B.B.A ENTREPRENEURSHIP

B.B.A-EntreprenurShip

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B.B.A Third Year

Core Paper No. 9

ENTREPRENEURSHIP

BHARATHIAR UNIVERSITY

SCHOOL OF DISTANCE EDUCATION COIMBATORE – 641 046


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(Syllabus) CORE PAPER : 9 B.B.A. ENTREPRENURSHIP

UNIT - I

Meaning of Entrepreneurship – characteristics, entrepreneurial structures – environmental factors affecting entrepreneurship, Barriers to entrepreneurship, - Socio-economic origins of entrepreneurship.

UNIT – II Types of entrepreneurship – entrepreneurs – role of entrepreneurship in economic development – theories of entrepreneurial origin – A conceptual Model, views of Schumpeier etc.

UNIT – III Entrepreneur – and enterprise – entrepreneurs and managers – traits of – true entrepreneur – behavioral patterns of entrepreneurs – women entrepreneur.

UNIT – IV The motivating factors – entrepreneurship ambitions – compelling factors – facilitating factors the achievement motivation, search for a business idea, sources of idea, idea processing.

UNIT – V All India financial and investment institutions – institutional infrastructure – dies – SIDO – SSIC – SIDCO

Text Books

1) Entrepreneurship Development S.B.Gupta, N.P.Srinivasan

2) Entrepreneurship Development S.S.Khanku

3) Entrepreneurship Development P.Saravanavel


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CONTENT

Lessons PAGE No.

UNIT-I

1 Entrepreneurship 4

UNIT-II

2 Type of Entrepreneurship 22

UNIT-III

3 Entrepreneur 35

UNIT-IV

4 Motivation 50

UNIT-V

5 All India Financial and Investment Institutions 68


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UNIT– I

LESSON-1 ENTREPRENEURSHIP

CONTENTS

1.0 Aims and Objectives

1. 1 Meaning of Entrepreneurship

1.1.1 Innovation

1.1.2 Risk-Bearing

1.1.3 Concept of Entrepreneurship

1.2 Nature and Characteristics of Entrepreneurship

1.2.1 Entrepreneurial structures

1.2.2 Innovating Entrepreneurs:

1.2.3 Adoptive or Imitating Entrepreneurs

1.2.4 Fabian Entrepreneurs

1.2.5 Drone Entrepreneurship:

1.2.6 Individual and Institutionalised Entrepreneurs

1.2.7 Entrepreneurs by Inheritance

1.2.8 Technologist Entrepreneurs

1.2.9 Forced Entrepreneurs

1.2.10 Small Entrepreneur and Small Enterprise

1.3 Factors Affecting Entrepreneurial Growth

1.3.1 Economic conditions

1.3.2 Non-economic conditions

1.3.3 Social conditions are as follows

1.3.4 Psychological conditions are as-follows

1.3.5 Political /Governmental Action

1.4 Barriers to Entrepreneurship


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1.5 Socio Economic Origins of Entrepreneurship

1.5.1 Socio-demographic Variables

1.5.2 Economic Variables

1.5.3 Variables of Systemic Linkage

1.5.4 Latent Characteristics

1.5.5 Bio-characteristics

1.0 AIMS AND OBJECTIVES

- Meaning of entrepreneurship

- Characteristics of entrepreneurship

- Entrepreneurship Structures

- Barriers to entrepreneurship

- Socioeconomic origins of entrepreneurship

1. 1 MEANING OF ENTREPRENEURSHIP

Like other economic concepts entrepreneurship has been a subject of much debate and discussions. It is an elusive concept. Hence, it is defined differently by different authors. While some call entrepreneurship as ‘risk-bearing’, others view it ‘innovating’ and yet others consider it ‘thrill-seeking’. Let us consider some important definitions of entrepreneurship to understand what entrepreneurship is all about.

In a Conference on Entrepreneurship held in United States, the term ‘entrepreneurship’ was defined as follows. “Entrepreneurship is the attempt to create value through recognition of business opportunity, the management of risk-taking appropriate to the opportunity, and through the communicative and management skills to mobilize human, financial and material resources necessary to bring a project to fruition”.

In the opinion of A. H. Cole, “Entrepreneurship is the purposeful activity of an individual or a group of associated individuals, undertaken to initiate, maintain or aggrandize profit production or distribution of economic goods and services”.

According to Schumpeter, “Entrepreneurship is based on purposeful and systematic innovation. It included not only the independent businessman but also company directors and managers who actually carry out innovative functions”.


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In all above definitions, entrepreneurship refers to the functions performed by an entrepreneur in establishing an enterprise. Just as management is regarded as what managers do, entrepreneurship may be regarded as what entrepreneurs do. In other words, entrepreneurship is the act of being an entrepreneur. Entrepreneurship is a process involving various actions to be undertaken to establish an enterprise. It is, thus, process of giving birth to a new enterprise.

Innovation and risk-bearing are regarded as the two basic elements involved in entrepreneurship. Let us understand what these two terms actually mean.

1.1.1 Innovation

Innovation. i.e., doing something new or something different is a necessary condition to be called a person as an entrepreneur. The entrepreneurs are constantly on the look out to do something different and unique to meet the changing requirements of the customers. They may or may not be inventors of new products or new methods of production, but they possess the ability to foresee the possibility of making use of the inventions for their enterprises. Let some facts speak.

In order to satisfy the changing preference of customers, now-a-days fruit juice is sold in small cartons (Mango Fruity) instead of bottles so that customers can carry it and throw away the container after drinking the juice. Let us take another example. Lipton offers its tea in small packs known as ‘PUDIYAS’ to meet the requirements of its rural customers. You may have heard of Henry Ford, the founder of the Ford Motor Company in the United States. Remember, Henry Ford himself did not invent the automobile. Foreseeing the people’s desire to have passenger cars at somewhat lower rates, he applied new methods of mass production to offer passenger cars to the customers at affordable price. Since customers’ taste and preference always keep on changing, hence the entrepreneur needs to apply invention after invention on a continuous basis to meet the customers changing demands for products.

