Entrepreneurship

ByAvinash Kumar kumaravinash23@gmail.com

Everyone in the world has at least one talent, one passion, one hobby that can become profitable if used correctly.

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"

Impact of entrepreneurial firms

Job creation
Economic growth New technology

Serving small markets

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.

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 meet this 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) RBIs role and steps for the development of SSI sector

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.

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 develop

their concern for enterprise and for achievement. Methodology includes role playing 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.

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
Net Bank credit

7,734 (29.93)
1,69,038

8,183 (29.93)
1,84,381

9,515 (30.2)
1,89,684

10,273 (27.0)
2,18,219

NA

2,46,203

RBI website source

Credit Flow of Commercial Banks to SSI and Tiny Sectors ie,very small sector
250000 200000 150000 100000 50000 0 1995 1996 1997 1998 Net Bank credit 1999 SSI Sector Tiny sector

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 whollyowned 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 selfemployment, small hospitals and nursing homes and to promote hotels and tourism-related activities.

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) 2410 2847 2909
3357 4706 6066

Disbursemen Sanction Growth of t Disbursemen Disburseme t Gap nt (%) (pay out money) 1839 2028 2146
2672 3390 4801

199091 199192 199293

199394 199495 1995-

571 819 763

685 1316 1265

10.23 5.82
24.51 26.87 41.62

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

Growth of Credit Flow from SIDBI to SSI Sector

8000 7000 6000 5000 4000 3000 2000 1000 0

91

92

93

94

95

96

97 96 19 19

90 -

91 -

92 -

93 -

94 -

95 -

19

19

19

19

19

Sanction(in cr)

Disbursement

Sanction Disbursement Gap

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

19

97 -

98

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

Growth of Credit Flow from SIDBI to SSI Sector

50 40 30 20 10 0 -10
0 10.23 5.82 -4.5 24.51 41.62 26.87 14.31

-9 1

-9 2

-9 3

-9 4

-9 5

-9 6

-9 7

19 90

19 91

19 92

19 93

19 94

19 95

19 96

Growth Disbursement(%)

19 97

-9 8

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 Level Bankers Committee and District Level Coordination Committees of the Bank.

The Central Government on the recommendation of RBI has raised the

investment limit for SSIs from Rs.60 lakhs to Rs.300 lakhs and for tiny units from Rs.5 lakhs to Rs.25 lakhs.
specialized SSI branches at centers where there is a potential for financing many SSI borrowers. financial requirements (both term loan & working capital) of SSIs.

Public sector banks have been advised to make it operational more

To extend 'Single Window Scheme' of SIDBI to all districts to meet the

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

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 of lower spread over the Prime Lending Rate. banks have been advised to delegate enhanced powers to the branch managers of the specialized SSI branch so that most of the credit proposals are decided at the branch level.

In order to take expeditious decision on credit proposals of SSI units,

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

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

Institutional Network: Finance and Credit in India

Long-term -All India

Financial Institutions (AIFIs) -Regional DFIs Non-banking Finance Companies (NBFCs)

Short-term & Medium-term

-Commercial Banks --Regional Rural Banks ( RRBs) Government owned Institutions/ Corporations

Agriculture Credit
-Cooperative Banks -NABARD Non-Govt. Organisations (NGOs) & Micro Finance Institutions

(MFIs)
RBI website source & FICCI Source

All India Financial Institutions(AIFIs) Financial Assistance

250000 228570 206655 200000

RS IN MILLION

150000

103658 100000

104484

50000

0 2003-2004 YEAR (April - Septem ber) Sanctions Disbursements 2004-2005

(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.

ALL FINANCIAL INSTITUTIONS

1400000 1200000 1000000
RS IN MILLION

800000 600000 400000 200000 0 1999-2000 2000-2001 2001-2002 YEAR Sanctions Disbursements 2002-2003 2003-2004

Source : Report on Development Banking in India 2003-04

Long Term Loans by Commercial Banks

Amt (in Crs) % of Tot. Credit 35.00%

160,000 140,000 120,000 100,000

30.00%

25.00%

20.00%

80,000
15.00%

60,000 40,000 20,000 Mar-90 Mar-95 Year Mar-00 Mar-02 Amt(Crs) % of Tot. Credit 10.00%

5.00%

0.00%

Source : RBI Website

Long Term Loans by AIFIs

140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 Mar-90 Mar-95 Mar-00 Mar-02

90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

Source: RBI website

LT Credit

% to totalcredit

Comparative Chart in Rs cr
180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 Mar-90 Mar-95 Mar-00 Mar-02 Banks AIFI

Rs in crores

Source: RBI website

M
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.

PLANS FOR FRESH INVESTMENTS IN NEAR FUTURE

No 11%

Yes 89%

Yes

No

Source : FICCI Study March 04

SOURCE OF FINANCE

PROPORTION OF RESPONDENTS* 22

EQUITY CAPITAL

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)

M PROPORTION OF PROJECT COST TO BE MET FROM DEBT FINANCE

30

PROPORTION OF RESPONDENTS

25

24 22 20

20

15

10
10

9 7 7

1
0 less than 20 20-40 40-50 50-60 60-70 70-80 80-90 90-100

Source : FICCI Study March 04

PROPORTION OF DEBT FINANCE

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

HIGHLIGHTS
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 Indias heavy dependence of debt financing for fresh investments continues Respondents have voiced concerns about the low levels of activity of the DFIs

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

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.

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 Depository

Services Ltd. (NSDL), Stock Holding Corporation of India (SHCIL) are some of the institutions which has been built by IDBI.

IDBI is a strategic investor in a plethora of institutions which have

revolutionized the Indian Financial Markets.

IDBI Bank, promoted by IDBI Group started in November 1995 with a branch

at Indore with an equity capital base of Rs. 1000 million.

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

D
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.

Role of North Eastern Development Finance

Corporation Limited
NEDFi is the premier financial and development institution of the North East of

India.

The main objectives is to carry on and transact the business of providing credit

and other facilities for promotion, expansion and modernization of industrial enterprises and infrastructure projects in the North Eastern Region of India promotion of agro-horticulture, and sericulture plantation, aquaculture, poultry, dairy etc in order to initiate large involvement of rural population in the economic upsurge of the society and faster economic growth of the region.

Also carry on and transact business of providing credit and other facilities for

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 the

implementing agency, and the Design Centre for Handloom and Handicrafts, were undertaken not only to improve the lot of thousands of rural artisans all over the North-East, but also help promote exports in the sector. industries to help increase the lending portfolio of NEDFi. with foreign promoters.

Establishment of IT Park at Guwahati and an appropriate financing scheme for IT

Making some headway in promoting bio-technology in the region by negotiating

Preparing a master plan for the development of tourism and particularly embarking

on a big private sector adventure tourism project.