UNIT III - SBED

Role of Agencies to promote

Entrepreneurship
 Promotional role
 Supportive role
 Regulatory role
1. Promotional Role
o Promote entrepreneurship by Awareness building, encouragement, motivation, guidance, etc.
o Various EDPs fall in this category
o The objective role of these agencies is to attract people to start on on their own
o Identification of potential entrepreneurs through research and scientific methods has to be done
o These agencies can play a major role in promotion of new entrepreneurs which results in the
entrepreneurial growth. The efforts are of three types:
o Awareness creation programme
o Programme on creation of new entrepreneurs
o Program for current entrepreneurs
 These programmes are target-group oriented, product-specific and Location Specific.

2. Supportive Role
 This role helps in promotion, maintenance and development of entrepreneurship
 They motivate individuals to start their entreprises
 By providing financial support to new as well as existing entrepreneurs by various institutions
such as SIDBI, SIET, NABARD, KVIC, etc.
 Supportive role has 3 to 4 tier machinery levels to serve entrepreneurs
 District- DIC, KVIC
 State level- SFC, TCO, SSIDC, SIDC, KVIB, EDI, SISI, SIDBI
 National level- ICICI, IIC, EDII, KVIC, NABARD, IDBI, IFC
3. Regulatory Role

 Regulatory Institutions give clearance for construction of factories, supply of

power, tax reliefs, concessions, etc.
 All regulatory institutions have their policies and programmes to provide
necessary help and support to entrepreneurs
 Proper & simple rules and regulations will act as a positive factor in the
promotion of entrepreneurship. Otherwise it will dampen the spirit of
entrepreneurship
 So the regulation and policies have to be carefully framed and have clear
objective of promoting entrepreneurship is the foremost important factor in
mind
Institutional support to
entrepreneurs/promotional agencies
 Both Governmental and Non-governmental have taken a number of measures
for the SME development. Supportive institutions were classified as two ways

Promotional & Development

(General services)
e.g., SIPCOT, DIC, SIDO Financial support
e.g. IDBI, ICICI, SIDBI
 INDUSTRIAL CREDIT AND
INVESTMENT CORPORATION
OF INDIA LTD. (ICICI)
Introduction

 Set up in 1955
 Under the Indian companies act with the primary objective of developing
small and medium industries in the private sector
 It issued capital has been subscribed by the Indian banks, insurance
companies and the individuals and corporations of the united states, the
British eastern exchange bank and other companies and general public in
India
Objectives

 Assisting in the creation, expansion and modernization of private sector

 Encouraging and promoting private capital participation
 Encouraging and promoting private industrial investment
Functions of the ICICI
 It has primary and secondary functions
Primary functions:
i. Direct loans
ii. Loans in foreign currency
iii. Guaranteeing for securities
iv. Underwriting for securities
v. Contributing to the share capital and
debuntures
 SECONDARY FUNCTIONS
i. Providing long term finance by defeered credit
ii. Leasing
iii. Venture capital
iv. Asset credit
v. Merchant banking
vi. Research and development
 --ICICI has setup an Asset Management company Ltd and a Merchant
Banking Division.
--It assists the private, joint public and the co-operative sectors
--The major beneficiary of the ICICI.s assistance is the private sector
which is to a tune of 90% and mainly compromising small scale units
Financial Assistance
 Core business activity was providing the project finance
 But over the years, it has undertaken many other modes of providing
financial assistance and has involved in non-project based finance as
well
Project Finance:
 A distinguishing feature of the ICICI’s financial assistance is the
significant share of foreign currency loans in the total sanctioned
assistance
 This have been the policy because of the facility its enjoys
of raising resources in foreign currencies
 Financial assistance of sanctioned loans and its disbursed
by ICICI ltd. is not only growing substantially but also
undergoing purpose –wise diversification
SIPCOT (state industries promotion corporation of tamilnadu limited)

