The document discusses micro enterprises and microfinance in tourism. It defines micro enterprises based on investment levels for manufacturing and service sectors. Micro enterprises are very small businesses that play an important role in developing economies by creating jobs and income. They often rely on microloans from microfinance institutions. The document also discusses microfinance and its evolution and role in India, where it provides small loans and financial services to low-income individuals and families. Micro enterprises, especially small travel agencies, make up a major part of the tourism industry in many countries.

1. Micro Enterprises and Micro Finance in Tourism
© Ramakrishna Kongalla,
Assistant Professor
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2. Micro Enterprises
• In accordance with the provision of Micro, Small & Medium
Enterprises Development (MSMED) Act, 2006 the Micro, Small
and Medium Enterprises (MSME) are classified in two Classes:
– (a) Manufacturing Enterprises- The enterprises engaged in the
manufacture or production of goods pertaining to any industry specified in
the first schedule to the industries (Development and regulation) Act,
1951). The Manufacturing Enterprise are defined in terms of investment in
Plant & Machinery.
– (b) Service Enterprises: The enterprises engaged in providing or
rendering of services and are defined in terms of investment in equipment.
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3. Manufacturing Sector
Enterprises Investment in plant & machinery
Micro - Does not exceed twenty five lakh rupees
Small - More than twenty five lakh rupees but does not exceed
five crore rupees
Medium - More than five crore rupees but does not exceed
ten crore rupees
Service Sector
Enterprises Investment in equipments
Micro - Does not exceed ten lakh rupees:
Small - More than ten lakh rupees but does not exceed two crore
rupees
Medium - More than two crore rupees but does not exceed five core
rupees
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4. The term microenterprise connotes different
entities and sectors depending on the country.
– in developed countries, microenterprises comprise
the smallest end (by size) of the small business
sector, whereas
– in developing countries, microenterprises comprise
the vast majority of the small business sector—a
result of the relative lack of formal sector jobs
available for the poor. These microentrepreneurs
operate microenterprises not by choice, but out of
necessity.
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5. • Microenterprises add value to a country's economy by creating jobs,
enhancing income, strengthening purchasing power, lowering costs and
adding business convenience
• Because microenterprises typically have little to no access to the commercial
banking sector, they often rely on "micro-loans" or microcredit in order to be
financed.
• Microfinance institutions often finance these small loans, particularly in the
Third World.
• Those who found microenterprises are usually referred to as entrepreneurs.
• The terms microenterprise and microbusiness have the same meaning,
though traditionally when referring to a small business financed by
microcredit the term microenterprise is used.
• Similarly when referring to a small, usually legal business that isn't financed
by microcredit, the term microbusiness is used.
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6. Concept in disability recovery
• Utilized as a therapeutic tool within Person centered planning
Microenterprise has become valuable to persons who for many reasons
cannot efficiently participate in typically rigid work environments, i.e. 9 to 5 /
40 hours per week.
• Microenterprise gives persons who have a disability flexibility to attend
doctor’s appointments or treatments that normally occur in the 9–5 time
frame of the day and would eventually conflict with the norm of most typical
work environments.
• Microenterprise presents persons with a disability, business networking
avenues into the community that differ greatly from the medical or treatment
mode that they may have become confined to.
• Persons with a disability who own their own business often report an
increased feeling of worth or an emotional equity that becomes an
enhancement to their present treatment.
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7. Micro-loans
• Micro-loans are a way for organizations and
entrepreneurs to make small loans to those in poverty
often in third world countries. The term "micro-loans"
is more commonly referred to as Microcredit.
Microenterprises in developing countries
• In developing countries, microenterprises comprise the
vast majority of the small business sector—a result of
the relative lack of formal sector jobs available for the
poor.
• Microenterprises in developing countries, then, tend
to be the most frequent form/size of business.
• Most microcredit clients are not microentrepreneurs by
choice.
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8. • They would gladly take a factory job at reasonable wages
if it were available. We should not romanticize the idea
of the “poor as entrepreneurs.”
• The International Labour Organization (ILO) uses a more
appropriate term for these people: “own-account
workers.”
• The enterprises in tourism are generally micro
enterprises
• The travel agencies started by individuals are of this kind
• They occupy major part of the industry
• They generate employment and major finance in
industry
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9. Micro Finance
• Micro Finance is the supply of loans, savings,
and other basic financial service to the poor .
- CGAP
•To most, micro finance means providing very
poor families with very small loans (micro
credit) to help them engage in productive
activities or grow their tiny businesses.
- Financial Gateway
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10. • Micro finance refers to loans, savings, insurance,
transfer services and other financial products targeted
at low-income clients.
• Micro credit refers to a small loan to a client made by a
bank or other institution. Micro credit can be offered,
often without collateral, to an individual or through
group lending.
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11. Evolution of Micro finance in India
Micro finance has been in practice for ages
( though informally).
– Legal framework for establishing the co-operative
movement set up in 1904.
– Reserve Bank of India Act, 1934 provided for the
establishment of the Agricultural Credit
Department.
– Nationalization of banks in 1969
– Regional Rural Banks created in 1975.
– established as an apex agency for rural finance in
1982.
– Passing of Mutually Aided Co-op. Act in AP in 1995.
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12. The profile of micro finance in india
• Estimated that 350 million people live Below Poverty
Line
• This translates to approximately 75 million
households.
• Annual credit demand by the poor in the country is
estimated to be about Rs. 60,000 crores.
• Cumulative disbursements under all micro finance
programmes is only about Rs. 5000 crores.(Mar. 04)
• Total outstanding of all micro finance initiatives in
India estimated to be Rs. 1600 crores. (March 04)
• Only about 5 % of rural poor have access to micro
finance
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13. The status of micro finance in India
• Considerable gap between demand and supply for all
financial services
• Majority of poor are excluded from financial services.
This is due to, inter-Alia, the following reasons
• Bankers feel that it is fraught with risks and uncertainties.
• High transaction costs
• Unfavourable policies like caps on interest rates which effectively
limits the viability of serving the poor.
• While MFIs have shown that serving the poor is not an
unviable proposition there are issues that have
constrained MFIs while scaling up. These include
• Lack of an appropriate legal vehicle
• Limited access to equity
• Difficulty in accessing low cost on-lending funds (as of now they are
unable to offer savings services in a legitimate
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14. • Limited access to Capacity Building support which is
an important variable in terms of quality of the
portfolio, MIS, and the sustainability of operations.
• About 56 % of the poor still borrow from informal
sources.
• 70 % of the rural poor do not have a deposit account
• 87 % have no access to credit from formal sources.
• Less than 15 % of the households have any kind of
insurance.
• Negligible numbers have access to health insurance
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15. Features of Indian MF
• About 60 % of the MFIs are registered as societies.
• About 20 % are Trusts
• About 65 % of the MFIs follow the operating model of SHGs.
• Large concentration in South India
• 600 MFI initiatives have a cumulative outreach of 1.25 crore
poor households
• NABARD’s bank linkage program has cumulatively reached a
total of 9.4 lakh SHGs with about 1.4 crore households.
• Annual growth rate of about 20 % during the next five years.
• 75 % of the total poor households of 80 million (i.e. about 60
million will be reached in the next five years.
• The loan outstanding will consequently grow from the present
level of about 1600 crores to about 42000 crores
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16. Thank You…!!!
©Ramakrishna Kongalla
e-mail: artist.ramakrishna@gmail.com
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