1.1.2 Risk-Bearing

Starting a new enterprise always involves risk and trying for doing something new and different is also risky. The reason is not difficult to seek. The enterprise may earn profits or incur losses because of various factors like increasing competition, changes in customer preferences, shortage of raw material and so on. An entrepreneur, therefore, needs to be bold enough to assume the risk involved in the enterprises. In fact, he needs to be a risk-taker, not risk avoider. His risk-bearing ability enables him even if he fails in one time or one venture to persist on and on which ultimately helps him succeed.

1.1.3 Concept of Entrepreneurship

The term ‘entrepreneurship’ is often used synonymously with the term ‘Entrepreneur’ though, they are different.


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Entrepreneurship is the indivisible process flourishes, when the interlinked dimensions of individual psychological entrepreneurship, entrepreneur traits, social encouragement, business opportunities. Government policies, availability of plenty of resources and opportunities coverage towards the common good, development of the society and economy.

Entrepreneurship is the process of identifying opportunities in the market place, arranging the resources required to pursue these opportunities and investing the resources to exploit the opportunities for long term gains. It involves creating wealth by brining together resources in new way to start and operate an enterprise.

According to Cole “Entrepreneurship is the purposeful activity of an individual or a group of associated individuals undertaken to initiate, maintain and aggrandize profit by production or distribution of economic goods and services.

According to Higgins “entrepreneurship is meant the function of foreseeing investment and production opportunities, organizing an enterprise to undertake a new production process, raising capital, hiring labour, arranging the supply of raw materials, finding site, introducing a new technique, discovering new resources or raw materials an selecting top managers for day to day operations of the enterprise.”

The above definitions highlights risk bearing, innovating and resources organizing aspects and an individual or group of people achieve goal through production or distribution of products or services.

To conclude entrepreneurship is set of activities performed by an entrepreneur thus, entrepreneur proceeds entrepreneurship.

Check Your Progress

1. Discuss meaning of entrepreneurship.

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1.2 NATURE AND CHARACTERISTICS OF ENTREPRENEURSHIP

Above study of entrepreneurship has shown that the process of entrepreneurship is indeed complex and also when we say entrepreneur is what an entrepreneur does experts have enlisted the characteristics of entrepreneurship.


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1. Ability to create enterprise. Entrepreneurship is primarily an economic activity because it involves creation and operation of an enterprise. It is basically concerned with satisfying the needs of customer with the help of production and distribution of goods and services.

2. Organizing function: An entrepreneur brings together various factors of production for an economic use. He co-ordinates and controls the factors of production, efforts of are the persons engaged in his enterprise.

3. Innovation: Entrepreneurship is an automatic, spontaneous and creative response to changes in the environment. It involves innovation of something new to cause dynamic change and spectacular success in the economy, and create conditions for growth of the economy.

4. Risk bearing capacity: Risk is an inherent and inseparable element of entrepreneurship. He assumes the uncertainty of future. An entrepreneur guarantees rent to the landlord, wages to employees and interest to the investors in the hope of earning more than the expenses.

5. Managerial and leadership functions: An industrial entrepreneur must have additional personality traits such as managerial and leadership skills. Managerial and leadership qualities predominant orientation is in the direction of productivity. Working relation and creative integration along with desire to make profit. Entrepreneurship demands tactful handling of risk and uncertainties because new commodity and its acceptability is uncertain.

6. Gap filling: The gap filling between human needs and the available products and services leads to Entrepreneurship. An entrepreneur identifies the gap and takes necessary corrective measures to fill the gap, to achieve his action oriented motive in the enterprise as an entrepreneur with the help of Entrepreneurship process.

Ability to create enterprise

Organising factors of production

Innovative ideas

Gap filling function

Managerial and leadership activity

Risk bearing capacity

Entrepreneurship character


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1.2.1 Entrepreneurial structures Entrepreneurs can also be broadly divided into (i) Innovators, (ii) Imitators, (iii) Fabian entrepreneurs (iv) Drone entrepreneurs and (v) Laggards.

1.2.2 Innovating Entrepreneurs Innovating entrepreneurship is characterised by aggressive assemblage of information and the analysis of results deriving from novel combination of factors. Men in this group are generally aggressive in experimentation who exhibited cleverity in putting attracting possibilities into practice. Such an entrepreneur is one who sees the opportunity for introducing a new technique of production process or a new commodity or a new market or even reorganises the enterprise. He may raise money to launch an enterprise, assemble the various factors, choose top managers and set the organisation going. Schumpeter's entrepreneur was of this kind. Such persons of entrepreneurial ability are very commonly found in developed nations where as in developing or underdeveloped countries their number is very small. A country with little or no industrial tradition can hardly produce innovating entrepreneurs. Such entrepreneurs can work only when a certain level of development is already achieved, and people look forward to change and progress.

1.2.3 Adoptive or Imitating Entrepreneurs Imitative entrepreneurship is characterised by readiness to adopt successful innovation inaugurated by innovating entrepreneurs. In other words, imitators follow the innovators later after observing how the latter fare These groups are also revolutionary entrepreneurs with the difference that they do not innovate the changes themselves. They just imitate techniques and technology innovated by others. Such entrepreneurs are particularly important in developing countries because they contribute significantly .to the development of such economies. Imitative entrepreneurs are most suitable for the developing regions because in such sountries people prefer to imitate the technology, knowledge and skill already available in more advanced countries.

The reason for the backwardness of the underdeveloped countries lies in the fact that they are deficient in innovating and imitating entrepreneurs when they are found in abundance in developed countries. Men are needed who can imitate the technologies and products to the particular conditions prevailing in such countries. And at times there is a need of changing and adjusting the new technologies to their special conditions. Such countries, primarily need imitators who are responsible for transforming the system with the limited resources they possess.

1.2.4 Fabian Entrepreneurs Fabian entrepreneurship is characterised by great caution and septicism in practising any change. Such entrepreneurs have neither will to introduce new changes nor desire to adopt new methods innovated by the most enterprising entrepreneurs. Such entrepreneurs are shy and lazy. Their dealings are determined by customs, religion, tradition and past practices. They are not much interested in taking risk and they try to follow the footsteps of their predecessors.


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1.2.5 Drone Entrepreneurship Drone entrepreneurship is characterised. by a refusal to adopt and use opportunities to make changes in production. Such entrepreneurs may even suffer losses but they do not make changes in production methods. They are laggards because they continue in their traditional way and in fields their product loses its marketability of their operation becomes uneconomical they are pushed out of the market.