 SIPCOT was setup in 1971 for the medium and major industries
 Located at egmore, Chennai
OBJECTIVES
 To establish, develop, maintain & manage industrial complex, parks and growth centres
 Channelise incentives for industries
 Provide escort services to medium and large scale industries
 Provide EDPs for weaker sections to generate employment opportunities
 Help project assistance and single window statutory clearance
 Marketing assistance
 Financial assistance
DIC (District Industries centre)

 Scheme was started in 1978

 Main objective of the DIC is to develop and promote cottage, small, tiny sectors in the
country and to generate employement opportunities, especially among the rural and
backward areas of the country
Functions of DIC:
 Identification of entrepreneurship by conducting motivational campaigns
 Potential entrepreneurs are offered to suitable projects
 Provisional and permanent registration under SSI and issue of the certificate
 Recommendation of the loan application to land and building acquistions for state
level institutions and nationalised banks
 Pursue with the electricity board for power connection
 Recommendation of interest free sales tax loan at 8% of the total fixed assets to SIDCO
 Sponsoring applications and (Disburse the interest subsidy for engineers) under
industries rural development project
 Conduct artisan training programmes and provide sheds
 SIDO(small industries development organization)

 SIDO is a nodal agency for identifying the needs of SSI units, coordinating and monitoring the policies and
programmes for the promotion of the small industries
a) Coordination activities
 To coordinate various programmes and policies of various state governments pertaining to small industries
 To maintain relations with central industries ministry, state level industries ministry & financial institutions
b) Industrial developmental activities
 Develop import substitutions’
 Give support and guidance for the development of ancillary efforts
 Recommend to the central government for meaning certain items to produce at SSI levels only
c) Management activities
 Provide training, development and consultancy services to SSI
 Provide marketing assistance to various SSI units
 Assist SSI units in selection of plant & machinery location, layout design and appropriate process
SIDBI (Small industries developmental
bank of India)
 Setup under a special act of parliament in 1989 as a wholly owned subsidiary of
the IDBI
Objectives & functions of SIDBI:
i. Schemes of refinance assistance
ii. Direct Assistance Scheme
iii. Bills financing
iv. Resources support to institutions
v. Project financing
vi. Equity assistance
vii. Promotional & developmental services
viii. Credit guarantee fund schemen for small industries
IDBI(Industrial developmental Bank of
India)
 Established 1964 under an Act of Parliament
 In 1976 it becomes an autonomous institution with following objectives
1. Promoting rapid & balanced industrial growth in the country
2. Guiding in the field of industrial refinance by co-ordinating with other
developmental banks
3. Providing technical guidance and administrative assistance in promotion of
industries
4. Undertaking market and investment research for developmental of
industries
Functions of IDBI

 Direct finance
 Indirect finance
 Special assistance
 General assistance
 ENTREPRENUIAL
GROWTH/DEVELOPMENT
 Rabindranath Kunango in his book ‘Entrepreneurship Innovation – Models for development’.
It presents 10 conceptual models for entrepreneurship in various cultural contexts.
 Laissez-Faire
 Positive Environment
 Strategic Interventionist
 Subsidized Interest rate
 Egalitarian
 Trade Facilitation
 Yugopluralist
 Top-down reform
 Open-down reform
 Doi-Moi
 Indian Model
 Laissez-Faire:
The essence of this model is that government interference and regulation hinders economic development.
Example: Cayman Islands

 Positive Environment:
The Philosophy behind this model is that government should play a role in encouraging the small business
sector in limited term like adequate infrastructure, free trade aggreements, low level of taxation. Ex: Austria

