Definition of Institutions for Entrepreneurial Development

Introduction

Entrepreneurs need some support from outside agencies supporting project preparation and evaluation. Similarly support is needed for technological upgradation of the entrepreneurial venture.

Entrepreneurs need money for initial investment in their business. After doing business for few years, entrepreneurs will try to expand their business or diversify their business. Expansion or diversification needs substantial investment. Investment support facilities must be made available to them for expansion and diversification of their business. Hence, financial support system is needed to the entrepreneurs.

Entrepreneurs in the normal situation do not aware of the management techniques. They need managerial support to run their business efficiently and successfully. Entrepreneurship Development Institute, Management Institute, Financial Institutions and Academic Institutions provide managerial support to the small scale industries.

Marketing is the nucleus of any business enterprise. Large scale enterprises have enough money to spend for advertisement and sales promotional activities for marketing their products and to increase their market share in the days to come. They have brand value also. Whereas, SSIs are not in a position to compete with them and hence they require market support system.

Thus, Financial, Marketing, Managerial and technological support are needed to SSIs not only for industrial development but also overall economic development of our country.

In order to accelerate the small industries development, Government at the Central and State levels have set up a number of development agencies/ institutions. All India Financial Institutions - IDBI, IFCI, ICICI - have promoted / sponsored a number of technical Consultancy Organisations (TCOs) to assist small entrepreneurs in different ways. Recently, the small Industries Development Bank of India (SIDBI) has been established to help small scale units. In addition to these institutions there are agencies like National Science and Technology Entrepreneurship Board, Khadi and Village Industries Commission, Commercial Banks, Exim Bank and Co-operative Banks who undertake Promotional activities aiming at facilitating industrial development. A brief description about various institutions which are rendering support for promoting entrepreneurship is given below.

Indian Investment Centre (IIC)

The IIC is an autonomous, non-profit service organisation financed and supported by the Government of India. It is concerned with the important task of promoting mutually rewarding joint ventures between Indian and foreign entrepreneurs.

The center acts as a clearing house for information on economic conditions, laws, procedures, government regulations and specific opportunities for investment in India. It offers objective advice on investment conditions in the light of Industrial priorities and policies of the government of India, and on locating suitable Indian patterns for prospective foreign investors. It functions as a link between Indian and foreign parties and assists them in coming together for fruitful collaborations and formulating the terms, of joint venture participation. Its services are tailored to the need of Industrial corporations and furnished on entirely confidential basis.

Entrepreneurial Guidance Bureau (EGB)

The lIC has set up EGB in order to guide entrepreneurs in identifying investment opportunities, assisting them in selecting locations for the projects, preparing project profiles, assisting them to get financial assistance.

EGB has been supplying information pertaining to the products that offer scope for manufacture, statistical details relating to demand, capacity productions, sources of raw-materials, types of equipments required, investment involved, sources of finance, etc. Information on, procedures pertaining to obtaining letters of intent, import of capital equipment, export of finished products is also furnished. EGB also renders assistance from banks/ financial institutions or for submitting proposals for the letter of intent, etc., EGB also establishes direct contracts with engineering graduates,. technically qualified personnel and small entrepreneurs to promote entrepreneurship development.

National Productivity Council (NPC)

Recently National Productivity council has started a package of Consultancy Service to Small Industries. This service is in three stages.

Train young and prospective entrepreneurs;

Undertake market surveys in the state/areas for identifying invest-ment opportunities and consumption patterns for the prospective entrepreneurs; develop data bank for providing information in re-spect of investment opportunities and financial resources required, facilities available for obtaining loans; selection! modernisation of processes and equipment; product development; availability of raw materials and market opportunities, sales promotion and market-ing; and to undertake techno-economic feasibility studies either on behalf of prospective or existing entrepreneurs or on behalf of financial institutions.

Post - investment service consultancy and follow-up in the following form.

To assist the entrepreneurs in repayment of loans in the minimum possible time by helping them in improving their enterprise, level productivity through periodical visits; assist the small scale industries in training of workers in specific trades and supervisory and managerial personnel in techno-managerial subjects; assist the existing enterprises in improving their enterprise level productivity through training and consultancy services; and assisting them in market studies and sales promotion.