1.2.6 Individual and Institutionalised Entrepreneurs The need of the hour is not only the ability of a single man to organize a business he himself could run, control and embrance, it is also the ability to create and direct on organisation. In other words, the “individual entrepreneur” can only coexist with the “institutionalized entrepreneur” and is bound to gradually vield his place to the later. The business will have to acquire a number of new abilities, all of them entrepreneurial in nature, but all of them to be exercised in and through a managerial and usually a fairly large and complex organisation like a corporate body (group on entrepreneurs)., corporate sector has come to be understood and the typical and most important representative of the institutionalised entrepreneur.

When the organisation is big and grows bigger entrepreneurs start making delegation of authorities to subordinate executives. Moreover, the network of decision-making becomes more complex. But regardless of these changes in the form and increase in the complexity of organisation, the central functions of the entrepreneur remains the same. The entrepreneur determines alone without any managerial interference in what lines of business is to employ capital and how much is to be employed. He determines the expansion and contraction of the size of the total business and its various branches. There are essential decisions which are instrumental in the conduct of the business and entrepreneurs are at the helm of affairs.

1.2.7 Entrepreneurs by Inheritance

Inheritance of family business has been and will continue to be for many years to come, the most important reason for accepting entrepreneurship as a vocation. With the declining of the joint family business, the technologist aspiring to profit on his invention and the neorich and the educated unemployed seeking self-employment turning to business is slowly and surely gaining momentum.

1.2.8 Technologist Entrepreneurs A man of science and technology turning to business is something of recent origin, which is slowly picking up in India with the increased scientific and technical educational institutions. Usually technology stands as the only or main asset of this class which enters business -without being aware of the financial, legal, accounting, procedural marketing, organising and administrative requirements of business. Some of them may even be able to muster the financial resources from their own pockets or from the neorich friends like people who amassed huge wealth through windfalls or overseas employment. But their problems are mainly in all the rest of the above spheres. Their survival depends upon how soon they start producing and the acceptance of their product by the market.


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1.2.9 Forced Entrepreneurs

The money lenders of yesterday who are thrown out of their family business because of Government legislation, the neorich Indians returning from .abroad and the educated unemployed seeking self-employment form this class of entrepreneurs. This category includes educated but unemployed and newly married bridegrooms who start business with "in-laws" financial support. This class comprises either misfits for or rejects from other vocations and the idlers whose need is an investment opportunity for their wealth rather than a way of life. This class of entrepreneurs accounts for the most number of failures as there is no screening or weeding out of the misfits. Failure of this type of entrepreneurs can be reduced with the help of proper training and education. But it cannot totally be removed.

Entrepreneurs may also be classified into new (first generation) and established entrepreneurs, male (men) and female (women) entrepreneurs, rural and urban entrepreneurs, born and man-made entrepreneurs, entrepreneurs in small scale and large scale sectors, etc,

1.2.10 Small Entrepreneur and Small Enterprise

Small enterprises outnumber the large ones in every corner of the globe. In industrially advanced countries like U.S.A. and Japan they account for more then 90% of total business enterprises. The 14 million small business entities in U.S. provide employment to 100 million Americans and account for about 40 per cent of gross national product. In Japan, over 5 million enterprises fall in small scale sector. They employ about 80% of the total number of people employed by private business organisations. In Sweden 85,000 enterprises are engaged in industry, craft and building activities. Only about 600 of these firms have more than 200 employees each. In Belgium out of 15 lakh registered enterprises only 2800 have more than 100 employees each. In Hong Kong the share of small manufacturing enterprises in terms of number of establishments has increased from 78.7% in 1961 to 92.1% in 1977. In India, small sector accounts for about 40% of total industrial production. The number of registered units is around 30 lakhs.

Entrepreneurs in small scale sector have certain disadvantages as compared to those in the large organised units. They cannot always compete with them in the matters like procurement of raw materials, technical skills, capital and finance, modernisation of plants, sales net work and advertising, patronage by the government departments and building of infrastructural facilities due, to limited resources. The advantages connected with the size go with large operations. As ancillary and feeding units to large enterprises, small sector units have better scope and opportunities. The tiny units in small scale, manufacturing works of arts and crafts requiring individual craftsmanship also do not come in direct competition with the large scale units.

In developed as well as developing countries, the state has to assume the role of protector and promoter of small enterprises. The U.S. Government passed the Small Business Act in 1953 and established the Federal Small Business Administration to provide financial assistance to otherwise credit worthy small firms which, through no fault of their own, are


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unable to find such financing, with insuring free access by small firms to federal government contracts, and with providing advice on the most modern methods of management and production. The Commonwealth Government of Australia provides export incentives, marketing-assistance, industry research grant, productivity improvement programmes and training facilities for small enterprises. Among the diversified measures in Japan, the central one is a financial measure to relieve the difficulty which small and medium enterprises have to cope with. Semi-government financial, institutions have been set up for the purpose. In Belgium, the government provides interest subsidies, capital premium and employment incentives to small entrepreneurs and also exonerate them from certain taxes. Malaysian Government provides locational incentives, labour utilisation7 relief, increased capital allowance, investment tax credit and export incentives to small sector units. The Government of Nepal is encouraging small entrepreneurs to set up industries in back ward areas by providing them a higher percentage of loan of fixed investment. The benefits enjoyed by the entrepreneurs in small scale sector in India range from allotment of land/factory sheds at low cost by the state, concessional finance, tax exemptions, priority in government purchases, to the exclusive reservation of certain products for manufacturing.

Check Your Progress

1. Explain characteristics of entrepreneurship and its structures.

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1.3 FACTORS AFFECTING ENTREPRENEURIAL GROWTH

Following are the factors of environment affecting entrepreneurial growth. These conditions are grouped under two categories.

1. Economic conditions

2. Non-economic conditions

1.3.1 Economic conditions

Economic conditions includes the capital, labour, raw material and market.

Capital: It is the essence of enterprise. Availability of capital facilitates mobility of land, machine, material etc. is required to produce goods. Therefore, capital is a lubricant which smoothens the working of vehicle called enterprise. Increased capital investment, capital output ratio results in profit, which ultimately goes up to capital formation.


