UNIT-IV

INSTITUTIONAL SUPPORT TO ENTREPRENEURS

NEED FOR INSTITUTIONAL SUPPORT

In order to actually make the enterprise running, the entrepreneur still needs to
undertake some more activities. For example, he/she needs to procure material,
machinery, and men etc. to produce some product. Finance is required to procure
all these inputs and resources required to run an enterprise. For example, it is
finance only that enables an entrepreneur to buy raw material or input from
someone, purchase machinery and equipment from someone else, hire manpower
from labour market, meet day-to-day business expenses and so on. These resources
and inputs cannot be procured without finance. The fact remains that it is the
availability of finance that keeps the enterprise wheel on, or say, that keeps
enterprise running on continuous basis. It is due to this vital role of finance in
enterprise running, finance is regarded as life-blood of an enterprise.
Now, an important question arises is where does this finance come from?
Alternatively speaking, what are the sources of entrepreneurial finance? There are
two major sources of entrepreneurial finance: entrepreneur’s own funds and funds
from outside like financial institutions. There is ample research evidence available
to state that the scope for entrepreneur’s own funds is highly limited. The reason is
not difficult to seek. Majority of entrepreneurs are unemployed before assuming to
entrepreneurial career. As such, they lack in their own funds required to run the
enterprise. Therefore, they depend on outside funds required to run their
enterprises. The result is either some prospective entrepreneur give up the idea to
start enterprises with inadequate funds. The consequence is the enterprises suffer
from inadequate funds since beginning itself. Such a state of enterprise affairs is
just life enterprise malnutrition. Then, the future of enterprise is a common man’s
guess: sickness and closure. An idea about the magnitude of this problem can be
had from the fact that about 10 percent of total small enterprises in the country are
sick of which 90 percent of units have become non-viable, i.e. the incidence of
sickness has advanced to the extent beyond repair. Lack of funds has been found
one of the major causes of sickness in small enterprises. As stated earlier, lack of
funds causes malnutrition to small enterprises which, in turn, leads to high infant
mortality rates among the small enterprises.
In view of above, there is a need for extending financial support to entrepreneurs
so that they do not suffer from shortage of funds and, in turn, do not fall prey to
sickness and ultimately closure. Thus , the need for institutional finance for small
entrepreneurs can be imbued with multiplicity of justifications in a more orderly
manner as follows:
 Small enterprises in India are literally small in size and resources including
financial resources.
 Due to the lack of own funds, small entrepreneurs fall prey to local money
lenders who are generally known as exploiters by charging exorbitant high
rate of interest.
 Burden of high interest rate on borrowed capital from local money lenders,
on the one hand, and failure of entrepreneurs in repaying loans due to their
weak financial position, on the other, makes their financial position more
and more vulnerable.
 Failure is repaying loans in extreme cases leads the money lenders to absorb
the assets of small entrepreneurs.
 Availability of funds from local money lenders is, moreover, uncertain and
untimely also.
 Small entrepreneurs need protective finance under set rules and regulations
not the exploitative finance without any prescribed rules and regulations.
Finance is one of the essential requirements of any enterprise. Small
entrepreneurs, therefore, need to know very clearly about the type and extent of
their financial requirements. Integral to financial requirements is to know about the
possible alternative sources from which finance can be availed of. Given the
shortage or lack of entrepreneurs own funds/resources, the Government of India, as
a part of its policy of promotion of small-scale sector in the country has set up a
host of institutions to meet the financial requirements of small entrepreneurs.
FINANCIAL ASSISTANCE THROUGH
NATIONAL SMALL INDUSTRIES CORPORATION (NSIC)

NSIC (National Small Industries Corporation) is an ISO certified Indian

Government Enterprise under Micro, Small and Medium Enterprises. Established
in 1955. National Small Industries Corporation is working to aid, foster and
promote the growth of MSMEs (micro, small and medium enterprises) all across
the country. NSIC operates all across the nation through a network of Technical
Centres and offices. To manage its functions and operations in African countries,
National Small Industries Corporation operates performs its administration from
Johannesburg, South Africa. Apart from this, National Small Industries
Corporation has set up Training cum Incubation Centres managed by highly
trained professional manpower.

Objectives :-
 To fulfill its mission of promoting, aiding and fostering the growth of small
enterprises in the country.
 With passing of the Micro, Small and Medium Enterprises Development
(MSMED) Act, 2006, NSIC has also included medium enterprises.
 To enhance growth of SME’s.
 To achieve operational efficiency and self- sustenance
 To upgrade the professional skills of all employees.
 To provide safe, clean, hygienic & congenial work environment
 To provide training for skill upgradation of trainees.
 To provide common facility services to industries for enhancing their
competitiveness and quality.