Technical Consultancy Organisations (TCOs)

TCOS have been set up with the initiative of the all India financial institutions in order to provide consultancy services to entrepreneurs setting up small and medium scale units. Also entrepreneurs located in industrially backward areas may find it difficult to avail the services of consultancy organisations situated in cities and run on commercial considerations. Recognising that, to cater to the needs of entrepreneurs in the decentralised sector, a well spread out network of consultancy organisations offering a package of services at reasonable costs was called for, the All India Development Banks initiated action to establish TCOs in different parts of the country. The focus of this effort has been on industrial promotion on a dispersed yet viable basis.

Activities of TCOs: The activities of TCOs cover all the stages of project cycle starting from the stage of identification of project ideas by entrepreneurs to project implementation and operation. Thus, their activities include:

Industrial Potential Surveys

Preparation of profiles and feasibility studies.

Evaluation of projects referred to them by financial institutions. ­

Conduct of entrepreneurship development programmes

Provision of technical and administrative assistance to small/ medium enterprises where necessary.

Assisting such entrepreneurs in their modernization technical upgradation and rehabilitation programmes, etc.

Industrial and Technical Consultancy Organisation of Tamilnadu (ITCOT)­

ITCOT was established in 1979 with a paidup capital of ` 10 lakhs. It was sponsored by ICICI. ICICOT plays a lead role in entrepreneurship development. Its services to entrepreneurs include the preparation of project reports. providing consultancy services, conducting pre-investment studies, marketing potential surveys and EOPS to the new and established entrepreneurs.

Commercial Banks and Entrepreneurial Development

In recent times commercial banks have not confined themselves to mere extension of finance to small entrepreneurs but have shown genuine concern for their progress and development. They have now entered the challenging field of promoting new small scale entrepreneurs through entrepreneurship development programmes. In their new role as promoters of small scale sector they have accepted yet another challenging task. They are now holding EOPs in collaboration with specialised institutions such as DIC, SISI, TCOs, etc., with a view to identifying entrepreneurs, especially in backward areas, and training and monitoring them to start new ventures.

State Bank of India (SBI)

In order to accelerate the development of - identifying backward areas by monitoring potential entrepreneurs to take up risky new ventures, the SBI launched EOPs in 1978. As per the Bank’s ventures, the EOPs consist of one month’s intensive training in behavioural science, management aspects, field training. During the training period, the entire cost of boarding and lodging is borne by the Bank. The Bank’s EOP consists of three phases:

Initiation phase for creating awareness about entrepreneurial opportunities.

Development phase through training programmes in developing motivation and managerial skills.

Support phase counselling, encouragement and infra-structural support for establishing and running an enterprise.

Indian Bank Entrepreneurship Service Cell

The bank provides consultancy services to persons who graduate from colleges and institutions of engineering technology etc. and unemployed engineers, diploma holders and other graduates or business executives. The consultancy service right from identification of a project to its implementation and marketing is provided through the personnel of the bank and panels of expert specialists. For this purpose, the cell after preliminary discussion with a prospective entrepreneur arranges a meeting with the appropriate panel member.

The cell and the appropriate panel member then assist the ‘ entrepreneur. This service was inaugurated on 3rd October, 1973 and is available only at Madras and a few other selected centres.

Bank of India - Entrepreneurial Clinic - Cum- Guidance Service

With a view to fostering growth of entrepreneurship and economic development, the bank has set up the cell. The scheme offers:

Assistance in selection of industry, preparation and evaluation of project report and market survey;

Practical training in the line, if necessary;

Assistance in obtaining government clearance, procurement of machinery and equipment and marketing of products;

Assistance and guidance in implementation of the project.

The novel feature of the scheme is that bank will provide from a panel of industrialists a ‘foster father’ to guide and assist the budding entrepreneurs.

STED (Science and Technology Entrepreneurship Development)

The Government of India, in the year 1985, set up a National Science and technology Entrepreneurship Development Board (NSTEDB) particularly to encourage entrepreneurship amongst the Science and Technology persons and that too specifically in the industrially backward areas of the country. Besides, discovering of new resources and manufacturing techniques, remedying growing unemployment and achieving better industrialization in the country, too have been its other objectives. The NSTEDB therefore took up a special project entitled ‘Science and Technology Entrepreneurship Development’ (STED). For this, 12 districts which are industrially backward and have immense untapped and under tapped natural resources had been selected under this project from all over the country from most of the states. Jodhpur district in Rajasthan was selected as one of these centres. In this district, the project was started in the year 1985-86, under the control of Director, Science and Technology, Government, of Rajasthan, Jaipur.