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Labour: Quality and quantity of labour influence the entrepreneurship mobility dexterity and immobility. Low cost labour and capital intensive technology oriented enterprises influence entrepreneurship.

Raw material: Availability of raw material, nature of industrial establishment, technological innovation and mobility of raw material encourages or curbs the development of entrepreneurship.

Market: potential of the market constitutes the major department of probable rewards from entrepreneurial function. The size and composition of market monopoly in a particular product influence entrepreneurship.

1.3.2 Non-economic conditions

Non-economic conditions are as follows: social conditions, psychological conditions and political or governmental action. Sociologists and psychologists view that the influence of economic factors on entrepreneurial emergence largely depend upon the existence of non-economic factors.

1.3.3 Social conditions are as follows

1. Socio-cultural norms and values.

2. Degree of approval or disapproval of entrepreneurial behavior.

3. Family background, standard of education, technical knowledge and information.

4. Financial stability, caste and religious affiliation.

1.3.4 Psychological conditions are as-follows

1. David Mcdellond’s Theory of need achievement’—According to him a constellation of personality characteristics, and high need achievement is the major determinant of entrepreneurship.

2. Individual works in the society but remains different.

3. Impact of achievement motivation and training programmes influence development of entrepreneurship.

1.3.5 Political /Governmental Action

1. Government encourage entrepreneurship by creating basic facilities, utilities and services and by providing incentives and concessions.

2. Government provides the prospective entrepreneurships a facilitative socio-economic setting.

3. Entrepreneurship development is based on the Government interest in economic development of the society.


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Above discussed factors influence the emergence of entrepreneurship. These factors are interlocking, mutually dependent and mutually reinforcing.

Check Your Progress

1. Explain in brief the factors that affect the growth of entrepreneurship

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1.4 BARRIERS TO ENTREPRENEURSHIP

Many entrepreneurs fail due to several barriers and problems. Vasper has identified the following barriers.1

Table 1.1 Comparison between the Entrepreneurial culture and Administrative

culture

ENTREPRENEURIAL FOCUS

Characteristics Pressure Characteristics Pressure A Strategic

Orientation Driven by perception of opportunity

Diminishing opportunities Rapidly changing technology, consumer economics, and social values, and political rules

Driven by controlled resources

Social contracts performance measurement criteria planning systems and cylces

B Commitment to size opportunities

Revolutionary, with short duration

Action orientation Narrow decision windows Acceptance of reasonable risks few decision constituencies

Evolutlonary, with long duration

Acknowledgment of multiple constituencies Negotiation Coordination with existing resources base


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C Commitment of resources

Many stages, with minimal exposure at each stage

Lack of predictable resource needs Lack of control over the environment Social demands for appropriate use of resources

A single stage, with complete commitment out of decision

Need to reduce risk incentive compensation Turnover in managers Capital budgeting systems Formal planning systems

D Control of resources

Episodic use or rent of required resources

Increased resources specialization Long resource life compared with need Risk of obsolescence Risk Inherent in the identified opportunity Inflexibility of permanent

Ownership or employment of required resources

Power, status and financial rewards, Coordination of activity Efficiency measures Inertia and cost of change industry structures

E Management Structure

Flat, with multiple Informal networks

Coordination of key noncontrolled resources Challenge to hierarchy Employees’ desire for independence

Hierarchy Need for clearly defined authority and responsibility Organizational culture Reward systems Management theory

1. Lack of viable concept

2. Lack of market knowledge

3. Lack of technical skills

4. Lack of seed capital

5. Lack of business Knowhow

6. Complacency-lack of motivation


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7. Social stigma

8. Time pressuces and distractions

9. Legal constraints and regulations

10. Monopoly and protectionism

11. Inhibitions due to patents

Vasper lists certain entrepreneurial factors that help to reduce the effect of these barriers. The following table depicts how this happens.

Table 1.2: Barriers to Entrepreneurship

Source: Karl H. Vesper, Entrepreneurship and National Policy (1983). Walter E. Heller International Institute for small Business.

ENVIRONMENTAL HELPS BARRIERS

1. Market Contacts A. Lack of Viable concept

2. Local Incubator Companies B. Lack of Market Familiarity

3. Capable Local Manpower C. Lack of Technical Skills

4. Technical Education and support D. Lack of Seed Capital

5. Supplier Assistance and credit E. Lack of Business Knowhow

6. Local Venture Capitalists F. Complacency Nonmotivation

7. Venture Savvy Bakers G. Social Stigma

8. Capable Local Advisors H. Job Lock-ins Golden Handcuffs

9. Entrepreneurial Education I. Time Pressure, Distractions

10. Successful Role Models J. Legal Constraints, Regulation Red

Tape

K. Protectionism Monopoly

L. Patent Inhibitions

Personal Pushes

Personal Pulls


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1.5 SOCIO ECONOMIC ORIGINS OF ENTREPRENEURSHIP

Factors Influencing Entrepreneurship

The factors that contribute to the growth of entrepreneurship are varied in nature and very many in number. The behavioural aspect of an entrepreneur moulds his character. Dr. Robert Owen, an environ mental economist who is popularly known as the “Father of Co-operation”, had a strong belief that character was not inherent in man, but was the outcome-of the impact of the social system on the individual. His slogan was "change the Environment and Recreate society". According to him", the- Environment to which a person is exposed has a strong influence in shaping his character. Hence, there is need for counting the factual aspects, social and cultural variables such as family background, associations with prestige groups, political affiliation, investment climate, individual capacities, personal skills etc., in order to identify the influencing factors of entrepreneurship.

The factors that tend to influence entrepreneurship can be listed under five broad areas such as: 1. Socio-demographic variables 2. Economic variables 3. The variables of systemic linkage 4. Latent characteristics and 5. Bio-characteristics of entrepreneurs.

1.5.1 Socio-demographic Variables

The following factors may be grouped under the, broad heading “Socio-demographic variables.”

1. Education and Technical qualifications;

2. Emigration;

3. Family background;

4. Previous occupation;

Like Karl Marx, Schumpeter lays considerable emphasis on sociological factors for the emergence of entrepreneurship. Schumpeter's concept of “Social climate” is a complex phenomenon which reflects the whole social, political and socio-psychological atmosphere within which entrepreneurs must operate. It would also include the social values of a particular country at a particular time, the class structure, the educational system and the like. An entrepreneur's ability lies in mobilising capital either for concretising his plans or for later investment in his industry. Families with properties like land and house and having sound financial resources may provide the situational context for the growth of entrepreneurs.

