Monthly Archives

August 2018

How do opportunity entrepreneurs differ from necessity entrepreneurs? 

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Transforming Micro Financing 24X7
Unsecured loans to 'no-file' micro enterprises


What do you say - How do opportunity entrepreneurs differ from necessity entrepreneur? 


Imagine being a senior bureaucrat in planning commission which is formulating a policy for addressing the mentoring and credit needs of micro-entrepreneurs.  

Would your policy be targeted towards opportunity entrepreneurs or necessity entrepreneurs or both? If both, how and why?  

Experience indicates that needs, personalities, traits, behavior, habits and abilities of opportunity entrepreneurs differ significantly from that of necessity entrepreneurs. In fact, both can be categorized as opposites. One standard policy cannot and should not target both at one go. Let’s delve deeper into differences – 
 
   
Appetite for risk and leverage

Opportunity entrepreneurs have significantly higher risk appetite than necessity entrepreneurs. By nature, opportunity entrepreneurs are adept at taking calculated risks driven by intuition while necessity entrepreneurs are averse to uncertainty and risk.
Opportunity entrepreneurs also have high propensity for leverage. They do not mind taking heavy debt for growth and achieving their ambitions. On the other hand, necessity entrepreneurs are averse to leverage. 


Largeness of vision and predictive capability
Opportunity entrepreneurs are known for large vision and ‘the need to achieve’. They are driven individuals with ambitions to scale and grow steadily: from 0 --> X, from X--> X++ and from X --> Y. On the other hand, necessity entrepreneurs are typically satisfied with either a chance to marginally exploit the high season or the status quo.
Opportunity entrepreneurs also have sophisticated intuition of predicting the size of market and therefore, the opportunity. Necessity entrepreneurs on the other hand go by very rational  approach of surviving the competition.
 
   
Openness to innovation

Opportunity entrepreneurs have high propensity for innovation which pushes the market forward. On the other hand, necessity entrepreneurs are best manifestations of ‘herd behavior’. Necessity entrepreneurs don’t like to experiment/ innovate and are more comfortable in following the already established models.
What do you say - How do opportunity entrepreneurs differ from necessity entrepreneurs? We would love to hear your feedback.
About Us: IMV facilitates loans to MSME and small scale industries in India through partner microfinance institutions, NBFCs and SFBs. IMV’s sister concern, Enable Livelihoods Foundation which is a social enterprise, has vast experience of working in space of rural development, skill development and social entrepreneurship. The founders, themselves being social entrepreneurs in India, have authored several publications on microenterprise and entrepreneurship.

Contact us

Pranay Bhargava
CEO & Founder
www.impaact.in
pranay@impaact.in
+91 9848748364
 

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Social investor Village Capital to back two fintech startups

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Impact Micro Ventures and mPokket – both early-stage fintech startups – will receive offers of $50,000 (Rs 32.5 lakh) each from US-headquartered venture capital firm Village Capital.

The startups were selected at the end of an India-focused investment-readiness programme run by Village Capital with support from Paypal, BlackRock and FMO.

Village Capital Offers $50K Investment to Two Indian “Financial Health” Startups Selected By Their Peers

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Two early-stage financial health startups, Impact Micro Ventures and mPokket, were selected by peer entrepreneurs to receive offers of $50,000 in investment each, marking the completion of an India-focused investment-readiness program run by Village Capital, with support from PayPal, BlackRock and FMO. A total of 11 fintech startups completed in the three-month program. All 11 are building India-specific solutions to the country’s unique challenges around financial health.

What are the most suitable loan products for micro entrepreneur?

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Transforming Micro Financing 24X7
Unsecured loans to 'no-file' micro enterprises


What do you say - What are the most suitable loan products for micro entrepreneur? 


Imagine being on RBI (central bank) committee which has been formed to develop a policy framework for suitable loan products for micro enterprises.  

What aspects would you look at? Would you design loan products as per cashflow characteristics of micro enterprise? If yes, do most of them have similar cashflows and risk profiles? 
 
Research indicates that micro enterprise growth can be classified into four categories – 0 --> X, X --> X+, X --> X++ and X --> Y. These growth classifications have different cashflow characteristics and require different loan products. 
 
 
   

0 --> X and X --> Y
This is applicable mostly to opportunity entrepreneurs. Starting up a business or diversifying into a new business requires patient capital. Owing to uncertainty in initial months w.r.t. sales and go-to-market success, fixed repayments can not be expected until break-even, which  in turn depends on external factors like price elasticity, labor costs, raw material costs etc. In informal microenterprise sector, the most suitable financial instrument which conforms to features of patient capital is ‘quasi-equity' financing wherein repayments are linked to cashflows of business.


X --> X+
This is applicable mostly to necessity entrepreneurs, who are averse to both risk and leverage. In this growth classification, there is temporary intake of working capital to fund high season sales. Owing to predictable nature of seasonality and sales cycle, borrowers can optimize on fund withdrawals and therefore, the interest expenses. The most suitable financial instrument for meeting short-term working capital needs is Cash Credit Limit/ Overdraft, which unfortunately, is not available to retail and services enterprises in informal sector in India. 
 
   

X --> X ++
This is applicable to both necessity and opportunity entrepreneurs. Expanding a business requires capital investment (say, for higher capacity machinery, furniture, shed, stock, infrastructure etc) and a repayment schedule suitable to cashflows of business. The most suitable financial instrument for meeting capital investment is a Term Loan, which interestingly is the only loan product available for all growth classifications in informal sector in India. 
What do you say - What are the most suitable loan products for micro entrepreneur? We would love to hear your feedback. 
About Us: IMV facilitates loans to MSME and small scale industries in India through partner microfinance institutions, NBFCs and SFBs. IMV’s sister concern, Enable Livelihoods Foundation which is a social enterprise, has vast experience of working in space of rural development, skill development and social entrepreneurship. The founders, themselves being social entrepreneurs in India, have authored several publications on microenterprise and entrepreneurship.  

Contact us

Pranay Bhargava
CEO & Founder
www.impaact.in
pranay@impaact.in
+91 9848748364
 

Follow us