Schemes of NSIC
National Small Industries Corporation facilitates MSMEs with specially tailored
scheme to build and improve their competitiveness. National Small Industries
Corporation provides complete integrated services under Finance, Marketing,
Technology and another allied Support service.
Marketing Support
Marketing support has been considered as one of the most important tools for the
development of any business. It is crucial for the survival and growth of Micro,
Small and Medium Enterprises in today’s intensely competitive market. National
Small Industries Corporation devised numerous of schemes to support enterprises
(both domestic and foreign markets) in their marketing efforts. These schemes are
briefly described as under:

Consortia and Tender Marketing

Micro and Small Enterprises in their individual capacity encounter several issues in
order to procure & deliver large orders, which negate them a level playing field
vis-a’-vis large enterprises. National Small Industries Corporation forms consortia
of MSEs manufacturing the same or similar product or products, thereby
combining in their capacity.
National Small Industries Corporation applies the tenders on behalf of single Micro
and Small Enterprise/Consortia of Micro and Small Enterprise for securing orders
for them. Finally, these orders are dispersed amongst Micro and Small Enterprises
in tune with their capacity of production.

Marketing Intelligence
Disseminate and collect both international as well as domestic marketing
intelligence for the benefit of Micro and Small Enterprises. This Marketing
Intelligence cell, apart from to spreading awareness about several schemes for
MSMEs, will maintain a database in detail and distribute information.

Exhibitions and Technology Fairs

To showcase the core competencies of Micro and Small Enterprises in India and to
capitalize market opportunities, National Small Industries Corporation participates
in National and International Trade Fairs and Exhibitions every year. National
Small Industries Corporation facilitates the participation of the MSEs by offering
concessions in rental etc. Participation in these national and international events
exposes Micro and Small Enterprises units to international practices and improves
their business competencies and prowess.
Credit Support
National Small Industries Corporation enables credit requirements of MSEs in the
following areas:

Financing for Raw Material Procurement

The scheme framed by National Small Industries Corporation for the assistance of
Raw Material helps MSEs by way of financing the procurement of Raw Material
(both indigenous & imported).
The salient features are as follows:

1. Bulk purchase of basic raw materials at competitive rates.

2. Financial Assistance for Raw Materials procurement up to 90 days.
3. National Small Industries Corporation facilitates import of scares raw
materials.
4. National Small Industries Corporation takes overall care of all the
documentation, procedures and issuance of a letter of credit in case of
imports.

Financing for Marketing Activities

National Small Industries Corporation provides assistance in the financing of
marketing actives such as Exports, Internal Marketing and Bill Discounting.

Finance Through Syndication with Banks

To make the sure smooth flow of credit to MSEs, National Small Industries
Corporation enters into strategic alliances with several commercial banks to
facilitate working capital/ long-term financing of the MSEs across the country. The
engagement foresees forwarding of loan applications of the interested MSEs by
National Small Industries Corporation to the banks and sharing the processing fee.

Credit Rating Scheme and Performance for Small Industries

The need of Credit Rating Mechanism and Performance appraisal for MSMEs was
highlighted in Union Budget’04-05. A scheme for MSMEs has been drafted in
consultation with Rating Agencies and IBA (Indian Banks’ Association). National
Small Industries Corporation has been appointed the nodal agency for
implementation of this scheme through impanelled agencies.

Benefits of Performance and Credit Rating

1. Availability of credit at attractive interest rates

2. A trusted, independent third party opinion on credit-worthiness and
capabilities of Micro and Small Enterprises
3. Prompt sanctions of Credit from Banks and Financial Institutions
4. Recognition in global trade
5. Facilitate buyers/vendors in capacity and capability assessment of MSMEs
6. Subsidized rating fee structure for Micro and Small Enterprises
7. Enable MSMEs to ascertain the strengths and weaknesses of their existing
operations and take corrective measures.

Technology Support
NSIC offers small enterprises the following support services through its Technical
Services Centres.

1. Material testing facilities through accredited laboratories

2. Advise on application of new techniques
3. Common facility support in machining, EDM, CNC, etc.
4. Product design including CAD
5. Energy and environment services at selected centres
6. Classroom and practical training for skill upgrading

SMALL INDUSTRIES DEVELOPMENT ORGANISATION (SIDO)

Small Industries Development Organization (SIDO) is a subordinate office of the
Department of SSI & Auxiliary and Rural Industry (ARI). It is an apex body and
nodal agency for formulating, coordinating and monitoring the policies and
programmes for promotion and development of small-scale industries.
Development Commissioner is the head of the SIDO. He is assisted by various
directors and advisers in evolving and implementing various programmes of
training and management, consultancy, industrial investigation, possibilities for
development of different types of smallscale industries, industrial estates, etc.
The main functions of the SIDO are classified into:
(i) Co-ordination,
(ii) Industrial development, and
(iii) Extension.
These functions are performed through a national network of institutions and
associated agencies created for specific functions. At present, the SIDO
functions through 27 offices, 31 Small Industries Service Institutes (SISI),
37 Extension Centres, 3 Product-cum - Process Development Centres, and 4
Production Centres.
All small-scale industries except those falling within the specialized boards
and agencies like Khadi and Village Industries (KVI), Coir Boards, Central
Silk Board, etc., fall under the purview of the SIDO.
The main functions performed by the SIDO -
a. To evolve a national policy for the development of small-scale industries,
b. To co-ordinate the policies and programmes of various State
Governments,
c. To maintain a proper liaison with the related Central Ministries, Planning
Commission, State Governments, Financial Institutions etc., and
d. To co-ordinate the programmes for the development of industrial estates.
Functions Relating to Industrial Development:
e. To reserve items for production by small-scale industries,
f. To collect data on consumer items imported and then, encourage the
setting of industrial units to produce these items by giving coordinated
assistance.
g. To render required support for the development of ancillary units, and to
encourage small-scale industries to actively participate in Government
Stores Purchase Program by giving them necessary guidance, market advice,
and assistance. Function Relating to Extension:
h. To make provision to technical services for improving technical process,
production planning, selecting appropriate machinery, and preparing factory
lay-out and design,
i. To provide consultancy and training services to strengthen the
competitive ability of small scale industries.
 j. To render marketing assistance to small-scale industries to effectively sell
their products, and
k. To provide assistance in economic investigation and information to
small- scale industries.