 Strategic Interventionist:
Assumes that state should have a strategy of promoting small business through intervention by ensuring
training, research, finance, marketing, know-how and support. Ex: Namibia
 Subsidized Interest rate:
Certain Industries below market rate help a few selected entrepreneurs whose enterprises subsequently
develop into mega-Conglomerates. Ex: South Korea (Where only few industries –Heavy Industries &
Chemicals are supported and economy is dominated by a small no. of diversified mega-conglomerates).
 Egalitarian:
All borrowings by the entrepreneurs are at relatively high rates. High interest rates are an incentive to be
thrifty. Thus, Encouraging saving than borrowing. Ex: Taiwan.
 Trade Facilitation:
Unique model because it is only focus on internalization of small and medium-sized enterprise. Apart from
tangible aid, the government facilitates paper-work procedures and reduce bureaucratic constraints. Ex: Kenya.
 Yugopluralist:
There is a autonomy due to decentralization of the federal system. Culture is an important
determinant of differences in the economic policy, which in turn contributed to regional disparity.
Ex: Yugoslavia.
 Top-down approach:
Several governments declared a change from centrally planned economy to the one driven by
market forces. Ex: German Democratic Republic.
 Open-down approach:
It adopted with major reforms of a completely planned economy. Ex: China
 Doi-Moi:
The word literally means ‘renovation’ or ‘new thinking’. This is to help enterprise operate within a
Socialist system. Ex: Vietnam.
 Indian Model:
It is a combination of strategic internalist & subsidized interest rate. It has probably high entrepreneurial
talents in the world.

Above models as the most appropriate development for small business sector which each was chosen by
different countries.
EDPs (Entrepreneurial Development
programs)
 Initially Small Industries Extension and training institute (SIET), Hyderabad
selected 52 young persons in 1971 from business and industrial community
and offered a 3 month training programme and motivated the participants to
be an entrepreneurs.
 At present there are about 686 (all India & States financial institutions &
public sector banks) for conducting short and long term EDPs. Even private
companies have started for offering EDPs.
Entrepreneurial training
The main objectives of EDPs are
 To attract people to entrepreneurial development programmes through effective promotion
 To make them aware of the various business opportunities
 To motivate and strengthen entrepreneurial quality
 To develop the course content and curriculum of the program
General Introduction( Need, importance and influencing factors)
Motivation training(Motivation through training & Education- Maslow’s Hierarchy Needs)
Maslow’ Need Hierarch Theory
 To develop management related skills like problem solving, decision making, communication,
opportunity identification, interpersonal , team building, etc.
 To make participants aware various laws, procedures, etc.
 To develop passion & interest
 To develop research and study on the effectiveness of the various programmes, schemes,
market potential of various business opportunities, etc.

--A study by EDII (Entrepreneurship development Institute of India) at Ahmedabad & Goa has
revealed that one out of every four trainees started their own enterprise after the completion of
the training programme.
Training to Existing entrepreneurs
Not only focus on new entrepreneurs but also for existing entrepreneurs for their development.
Conduct EDPs on latest issues and train entrepreneurs to face challenges. Ex: WTO (Workshop
on education of WTO treaty , and also paves the way for free exchange of goods across countries
resulting in free imports have a direct impact on the tiny & Small sectors.
CRITICISMS FOR EDPs:
Poor training faculty
Selection of wrong trainees
Lack of commitment from the organisations
Lack of focus
Lack of follow up
Lack of support
Emphasis on quantity but not quality
SMALL SCALE SERVICE INSTITUTIONS (SISI)

