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Students shout slogans during a protest against the reservation of college places for lower castes in New Delhi. (Adnan Abidi / Reuters/Adnan Abidi / Reuters)
Students shout slogans during a protest against the reservation of college places for lower castes in New Delhi. (Adnan Abidi / Reuters/Adnan Abidi / Reuters)

Equal Rights

How India's 'untouchable' entrepreneurs use capital to fight caste Add to ...

When Prashant Tambe sought a loan to expand his private college last year, the bank didn’t turn him down outright. “It was just red-tape-ism,” the young entrepreneur said, using a popular Indian expression for business death by a thousand bureaucratic hurdles.

His brother, Avinash Tambe, had an identical experience seeking funds to build his coal import firm. They have no illusions about the source of the banks’ reluctance: It began when they wrote their surname on their loan applications.

The name Tambe identifies them as Dalits – the people once known as “untouchables,” at the bottom of the Hindu caste system. And so despite the fact that the brothers have eight post-graduate degrees and two successful businesses between them, they struggle to get access to capital and chafe at the opportunities they are missing.

They recently had an opportunity to share that frustration, and to seek out new partners, at a first-ever trade fair organized by the Dalit Indian Chamber of Commerce and Industry.

“It’s a strange irony and it tells you a lot about the ground reality of India,” Prashant Tambe mused as they set up their stall in a vast Mumbai exhibition hall – it’s popular wisdom in the country today that the booming economy will end the influence of caste, but the best way they can find to be part of that economy is to join a caste-based business association.

The Dalit business lobby, founded in 2005, has 1,000 members; 180 of them came from across the country to exhibit and network at the three-day fair. There were companies making solar-power systems, military uniforms, car parts, pharmaceuticals, pesticides and industrial piping; there were also small financial-service companies and construction firms.

The DICCI slogan is “fighting caste with capital.” But many business owners at the fair said they share one key problem: They can’t get their hands on that capital.

As the Tambes and others described, Dalit business owners struggle to obtain conventional bank loans. Sometimes it’s malice from dominant-caste bank employees who do not want to see a Dalit business succeed, said Prashant Tambe; other times it’s simply that the bankers doubt that a first-generation Dalit business owner will have the acumen to be a safe loan risk.

Almost always, they lack collateral – while Dalits are a sixth of India’s population, they control only an estimated 1 per cent of the country’s wealth. The vast bulk of the population continues to be landless labourers working for occasional daily wages of one or two dollars.

And they have no access to the other key source of funding for Indian entrepreneurs; loans from extended family or their caste community – “internal funding,” as it’s known here. The Tambes’ father was the kind of general labourer called a “peon” here and their mother was a nursing assistant with a primary-school education; the cousin who is a co-owner of the coal business is the son of a cycle rickshaw driver. They pushed their sons to seek education, but they had no funds to bankroll their good ideas.

The Indian government has attempted to address the issue through a Dalit-focused national finance-development corporation, but it provides only small loans of up to $5,000 – enough, as DICCI chairperson Milind Kamble put it, to buy a large photocopier and set a family up as a corner copy shop, but not enough to bankroll an entrepreneur whose ambitions stretch beyond that.

Kaushal Vidyarthee, who is working on a doctoral dissertation on caste and capitalism at Oxford University, said that one government policy has made a difference, in cases exactly like the Tambes: affirmative-action quotas, or reservations as they are known here, which set aside 15 per cent of government jobs for Dalits. With even an entry-level position, the family is able slowly to salt away enough money to fund a small entry into business; those jobs, and reserved seats for Dalits in educational institutions, are behind every Dalit-owned business he has examined.

That’s what Mr. Tambe found when he opened Imperial Mineral Resources Pty Ltd. in 2008 to import Australian coal to India’s hungry energy sector. Private power plants were owned by wealthy members of dominant castes and didn’t want to deal with him, so he turned to government-owned plants. But even there, dominant caste people made up the senior staff. He pressed on – “999 people will say no but one will say yes – and I started getting more contracts because I deliver on time with less profit margin.” The firm did just under $1-million in business this year and has nine employees.

Mr. Kamble hoped the trade fair would help small entrepreneurs make helpful connections, but the main audience he was targeting was not Dalit: Indian society perceives Dalits only as takers, he said, who need ration cards and a dozen other government programs – “that without government support or affirmative action Dalits cannot walk a single step. People don’t know that in the Dalit community people are running corporate houses and running multinationals.”

Mr. Kamble, the son of a schoolteacher, is an engineer; in the early 1990s, he collected 25,000 rupees (today worth $5,000) from friends to begin his own construction firm, now worth millions. But raising that early cash was a struggle, and there was no one in his community to advise or mentor him.

Hoping to pave the way for other Dalit entrepreneurs, the DICCI is setting up a $100-million (U.S.) venture-capital fund, which Mr. Kamble said would be operational by mid-2012. The sector-agnostic fund will provide risk capital to DICCI-member businesses, both market entrants and those seeking to expand. Prasad Dahapute, who will manage the fund through a small investment-banking firm Varhad Capital, said that the Dalit business elite had been approached to provide the capital. The fund so far has two anchor partners: Ashok Khade, chief executive of the $1-billion Mumbai-based Das Offshore Engineering, who is the oft-cited business hero of many at the trade fair, and Rajesh Saraiya, who heads the $400-million British-based steel trading firm Steelmont Pvt. Ltd.

“Of the 180 businesses that are here, 160 of them need debt or equity capital now,” Mr. Dahapute said. The businesses they fund will need to be Dalit-owned, but first and foremost good ideas, he said; the venture-capital model means that new entrepreneurs will get the assistance of experienced directors.

“Godrej or Tata have been in business for 100 years, but we have no business history,” Mr. Kamble mused, citing two of India’s biggest conglomerates. “But we are trying. Now we are making parts for the [Tata]Nano – our dream is that in 10 years we will make our own car.”

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