SMALL SCALE INDUSTRIES BOARD (SSIB)

The Government of India constituted Small Scale Industries Board (SSIB) in 1954
to advice on development of small scale industries in the country. The SSIB is also
known as Central Small Industries Board. The range of developmental work in
small-scale industries involves several departments/ministries and several organs
of the Central/State governments. Hence, the Small-Scale Industries Board has
been constituted and established as an apex advisory to facilitate co-ordination and
inter-institutional linkage among several departments/ministries of the central and
state Governments.
The Industries Minister of the Government of India is the Chairman of the SSIB.
The SSIB comprises of 50 members including state industry Minister, some
members of Parliament, and Secretaries of various Departments of Government of
India, Financial institutions, public sector undertakings, industry associations and
eminent experts in the field.
STATE FINANCE CORPORATIONS (SFCs)
The State Finance Corporations (SFCs) are the integral part of institutional finance
structure in the country. SFC promotes small and medium industries of the states.
Besides, SFCs are helpful in ensuring balanced regional development, higher
investment, more employment generation and broad ownership of industries. At
present there are 18 state finance corporations (out of which 17 SFCs were
established under SFC Act 1951). Tamil Nadu Industrial Investment Corporation
Ltd. established under Company Act, 1949, is also working as state finance
corporation.
Organisation and Management: The State Finance Corporations management is
vested in a Board of ten directors. The State Government appoints the managing
director generally in consultation with the Reserve Bank and nominates three other
directors. The insurance companies, scheduled banks, investment trusts, co-
operative banks and other financial institutions elect three directors. Thus the
majority of the directors are nominated by the government and quasi-government
institutions.
The important functions of State Finance Corporations are:
(i) The SFCs grant loans mainly for acquisition of fixed assets like land, building,
plant and machinery.
(ii) The SFCs provide financial assistance to industrial units whose paid-up capital
and reserves do not exceed Rs. 3 crore (or such higher limit up to Rs. 30 crore as
may be specified by the central government).
(iii) The SFCs underwrite new stocks, shares, debentures etc., of industrial
concerns.
(iv) The SFCs provide guarantee loans raised in the capital market by scheduled
banks, industrial concerns, and state co-operative banks to be repayable within 20
years.
Working of SFCs: The government of India passed the State Financial
Corporation Act in 1951 and made it applicable to all the States. The authorised
Capital of a State Financial Corporation is fixed by the State government within
the minimum and maximum limits of Rs. 50 lakh and Rs. 5 crore and is divided
into shares of equal value which were taken by the respective State Governments,
the Reserve Bank of India, scheduled banks, co-operative banks, other financial
institutions such as insurance companies, investment trusts and private parties. The
shares are guaranteed by the State Government. The SFCs can augment its fund
through issue and sale of bonds and debentures, which should not exceed five
times the capital and reserves at Rs. 10 Lakh.
SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI)
The SIDBI was established as a wholly owned subsidiary of Industrial
Development Bank of India (IDBI) under a special Act of the Parliament 1988 and
started its operations on April 2, 1990. It took over the responsibility of
administering Small Industries Development Fund and National Equity Fund
which were earlier administered by IDBI. It is the Principal Financial Institution
for the Promotion, Financing and Development of the Micro, Small and Medium
Enterprise (MSME) sector and for Co-ordination of the functions of the
institutions engaged in similar activities. It is managed by a team of 10 Board of
Directors. The authorised capital of the Bank is Rs. 1000 crore and the Paid up
capital is Rs. 450 crore.

Small Industries Development Bank of India (SIDBI) helps small scale industrial
units by refinancing loans extended by primary lending institutions. It serves as a
major financial institution for Micro, Small and Medium Enterprises (MSME)
sectors. They help MSMEs get the funds that they need to grow, market, develop
and commercialize the products that they create. SIDBI’s key initiatives over 25
years have been:
 Providing an assistance of around Rs. 5.40 lakh crore to the MSME sector
 Extending loans to lakhs of disadvantaged people, mostly women, through its
Microfinance operations
 Supporting budding and existing entrepreneurs by taking initiatives to help
them build their skills

SIDBI Associates

 CREDIT GUARANTEE FUND TRUST FOR MICRO AND SMALL

ENTERPRISES (CGTMSE)
 INDIA SME TECHNOLOGY SERVICES LTD. (ISTSL)
 SME RATING AGENCY OF INDIA LTD. (SMERA)
 INDIA SME ASSET RECONSTRUCTION COMPANY LTD
 SIDBI TRUSTEE COMPANY LIMITED (STCL)
 RECEIVABLES EXCHANGE OF INDIA LTD (RXIL)

SIDBI Subsidiaries

 SIDBI VENTURE CAPITAL LIMITED (SVCL)

 MICRO UNITS DEVELOPMENT & REFINANCE AGENCY LTD
(MUDRA)
Modes of Finance
SIDBI provides direct, indirect and micro finance facilities.