• Set up to provide consultancy and training to small entrepreneurs- both existing and prospective
• Activities of SISIs are coordinated by Industrial management training division of the DCSSI’s
office
Functions
i. To serve as interface between central and state governments
ii. To render technical support services
iii. To conduct entrepreneurship developmental programmes
iv. To initiate promotional programmes
v. To assist in preparing project profiles, training, trade & market information. Economic
consultancy, state industrial potential survey and modernization studies
IFCI (Industrial Finance corporation of India Ltd.)
 Setup in 1948 under the IFCI Act was brought under companies Act, 1956
 It extends financial assistance to the industrial sector through rupee and foreign currency loans,
underwriting subscriptions to share debentures and guarantees, offering equipment procurement
and provide merchant banking activities
 Shareholders of IFCI – IDBI, scheduled banks, insurance companies, investment trusts &
cooperative banks
 Started new promotional schemes
i. Interest subsidy scheme for entrepreneurs
ii. Consultancy fee subsidy schemes for providing marketing assistance to SSI
iii. Encouraging modernising of tiny and Small scale Industries
iv. Control of pollution in the small and medium case industries
v. Promoting research for the development of industries
vi. Setting up management developmental institute for providing management
CRITICISMS
 IFCI’s lending operations have only encouraged the concentration of wealth and capital
 It pursues a discriminatory policy to the disadvantage of medium and small scale units
 Delays in sanctioning loans and making the loan amount available
 Failed to exercise necessary control over the defaulting borrowers
 Assistance has been used for the specific purpose for which it is given and IFCI has failed to take
any actions against such practices
Directorate of industries
(state directorate of
Industries)
Introduction

 The directorate of industries is an executive arm of the industry department

 Directorate of industries is the state level office responsible for implementing the
policies and programmes for industrial development in the state
 It is able to achieve that by ensuring the coordination amongst the state level
programme corporations and other departments/agencies of the government
relating to industries
 It resolves the problems of the industry by interdepartmental coordination
 It acts under the overall guidance of SIDO and concerned central institutions in
the country
Objectives of SDIs

 To promote and develop village and small scale sectors

 To supervise and control the district level functionaries, i.e., the
district industries center in implementation of various schemes
and programmes of department.
Role of SDIs

 Registration of small- scale of units

 Providing financial assistance
 Distributing scare and indigenous raw material to industrial units
 Developing industrial infrastructure .
Functions of SDIs
 To implement industrial policies of the government
 To suggest policy measures to the government for bringing
healthy and all around industrial development in the state
 To assist government in framing various policies viz.
Industrial policy, package scheme of incentives, etc.
 To implement various promotional schemes of the
government
 To solve the operational problems of industry by inter
departmental coordination
 To provide important statistical information to the state
government
 The Directorate of industries is led by development
commissioner (industries). The Director of industries is
supported by six regional offices & District Industries centers at
every district.
COMMERCIAL BANKS

After nationalism it plays a key role in

economic and social transformation and in
development of our country. These banks have
expanded their networks remarkably in respect of
number of branches as well as diversifying their
services in several directions.
COMMERCIAL BANKS
 It plays a key role in the economic and social transformation and in the development of our
country
 The banks have expanded their network remarkably in respect of number of branches as well as
in diversifying their services in several directions
 Apart from discharging their economic functions the banks are entrusted with the challenging
task of responding to certain social problems
 Through various schemes they are catering to the needs of retail traders, rural artisans, village
craftsmen, small businessmen, transport operators & self-employed
ROLE OF COMMERCIAL BANKS FOR ENTREPRENEURIAL DEVELOPMENT

 For Assisting SSI sector

A. Credit to small scale industries
B. Financing the establishment of small scale units
C. Financing and development of khadi and village industries
D. Finance to Tiny sector of SSI

