Csr for Smes

CSR for MSMEs

Micro, small and medium enterprises (MSMEs) play an important role in contribution to India’s economic growth. These units serve as ancillary to large units and contribute enormously to employment generation and industrialization of rural and backward regions of India. They employ nearly 40% of India’s workforce and contribute 45% to India’s manufacturing output. The business activities of MSMEs are performed in close proximity to the local population, enabling them to be better aware of community needs and also appropriately placed to develop CSR programs to manage expectations.

MSMEs are being treated separately because of the peculiarities of this set of enterprises. The CSR activities of these enterprises are mostly driven by the personal idiosyncrasies and interests of the promoters. MSMEs are clustered around a region and engage in a similar set of business activities. A majority of MSMEs also have similar financial turnovers. While the quantum of revenue available for CSR with individual MSMEs is expected to be small, MSMEs could pool their resources to create a sizeable CSR fund. Geographic and business proximity of MSMEs would play an important role in the fostering such a collaboration. This section analyzes the option of undertaking CSR activities through collaboration by MSMEs. This collaboration could also be leveraged by other companies in maximizing the impact of their CSR initiatives while reducing operational cost of fund management.

Undertaking CSR through collaboration

Against the popular perceptions that CSR is for large corporates, SMEs in India have participated in CSR activities but these efforts have not delivered the desired level of satisfaction. One possible reason of this low level of satisfaction could be the fact that CSR activities depend upon the profits of a SME and any fluctuations in fortunes of a SME, also adversely affects the CSR activities. Another reason for this dissatisfaction could be the lack of a...