 Direct Finance: In the form of Term Loan Assistance, Working Capital

Assistance, Support against Receivables, Foreign Currency Loan, Scheme of
Energy Saving for MSME sector, equity support etc.
 Indirect Finance: The Indirect assistance in the form of Refinance is
provided to Primary Lending Institutions (PLIs), comprising banks, State
Level Financial Institutions, etc. having a wide network of branches all over
the country. The main objective of Refinance Scheme is to increase the
resource position of PLIs which would ultimately facilitate the flow of credit
to MSME sector.
 Micro Finance: SIDBI provides micro finance i.e. credit to small
entrepreneurs and businessmen for establish their business.

Functions of SIDBI

1. SIDBI refinances loans extended by the primary lending institutions to small

scale industrial units, and also provides resources support to them.
2. SIDBI discounts and rediscounts bills arising from sale of machinery to or
manufactured by industrial units in the small scale sector.
3. To expand the channels for marketing the products of Small Scale Industries
(SSI) sector in domestic and international markets.
4. It provides services like leasing, factoring etc. to industrial concerns in the
small scale sector.
5. To promote employment oriented industries especially in semi-urban areas
to create more employment opportunities and thereby checking migration of
people to urban areas.
6. To initiate steps for technological up-gradation and modernisation of
existing units.
7. SIDBI facilitates timely flow of credit for both term loans and working
capital to SSI in collaboration with commercial banks.
8. SIDBI Co-Promotes state level venture funds in association with respective
state government.
 9. It grants direct assistance and refinance loans extended by primary lending
institutions for financing exports of products manufactured by small scale
units.

INDUSTRIAL FINANCE CORPORATION OF INDIA (IFCI)

After the Second World War, there was a great need for the expansion of industries
in India. Again with the introduction of planned industrial development, the
industrial finance became inadequate to meet the requirements of industrial
development of the country. Thus in July 1, 1948 the Industrial Finance
Corporation of India (IFCI) was established by the Government under a special
Act.

The prime object of IFCI is to provide medium term and long-term finance to
public limited companies and co-operative organisations. The authorised share
capital of the IFCI is now raised to Rs 20 crore. The IDBI, scheduled banks,
insurance companies, investment trusts and co-operative banks are the
shareholders of the IFCI.

Later, by an amendment to the IFCI Act, private limited companies have become
eligible to get financial assistance from IFCI. After the establishment of Industrial
Development Bank of India (IDBI) in 1964, the IFCI became a subsidiary to the
IDBI. Again on 24th March, 1993 the Industrial Finance Corporation (Transfer of
Undertaking and Repeal) Bill 1993 was passed in the Parliament in order to
privatize the I.F.C.I.

Now I.F.C.I. would be free to raise resources from the open market and face
competition. Moreover, with effect from 1st July, 1993, the IFCI has been
converted into a public limited company and it is renamed as Industrial
Finance Corporation of India Ltd.

The Corporation is authorised to perform the following functions:

i) Granting loans and advances to industrial concerns and subscribing to the shares
and debentures floated by them;

(ii) Underwriting the issue of stocks, shares, debentures and bonds of industrial
concerns provided these stocks, shares etc., are disposed of by the Corporation
within seven years;

(iii) Guaranteeing loans raised by industrial concerns in the capital market;

(iv) Granting loans in foreign currencies to specified industries; and

(v) Guaranteeing deferred payments in respect of imports of capital goods made by

approved industrial concerns.

The IFCI is authorised to advance long and medium term finance only to those
companies which are engaged in manufacturing, mining, shipping and generation
and distribution of electricity. Now the Corporation’s capacity to advance loan or
to assist a single concern is limited to Rs 1 crore and the period of loans should not
exceed 25 years.

The corporation is charging rate of interest on loan at the rate of 11.25 per cent on
rupee loan and 11.50 per cent on foreign loan.

The corporation is giving more preference in advancing finance to:

(i) New entrepreneurs,

(ii) Projects aimed at exploring new areas of technology,

(iii) Prospect of the projects in earning foreign exchange,

(iv) Projects involved for producing inputs for raising agricultural production,

(v) Projects involved in the production of essential consumer goods, and

(vi) Projects located in notified list.

The main three components of financial resources of IFCI include:

(i) Share capital

(ii) Bonds and debentures and

(iii) Other borrowings.

Initially, the paid up capital of the IFCI was Rs 5 crore. Later on, the amount was
increased several times and as on 31st March, 2013, the amount of paid up capital
stood at Rs 1,926 crore. The share capital of IFCI is mostly subscribed by IDBI,
the LICI, commercial banks and the cooperative banks. IFCI has also accumulated
sizeable reserves.

