NEED FOR INSTITUTIONAL SUPPORT

Finance is the life blood of any business. In other words finance is the nerve centre of a business. Every kind of business requires adequate amount of finance for its start.

ENTREPRENEUR NEEDS FINANCE :-

* To start an Industry.* For acquiring Fixed Assets.* Developing Product.* Developing Men and Machine at Work.* Encourage Management to make Progress.

Finance is important but not the only condition to run an Enterprise. Any economic activity requires prior built-up Infrastructural facilities for its start.But creation of infrastructural facilities requires huge funds which small entrepreneurs can not afford or are always found short of.

Finance is required by large, medium as well as small business Enterprises.

Central and State Governments provides various kinds of supports and facilities to help the small entrepreneurs which helps them :- • To establish their industry In market & Grow Bigger

A separate ministry of Small Scale Industries was created on October 14,1999 to focus attention of SSI (Small Scale Industries) sector. (Now renamed as the Ministry of Micro, Small and Medium Enterprises (M/OMSME) for all matters relating to Micro, Small and Medium Enterprises).

Before 1999, the same Ministry was known by name of Small Scale Industries and Agro & Rural industries (SSI & RRI).

Work of Ministry of SSI - * Initiates various i) Policy measures ii) Programmes & iii) Schemes for the Promotion of SSIs (Small Scale Industries)

MATRIX of Institutional Support StructureSSI support Agencies and Specialized Services Support Agencies

SSIs

STATE GOVERNMENT

1.Dis 2.DICs 3.SFCs 4.SSIDCs 5.TCOS

CENTRAL GOVERNMENT

1. SSI Board 2.SIDO

3. SISIs 4. PPDCs

5. RTCs 6CEFTIs

7.EDIs 8. NSIC

9. SIDBI

OTHERS 1. INDUSTRY ASSOCIATIONS2. NON - GOVRNMENT ORGANISATIONS

Providers of Finance & Specialized Support Services

FINANCEAPEX1.Commercial Banks2.RRBs3.Coperative BanksState Level1.SFCs2.SIDCs3.SSIDCsOTHERS1.NABARD2.NSIC

TECHNOLOGY UPGRADATION1.NSIC2.SIDO3.SISIs4.RTCs5.PPDCs6.TBSE

INDUSTRIAL INPUTS1.NSIC2.SSIDs3.DICs

TECHNICAL TRAINING1. SIDO 5. DICs2. SISIs 6.RTCs3. TCOs 7. GFTISs4. PPDCs 8. Tool Rooms

MARKETING1.SIDO 4. SISIs 2.NSIC 5. EICs 3.SSIDCs 6. SECs

ENTREPRENERURIAL DEVELOPMENT1.SIDO2.Specialised Institutes3.EDII4.NIESBUD5.EDIs6.SISIs

SSIs

Services offered by Ministry of SSIsConsultancy in various aspects like

$ Management

$ Training

$ Testing Facilities

$ Marketing assistance through various institutions set up

by Govt.

CENTRAL GOVERNMENT SUPPORT NETWORK

1. Small Scale Industries Board (SSIB) Constituted in 1954, to advice the government in various policy matters concerning the Promotion & Development of SSIs. Minister of SSIs of the government of India is the Chairperson of SSIB. Members of SSIB

* Central Ministers * Chairman of Parliamentary Committes concerned with SSIs * Secretaries of various departments of Central Government, Financial * Institutions, Public Sector Undertakings, State Level Ministry Industries, * Prominent Industry Associations, & Eminent experts from the related fields.

2. Small Industry Development Organization (SIDO)

The Office of Development Commissioner Small Scale Industries (DC(SSI)) is also known as the small Industry Development Organization (SIDO).

Established in 1954, Apex Body which Assists the Government in Formulation & Overseeing the Implementation of its Policies & Programmes/Projects/Schemes . The SIDO is Headed by The Additional Secretary & Development Commissioner (SSI).

SIDO Provides comprehensive range of facilities, technology support etc., through its network of 30 Small Industries Service Institutes SISIs, 28 Branch SISIs, 4 Regional Testing Centre's (RTCs), 7 Field Testing Stations (FTSs), 2 Small Entrepreneur Promotion Centre. The SIDO also has a network of Tool Rooms and Process- cum – Product Development Centers (PPDCs) to provide technology and Training support. These Institutions are run as Autonomous Bodies, Registered as Societies under the Societies Act.