Project Director, Department of Science and Technology, Jodhpur is looking after (STED Project) for Jodhpur district. This office is keeping constant touch with intending entrepreneurs till they get their own industrial unit and the product is marketed.

Objectives

Basically for Science & Technology persons.

Create entrepreneurship awareness-Identify potential S&T persons motivate them.

Identify resources (untapped, undertapped and innovative) – Demand studies and Market Surveys –Tie-up with research organizations-Prepare project reports profiles-Prepare feasibility reports.

Tie-up with financial and other institutions-Render assistance for Infra-structure-Promote entrepreneurship.

Establish Industrial units-Prepare modernization and expansion reports – Help upgrade existing units –Rehabilitate sick units.

Assistance Given

Selection and designing of manufacturing product with commercial feasibility.

Preparation of project profiles / reports.

Identifying of natural resources.

Applying for loans from DIC, RFC, RIICO, Banks etc.

Applying for allotment of land from RIICO.

The formation of Co-operative ventures for setting up industries.

Providing consultancy in the areas of marketing, production, finance etc.,

With whom the Entrepreneurs

Prepare feasibility reports of identified opportunity.

Know technical know-how of new product.

Get training regarding entrepreneurship.

Get expert opinion in monthly motivation camps.

Get advice for upgradation and modernization of existing small scale industry.

Get help for sick units as well as advice for preventive measures against projects of cost, quality, sales etc.

Science Parks

A science park is a low density site in attractive landscaped surroundings for science based industrial and research establishments located near a major scientific institution which provides supporting technical and business services. If offers opportunities for a close interaction between the University and industry and is a means of bringing suitable industry and research close to the sources of scientific progress. “PART” has many different meanings. Similar to a Car Park, the term ‘Science Park’ implies that, one can ‘part’ his industry for a short duration but will not make its use as a permanent garage. One must go out of the part and establish himself in the real industrial world and allow others to come into the park, so that more can get the benefits.

Entrepreneurship and Market Support

The success of entrepreneurship depends solely on the well established institutional set up. In order to meet the requirements of the rapidly expanding entrepreneurship in the SSI sector in the country, the Government gave adequate institutional support. The role of various institutions set up especially to promote the growth of entrepreneurship in small scale sector is quite unique.

Need for Market Support

The modern marketing requires product planning, process planning and market planning. Entrepreneurs are expected to learn these three planning techniques to withstand and survive in the competitive market. So they require some support from inside the outside the organisation.

Small scale entrepreneurs face difficulties to enter the market independently. There are mainly two types of problems for marketing the products of SSIs. The first type of problem associated with product may be created due to lack of standardization, inadequacy of products, unsuitable packing and difference in the quality of materials used. The second type of problem may be developed from inadequate resources at the disposal of SSIs for identifying market outlets and marketable characteristics of their product.

Marketing support is the basic requisite to the entrepreneurs to continue their venture for an indefinite period of time and to stay in the market.

Institutional Support

To strengthen the marketing efforts of SSIs. Government has ex-tended various types of assistances such as market research survey studies, dissemination of information relating to market and various marketing aspects, sub contracts exchange, quality marketing scheme, ancillary pro-motion, publicity, exhibitions, trade fairs, displays, training programmes, seminars, open house discussions, buyer seller meets, marketing consul-tancy services, trade centres and export marketing assistance.

There are some institutions (Central and States) and schemes to extend marketing support to the small scale enterprises. Marketing support is the felt need of the hour to the small scale enterprises in India. The small scale enterprises are in need of institutional support to market their products and to survive in the business.

In order to assist the small scale industries in their marketing programme. Government of India and State Governments have established various institutions, such as

National Small Industries Corporation

State Small Industries corporation.

Small Industries Development Organisation

Khadi and Village Industries Commission,

Export Promotion Councils, Commodity Boards,

State Trading Corporation,

Minerals and Metals Trading Corporation, etc.,

A brief note about the role of few institutions who are extending market support to entrepreneurial ventures are given below.