Besides paid up capital and reserves, the other major sources of financial resources
of IFCI are issue of bonds and debentures, borrowings, from the IDBI, the
government and foreign loans. Again such bonds and debentures issued by IFCI
are guaranteed by the Government of India for its repayment of principal and
payment of interest.

Working of Industrial Finance Corporation of India (IFCI):

Since its inception in 1948, the IFCI has sanctioned net financial assistance up to
March 1993 to the extent of Rs 15,430 crore against which the total disbursement
was Rs 10,380 crore. The industries of high national priority which have been
receiving financial assistance from IFCI include fertilizers, cement, power
generation, paper, industrial machinery etc.

Again, the IFCI has registered an impressive performance by earning a net profit of
18.81 per cent, i.e.. to the tune of Rs 217.59 crore during the period of half year
ending on September 30, 1997 as against Rs 183.14 crore during the same period
of the previous year.

In recent years, IFCI has introduced the following new promotional schemes:

(a) Interest subsidy scheme for women entrepreneurs,

(b) Consultancy fee subsidy schemes for providing marketing assistance to small
scale units,

(c) Encouraging modernisation of tiny, small and ancillary units,

(d) Controlling pollution of small and medium scale units.

In recent years about 50 per cent of the assistance has been advanced to industrial
projects located in backward districts of country. However, in recent years, the
performance of IFCI is not at all satisfactory. Total amount of loan sanctioned by
IFCI initially increased from Rs 3,746 crore in 1993-94 to Rs 6,580 crore in 1995-
96 and then it gradually declined to Rs 1,050.4 crore in 2006-07 and then increased
to Rs 4,015 crore in 2008-09.

But the total amount of loan disturbed by the IFCI which initially increased from
Rs 2.163 crore in 1993-94 to Rs 4,586.5 crore in 1995-96 and then drastically fell
to Rs 2,164.7 crore in 2000-01 and then to Rs 278 crore in 2003-04 and then
finally to only Rs 3,311 crore in 2008-09.

In 2012-13, total amount of financial resources sanctioned and disbursed by the

IFCI stood at Rs 2,219 crore and Rs 1,504 crore respectively. Unfortunately, IFCI
has been worse affected due to its huge non-paying assets, willful defaults etc.

The Government of India have also made an attempt to rehabilitate IFCI by

subscribing Rs 400 crore through long term convertible bonds and also advised
IDBI, SBI and LIC for extending assistance worth Rs 200 crore each. In order to
meet its outstanding liabilities the Government of India has provided Rs 2,096
crore as loan during 2002-03 and 2003-04.

Again the share of non-performing assets (NPAs) in net loans advanced by IFCI
stood at 28.0 per cent as at the end of March, 2005. Even then the IFCI is gradually
becoming sick. The Government of India is now seriously considering to merge
IFCI with a large PSU bank such as Punjab National Bank.
COMMERCIAL BANKS
The Scheduled Commercial Banks (SCBs) in the country (288) comprise the
State Bank of India and its associated banks, nationalized banks, private sector
banks, regional rural banks (RRBs), and foreign banks. Presently, the total number
of branches of SCB stand at 62,067, of these 35,060 (56.5% of the total ) are in
rural areas.
For a long period, commercial banks did not come forward to extend financial
assistance to the small-scale industries because of the SSIs weak economic base.
The first lead in this regard was taken by the State Bank of India (SBI) in
consultation with the Reserve Bank of India (RBI) in march 1956, by setting up a
pilot scheme for the provision of credit for small scale industries. In the beginning,
the scheme was confined to 9 branches of the SBI which was later extended to its
all branches. The commercial banks started taking initiation in financing SSIs in a
greater way only after the bank nationalization in july 1969. Normally the
commercial banks provide assistance for working capital requirements of SSIs.
Over the years, they have also started providing ‘term’ finance as is indicated by
the data complied by the RBI that of all the advances given to SSIs by the
commercial banks, the share of the term loan accounted for nearly 30%. A notable
feature in the financing of SSIs has been the introduction of the ‘Lead Bank
Scheme’ by the RBI. Under this scheme, each district has been allotted to one
scheduled commercial bank for intensive development of banking facilities.
The introduction of ‘Credit Guarantee Scheme (CGS)’ in 1960 was a big fillip in
the field of commercial bank financing to SSIs. Initially, this scheme was
introduced in 22 districts on experimental basis. Later, it was extended to all over
the country. Further the RBI set up a committee under the Chairmanship of Shri
P.R.Nayak , to look into the adequacy of institutional credit of SSIs. Based on the
recommendations of the committee, the RBI introduced a special package of
measures for financing SSIs and advised banks to take various measures aimed at
increasing the credit flow to the SSIs and arresting the problem of sickness in small
sector. Availability of credit to the SSI sector improved further with the stipulation
on foreign banks to extend at least 10% of their net bank credit to the SSI sector
and to deposit the shortfall, if any, with the Small Industries Development Bank of
India (SIDBI). It is encouraging to mention that the bank credit to small sector as a
percentage to total bank credit is on increase year after year. For example, it
increased from 22% in March 1993 to nearly 31% in March 2003.