(SISIs) Small Industry Service Institutes

At the heart of all agencies dealing with Development of small industry is Small Industries Development Organization (SIDO).It was originally known as Central Small Industries Organizations (CSIO)Attached, to the ministry of Industry, SIDO administers 43 Small Industries Service Institutes (SISIs).

Functions of SISIs

(i)To assist existing and prospective entrepreneurs through technical and managerial counselling.(ii)Conducting EDPSs all over the country.(iii)To advise the central and state governments on policy matters relating to small industry development.(iv)To provide technical advise to small scale entrepreneurs.(v)To assist in testing of raw - materials and products of SISIs, their inspection and quality control.(vi)To supply market information to SSIs.

(vii)To recommend SSIs for financial assistance from banks.(viii)To enlist entrepreneurs for participation in Government stores

purchase Programme.(ix) Conduct economic and technical surveys and prepare techno –

economic reports for selected areas and industries.(x) Identify the potential for ancillary development through sub – contract

exchanges.(xi)Organize seminars, workshops and industry clinics for the benefit of

entrepreneurs.

Proces Cum Product Development Centres (PPDCs)

Six PPDCS established across the country provides the following services :-

(i) Product Design and Innovation.(ii) R & D Support.(iii) Technical Support.(iv) Manpower Development & Training.

(v) Development of new processes & upgrade the existing level of technology.

These PPDCs are performing some of the functions of the SISIs and RTCs in

The areas of technical support and manpower development and training.

5. Regional Testing Centres (RTCs) (NEW MSME – Testing Centre

(MSME-TC)

SIDO is operating four Regional Testing Centres (RTCs) located at New Delhi,Mumbai, Chennai & Kolkata.

Functions

(i) RTCs provide testing and calibration facilities to industries in general and small scale industries in particular for raw materials, semi finished and finished products, manufactured by them.

(ii) RTCs are equipped with the State of art indigenous and imported equipments in the disciplines of :- chemical, mechanical, metallurgical and electrical engineering to undertake :- performance test, type test and acceptance test of semi finished products and finished products etc.

These centre's accredited by Internationally recognized National Accreditation Board of Testing & Calibration Laboratories (NABL) certification as per ISO (17025).

6. Central Footwear Testing Institute Renamed as MSME Technology Development Centre – Footwear (MSME-TDC)

CCFTIs provide training facilities and design development facilities for the footwear and leather industry.Branches are located at Agra, Chennai, Mumbai & Calcutta. CCFTIs found to be quite useful and productive by several small industries located at not merely where its branches are located but also at other places as well

7. National Institute of Small Industry Extension Training (NISIET), Hyderabad.

NISIETs, formerly known as Central Industrial Extension Training Institute (CIETI), was set up in 1960 at New Delhi as a Department of Central Government under the Ministry of Commerce & Industry.

Main Objective – to provide training to the personnel of the Central Small Industries Organization as well as the Departments of Industries of the State Governments.

In 1962, it was shifted to Hyderabad and converted into an autonomous society. In 1984, the Institute was renamed as National Institute of Small Industry Extension Training (NISIET).

NISIET has not only contributed towards Indian Micro, Small and Medium Enterprises (MSMEs) but also in other development countries & Helped in Providing Self – Employment and Enterprise Development.

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8. National Entrepreneurship Development Institutes (EDIs)

Entrepreneurship Development and training is one of the key elements for the promotion of Micro, Small, & Medium Enterprises (MMSEs), Particularly the First Generation Entrepreneurs.To undertake this task on regular basis, the Ministry has set up 3 National – Level Entrepreneurship Development Institutes, viz

1.National Institute of Small Industry Extension Training (NISIET) at Hyderabad,

2.National Institute of Entrepreneurship and Small Business Development (NIESBUD) at Noida ,

3.Indian Institute of Entrepreneurship (IIE) at Guwahati, as Autonomous Societies.