Reservation of Products

The Government and other agencies have reserved certain items to be procured from the small scale industries. The policy helps the small scale enterprises to expand their market. The State Small Industries Corporation and National Small Industries Corporation help to the small scale enterprises to market their products to the Government. For providing marketing support to SSIs. Government stores purchase programme in the form of reservation of products (358 items) for exclusive purchase from small scale sector and price preference programme is a major instrument.

Central Government Stores Purchase Programme

This programme is meant for procuring stores needed by the Central Government, State government, Public Sector organizations and other Government and Semi-Government bodies. The Central Government Stores Purchase Programme provides the following support to small scale enterprises in order to expand the market for their products.

Price preference to products of cotton and small scale enterprises, including reservation of certain items of stores for purchase from the small scale sector only and

Providing facilities for the registration of small scale and cottage industries.

Marketing Support by National Small Industries Corporation (NSIC)

The NSIC was established to coordinate the small scale units scattered in the country and make them to participate in the Government purchase programme. Steps were taken to give priority to the small scale units in Government procurement. NSIC services as a liaison agency to enable the small sale enterprises to get a substantial share in the Government procurement. NSIC acts as an agent between the Director-General of Supplies and Disposals (DGS&D), Government of India and the small scale enterprises of our country. The NSIC is a recognized export house also. It encourages exports of the small scale units-hardwares, industrial fastners, sanitary fittings, locks and machine tools etc.

State Small Industries Development Corporation (SSIDC)

State Small Industries Development Corporation takes steps to promote exports of the small scale enterprises. These corporations support the various export promotional programmes organised by the small industries service institute. State Small Industries Development Corporations are established under the Companies Act 1956. These corporations are created for catering to the needs of the small, tiny and cottage industries in the respective state or union territory. At present there are 18 State Small Industries Development Corporations (SSIDC) are functioning in India.

The Services of the SSIDC are given below

Procurement and distribution of scarce raw materials to the small scale units.

Supplying machineries and other equipments to the small scale units on hire-purchase basis.

Providing marketing support to the products of the small scale enterprises.

Providing infrastructure facilities to the small scale units.

Maintenance of infrastructure facilities.

Construction of industrial estates and sheds for the benefit of small scale units.

Extending seed capital assistance on behalf of the state governments.

SSIDC serves the small scale, tiny and cottage industries to increase market share for their products.

Marketing Assistance by SIDO

Small Industries Development Organisation through its network of Small Industry Service Institute & Extension Centres throughout India provides assistance for promotion of exports of Small Industries products. The activities in this regard include dissemination of information about foreign markets, consultancy services in matters of export procedures and undertaking production of items having export potential, organizing meetings and seminars on export promotion etc., The training programmes, seminars and workshops are organised on packaging techniques for the benefit of small scale industries.

Khadi and Village Industries Commission (KVIC)

The Khadi and Village Industries Commission was established by an Act of Parliament in 1956. Promoting Khadi and Village Industries in the rural areas is the basic objective of KVIC. It provides marketing support to the rural industries. KVIC and established retail outlets throughout India for selling the products of the rural industries.

There are 30 State Khadi and Village Industries Board functioning in India to cater to the needs of the Khadi and Village industries. The KVIC provides necessary support needed to the entrepreneurs through State Khadi and Village Industries Boards and Khadi and Village Industries Programme.

Khadi and Village Industries Board in Collaboration with the concerned District Rural Development Authority has brought out the following developments:

Upgrading of Khadi and Village industries technology.

Improving quality of KVI products

Establishing rapport with exporters for exporting KVI products

Utilising distribution network of large scale and reputed business houses.

Expanding need based product line in KVI.

Pondicherry Industrial Promotion Development and Investment Corporation Ltd., (Pipdic)

The Pondicherry Industrial Promotion Development and Investment Corporation Ltd., (PIPDIC) is the only major agency (apart from the Commercial Banks) in the sphere of entrepreneurial development and finance. PIPDIC is the promotional, developmental and investment corporation as the name itself suggests. It was established in the year 1974 with the primary objective of promoting the industrial development (with the equity participation from the Government of Pondicherry and Industrial Development Bank of India).

It aims at promoting the small, medium and large scale industries by providing:

Financial assistance to the entrepreneurs;

Developing Industrial Estates with all infrastructural facilities.