There is a possibility of higher income and level of living and other financial resources, facilitating the growth and development of entrepreneurial ability. But the findings made by a study during 1970 disproved the commonly held notion that it was only moneyed people who started industries. On the contrary, “the desire to make money” played the most important rule in starting an industrial unit” The motivational factor – “desire to


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make money” – be - comes intensified and is activised only on the strength of resource’! available with him. Even at the lower economic levels, assets in the form of jewels, land and buildings owned by the entrepreneur have all tended to agglomerate into the 'seed capital' for him. There are strong evidences, in India, to prove that technical qualifications and family backgrounds played greater rote in influencing entrepreneurship. There are certain leading communities in India, well known for their enterprising nature in the trade with the neighbouring countries.

Indians as a race have been second to none in this regard. Indian traders and businessmen in past carried not "only Indian goods abroad, but also its rich culture. During Moghul period Indian textiles, zari and embroidered clothes, carpets, jewelleries and other works of fine arts were popular in different markets of the world. The British regime discouraged Indian businessmen and pursued policies favourable to British manufacturers and traders, but in spite of this, textile, jute, sugar, steel, cement and some other industries were set up by the local business community. During and after world wars, the British government in India had i.3 depend largely on indigenous products. The speed of industrialisation during British period has however, been miserably slow which also accounts for poverty and economic backwardness of this region. The post-independence era has given boost to the morale of the Indian entrepreneurs. Today, the “Hindu Entrepreneurs” as they are called are spread throughout the world, from running motels in small towns in U.S.A., the Indian businessmen can be seen running giant manufacturing organizations in several countries of Asia and Africa. The Indian traders and merchants have gone in several unexplored and underdeveloped market of the world. In some of the established markets too, they are successfully competing with Chinese and European businessmen. The business leaders, both from private and public sectors, are helping in transnationalising the Indian business.

Entrepreneurial behaviour is also a function of the surrounding social structure, both past and present and can be readily influenced by manipulative economic and social incentives. Children in marwari families in India, for instance, are brought up in an environment which develops entrepreneurial qualities in them from an early age. The Joint Hindu family system has promoted the entrepreneurship by providing environment, developing skills and building strong traditions and customs. The environment of the family prepares its members for certain types of business, profession or occupation. Those born is rich business- families ‘with silver spoons in their mouths’ have not only an advantage of having seed capital for carrying out business, but also learn the basic business skills by continuous interaction and contacts with parents, customers, employees and visitors in family shops, mills, offices and homes. Prof. M. David Morris has rightly observed that the Hindu joint family system cannot be identified as an obstacle to economic growth.

The caste system, too in Hindu society has promoted to the growth of business and professional skills. Baniyas have been a dominant business community in India for centuries. They have taken lead in promoting and organising manufacturing and business enterprises. The Jain and Marwari businessman from certain districts in Rajasthan can be seen in almost every part of the country engaged in trading manufacturing and banking business.


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Both the joint Hindu family and the caste system however have certain limitations. In joint family, the enterprising members may be exploited By non-enterprising ones due to common ownership of capital and other resources. Children born in rich families have better opportunities of education, social interaction and accumulation of resources, than those born in poor families. The caste system in Hindu society based on the law of Karma (birth on the basis of one’s activities in previous lives) denies equality of opportunities and discriminates against the members of society born in so-called low castes and permits their exploitation by the so-called high castes. These and other drawbacks of joint Hindu family and caste systems have deprived till recently a Sizeable, section of population from acquiring and developing entrepreneurial abilities.

1.5.2 Economic Variables

The factors that constitute the economic variables are:

1. Ancestral property;

2. Prior income;

3. Initial investment;

4. Profit utilisation; and

5. Level of living.

The economic variables like ‘Profit utilisation’, ‘official contact’, ‘mutual help’ and social participation constitute the second factor. Official and social contacts are necessary requirements for a thriving entrepreneur. As the entrepreneurs, in general, come from affluent families with sound economic background, the need to plough back profit into the industry may be less intense. Their high level of living and their sources of income given them opportunity to reap the benefits of the momentum of an early start through the initial investment.

1.5.3 Variables of Systemic Linkage

The National Institute of Community Development, Hyderabad, has recommended two pre-requisites for achieving success in the establishment and growth of an industry viz., (i) contact at higher social and Governmental levels and (ii) Availability of expert technical advice and guidance at all stages of development of industry. There is the need for the entrepreneur to work with Prestige groups o have contacts at high political, social and Governmental levels either individually or through relatives, friends, associations or training agencies. Since, systemic linkage comprises expert and official contacts, mutual help, political affiliation, social participation and personnel training. It is considered to be an important factor influencing entrepreneurship.


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1.5.4 Latent Characteristics

It is not always the availability of physical resources that account for the development of economies of various countries. There are countries which are profusely rich in resources and yet are poor and underdeveloped, with low living standards is due to the dearth of entrepreneurial skills. On the other side, instances are not wanting of countries poor in physical resources but which have achieved a remarkable recovery despite the crippling effect of the second world war. In these countries, the miracles of entrepreneurial ability have turned 'sand into gold'. Japan has no iron ore but she is one of the leading sellers of the best steel and steel products in the global market. A flourishing economy was built in West Germany right from the scrap is attributed to the high degree of dedicated entrepreneurs available.

An entrepreneur becomes an accepted leader of industry, if he exhibits leadership qualities, a personality that shows up the elements in him - innovativeness, risk-bearing, self-reliance, eagerness to evaluate enterprise and to fix long and short-term goals.

1.5.5 Bio-characteristics

Bio-characteristics that generally influence entrepreneurship are Age, Marital Status, Religion and Community. In a study conducted at Madurai,1 it was found that mean age of the entrepreneurs was 33 years and the maximum number of entrepreneurs was in the group of 28 to 32 years which bear testimony that youngsters are more optimistic than elders in facing the challenges of the day. Further, married status also may be throwing up challenges and stimulations for one to develop entrepreneurial qualities in the course of fulfilling family responsibilities. Hence marital status may be a conducive factor in prodding entrepreneurial growth in individuals.