NON FINANCIAL ASSISTANCE

SMALL INDUSTRIES SERVICE INSTITUTES (SISI)
The Small Industries Service Institutes (SISIs) are established to provide
consultancy and training to small entrepreneurs. Both prospective as well as
existing entrepreneurs need for consultancy and training are served by these
institutes. The Industrial Management Training Division of the DCSSI’s office co-
ordinates the activities of Small Industries Service Institutes. There are about 28
SISIs and 30 branch SISIs are setup in state capital and other places across the
country.
The main functions of SISI include:
(1) To serve as interface between central and state government.
(2) To render technical support services.
(3) To conduct entrepreneurship development programmes.
(4) To initiate promotional programmes.
The SISIs also render assistance in the following areas
(1) Economic consultancy/information/EDP consultancy.
(2) Trade and market information.
(3) Project profiles.
(4) State industrial potential surveys
(5) District industrial potential surveys.
(6) Modernization and in plant studies.
(7) Workshop facilities.
(8) Training in various trade/activities
FUNCTIONS
1. To assist existing and prospective entrepreneurs through technical and
managerial counseling such as help in selecting the appropriate machinery and
equipment, adoption of recognized standards of testing, quality performance etc;
2. Conducting EDPs all over the country;
3. To advise the Central and State governments on policy matters relating to small
industry development;
4. To assist in testing of raw materials and products of SSIs, their inspection and
quality control;
5. To provide market information to the SISI’s;
6. To recommend SSI’s for financial assistance from financial institutions;
7. To enlist entrepreneurs for partition in Government stores purchase programme;
8. Conduct economic and technical surveys and prepare techno-economic feasible
reports for selected areas and industries.

DISTRICT INDUSTRIES CENTERS (DICs)

The District Industries Centres Programmes was started on May 8, 1978 by the
Government of India. The main objective of this programme is to ensure an
integrated administrative framework at the district level to promote small scale
industries in rural areas. DICs have been offering services and supporting small
entrepreneurs under a single roof. The programmes and schemes of central and
state Governments are implementing through DICs. Registration of small scale
units is done at the DICs. DICs lay more emphasis on generating employment
opportunities and bringing down the unemployment rate.
The following are the main objectives of DICs:
 To identify the new entrepreneurs and providing assistance to them regarding
their own startup’s.
 To provide financial and other facilities to smaller blocks.
 To rise the complete efforts for industrialization at district level.
 To enhance the rural industrialization and also the development of handicrafts.
 To reach economic equality in multiple areas of the district.
 To allow various government schemes to the new entrepreneurs.
 To desize the regional imbalance of development.
 To make all the necessary facilities to come under one roof.

FUNCTIONS OF DISTRICT INDUSTRIES CENTERS (DICs)

The DICs programme is funded jointly by the concerned state and central
government. It took part in various promotional measures In order to bring out the
development of small unit sectors in the district level.
The DICs performs the following functions mainly:
1. To spot the entrepreneurs: DICs conducting various motivational programmes
so that they can find new entrepreneurs throughout the districts. It is done
particularly under some schemes and with the association of SIS’s and TCO’s for
conducting Entrepreneurial programmes.
2. Purchase of fixed assets: To purchase fixed assets, the DICs suggest loan
applications of the prospective entrepreneur to some of the concerned financial and
development institutions like NSIC, SISI etc., DIC’s also recommend commercial
banks so that to meet the working capital requirement of SSI to run operations
daily.
3. Offers subsidies and other incentives: DICs help the rural people to subsidies
offered by the government on various schemes. It leads to the betterment in
boosting financial capacity of the units and may undergo for further development
activities.
4. Guidance of import and export: Government provides various types of
incentives for import and export on particular goods and services. The license to
the importer and exporter is issued on the basis of recommendation of DIC.
5. Entrepreneurial training programmes: DICs allow a lot of training programmes
for the rural entrepreneurs who are new to the business world and also recommend
other institutions to take part in such training programs.These are intended to give
better assistance to the new entrepreneurs
6. Provides employment for unemployed educated ones: The DIC s have
introduced a scheme to guide the unemployed educated youth by providing them
facilities for selfemployment. The age limits between 18 to 35 years with minimum
qualification of metric or technical trade. The notable thing here is that the
technocrats and women are given importance.
ACTIVITIES OF DISTRICT INDUSTRIES CENTRE (DICs)
The DIC’s performs the following activities primarily:
 Economic Investigation.
 Plant and Machinery
 Research, education and training
 Raw materials
 Credit facilities
 Marketing assistance
 Cottage industries

ASSOCIATION OF WOMENT ENTREPRENEURS OF KARNATKA

(AWAKE)

AWAKE – Association of Women Entrepreneurs of Karnataka is a not-for-profit,

Non-Governmental Organization (NGO) based in Bangalore, India, working
towards ' Empowerment of women through entrepreneurship development to
improve their economic condition '.AWAKE is exempt from Income Tax under
Sections 12A and 80G of the Income Tax Act, India.

SERVICES
Business Counseling-is conducted for potential entrepreneur aspiring to start her
own business enterprise. Counseling helps the prospective entrepreneurs to
introspect their strengths and weaknesses, identify their talents and gives them the
confidence to choose their line of business activity. Counseling is also conducted
for established entrepreneurs seeking information and guidance for managing their
enterprise efficiently/enhancing their business.