Various ancillary services to entrepreneurs; and

Implementing a package of incentives.

State Trading Corporation (STC)

The State Trading Corporation of India Ltd., was established in May, 1956 under the Indian Companies Act 1956 and it was designated as the sole import agency for the products that the Government imports from time to time. Its main aim is to increase India’s exports and to facilitate for the import of essential capital goods, raw materials and other components. It concentrates to expand the existing market and to promote exports of certain bulk commodities and to canalize the import of bulk commodities.

STC promotes through its subsidiaries viz.,

The Project and Equipment Corporation of India Ltd.,

The Tea Trading Corporation of India Ltd.

State Chemicals and Pharmaceuticals Corporation of India Ltd.

The Cotton Corporation of India Ltd.

The Cashew Corporation of India Ltd.,

Export Promotion Councils (EPCs)

The EPCs are established under the companies act 1956 to provide direct institution support to the entrepreneurs who are involving in export trade. Separate EPCs has been created by every type of Industry. EPCs has been created by every type of Industry. EPCs helps the member exporters on technical matters, export marketing strategies and export promotion.

Commodity Boards

Commodity Boards are established by the Govt. of India in order to help the organisation of Industry and trade. The boards take care of the entire range of problems of production, marketing, promotion, competition etc., on respect of the commodities concerned. They take steps for the development of cultivation, increased productivity, processing, marketing and R & D. Some of the commodities are:

All India Handlooms and Handicrafts Board.

Coir Board

The Central Silk Board etc.

Ancillary development and Marketing Assistances

The ancillary division of SIDO functions as a nodal agency of the central government to develop small scale and ancillary sub-contracting units in the country through its network of 16 sub contracting exchanges and SISIs set up in various parts of India. They organised various programmes such as

State level ancillary development seminars

Buyers Sellers meet cum exhibitions

State level ancillary advisory committee meeting

Plant level committee meeting

National workshop on automobile ancillaries

Regional workshops on ancillary development.

New SSI enlisted with sub-contracting exchanges and

Small scale units assisted by the sub contract exchanges.

Tender Marketing

In order to help SSIs in marketing their products. Small Industries Corporation in the States submit tenders on behalf of the SSIs to the various agencies like Railways. Defence and State Store Purchase Authorities including Public sector undertakings.

Trade Centres

Trade centres have been established by the Government of India for marketing of small industries products. The centres collect and disseminate information relating to all types of small scale industries in the region, given full details of products, capacities and prices.

They provide library cum documentation service and function as agencies for contracts between small scale units and prospective buyers in the country and abroad. They also assist the small scale units in the maintenance of quality control and the adoption of standardization.

International Marketing

Trade fairs and exhibitions provide a marketing ground for buyers and sellers as a result of which the communication gap is reduced and transactions are facilitated. During exhibitions SIDO provides different facilities to the small scale entrepreneurs without any charge, such as space in exhibition pavilion, sea freight, handling and clearing facilities etc.

Entrepreneurship and Financial Support

Finance is the lifeblood of any entrepreneurial venture. It is a basic requirement to commence a project. Entrepreneurs are in need of capital to start business and they can get financial assistance at every stage of business. Entrepreneurs should plan in advance to procure the needed finance for investment from the external sources. They should identify the financial institutions providing financial assistance for their projects. Financial institutions provide financial assistance to meet fixed capital working capital and venture capital requirements of the entrepreneurs.

Types of Finance

Entrepreneurs require three types of finances depending upon their nature of business. They are:

Short Term Finance

Short term finance refers to funds required to meet the commit-ments during the shorter period of time i.e., less than one year. Short term finance is used to meet the temporary working capital of the enter-prise. Short term financial requirements can be met through the following sources:

Bank Credit

Trade Credit

Instalment Credit

Customer Advance

Medium-Term Finance

Medium term refers to a period of five years. Medium term finance is required to meet permanent working capital needs, to expand the business, to replace certain assets and to meet the expenses for modernization. Medium term financial requirements can be fulfilled through the following source:

Issue of shares and debentures

Loans from the financial institutions and commercial banks

Ploughing back of profits

Public deposits

Long-Term Finance

Long term refers to the period exceeding five years. Long term finance is required to purchase fixed assets, establish a new business, and to meet the expenses of expansion and modernization of the business enterprise. The sources of long term finance are listed below:

Issue of shares and debentures

Long from the financial institutions providing long term finance

Ploughing back of profit

Working Capital Support

Working capital refers to the capital required to meet the day-to-day expenses/commitments of the business enterprise. Working capital needs could be fulfilled through loans from the commercial banks in the form of hypothecation or pledge. Working capital assistance is also given by finance companies, state financial corporations and Cooperative banks.

