enterpreneurship 2

Entrepreneurship

By-

Avinash Kumar

[email protected]

Everyone in the world has at least one

talent, one passion, one hobby that can

become profitable if used correctly.

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Entrepreneur

one who organizes, manages and assumes the risks of a

business or enterprise

"Entrepreneurship is the process of creating or seizing an

opportunity and pursuing it regardless of the resources

currently controlled"

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Impact of entrepreneurial firms

Job creation

Economic growth

New technology

Serving small markets

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Entrepreneurship Development: Role of Financial

Institutions

Industrial growth and economic development of developing nations depend to a

great extent on the role played by entrepreneurs. There are many instances of

individual entrepreneurs whose creativity has led to the industrialization of

many nations.

However, in India the economic and industrial growth was slow due to lack of

efficient entrepreneurs, industrial environment, technical know-how .

Government and financial institutions have played a very important role in the

entrepreneurship development.

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Efforts to Foster Entrepreneurship in India Many of India's leaders have perceived the need for the development of

entrepreneurship in their country, and a number of programs have emerged to meetthis need. Various agencies participate in entrepreneurial development across India.Such as:-

The National Institute for Entrepreneurship and Small Business Development(NIESBUD).

The Entrepreneurship Development Institute of India (EDII).

Industrial Development Bank of India (IDBI).

Small Industries Development Bank of India (SIDBI).

North Eastern Development Finance Corporation Limited (NEDFi)

RBI’s role and steps for the development of SSI sector

s

The Entrepreneurship Development Institute

of India

Sponsored by several financial institutions, namely (ICICI), (IDBI), the

Industrial Finance Corporation of India (IFCI), and the State Bank of India.

One of the institute that, focuses on creating entrepreneurial personalities

among youth.

EDII launched a variety of programs to do just that. The Rural

Entrepreneurship Development division, for instance, concentrates on rural

development, employment generation, and poverty alleviation through the

promotion of micro-enterprises. This division also has an informal micro-credit

delivery system.

s

Contd…. EDII's entrepreneurship camp involves teenagers from across India coming to

the EDII campus for a ten-day period.

The program is designed to increase the self-confidence and thereby to developtheir concern for enterprise and for achievement. Methodology includes roleplaying and simulation exercises, with the following objectives in mind:

enabling participants to realize their latent potential;

developing capabilities by sharpening skills;

motivating individuals to seek independent, innovative, and challenging careers;

fostering entrepreneurial traits including creativity, concern for excellence,leadership, and problem-solving;

providing an opportunity to interact with achievers.

s

Credit Flow of Commercial Banks to Small Scale

Industry(SSI) and Tiny Sectors

Credit to (

in lakhs )

1995 1996 1997 1998 1999

SSI sector 25,8431

(15.29)

29,485

(15.99)

31,542

(16.6)

38,109

(17.5)

42,674

(17.33)

Tiny

sector

7,734

(29.93)

8,183

(29.93)

9,515

(30.2)

10,273

(27.0)

NA

Net Bank

credit

1,69,038 1,84,381 1,89,684 2,18,219 2,46,203

s

RBI website source

Credit Flow of Commercial Banks to SSI and

Tiny Sectors ie,very small sector

0

50000

100000

150000

200000

250000

1995 1996 1997 1998 1999

SSI Sector Tiny sector Net Bank credit

S

RBI website source

Role of Small Industries Development Bank of India(SIDBI) SIDBI was established in April 1990 under an Act of Parliament as a wholly-

owned subsidiary of Industrial Development Bank of India and as the principal

financial institution for the following three-fold activities:

Financing the small scale sector by providing:

Indirect assistance to primary lending institutions

Loans granted by PLIs for new SSI projects and their expansion, technology up gradation,

modernization, quality promotion etc.

Loans sanctioned by PLIs to small road transport operators, qualified professionals for self-

employment, small hospitals and nursing homes and to promote hotels and tourism-related

activities.

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RBI website source

Contd… Direct assistance to small scale units SSI units for new/expansion/diversification/modernization projects.

Marketing development projects which expand the domestic and international marketability of SSI products.

Existing well-run SSI units and ancillaries/sub-contracting units/ vendor units for modernization and technology up gradation.

Infrastructure development agencies for developing industrial areas.

Leasing and hire purchase companies for offering leasing/hire purchase facilities to SSI units.

Existing export-oriented units to enable them to acquire ISO-9000 Series Certification

Promoting small industries through development and support services;

Coordinating the functions of other institutions engaged in similar activities

Source: CMIE, Money and Banking, Economic Intelligence Service, Sept. 2004, pp. 163-164.