Caste and Religion to which a person is affiliated serve as one of the contributory factors to entrepreneurship. Historical investigation in the growth of entrepreneurship in India, reveals that big industrial entrepreneurs had emerged from different social and religious communities.

Conclusion

From the foregoing discussion it is vivid that at any rate entrepreneurs do not come spontaneously of their own. While the other factors of production are at least, in principle, hirable bat enterprise is not. They have to come from different vocations. Even the educational system in most of the developing countries one designed in such a way as to create more of job creators. In many countries, to sum up, entrepreneurs appear to have been motivated by the combination and interaction of the following factors of environment:


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1. Socio-economic environment;

2. Family background;

3. Standard of education and Technical knowledge;

4. Financial stability;

5. Political stability and government's policy

6. Caste and Religious affiliation;

7. Availability of supporting facilities

8. Achievement motivation

9. Personality and personal skill.

In conclusion, the environmental factors may be summarised as follows:

1. Entrepreneurship is not influenced by a single factor but is the outcome of the interaction and combination of various environmental factors.

2. By changing the environment, society could be recreated.

3. It is the “desire to make money” that drives one to start an industry rather than the amount of money one owns.

4. Encouraging Governmental policy and social recognition influence a person to become an entrepreneur. As educationanist, we can think of modifying the educational system so as to produce more job creators rather than job-seekers.

Check Your Progress

1. Describe socio economic origins of entrepreneurship.

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UNIT – II

LESSON-2 TYPE OF ENTREPRENEURSHIP

CONTENTS 2.0 Aims and Objectives 2.1 Types of Entrepreneurship

2.1.1 Clarence Danhof Classification 2.1.2 Aruther H. Cole Classification 2.1.3 Classification on the Basis of Ownership 2.1.4 Classification Based on the Scale of Enterprise

2.2 Evolution of the Concept of Entrepreneur 2.2.1 Entrepreneur as a Risk-Bearer 2.2.2 Entrepreneur as an Organiser 2.2.3 Entrepreneur as an Innovator

2.3 Role of Entrepreneurship in Economic Development 2.4 Theories of Entrepreneurial Supply (Origin)

2.4.1 Economic Theory 2.4.2 Sociological Theory 2.4.3 Psychological Theory

2.5 Model of Entrepreneurship 2.5.1 Schumpeter's Definition of Entrepreneur


In Unit I, we discussed the meaning of entrepreneurship along with the structure, barriers and the factors affecting entrepreneurship. After going through the Unit – II you will be able to understand.

- Types of entrepreneurship

- Role of entrepreneurship in economic

- Theories of entrepreneurial development

- A model of Schumpeter


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2.1 TYPES OF ENTREPRENEURSHIP

Following are the classification of entrepreneurs on the basis of common characteristics. Entrepreneur

2.1.1 Clarence Danhof Classification:

Clarence Danhof classifies entrepreneurs into four types.

1. Innovative: Innovative entrepreneur is one who assembles and synthesis information and introduces new combinations of factors of production.

2. Immitative: Immitative entrepreneur is also known as adoptive entrepreneur. He simply adopts successful innovation introduced by other innovators.

3. Fabian: The Fabian entrepreneur is timid and cautious. He imitates other innovations only if he is certain that failure to do so may damage his business.

4. Drone. His entrepreneurial activity may be restricted to just one or two innovations. He refuses to adopt changes in production even at the risk of reduced returns.

2.1.2 Aruther H. Cole Classification

Aruther Hr-Cole classifies entrepreneurs as

1. Empirical: He is an entrepreneur hardly introduces anything revolution ary and follows the principle of rule of thumb.

2. Rational: The rational entrepreneur is well informed about the general economic conditions and introduces changes which look more revolutionary.

3. Cognitive: Cognitive entrepreneur is well informed, draws upon the advice and services of experts and introduces changes that reflect complete break from the existing scheme of enterprise.

A. Clarence Danhof. Classification 1.Aggressive/Innovative 2. Immitative 3. Fabian 4. Drone

B. Arthur H. Cole Classification 1. Empirical 2. Rational 3. Cognitive

C. On the basis of ownership 1. Private 2. Public

D. On the basis of scale of enterprise 1. Small scale 2. Large Scale

I II III IV


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2.1.3 Classification on the Basis of Ownership

1. Private: Private entrepreneur is motivated by profit and it would not enter those sectors of the economy in which prospects of monetary rewards are not very bright.

2. Public entrepreneurship: In the underdeveloped countries government will take the initiative to share enterprises.

2.1.4 Classification Based on the Scale of Enterprise

1. Small scale: This classification is specially popular in the underdeveloped countries. Small entrepreneurs does not posses the necessary talents and resources to initiate large scale production and introduce revolutionary technological changes.

2. Large scale: In the developed countries most entrepreneurs deal with large scale enterprises. They possess the financial and necessary enterprise to initiate and introduce new technical changes. The result is the developed. countries are able to sustain and develop a high level of technical progress.

Check Your Progress

1. Describe the type of entrepreneurs.

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2.2 EVOLUTION OF THE CONCEPT OF ENTREPRENEUR

The word 'entrepreneur' has been taken from the French language where it cradled and originally meant to designate an organizer of musical or other entertainments. Oxford English Dictionary (in 1897) also defined an entrepreneur in similar way as "the director or a manager of a public musical institution, one who ‘gets-up’ entertainment, especially musical performance”. In the early 16th century, it was applied to those who were engaged in military expeditions. It was extended to cover civil engineering activities such as construction and fortification in the 17th century.' It was only in the beginning of the 18th century that the word was used to refer to economic aspects. In this way, the evolution of the concept of entrepreneur is considered over more than four centuries. Since then, the term ‘entrepreneur’ is used in various ways and various views. These views are broadly classified into three groups, namely, risk-bearer, organiser and innovator. Now, we are discussing below each of these views.


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2.2.1 Entrepreneur as a Risk-Bearer Richard Cantillon, an Irish man living in France, was the first who introduced the term ‘entrepreneur’ and his unique risk-bearing function in economics in the early 18th century. He defined entrepreneur as an agent who buys factors of production at certain prices in order to combine them into a product with a view to selling it at uncertain prices in future. He illustrated a farmer who pays out contractual incomes which are certain to the landlords and labourers and sells at prices that are 'uncertain'. He further states that so do merchants also who make certain payments in expectation of uncertain receipts. That they too are 'risk-bearing' agents of production.