Fixed Capital Support

Fixed capital refers to the capital required to purchase fixed assets such as land and buildings, plant and machinery, furniture etc., Fixed assets are used for processing the inputs and for getting standard output. Fixed capital needs could be fulfilled through market borrowings and term loans from the financial institutions as given below.

Institutional Framework

To provide assistance to the entrepreneurs the Government has set up Financial institutions which can be categorized into two groups. Viz.,

All India Financial Institutions

State Level Financial Institutions

Commercial Banks

Co-operative banks

Development Banks

The national level institutions are

Industrial Development Bank of India

Industrial Finance Corporation of India

Small Industries Development Bank of India

Industrial credit and Investment corporation of India

National Small Industries Corporation

National Bank for Agriculture and Rural Development

Shipping Credit and Investment Corporation of India

Industrial Reconstruction Bank of India

The State level institutions are further divided into

State Financial corporations

State Industrial Investment Corporation

Small Industries Development Corporation

Investment Institutions

Unit Trust of India

Life Insurance Corporation of India

General Insurance Corporation of India

Industrial Finance Corporation of India (IFCI)

IFCI was established in July 1948 under a special statute, as the first development bank in the country with the main object of making medium and long term credits available to industrial concerns. It’s primary role is to provide financial assistance to medium, medium-large and large scale industries in all aspects and spread industrialization in the country.

Industrial Development Bank of India (IDBI)

IDBI was set up in July 1964. It is the apex financial institution among the development banks of the country for co-ordinating the activities of various financial institutions including banks, engaged in financing and promoting the industries spreading entrepreneurship development in the country.

The various industries eligible to get finance from IDBI includes the industries engaged in the manufacture, processing or preservation of goods, mining, shipping, transport, hotel industry, generation or distribution of power, fishing, repairing, testing or servicing of machinery or vehicles, vessels etc., setting up of industrial estates, research and development of any process or product in providing special or technical knowledge or other services for the promotion of industrial growth. Besides, IDBI has the following main objectives.

To plan and promote the development of industries in the backward areas.

To provide financial and promotional assistance to all types of industries including for modernization and expansion of the units.

To undertake, market and investment surveys and also research activities to help the entrepreneurs.

The Industrial Credit and Investment Corporation of India (ICICI)

ICICI was set up in 1955 to encourage assist industrial development and investment in India. ICICI provides finance in the form of long and medium term loans or equity participation sponsoring and underwriting issues of shares and debentures, guaranteeing rupee and foreign currency loans from other sources making funds available for reinvestment and providing technical and administrative advice to Indian industry. Besides, it offers a wide range of services to eater for the variety of needs of the entrepreneurs viz.,

Small Industry development bank of India (SIDBI)

It is a national institution for promotion, financing and development of small scale industries. It came to operation on April 2, 1990. SSI can avail financial assistance from SIDBI through its direct and indirect financial assistance programme. All the programmes of the SIDBI are directed to solve the problems of the SSIs in areas like, quality of upgradation, obsolescence of technology and technology improvement, marketing, infrastructure development, delayed realization of bills, ancillarisation, export financing and venture capital financing.

National Bank for Agriculture and Rural Development (NABARD)

It has been established for promoting agriculture and rural development in the country. They provide direct finance and refinance facilities to State Cooperative Banks, RRBs and other financial institutions. They take steps for promoting integrated rural development and to provide all sorts of production and investment credit for agriculture and rural development.

State Financial Corporations (SFCs)

They play a pivotal role in the development financing system of the concerned state. They provide financial assistance to promote small and medium scale industries so as to bring balanced regional development in the country. They are performing multiple roles such as providing financial assistances through various schemes, imparting training schemes and also undertaken all sorts of promotional efforts. There are 18 SFCs functioning in our country. They provide financial support for transport operators, setting up hotels, hospitals and tourism related activities. They have special schemes for women entrepreneurs, schedule caste schedule tribe, ex-servicemen and physically handicapped.