Growth of Credit Flow from SIDBI to SSI Sector

Year Sanction ( in

cr) (express

permission)

Disbursemen

t

(pay out

money)

Sanction

Disbursemen

t Gap

Growth of

Disburseme

nt (%)

1990-

91

2410 1839 571 -

1991-

92

2847 2028 819 10.23

1992-

93

2909 2146 763 5.82

1993-

94

3357 2672 685 24.51

1994-

95

4706 3390 1316 26.87

1995-

96

6066 4801 1265 41.62 Source: CMIE, Money and Banking, Economic Intelligence Service, Sept. 2004, pp. 163-164.

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0

1000

2000

3000

4000

5000

6000

7000

8000

1990

-91

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

Sanction(in cr) Disbursement Sanction Disbursement Gap

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0

10.235.82

24.5126.87

41.62

-4.5

14.31

-10

0

10

20

30

40

50

1990

-91

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

Growth Disbursement(%)

MSource: CMIE, Money and Banking, Economic Intelligence Service, Sept. 2004, pp. 163-164.

Role and Steps taken by RBI for the Development

of SSI Sector

Credit to SSI sector is monitored periodically by Reserve Bank of India,Department of SSI and National Advisory Committee of SIDBI, State LevelBankers Committee and District Level Coordination Committees of theBank.

The Central Government on the recommendation of RBI has raised theinvestment limit for SSIs from Rs.60 lakhs to Rs.300 lakhs and for tiny unitsfrom Rs.5 lakhs to Rs.25 lakhs.

Public sector banks have been advised to make it operational morespecialized SSI branches at centers where there is a potential for financingmany SSI borrowers.

To extend 'Single Window Scheme' of SIDBI to all districts to meet thefinancial requirements (both term loan & working capital) of SSIs.

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Contd….. With a view to moderating the cost of credit to SSI units, banks are

advised to accord SSI units with a good track record the benefits oflower spread over the Prime Lending Rate.

In order to take expeditious decision on credit proposals of SSI units,banks have been advised to delegate enhanced powers to the branchmanagers of the specialized SSI branch so that most of the creditproposals are decided at the branch level.

Initiatives Announced:-

a) Launching of A New Credit Insurance Scheme

b) Enhancement of Limit of Composite Loan Scheme

c) Enhancement of Limit of Working Capital

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Institutional Network: Finance and Credit in India

Long-term

-All India

Financial

Institutions

(AIFIs)

-Regional DFIs

Short-term &

Medium-term

-Commercial

Banks

--Regional Rural

Banks ( RRBs)

Agriculture

Credit

-Cooperative

Banks

-NABARD

Non-banking

Finance

Companies

(NBFCs)

Government

owned

Institutions/

Corporations

Non-Govt.

Organisations

(NGOs) & Micro

Finance

Institutions

(MFIs)

RBI website source & FICCI Source

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All India Financial Institutions(AIFIs)

Financial Assistance

228570

206655

103658 104484

0

50000

100000

150000

200000

250000

2003-2004 2004-2005

YEAR (April - September)

RS

IN

MIL

LIO

N

Sanctions Disbursements

(Data Relate to All India Development Banks and Investment Institutions only)

Viz. IDBI, IFCI, SIDBI, IIBI, IDFC and LIC, GIC, National Insurance Co. Ltd,

New India Ass. Co. Ltd , Oriental Insurance Co. Ltd., United India Insurance Co. Ltd.

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ALL FINANCIAL INSTITUTIONS

0

200000

400000

600000

800000

1000000

1200000

1400000

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004

YEAR

RS

IN

MIL

LIO

N

Sanctions Disbursements

Source : Report on Development Banking in India 2003-04

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Long Term Loans by Commercial Banks

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Mar-90 Mar-95 Mar-00 Mar-02

Year

Amt (in Crs)

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

% of Tot. Credit

Amt(Crs) % of Tot. CreditSource : RBI Website

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Long Term Loans by AIFIs

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000


0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

LT Credit % to totalcreditSource: RBI website

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Comparative Chart – in Rs cr

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000


Banks AIFI

Rs in crores

Source: RBI website

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FICCI STUDY ON

LONG TERM FINANCING NEEDS OF THE INDIAN

INDUSTRY AND THE ROLE OF DEVELOPMENT FINANCIAL INSTITUTIONS

IN PROMOTING “Entrepreneurship” IN VARIOUS INDUSTRIAL SECTOR

Survey conducted Feb – March 2004, elicited(factual) response from 248 companies with a wide geographical and sectoral spread

The companies which participated in the survey ranged from Rs. 1 million to 5000 million

The Survey represents a wide array of activities and includes sectors such as paper, cement, automobiles and auto ancillary, consumer electronics, electrical machinery, textile, wires and cables, petrochemicals, iron and steel, real estate and pharmaceuticals.