9. National Institute for Entrepreneurship and Small Business Development (NIESBUD), NOIDA

NIESBUD was set up in 1983 as an apex institution in the field of Entrepreneurship Development to promote, support and sustain entrepreneurship and small business through training, education, research and consultancy services.

Major Activities includes:-

(i) Evolving Model Syllabi for training various target groups, (ii) Providing effective training strategies, methodology, manuals & tools, (iii) Facilitating and supporting Central/State Governments and other agencies in executing programmes of entrepreneurship and small business development; (iv) Maximizing benefits and accelerating the process of entrepreneurship development; conducting programmes of motivators, trainers, and entrepreneurs.

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10. National Small Industries Corporation Ltd. (NSIC)

NSIC was established in 1955, as a Public Sector Company by Government with a view to promote,aid To foster the Growth of Micro, Small & Medium Enterprises (MSMEs) in the country, with focus on - * commercial aspect of their operations NSIC implements - several schemes to help the MSMEs in the areas of -* raw material procurement, product marketing, Credit Rating, Acquisition of Technologies, adoption of improved management practices, etc; Through its,7 Zonal Offices, 26 Branch Offices, 15 Sub Offices , 5 National Technical

Centres, 2 Software Technology Parks, and 3 Technical Services Extension Centres , spread Practically all over the country.

NSIC carries forward its mission to assist small enterprises with a set of schemes designed to put them in a competitive and advantageous position .

These schemes now comprise facilitating marketing support, credit support, technology support & other support services.

STATE GOVERNMENT AGENCIES

The network of institutional support at the state level for the development of industries are as under :-

Directorate of Industries.

The Directorate of Industries is the executive agency for the

• Promotion & Development of the village and small industries sector.

• It acts under the overall guidance of SIDOs.

• It’s functions are of both Regulatory & Developmental in nature. The directorate of industries has a network of district industrial centre's (DICs) at the -

• District Level, Industrial Officers at the Sub – Divisional Level & Extension Officers at the Block Level functioning under its Control.

1. District Industries Centres (DICS)

District Industries Centres have emerged since, 1978 as the nodal agency for the development of the village and small industries to provide -

* All the support service needed for such development. The DICs were established with a view to provide –

Integrated administrative framework at the District Level for industrial promotion. DICs were established at district level with qualified personnel in technology, marketing, credit economic investigation, raw materials, so that DICs would be the ‘single window’ through which all assistance would be channeled to the small scale sector.

Up to 1991, about 422 DICs were serving the country almost one for each district throughout the country and 431 districts were in operation. These DICs have assisted more than 1.5 lakh units generating employment for more than 10.3 lakh persons. The four Metropolitan cities Mumbai, Chennai, Delhi, Kolkata have been kept outside the purview of DICs.

2. State Financial Corporations (SFCs)

SFCs established under the SFCs Act 1951, play an important role in the development of small and medium enterprises.

The main objective of SFCs are as follows :-

• To finance and promote small and medium enterprise in their respective states for achieving a balanced regional growth.• To Catalyze investment.• To Generate employment.• To Widen the ownership base of the industry.

3. State Industrial Development Corporation/State Industrial Investment Corporation (SIDC/SIICS)Established in 1956 as a wholly owned subsidiary of State Governments, act

as catalysts to Industrial Growth. SIDC provides :- Infrastructure facilities like roads, water supply, electricity etc. to the

industries. Give assistance by way of - term loans, subscription to equity, under writing etc. They have also diversified by entering into areas like -merchant banking, venture capital and mutual funds.

4. State Small Industries Development Corporation (SSIDC)

SSIDC cater to the needs of the small, tiny, & village industries in the state\union territories concerned. Various Activities Undertaken By them:-

(i) Supply of machinery(ii) Raw material procurement & distribution(iii) Marketing assistance(iv) Seed capital assistance(v) Construction of Industrial estates.

IV. OTHER AGENCIES

1.Housing & Urban Development Corporation (HUDCO)

Established in 1980, HUDCO provides assistance in creating infrastructures for the SSI sector. HUDCO also undertakes research and promotes the building material industry.

2. Institute for Design of Electrical Measuring Instruments (IDEMI)

Set up with assistance of UNDP & UNIDO in the year 1969, IDEMI renders services to instrument industry in general and SSI in particular.