Commercial Banks

Commercial banks play a vital role in providing financial assistance to all types of entrepreneurial activities. They participated in lending programme sponsored by the Government for the benefit of SSIs, agriculture rural industries. They have wider network of branches in India which facilitate them to serve the people living in rural areas and remote villages. Priority sector lending is a specific lending programme of the commercial banks. Around 40% of the net bank credit is earmarked for priority sector lending. They provide term loan and working capital finance to industrial sector by means of assisting self employment opportunities in the rural and urban areas.

Types of Assistance

The All India Financial Institutions provide the following kinds of assistance:

Term loans 1. Rupee loan 2. Foreign currency loan

Underwriting of equity / preference shares /bonds and debentures

Direct subscription to the capital

Issue Guarantee (IFCI, ICICI)

Bills discounting scheme (IDBI)

Operation of Technical Development fund (IDBI)

Soft Loan schemes (IDBI)

Seed capital Assistance (IDBI)

Risk Capital Assistance (IFCI)

Direct loans scheme

Refinance of Industrial Loan Scheme

Refinance Scheme for industrial rehabilitation

Refinance scheme for modernization

Development Assistance Fund

Merchant banking

Facilities for non-resident Indians

Letters of credit

Project Promotion

Backward Area Development

However, the major function of all the institutions are to provide term loans. The State Level Institutions provide besides term loan, the following assistance.

Underwriting of shares

Direct subscription to capital

Providing guidance in selection of project site etc.

Operations of various incentives schemes

Central Investment subsidy

Sales tax loan / sales tax exemption

Operation of transport subsidy

Leasing finance scheme

Thus, SFCs contribute about 20% of the total assistance sanctioned by all institutions taken together.

Investment Institutions

In addition to the above institutions, UTI, was established in 1964, LIC in 1956 and GIC was established in 1973 to meet the requirement of industrial projects on a limited scale. They mobilize savings of the people and utilize it for the purpose of developing infrastructure facilities in our country. Investment institutions participate with other financial institu-tions in providing term loans to the industries and providing facilities for underwriting /direct subscription to the shares and debentures in indus-trial undertakings. These institutions normally do not sanction term loans.

International Financial Agencies

International Financial Agencies (World Bank, International Bank for Reconstruction and Development, International Development Association) provide financial support to the projects of their member countries. The agencies provide financial support to the projects related to social and economic progress of the member countries.

The services of the IBRD and IDA are listed below

Providing financial support to the member countries.

Providing economic advice and technical assistance

Serving as a catalyst to investment by others

Assisting the member countries for reconstruction and development of their economy by facilitating investment of capital for productive purposes.

Promoting foreign investment by guarantees or through participation and other investment of capital for fulfilling the investment needs of the number countries.

Maintain equilibrium in the balance of payments of member coun-tries by promoting international investments for creating produc-tive resources and increasing exports in the member countries.

Asian Development Bank’s (ADB) strategic objectives are given below

Promotion of growth

Reduction of poverty

Development of human resources (including among other things, population planning) and

Sound management of natural resources and the environment

Efforts are taken by the ADB to strengthen basic infrastructure to enable the member countries to face the problems generated by rapid urbanization. Improving living conditions in slums and squatter settlements is also an important element of the Bank’s urban development projects. ADB sanctions projects on Environment Preservation and Natural Resources Management.

Finance is now made available to entrepreneurs on a ‘totality’ basis by commercial banks, national and state level financial institutions, investment companies and international financial institutions to meet their medium term and long term requirements.

Credit facilities are being granted for the construction of factory building, the purchase of plant, machinery and equipment and also for working capital requirements. Loans are being given for expansion, renovation and modernization of business unit. Thus the institutional supports stimulate entrepreneurial activity and generate more robust economic development.

Banks and Financial Institutions are very much concerned about the effective utilization of their scarce resources. Hence, they have designed their operational principles and procedures on scientific lines and practiced them for realizing the objectives of the Corporation. This chapter briefly describes the project financing procedure practiced by the financial institutions. In discharge of its functions, these institutions are required to act on business principles; due regard to being given to the interest of industry, commerce and general public.

