MUMBAI // For centuries, India's ethnic version of haute couture - sequined bridal saris, embroidered tunics and embellished shirts - were a world-famous export.
They involve the finest quality fibre, meticulously handwoven in a rich palette of colours and intricate designs by millions of artisans and weavers working on rickety looms across India.
Their skill made hand looms India's largest cottage industry and the second-biggest source of employment after agriculture.
But the once-prosperous industry is now slowly perishing amid fast-changing fashion rules and new market forces. Millions of artisans, lacking social security and bypassed by India's economic boom, remain vulnerable to cheap machine-made imports from China and other foreign competitors.
However, one enterprise - with a capitalist veneer and socialist underpinnings - is determined to resuscitate the industry and restore its old-world glory.
Fabindia, a retail brand synonymous with India's hand loom couture revolution, sources garments and handicrafts directly from thousands of rural artisans across India.
It was founded in 1960 by John Bissel, an American entrepreneur, as a village-based textile export company, and inherited on his death in 1998 by his son William. Over the years, Fabindia transformed into a 140-store, 4 billion rupee (Dh332 million) retailer with outlets throughout India and in Dubai, Rome, Kathmandu and Guangzhou. But its focus is on the domestic market, which accounts for more than 95 per cent of its business. Besides garments, its product line has expanded in recent years to include home furnishings, organic foods, body-care products and jewellery popular among the Indian middle class and the elite alike.
With the company's popularity surging, Mr Bissel realised the venture needed the capacity to handle large volumes in order to expand, a feat difficult to accomplish amid a scattered supply network with thousands of rural artisans spread out across the sprawling country. Without a smooth supply chain, the artisans also suffered, as middlemen who provided the link with Fabindia whittled away a tidy part of the artisans' earnings.
To fix the problem, Mr Bissel undertook a revolutionary experiment in 2007, which, if successful, could be the blueprint to remedy the economic ills plaguing much of rural India.
Fabindia set up a fully owned subsidiary called Artisans Micro Finance, a venture fund that helped establish a chain of 16 community-owned ventures, known as supplier-region companies (SRCs).
Fabindia buys all its stock from the SRCs and owns up to a 49 per cent stake in them. The remaining stake is sold to artisans - who can sell to any company - and to private investors and other employees of the SRCs.
Each SRC, run by locals, has its own micro stock exchange with artisans allowed to purchase internal shares of the company without the venture being listed. As stakeholders, the 40,000 artisans developed a sense of ownership and a strong motive to perform.
Like co-operatives, the SRCs provide an opportunity to cash-strapped artisans to pool resources to expand and modernise operations. But like listed companies, they reward larger stakeholders with a bigger chunk of the profits and a bigger say in the decision-making process.
"It's a win-win business model," says Sunil Chainani, the finance director at Fabindia. "We brought rural weavers and craftsmen closer to the capitalist markets, which they previously had no access to."
Before this business model was introduced, artisans were understandably far removed from the demands of the urban consumer, a disadvantage that had hastened their decline.
"We provide them management support and help them do business in an organised way," Mr Chainani says. "We teach them budgeting, ways to keep costs down and stay up to date with latest trends in the business."
The initiative has borne rich dividends so far. Fabindia's turnover grew from 2bn rupees in 2007 to 4bn rupees last year. The number of artisans supplying Fabindia has grown from 22,000 in 2007 to 40,000 today.
Unlike other brands, Fabindia does not invest heavily in advertising and packaging, thereby reducing prices for consumers.
This year, the company plans to open new stores, including three in the UAE. Details of its expansion spree are still being worked out.
India's booming economy has created opportunities for social mobility, but millions continue to languish in chronic poverty. The World Bank says India reduced the number of its poor from 60 per cent of the population to 42 per cent between 1981 and 2005, but the country still accounts for one-third of the world's 1.4 billion poor.
Those dramatic levels of poverty will not ebb, analysts say, unless India creates equitable and sustainable employment opportunities for the 93 per cent of its population that is employed outside the formal sector.
The most plausible way to do it, Mr Bissel says, is for domestic firms to make employees part-owners with real stakes in their profits and losses.
The business model initiated by him helped to support and sustain good artisanship in a village-based industry in which artisanal skills would otherwise remain hidden from the world. It also helped Fabindia to establish a fair and equitable relationship with its producers.
Fabindia describes itself as a "socially conscious company", but the new model is by no means a philanthropic endeavour.
"Fabindia is very much a for-profit company," Mr Chainani says.
The model helped to established a symbiotic relationship between Fabindia and artisans. Neither Fabindia nor the artisans will flourish if both do not grow together, he insists.
"The model helped us convey to our producers that we don't prosper if they don't prosper."