can accelerate India’s journey towards a sustainable, inclusive growth trajectory, while staying true to the country’s rich and diverse cultural heritage.
Abhishek Gupta
Abhsihek is a Research Manager at IFMR LEAD. He is currently leading a large-scale credit impact assessment project on small and growing businesses (SGBs) in India and a policy design project on digital transformation of MSMEs in the country. Abhishek has previously worked on a World Bank sponsored project with the Government of Uttar Pradesh on rejuvenation of traditional creative industries in the state.
Neetika Shree
Neetika is working as a Research Associate with Catalyst AIC, an incubation and innovation center for inclusive tech startups set up by IFMR with a grant from NITI Aayog’s Atal Innovation Mission. She currently provides research support to craft-based startups to create products that can plug critical pain points faced by artisans, such as market access, supply chain, upskilling, etc.