A special feature of its lending policy is that it is tailored to the changing requirements of a growing economy and at the same time with the objects of the national policies and priorities laid down from time to time by the Central Government. The Corporation has had to strive continuously to sophisticate its tools for project appraisal, implementation and follow-up.

The process of project financing goes through the different stages viz.,

Conceptualisation Stage

Application Stage

Processing Stage

Sanction Stage

Disbursement Stage

Post-Disbursement Stage

It is the first stage where the promoter goes in for the selection of the product / project. He may consultant the FIs officials or consultants to have the advice about the desirability of setting up a particular project. Then he has to prepare a detailed project report and submit it alongwith a prescribed application form. Then detailed procedure of the appraisal of the project is initiated by FIs. It is at this stage that promoter starts negotiating with the financial institutions for the sanction of the necessary financial assistance.

Once the basic information is available in the application practice of registration of project begins. The registration committee also take into consideration the government guidelines with respect to location and type of the industry proposed and other criteria like eligibility of seed capital and refinability etc.,

Immediately after the project is cleared by registration committee the following actions are normally taken:

Allotment of the case to appraising officer.

If, the application is incomplete additional information maybe asked.

The proposal is likely to get favourable consideration of the Registration Committee if

The project has some priority according to Govt. Policy.

The promoters inspire confidence

The product has a distinct market potential

The project cost is not unreasonably high and is comparable with similar projects earlier financed by the institution.

The promoter’s contribution is satisfactory.

The profitability estimates are conservative and indicate that the repayment is to be made after a reasonable time.

The proposal is likely to be rejected if some of the following features are observed.

Bankers report about promoter is not satisfactory

Promoters are economic offenders

Promoters hail from a group which is not taking steps to rehabilitate the other unit assisted by institutions.

Financial position of company is not satisfactory The product belongs to low priority sector.

Setting up of the unit would adversely affect the existing units.

Cost of the project is unduly excessive

Promoter’s contribution is low and promoters don’t agree to increase it.

Debt-Equity ratio is adverse

Collaborators have inadequate experience

Past experience of institutions with consultant is not satisfactory Proces know-how has become obsolete / is insufficient Availability of raw material is inadequate Project does not have adequate market potential

Centre for Entrepreneurship Development

Centre for Entrepreneurship Development, Tamil Nadu (CED-TN) was established, during 1990, as a public Charitable Trust to function as an Autonomous Institution of Madurai Kamaraj University. CED-TN operates as a non-profit making organization and committed to promote/ enhance entrepreneurship culture in the State of Tamil Nadu.

Mission and Objectives

The three core objectives of CED (Tamil Nadu) are:

To promote Entrepreneurship Culture in the State of Tamil Nadu.

To enhance employability of educated unemployed youth through Professional Training.

NGO Capacity Building for Mass Employment Generation through Income Generation Activities.

Professional Services offered by CED (Tamil Nadu)

Entrepreneurship Development Programmes

Achievement Motivation Training.

Training of trainers and Extension Officers

Managerial Skill Development

Technical Skill Development

Export Marketing

Project Report Preparation and Evaluation

Working Capital Management

Performance Improvement Programme (PIP)

Institutional Capacity Building

Self Help Groups (SHGs) and Micro Enterprises

Women Empowerment

Information Dissemination

Entrepreneurship Awareness Camps

Regional / National Seminars / Workshops / Conferences on topical issues

Facilitation Seminars on Govt. Schemes like Technology Upgradation Fund of Textile Committee, Govt. of India and Margin Money Assistance Scheme of Khadi and Village Industries Commission (KVIC), etc.,

Technology Transfer

Consultancy Services

Pre-investment Feasibility Studies

Preparation of detailed Techno-Economic Feasibility Reports.

Identification and Selection of Viable Project Opportunities.

Diagnostic Studies of Modernization and Technology Upgradation in Existing Industries.

Diagnostic Studies for Rehabilitation / Revival of Sick Industrial Units.

Industrial Clusters of Micro and Small Enterprises in specific sectors.

Research and Consultancy Activities

Marketing Research

Industrial Potential Survey

Technology Transfer

Evaluation of Training Activities

Evaluation of Project Implementation

Evaluation of Policy Implementation

Industrial Clusters

Summary