Services Provided by IDEMI

(i)Training and consultancy on the area of instrumentation.(ii)Design & Development of new electronic instruments.(iii) Testing & Calibration of instruments.(iv) Tool Design & Tool Making.

3. Technical Consultancy Organizations (TCO)

TCOs set up by the financial instruments such as IDBI, SIDBI, etc; mainly cater to the consultancy needs of new entrepreneurs, SMIs, banks, government representatives, & other institutions. They offer consultancy in the areas of industrial development and financing.

Services Provided by TCOs

(i)Preparation of project profiles and undertake feasibility studies.(ii) Undertaking market research and surveys.(iii) Conducting EDPs & skill - up gradation programmes.

4. Non – Governmental Organization (NGO)

Besides the state, central, & autonomous bodies the country saw the emergence of many NGOs providing training , finance, marketing support and other assistance to SSI. The 1991, SSI policy favoured assistance to SSIs through NGOs.

5. Khadi and Village Industries Commission (KVIC)

Established in 1957, KVIC is an autonomous body set up for promoting khadi and village industries.

Three Main Objectives :-

(i)Social objective of creating employment(ii) Economic objective of producing saleable articles and thereby improve rural economy.(iii) Wide objective of creating self – reliance. Functions of KVIC

•Training rural artisans,• Marketing of products,•Supply of raw materials to khadi and village industries,•Research activities in the area of production of khadi and village products, •To encourage cooperative efforts from manufactures.

6. Entrepreneurship Development Institute of India (EDI)

EDI is an autonomous body situated in Ahmadabad. Leading financial institutions in India and Government of Gujarat jointly sponsored EDI

Main Objectives (i) To augment the supply of trained entrepreneurs,(ii) To promote micro enterprises at the rural level,(iii)To inculcate the spirit of entrepreneur amongst youth.

EDI conducts training programmes on entrepreneurship education, micro finance and micro enterprise development.

V. FINANCIAL INSTITUTIONS

1.Small Industries Development Bank of India (SIDBI)

It is an apex institution functioning from 2nd April 1990 for the promotion, development and financing of the small scale, tiny and cottage industries in the country. SIDBI also coordinates the institutions engaged in similar activities. The banks lending operations are the institutions with developmental activities so, as to facilitate the entry of new entrepreneurs and the strengthening of the SSI sector.

2. Commercial Banks

27 Commercial Banks through their country wide network of more than 68000 branches cater to the working capital requirements of SSIs. They have offered about 17.5% of net bank credit to the SSI sector. Besides the short term assistance, SSI sector, enjoys the status of ‘priority sector’ in terms of financing. Specialized branches are opened in selected industrial estates and cities to exclusively cater to the requirements of the small – scale entrepreneur.

3. Regional Rural Banks

Regional Rural Banks have been created to promote agriculture, trade, commerce, and industry in rural areas and improve the rural economy.

RRBs provide credit facilities in rural areas particularly to artisans, farmers, and small entrepreneurs. With the restructuring of 139 Regional Rural Banks by the Government of India, there has been a paradigm shift in the working of RRBs whereby the needs SSIs are being attended to.

4. Co – Operative Banks

Co – Operative Banks, through a network of over 12,000 Branches provide working capital funds to small entrepreneurs.

The Primary Agriculture Co – Operative Society (PACS) finances the

agriculture related industry. The Primary Co – Operative Banks (PCBs) plays a vital role in meeting the working capital needs of cottage and tiny industries.

5. National Bank for Agriculture and Rural Development (NABARD)

NABARD main objective is to provide assistance to agriculture related activities. NABARD conduct promotional programmes for rural development such as Rural Entrepreneurship Development Programme (REDP), training cum production programmes and action plan for rural Industrialization.

VI. INDUSTRY ASSOCIATIONS

Industry Associations also impart institutional support to SSIs.

1. Federation of Association of Small Scale Industries (FASSI)

Established in 1959, FASSI aims at promoting the development of SSI, co - operating with industries and other institutions, undertaking consultancy and research studies, furthering the cause of SSI and established trade centre's and test centre's.

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2. Confederation of Indian Industry

The CIIs function is of advisory and consultative in nature. They also provide information to the government and industry. It also organizes industry exhibitions, trade fairs and the India Engineering Trade Fair .