Knight also described entrepreneur to be a specialised group of persons who bear uncertainty. Uncertainty is defined as a risk which cannot be insured against and incalculable. He, thus, draws a distinction between ordinary risk and uncertainty. A risk can be reduced through the insurance principle, where the distribution of the outcome in a group of instances is known. On the contrary, uncertainty is the risk which cannot calculated. The entrepreneur, according to Knight, is the economic functionary who undertakes such responsibility of uncertainty which by its very nature cannot be insure nor capitalised nor salaried too.

2.2.2 Entrepreneur as an Organiser Jean-Baptiste Say, an aristocratic industrialist, with his unpleasant practical experience developed the concept of entrepreneur a little further which survived for almost two centuries. His definition associates entrepreneur with the functions of coordination organisation and supervision. According to him, an entrepreneur is one who combines the land of one, the labour of another and the capital of yet another, and, thus, produces product. By selling the product in the market, he pays interest on capital, rent on land and wages to labourers and what remains is his/her profit. Thus, Say has made a clear distinction between the role of the capitalist as a financer and the entrepreneur as an organiser. He further elaborates that in the course of undertaking a number of complex operations like obstacles to be surmounted, anxities to be suppressed, misfortunes to be repaired and expedients to be devised, three more implicit factors are deemed to be essential. These are:

1. Moral qualities for work judgement, perseverance and a knowledge about the business world.

2. Command over sufficient capital, and

3. Uncertainty of profits.

Marshall also advocated the significance of organisation among the services of special class of business undertakers.


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2.2.3 Entrepreneur as an Innovator Joseph A. Schumpeter, for the first time in 1934, assigned a crucial role of ‘innovation’ to the entrepreneur in his magnum opus 'Theory of Economic Development'. Schumpeter considered economic development as a discrete dynamic change brought by entrepreneur by instituting new combinations of production, i.e., innovations.6 The introduction of new combination of factors of production, according to him, may occur in any one of the following five forms:

1. The introduction of a new product in the market.

2. The instituting of a new production technology which is not yet tested by experience in the branch of manufacture concerned.

3. The opening of a new market into which the specific product has not previously entered.

4. The discovery of a new source of supply of raw material.

5. The carrying out of the new form of organisation of any industry by creating of a monopoly position or the breaking up of if.

Schumpeter also made a distinction between an inventor and an innovator. An inventor is one who discovers new methods and new materials. And, an innovator utilizes inventions and discoveries in order to make new combinations.

In sum, the concept of the entrepreneur is intimately associated with the three elements - risk-bearing, organising and innovating. Thus, an entrepreneur can be defined as a person who tries to create something new, organises production and undertakes risks and handles economic uncertainty involved in enterprise.

Check Your Progress 1. Explain concept of entrepreneur.

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2.3 ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT

The word development is used in so many ways that its precise connotation is often baffling. Nevertheless, economic development essentially means a process of upward change, whereby the real per capita income of a country increase over a long period of time. Then, a simple but meaningful question arises: what cause economic development? This question has absorbed the attention of scholars of socio-economic change for


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decades. In this section, we attempt to shed light on an important aspect of that larger question, the phenomenon of entrepreneurship. The one major issue we address here is: what is the significance of entrepreneurship for economic development? Does it add an important independent influence to that of other factors widely agreed to promote economic development?

Adam Smith the foremost classical economicst, assigned no significance to entrepreneur neurial role in economic development in his monumental work ‘An Enquiry into the Nature and Causes of the Wealth of Nations’ published in 1776. Smith extolled the rate of capital formation as an important determinant of economic development. The problem of economic development was ergo largely the ability of the people to save more and invest more in any country. According to him, ability to save is governed by improvement in productivity to the increase in the dexterity of every worker due to division of labour. Smith regarded every person as the best judge of his own interest who should be left to pursue it to his own advantage. According to him, each individual is led by an invisible hand in pursuing his/her interest. He always advocated the policy of laissez-faire in economic affairs.

In his history of economic development, David Ricardo identified only three factors of production, namely, machinery, capital and labour, among whom the entire produce is distributed as rent, profit and wages respectively. Ricardo appreciated the virtues of profit in capital accumulation. According to him, profit leads to saving of wealth which ultimately goes to capital formation.

Thus, in both the classical theories of economic development, there is no room for entrepreneurship. And economic development seems to be automatic and self-regulated. Thus, the attitude of classical economists was very cold towards the role of entrepreneurship in economic development. They took the attitude: “the firm is shadowy entity and entrepreneur evenshadower-or at least is shady when he is not shadowy”.

The economic history of the presently developed countries, for example America Russia and Japan tends to support the fact that the economy is an effect for which entrepreneurship is the cause. The crucial role played by the entrepreneurs in the development of the Western countries has made the people of under-developed countries too much conscious of the significance of entrepreneurship for economic development. Now, people have begun to realize that for achieving the goal of economic development, it is necessary to increase entrepreneurship both qualitative and quantitatively in the country. It is only active and enthusiastic entrepreneurs who fully explore the potentialities of the country’s available resources – labour, technology and capital. Schumperter visualized the entrepreneurs as the key figure in conomic development because of his role in introducing innovations. Parson and Smerlser described entrepreneurship as one of the two necessary conditions for economic development, the other being the increased output of capital. Harbison includes entrepreneurs among the prime movers of innovations, and Sayigh simply describes entrepreneurship as a necessary dynamic force. It is also opined that development does not occur spontaneously as a natural consequence when economic conditions are in some sens ‘right’: a catalyst or agent is needed, and this requires an


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entrepreneurial ability. It is the ability that her perceives opportunities which either others do not see or care about. Essentially, the entrepreneur searcher for change, sees need and then brings together the manpower, material and capital required to respond the opportunity what he sees. Akio Morita, the President of Sony who adopted the company’s products to create Walkman Personal – Stero and India’s Gulshan Kumar of T-series who skimmed the audio-cassette starved vast Indian market are the clearest examples of such able entrepreneurs.