And also assisting SSI sector schemes

 Schemes related to traders and small entrepreneurs
 Schemes relating to self-employed and professionals
ROLE OF COMMERCIAL BANKS IN ASSISTING SSI SECTOR
 For Assisting SSI sector
A. Credit to small scale industries (Maximum amount of 50% of the
cost for the acquisition of machineries for a period of 5 to 7 yrs)
B. Financing the establishment of small scale units by technical
entrepreneurs (providing term loan for Rs. 5 lakhs for
establishing an industrial unit)
C. Financing and development of khadi and village industries
(Grants maximum amount of Rs. 1500 to a borrower under KVIC
Interest subsidy scheme at an interest rate equal to 4% above the
bank rate and it does not exceed Rs. 3000)
D. Finance to Tiny sector of SSI (provide term loans as well as
working capital loans at an interest rate of 9.5% for borrowers
and 11 % for those in other areas)
And also assisting SSI sector schemes
 Schemes related to traders and small entrepreneurs (Small business can avail
finance from commercial banks to satisfy their working capital requirements
as well as term loans for purchase of any equioment. Maximum limit Rs.
50000 and is to be payable in 36 installments).
 Schemes relating to self-employed and professionals (Banks provide facilities
to engineers, technicians, architects and other self employed persons &
professionals to enable them to meet medium term as well as short term
financial needs- eligibility minimum 5 yrs experience)
ENTREPRENEURIAL ASSISTANCE BY COMMERCIAL BANKS
1. Entrepreneurial banking ( Assistance is provided to technicians for
acquisition of fixed assets and current assets and also these technicians are
provided in plant training in established units).
2. Entrepreneurial clinics (A panel of industrialists adopt budding
entrepreneurs to guide & assist them).
3. Indian bank entrepreneur advisory service (Consultancy is provided right
from the beginning of identification of project upto implementation stage
and marketing. For this purpose, a cell is established comprising of bank
employees and selected experts).
VARIOUS BENEFIT SCHEMES FOR MSME

 Schemes implemented directly by the ministry

 Scheme for International cooperation
 Scheme for Surveys, studies & research
 Scheme for Assistance to training institutions
 Scheme of fund for Regeneration of traditional Industries
 Rajiv Gandhi udyami Mitra Yojana
 Schemes implemented through NSIC
 Marketing assistance scheme through development of Business to Business (B2B), web portals & establishment
marketing intelligence cell
 Performance and credit rating scheme
 Schemes implemented through KVIC
 Market development assistance on production scheme
 Prime minister’s employment generation programme
 Product development, design intervention and packaging
  Khadi karigar Jayashree Bima Yojana for khadi artisans
 Interest subsidy eligibility certification
 Scheme for enhancing productivity and competitiveness of khadi industry and artisans
 Work shed scheme for khadi artisan
 Implemented through Coir board
 Rejuvenation, modernization and technology up graduation of the coir industry
 Schemes implemented by the office of the DC (MSME)
 National manufacturing competitiveness programme schemes under 12 th plan
 Micro & Small enterprises cluster development programme
 Scheme for capacity building
 Credit linked capital subsidy scheme for technology up gradation
 ISO 9000/ISO 14001 certification reimbursement scheme
 MSME MDA
 Participation in the international exhibition/fairs
 Purchase and price preference policy
FINANCIAL SCHEMES FROM THE COMMERCIAL BANKS
 Working capital limit
 up to 20% of the existing credit facilities for upto Rs 10 crores)
 This scheme is provided for the borrowers for any kind of genuine credit need
of temporary nature to tide over the liquidity crunch. The need may arise due
to receivables, sudden increase in raw material cost, cash flow problems, etc.
 Term loans
 Provided for purchase of machineries, equipment, construction of industrial
shed, working capital for trading units.
 The loan available could be Rs. 5 to 25 crores with repayment schedule of 7
years including moratorium period
 Margin money requirement is 20%
 Collateral at least 20% besides personal guarntees
 Composite term loan
 Can be utilized for purchase of shops, establishments, vehicles etc, renovation,
repairs, working capital
 It cannot exceed 50% of the total loan sanctioned
 Maximum Rs 20 lakhs with margin money of 20%
 No collateral security or third party guarantee is required except for micro
enterprises where investment is less than rs 2 lakhs
 If the loan repayment is prompt and regular topup loan will be sanctioned (The
loan repayment is 3 to 5 yrs)
 Term loan for generator
 In power deficit states, sets for registered MSMEs for the purchase off new diesel
set depending on the size of the unit
 Margin money required 16% prepayment period 60 months including moratorium
period of 6 months
 To set up cybercafe, BPO, internet, computing facilities term loan upto to Rs 3 lakhs.
Women entrepreneurs are giving most preference. Margin money 20%. No collateral
security while third party guarantee is required. Loan will be covered under credit
guarantee scheme of CGTMSE. Repayable within 3 to 5 yrs.
 For transport operators
 Term loan will be provided for upto 15 lakhs for 1 or 2 vehicles
 Rs 350 lakhs per fleet owning not more than 10 vehicles
 Margin requirement 20%
 Repayment period 5 yrs
 With moratorium of 6 months and no collateral is required
 Financing of receivables with minimum 25 to maximum 500 lakhs
--No margin money is required
--Tangible security of land and building repaid on the maturity of the payment
 Buyers bill discounting facility
--same as earlier scheme
 Collateral free loans
--For MSMEs for purchase of assets
 Artisan credit card
--provide timely finance assistance to the artisans
--Maximum amount is Rs. 2 lakh and limit valid for 3 yrs
--Artisans need to be registered with the development commissioner (Handicrafts)
--No collateral is required
Financial Institutions
6 All India developmental banks