Counseling is conducted by Certified Business Counselors voluntarily, who are

themselves established women entrepreneurs and are equipped with training in
professional counseling and also by a team of sector specific specialist and
technical consultants.

Business counselors provide guidance and information related to

 Business ideas considering the skill, interest, knowledge, experience and

financial capacity of the counselee
 Opportunities available in a specific field of business
 Innovative ideas and converting them into business
 Growth opportunities in existing business
 Information on access to finance opportunities
 Product/Service promotion and marketing
 Job orders and business linkages

Awake's Marketing & Exhibition

AWAKE, in association with various government and non-governmental agencies,
provides a platform for its members and trainees for marketing their products and
build their business network through various means:

 Facilitates joint participation in National and International trade fairs and

buyer-seller meets for an insight about latest market trends and customer
behavior.
 Organize periodic exhibitions and sales of its members’ products at regional,
national, and international platforms, either sector-wise or product shows, at a
subsidized cost for its members.
  B2B meets (product / sector specific) are organized regularly between member
entrepreneurs, exporters, corporate houses, traders and others to establish
business linkages with prospective buyers.
 Facilitates ‘Match making process’ through the concept of Virtual trade
missions.
 Set up Sub Contract Exchange and Conducts vendor development programs to
provide a common platform for buyer as well as seller organizations to
interact with each other with a view to identify emerging demands of the
buyer organizations while simultaneously providing an opportunity for
displaying the capabilities of the small scale entrepreneurs and their industrial
ventures.
 Promotional activities like publicity and campaigning through print and audio-
visual media are undertaken to support market linkages of members’ products.
 Product catalogues and advertisement spaces in newsletters and websites are
provided to facilitate sales promotions.

Awake's Incubation Center

Business incubation is a unique and highly flexible combination of business

development processes, infrastructure and people designed to nurture new and
small businesses by helping them to survive and grow through the difficult and
vulnerable early stages of development.

TRAINING

Entrepreneurship Awareness Program

Entrepreneurship Awareness Programs are designed to bring awareness about
Entrepreneurship among women and youth by holding one day Entrepreneurship
Awareness Programs in rural and urban areas, and also in colleges. EAPs spread
awareness about:

 The need for socio-economic independence of women

 Participants are motivated for starting their own enterprise and briefed on the
opportunities available for such enterprises, keeping in mind the local
resources and technical feasibility.
  Discussion on business ideas, schemes and incentives offered by various
development and support agencies involved in business development.
 Trainings and other services provided by AWAKE and other agencies.

Entrepreneurship Development Programme

Entrepreneurship Development Program (EDP) is a programme meant to develop
entrepreneurial abilities among the people. In other words, it refers to inculcation,
development, and polishing of entrepreneurial skills into a person needed to
establish and successfully run his / her enterprise. Thus, the concept of
entrepreneurship development programme involves equipping a person with the
required skills and knowledge needed for starting and running the enterprise.

 AWAKE conducts Entrepreneurship Development Program (EDP) for women

and youth intending to start a business in urban and rural areas.
 Entrepreneurship training is imparted through structured training module at
the end of which the participant is expected to develop self confidence and
motivated enough to start an enterprise for their economic self sustenance.
 The program comprises of various modules delivered through interactive
sessions with experienced faculties. The methodology includes lecture session,
group discussions and specifically designed location-specific business games
and case studies.
 AWAKE also organizes need based EDP in association with other
developmental and donor agencies. The duration of the training varies from
ten days to six weeks depending needs of the trainees and the donor agencies.
 The follow-up sessions for EDP trainees are conducted up to two years after
the training to ensure that the budding entrepreneurs get all the support
required to establish their enterprise.

Entrepreneurship Skill Development Programs

AWAKE conducts need-based Skill Development Programs for women in

various sectors like food processing, handicrafts, tailoring, embroidery,
garments, artificial jewellery, trading, eco-friendly products, candle making,
chemical products, mushroom cultivation, herbal products, catering, motor
 coil winding housekeeping, beautician training , many of the service industry
related trainings etc. During the programs, essential information related to raw
materials, product processing, development and designs, marketing the
products, packaging and quality control are provided.

The programs are conducted for both urban and rural women and youth,
considering the business opportunities and market trend of the environment.

Entrepreneurship Development Programs combined with Skill Development

Programs ensures delivery of comprehensive training for prospective
entrepreneurs to start their business. Regular follow-ups are conducted to
assess the additional training needs of the participants.

KHADI AND VILLAGE INDUSTRIES COMMISSION (KVIC)

Khadi and Village Industries Commission (KVIC) plans, promotes, organizes and
implements programs for the development of Khadi and other village industries in
rural areas nationwide. KVIC also helps in building up reserve of raw materials for
supply to producers. The commission focuses in creation of common service
facilities for processing of raw materials, such as semi-finished goods. KVIC has
also helped in creation of employment in Khadi industry.