CII also plays an important role in promoting international industrial cooperation.

3. Federation of Indian Chamber of Commerce and Industries in India (FICCI) FICCI has a network of around 400 chamber across the country. It provides a

platform for discussing various industry related issues. It also maintains synergic relationships with the central and state governments. FICCI is the nodal agencies for several agencies, like International Chamber of Commerce, Confedration of Asia – Pacific chamber of commerce and industry, which provides a platform for promoting international trade and investment.

4. Associated Chamber of Commerce and Industries in India (ASSOCHAM)

ASSOCHAM represents the cross section of business industry, services and professions located all over the country. Its main thrust is on “International for accelerating economic growth.”

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5. World Association of Small and Medium Enterprises (WASME)

WASME is a NGO governed by representatives from financial institutions, chamber of commerce, banks, department of small industries of various governments etc. Its main aim is to bring about business co – operation among developing countries.

FUNCTIONS

(i) Disseminating policies, strategies and support systems for promotion of SMEs in member countries.

(ii) Providing marketing opportunities.(iii) Indentification of training for entrepreneurs, managers etc.,

Moreover, WASME also organizes workshops and seminars, undertake consultancy works and act as a clearing – house of information relating to SMEs.

6. Consortium of Women Entrepreneurs in India (CWEI)

This consortium consisting of NGOs, voluntary organizations and self – help groups, both from rural and urban areas, helps the women entrepreneurs in finding innovative techniques of production, marketing and fiannce.

It gives manpower training, undertake product development activities and also act as a intermediary between India entrepreneurs and overseas agencies for marketing and exports.

The most effective function of all these associations is their lobbying for the cause of the SSIs.

THE TAMILNADU INDUSTRIAL INVESTMENT CORPORATION(TIIC)

TIIC wholly owned by Government of Tamil Nadu and is the first State level financial institution in the country. Established in 1949 and has Government of Tamil Nadu holding more than 53% of the shares. The rest of paid up capital is subscribed by IDBI, Government of Pondicherry and other public institutions.

TIIC visualizes and emphasizes the role of SSIs in providing

employment to Indian educated and uneducated youth. Over the years,

TIIC involves the following activities:-

(i) Provision of long – term loaned for acquisition of land, building , plant and machinery to tiny, small and medium scale industries,

(ii) Sanctioning term loans for modernization, expansion and diversification of existing units on easy terms;

(iii) Underwriting of shares;(iv) Designing special schemes for economically weaker sections like

scheduled case/tribe entrepreneurs, physically handicapped persons.(v) Provision of loans to those engaged in manufacturing, processing and

refrigeration of goods or in hotel industry or in transport business or development of industrial estates of share facilities for fishing or to any concern for purchase of clerical and surgical instruments and/or for setting up of nursing home or veterinary clinic.

Karnataka State Small Industries Development Corporation Ltd. - (KSSIDC) KSSIDC – Government of Karnataka Undertaking – was established for providing basic infrastructural facilities for the upliftment of small scale industries in the state of Karnataka.KSSIDC has constructed over 5523 industrial sheds for SSI entrepreneurs all over the state. These sheds have been designed to provide entrepreneurs the space they require, on a need – based manner. The corporation gives preference to those entrepreneurs who deal in high technology, export – oriented and import substitution products.

The sheds include(i) Factory accommodation (ii) Toilet facilities (iii) Storage space(iv) open area outside the shed. It also provides good natural ventilation lighting, security and easy accessibility.

Industrial sheds are allotted during the year at a uniform price which is Fixed,

However, the cost of sheds is based on the following factors:-

(i) Type of Shed,(ii) Land Cost,(iii) Actual Construction Cost(iv) Cost of Infrastructure,(v) Supervision Charges,(vi) Interest during construction.

In case of old sheds and sheds that are being re – allotted, the cost of the shed will be decided, based on the current cost less 2% depreciation per annum.

KSSIDC has a competent team of engineers with vast experience in construction activity.

How to Apply .

On notification by KSSIDC, application forms can be collected from and submitted to the concerned chief manager (IEs).