 (Industrial developmental bank of India) IDBI

 IFCI – Industrial Finance corporation of India Ltd.
 ICICI – Industrial credit and investment corporation of India Ltd.
 IIBI – Industrial Investment bank of India
 Infrastructure development finance company Ltd. And
 SIDBI – small industrioes developmental bank of India

Two specialized financial institutions

 EXIM bank – Export-import bank of India
 NABARD – National bank for agriculture and Rural Development
Three investment Institutions

 LIC – Life Insurance corporation of India

 GIC – General Insurance corporation of India
 UTI – Unit trust of India
IIBI (Industrial Investment bank of India)

 Also known as IRBI (Industrial reconstruction bank of India)

 Setup under companies act in 1971
 Provide assistance for speedy construction and rehabilitation
 1984 – IRCI (Industrial Reconstruction of corporation of India) converted to
IRBI
 Primary task – Revival of the sick industrial units
 Subsequently, Board of Industrial and Financial Reconstruction (BIFR) has
taken over the rehabilitation of sick industries
 Restructured in 1997 that IRBI converted to IIBI has full fledged for all
purpose developmental finance institutions
 Assistance provided inform of term loans for

Diversification

Promoting Assistance
Industrial provided Rehabilitatio
Developmen in form of n
t term loans

Modernization
 Formerly IRCI has extended assistance to closed sick industrial units in textiles, engineering,
mining and foundry industries
 Now it extends to sick small scale units
 Also diversified, offer consultancy servies, merchant banking services and equipment leasing
 By providing consulting services IRCI attempts to help banks and financial institutions to asses
intrinisic worth of sick units which seeking assistance for revival
 By providing merchant banking services, IRCI helps industrial units in the process of
amalgamation, merger and reconstruction
 Equipment leasing was an extension of hire purchase scheme
Project finance

Bank has
Direct subscription helped
of Debentures industries in
their asset
creation
efforts

Issuing Guarantees
 Analysis of assistance sanctioned in 1997, out of a total Rs. 3551 crores,

• Disbursed for expansion, renovation, balancing,

75%
equipment, diversification and modernisation

14% • Margin money for working capital

EXIM Bank

 Established on Jan, 1, 1982

 Provide financial assistance to exporters and importers
 Refinance facility to other commercial banks and financial institutions
SFCs (State Finance corporations)

 Establisshed under state financial corporations act, 1951

 In India TIIC , Tamilnadu established first
 Two or more enter into an agreement for conjoint financial corporation
 The capital is contributed by state govt., scheduled banks, RBI and other
financial Institutions
Functions of SFCs

 Providing long term to SME industries

 Promoting tiny sector, village and cottage industries
 Providing infrastructure facility by promoting Industrial estates
 Undertake modernization
 Help for purchasing machineries on deferred basis
 Discounting of bills
 Providing seed capital
 Consultancy
 Merchant banking services