The interest subsidy scheme offered by KVIC shall be applicable to specific loans
offered by financial agencies. Loans raised by KVIC for disbursement as capital
investment and working capital loans are offered by:

 Institutions: Registered under Societies Registration Act 1860

 Co-operative Society: Registered under Co-operative Societies Act 1912
 Charitable Trusts for public welfare and religious purposes
 Financial Institutions: Scheduled and Non-scheduled banks, Nationalised
Banks, Co-operative Banks, State Financial Corporations and Industrial
Development Banks
OBJECTIVES

 To promote Khadi in rural areas

 To provide employment
 To produce saleable articles
 To create self-reliance amongst the poor
 To build up strong rural community

FUNCTIONS

 Building up of a reserve of raw materials and implementation for supply to

producers
 Formation of common service facilities for processing of raw materials that
include semi-finished goods
 Promoting the sale and marketing of Khadi and Village Industries products,
as well as handicrafts
 Promoting research in the village industries sector related production
techniques and equipment
 Providing financial assistance to individuals and institutions for the
development and operation of Khadi and Village industries

SCHEMES

Prime Minister’s Employment Generation Programme (PMEGP)

Prime Minister’s Employment Generation Programme (PMEGP) was launched in

2008 to replace The Rural Employment Generation Programme (REGP) scheme.
Ministry of MSME launched PMEGP which is a credit linked subsidy program.
The prime reason for launching this scheme is to create employment in rural and
urban areas across the nation.

Under PMEGP, the beneficiaries are required to invest their own contribution of
certain percentage of the project cost to avail subsidy. Mentioned below is a
tabular representation of the amount required to be deposited by the beneficiaries:

Levels of Funding under PMEGP

 Beneficiary’s
Categories of beneficiaries Rate of Subsidy (of
contribution (of project
under PMEGP project cost)
cost)
Area (location of project/unit) Urban/Rural
General Category 10% 15%/25%
Special (including SC / ST /
OBC

/Minorities/Women, Ex-
servicemen,
5% 25%/35%
Physically handicapped,
NER, Hill

and Border areas etc.

Note: The maximum cost of the project/unit admissible under manufacturing sector
is Rs. 25 lakh.

The maximum cost of the project/unit admissible under business/service sector is

Rs. 10 lakh.

The balance amount of the total project cost will be provided by Banks as term
loan

Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

Launched in 2005, SFURTI is a Scheme of Fund for Regeneration of Traditional

Industries Ministry of MSME. The primary objective of SFURTI is to organize the
traditional artisans and industries into groups to make them competitive and
provide them with long-term sustainability. The financial support provided under
SFURTI for any specific project shall be subject to maximum of Rs 8 crore.
Institutions of the Central and State Governments and semi-Government
institutions, Non-Government organizations (NGOs), Panchayati Raj institutions
(PRIs), etc. can apply for this scheme.
Interest Subsidy Eligibility Certificate (ISEC)

The Interest Subsidy Eligibility Certificate (ISEC) Scheme is the major funding
source for the Khadi programme. This scheme is applicable for all registered
institutions of KVIC. This scheme was introduced to mobilize funds from banking
institutions to bridge the gap in the actual fund requirement and its availability
from budgetary sources. Under this scheme, funding is provided at a concessional
rate of interest of 4% per annum for working capital purposes as per the
requirements.

Market Promotion Development Assistance (MPDA)

Market Promotion Development Assistance (MPDA): This scheme is launched to

provide services like market promotion and development assistance for Khadi
industries. The aim of this scheme is to ensure increased earnings for artisans.

Under the former MDA scheme, financial assistance was distributed amongst
Artisans (25%), selling institutions (45%) and producing Institutions (30%). It goes
20% for selling institutions and 40% for both artisans and producing institutions.

Khadi Reform and Development Programme (KRDP)

Khadi Reform and Development Programme (KRDP) is formed for employment

generation, enhancing the earning of artisans and ensuring the positioning of Khadi
considering the present needs of Khadi industry. The main focus of this scheme is
on Repositioning of Khadi and linking to market requirements, providing selective
subsidy and enhanced remuneration.

Beekeeping – The Honey Mission

Honey Mission aims to improve the livelihoods of the rural communities. It works
around five dynamics that include:

 It’s an income generating activity

 Medicinal and food value of honey
 Supports agricultural activities
 Contributes to forests conservation efforts
 Facilitates healthy linkages between biodiversity towards sustainable
livelihoods
 Market Development Assistance (MDA)
 MDA scheme is promotion assistance for development of Khadi which is
paid at 20% on production. Approximately 25% of MDA is paid to the
institution from which 25% is given to artisans as incentive and 30% is
offered to institution for production and 45% for marketing purposes. Under
MDA scheme, financial assistance of 25% is reserved for payment among
weavers and spinners as an additional incentive through their post/bank
office account.
 KVIC also implements various other promotional activities for the
development of different village industries, such as handmade paper,
polymer, agro and chemical based, bee-keeping and other forest related
activities. KVIC loans are offered by various financial institutions at
attractive interest rates.
 Just after its establishment, KVIC took over All India Khadi and Village
Industries Board. KVIC operates via its network of zonal offices located in
Delhi, Bhopal, Bangalore, Kolkata, Mumbai (HO) and Guwah ati.