The application duly filled in must be accompanied by: (i) A detailed project report;(ii) A DD for the security fee;(iii) A provisional or permanent SSI Registration Certificate;(iv) The partnership deed (in case of partnership firm); (v) Memorandum of Articles of Association (in case of private/public limited

companies;(vi) A phased production approval copy (if available);(vii) Income Tax clearance certificate;(viii) Latest audited balance sheet and Project & Loss Account (in case of existing units);

Non Banking Financial Institutions NBFCS)

Traditionally banks excel in providing payment and liquidity related services (which includes loans) and usually selecting a portfolio mix commensurate to certain desired return. NBFCs can play a critical role as an instrument of credit delivery in providing support finance to SME sector. The strategy would have full support from SIDBI and the NABARD which have agreed to evolve viable credit dispensation arrangements to provide resource support to NBFCs (through viable refinance arrangements) for on – lending to SME sector. These refinancing institutions would be evolving appropriate mechanisms in consultation with NBFCs, to address their needs and provide supports in terms of their capacity building to development expertise for financing these sectors.Finance comes from some of the NBFCs in the form of Venture Capital Funds that aim to provide long term equity capital to SME players. The NBFCs are also looking aggressively into providing ancillary services through their subsidiary and associate companies. The Fact that they are able to offer all needs related to infrastructure, capital markets, insurance, forex, venture capital etc. under one umbrella makes them excellent referral point for SME clients who have limited market knowledge and contacts

ARRANGING FINANCE FOR SSI UNITS (AIFIs)

No SSI unit can take off without monetary support.

This need for finance can be classified into the following types :

• Long and medium term loans.• Short term of working capital requirements.• Risk Capital – Seed Capital/Marginal Money.• Bridge Loans.

The financial assistance in India for SSI unit is available from a variety of Institutions.

The important ones are :

•SIDBI. Small Industries Development Bank Of India (refinance and direct lending)• SFCs State Level Financial Corporation e.g. AP State Financial Corporation.

• NSIC National Small Industry Corporation • Small Industry corporation of various states.• Commercial/Co-Operative Banks.• DIC District Industry Centre.

State Financial Corporations , SIDBI and State Industrial Development Corporations provide long and medium term loans. Banks also finance term loans.

This type of financing is needed to fund purchase of land, building, machines, equipment and other stocks. The short-term loans are required for working capital requirements, which fund the purchase of raw material and consumable, payment of wages and other immediate manufacturing and administrative expenses. Such loans are generally available from commercial banks.There is however a single window scheme, for SSI units. Under the scheme, one agency, either the bank or the financial institution, funds both the term loans and working capital requirements. This scheme applies to all SSI projects with project cost up to RS. 50 Lakh.

For loans from financial institutions and commercial banks a formal application needs to be made.

The details of documentation that need to be provided with the loan application are shown here.

• Documentation for Loan Application.• Balance Sheet and Profit & Loss Statement for last three consecutive years of firms held by promoters.• Income Tax Assessment Certificates of Partners/Directors. • Proof of possession of Land/Building.• Architects estimate for construction cost. • Partnership Deed/Memorandum of Association and Memorandum of Articles of Associations of Company.• Project Report.• Budgetary Quotations of Plant and Machinery.

SANCTION OR REJECTON OF LOAN APPLICATON

A sanction or rejection letter is issued by bank after its assessment of the application.

After receiving a sanction letter applicants need to indicate in writing their acceptance of terms and conditions laid down by Financial Institutions/Banks.

Subsequent loan is disbursed according to the phased implementation of the project.

In today’s environment there are other choices apart from commercial banks and Government owned financial institutions.

These options include venture capital funds and non-government finance companies.

CONCLUSION

Government has made conscious effort to promote the growth of SSIs by facilitating the flow of not only finance (through institutional credit) but also other facilities also.

Not only finance but Infrastructural facilities, like transport, communication are also required.

Central & State Governments have come forward to provide these facilities which otherwise are beyond the capacity of a small entrepreneur to build up.

Various institutions have been coming up since independence which provide support to SSIs in many ways. Institutions like SISIs, DICs, NRDC, NIESBUD, NSIC, EDII, TCOs, SIDOs, NISIET etc, have been set up which provide timely assistance to SSIs.