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PLANS FOR FRESH INVESTMENTS IN NEAR FUTURE

Yes

89%

No

11%

Yes No

Source : FICCI Study – March 04

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SOURCE OF FINANCE PROPORTION OF RESPONDENTS*

EQUITY CAPITAL 22

DEBENTURES AND BONDS 08

TERM LOANS FROM FIs 46

TERM LOANS FROM BANKS 59

ANY OTHER (MAINLY INTERNAL) ACCRUALS & ECBs

33

(* Figures will not add up to 100 as multiple responses were allowed)

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PROPORTION OF PROJECT COST TO BE MET FROM DEBT FINANCE

1

10

7

20

22

24

7

9

0

5

10

15

20

25

30

less than

20

20-40 40-50 50-60 60-70 70-80 80-90 90-100

PROPORTION OF DEBT FINANCE

PR

OP

OR

TIO

N O

F R

ES

PO

ND

EN

TS

Source : FICCI Study –

March 04

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FICCI STUDY ON LONG TERM FINANCING NEEDS OF THE INDIAN INDUSTRY AND THE ROLE OF DEVELOPMENT FINANCIAL INSTITUTIONS

The economy today stands at the beginning of an investment cycle

A whopping 80% of the respondents are of the opinion that revival and strengthening of DFIs is extremely important

Corporate India’s heavy dependence of debt financing for fresh investments continues

Respondents have voiced concerns about the low levels of activity of the DFIs

HIGHLIGHTS

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Cont…

The Industry is divided in its opinion on the emergence of alternative structures for raising debt finance

An important finding in the above context is the skewness, in terms of turnover, that emerges

The participants in the present survey have expressed apprehensions about the role Universal Banks can pay

Revival and Strengthening of DFIs would go a long way in ensuring that fresh investments in the economy are not hampered

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The National Institute for Entrepreneurship

and Small Business Development

The institute organizes:-

Entrepreneurship development programs,

Prepares manuals, and produces educational videos;

Its training activities are stimulating, supporting, and sustaining

entrepreneurship.

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Industrial Development Bank of India (IDBI)

IDBI is the tenth largest bank in the world in terms of development.

The National Stock Exchange (NSE), The National Securities DepositoryServices Ltd. (NSDL), Stock Holding Corporation of India (SHCIL) are some ofthe institutions which has been built by IDBI.

IDBI is a strategic investor in a plethora of institutions which haverevolutionized the Indian Financial Markets.

IDBI Bank, promoted by IDBI Group started in November 1995 with a branchat Indore with an equity capital base of Rs. 1000 million.

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Main functions of IDBI

IDBI is vested with the responsibility of coordinating the working of institutions

engaged in financing, promoting and developing industries. It has evolved an

appropriate mechanism for this purpose.

Developmental Activities of IDBI:-

Promotional activities:

the Bank continues to perform a wide range of promotional activities relating to

developmental programmes for new entrepreneurs, consultancy services for small

and medium enterprises and programmes designed for accredited voluntary agencies

for the economic upliftment of the underprivileged

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Technical Consultancy Organizations:

With a view to making available at a reasonable cost, consultancy and advisory

services to entrepreneurs, particularly to new and small entrepreneurs, IDBI, in

collaboration with other All-India Financial Institutions, has set up a network of

Technical Consultancy Organizations (TCOs) covering the entire country.

Entrepreneurship Development Institute:

Realizing that entrepreneurship development is the key to industrial development,

IDBI played a prime role in setting up of the Entrepreneurship Development

Institute of India for fostering entrepreneurship in the country.

It has also established similar institutes in Bihar, Orissa, Madhya Pradesh and Uttar

Pradesh. IDBI also extends financial support to various organizations in conducting

studies or surveys of relevance to industrial development.

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Role of North Eastern Development Finance

Corporation Limited

NEDFi is the premier financial and development institution of the North East ofIndia.

The main objectives is to carry on and transact the business of providing creditand other facilities for promotion, expansion and modernization of industrialenterprises and infrastructure projects in the North Eastern Region of India

Also carry on and transact business of providing credit and other facilities forpromotion of agro-horticulture, and sericulture plantation, aquaculture, poultry,dairy etc in order to initiate large involvement of rural population in theeconomic upsurge of the society and faster economic growth of the region.

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NEDFi Initiatives

The corporation launched its Micro Credit Finance Scheme to benefit agriculture,fishery, animal husbandry, horticulture and rural industries.

Its initiatives which is being sponsored by UNDP with NEDFi being theimplementing agency, and the Design Centre for Handloom and Handicrafts, wereundertaken not only to improve the lot of thousands of rural artisans all over theNorth-East, but also help promote exports in the sector.

Establishment of IT Park at Guwahati and an appropriate financing scheme for ITindustries to help increase the lending portfolio of NEDFi.

Making some headway in promoting bio-technology in the region by negotiatingwith foreign promoters.

Preparing a master plan for the development of tourism and particularly embarkingon a big private sector adventure tourism project.

D