The role of entrepreneurship in economic development varies from economy to economy depending upon its material resources, industrial climate and the responsive of the political system to the entrepreneurial function. The entrepreneurs contribute in favourable opportunity conditions than in the economies with relatively less favourable opportunity conditions.

Viewed from opportunity point of view, the underdeveloped regions, due to the paucity of funds, lack of skilled labour and non-existence of a minimum social and economic overheads, are less conducive to the emergence particulary of innovative entrepreneurs. In such regions, entrepreneurship does not emerge out of industrial background with well developed institutions to support and encourage it. Therefore, entrepreneurs in such regions may not be an "innovator" but an "imitator" who would copy the innovations introduced by the "innovative” entrepreneurs of the developed regions. In these areas, McCelland's concept of personality aspect of entrepreneurship, some people with high achievement motivation come forward to behave in an entrepreneurial way to change the stationary inertia, as they would not be satisfied with the present status that they have in the society

Under the conditions of paucity of funds, and the problem of imperfect market in underdeveloped regions, the entrepreneurs are bound to launch their enterprises on a small-scale. As imitation requires lesser funds than innovation introduced in developed regions on a massive scale can bring about rapid economic development in under-developed regions also. But, it does not mean that imitation requires in any way lesser ability on the part of entrepreneurs. In this regard Berna opines: "It involves often what has aptly been called ‘subjective innovation’, that is, the ability to do things which have not been done before by the particular industrialists, even though unknown to him, the problem may have been solved in the same way by the others." These imitative entrepreneurs constitute the main spring of development of underdeveloped regions.

Further, India which itself is an under-developed country aims at decentralized industrial structure to militate the regional imbalances in levels of economic development, small-scale entrepreneurship in such industrial structure plays an important role to achieve balanced regional development. It is unequivocally believed that small-scale industries provide immediate large-scale employment, ensure a more equitable distribution of national income and also facilitate an effective resource mobilization of capital and skill which might otherwise remain unutilized. Lastly, the establishment of Entrepreneurship Development Institutes and alike by the Indian Government during the last decades is a good testimony to her strong realisation about the primum mobile role of entrepreneurship


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played in economic development. The important role that entrepreneurship plays in the economic development of an economy can now be put in a more systematic and orderly manner as follows:

1. Entrepreneurship promotes capital formation by mobilizing the idle saving of the public.

2. It provides immediate large-scale employment. Thus, it helps reduce the unemployment problem in the country, i.e., the root of all socio-economic problems.

3. It promotes balanced regional development.

4. It helps reduce the concentration of economic power.

5. It stimulates the equitable redistribution of wealth, income and even political power in the interest of the country.

6. It encourages effective resource mobilisation of capital and skill which might otherwise remain unutilized and idle.

7. It also induces backward and forward linkages which stimulate the process of economic development in the country.

8. Last but no, means the least, it also promotes country’s export trade i.e. an important ingredient to economic development.

Thus, it is clear that entrepreneurship serves as a catalyst of economic development. On the whole, the role of entrepreneurship is economic development of a country can best be put as “an economy is the effect for which entrepreneurship is the cause.”

Check Your Progress 1. Write an essay on the role of entrepreneurship in economic development.

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2.4 THEORIES OF ENTREPRENEURIAL SUPPLY (ORIGIN)

The concept of entrepreneurship and its theory have been evolved over a period of more than two centuries. There are different opinions on the emergence of entrepreneurship. These opinions may be classified into three categories.

1. The economist’s view

2. The sociologist’s view

3. The psychologist’s view


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2.4.1 Economic theory

According to economists entrepreneurship and economic growth will take place in those situations where particular economic conditions are most favourable. G.F. Papanek and J.R. Harris are the mair advocates of this theory. According to them, economic incentives are the mair drive for the entrepreneurial activities. In some cases, it is not so evident, but the person’s inner drives have always been associated with economic gains. There fore, these incentives and gains are are regarded as the sufficient condition for the emergence of industrial entrepreneurship.20 When an individual recognises that the market for a product or service is out of equilibrium, he may purchase or produce at the prevailing price and sell to those who are prepared to buy at the highest price.21 Lack of vigorous entrepreneurship is due to various kinds of market imperfections and inefficient economic policies.

2.4.2 Sociological Theory

Sociologists argue that entrepreneurship is most likely to emerge under a specific social culture. According to them social sanctions, cultural values and role expectations are responsible for the emergence of entrepreneurship. According to Cochran22 the entrepreneur represents society’s model personality. His performance depends upon his own attitudes towards his occupation, the role expectations of sanctioning groups and the occupations requirements of the job. Society’s values are the most important determinant of the attitudes and role expectations. According to Weber religious beliefs produce intensive exertion in occupational pursuits, the systematic ordering of means to end, and the accumulation of assets. It is these beliefs which generate a drive for entrepreneurial growth. Hoselitz suggests that culturally marginal groups promote entrepreneurship and economic development. Such groups, because of their ambiguous position are peculiarly suited to make creative adjustments and thereby develop genuine innovations. In several countries, entrepreneurs have emerged from a particular socio-economic class. The protestant ethic of the west Britain, the United States and Turkey, ranks of entrepreneurs were filled from commerce, Samurai in Japan, family pattern in France, Yoruba in Nigeria, Kikuyu, Christians in Lebanon, Halai Memon industrialist in Pakistan, Marwaris and Parsees in India are considered to the dominant social classes as source of entrepreneurship. In his study of the origin and background of entrepreneurs in several countries, Hagen also concluded that entrepreneurs have emerged from certain communities and castes.

According to Stokers socio-cultural values channel economic action. He suggests that personal and societal opportunity and the presence of the requisite psychological distributions may be seen as conditions for an individuals movement into industrial entrepreneurship.


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2.4.3 Psychological Theory

According to the advocates of this theory, entrepreneurship is most likely to emerge when a society has sufficient supply of individuals possessing particular psychological characteristics. Schumpeter believes that entrepreneurs are primarily motivated by an atavistic will to power, will to found a private kingdom or will to conquer. Their main characteristics are warmth, self – reliance training and low father dominance. Individuals with high achievement motive tend to take keen interest in situations of high risk, desire for responsibility and a desire for a concrete measure of task perfromance28. Hagen considers withdrawal of status respect as the trigger mechanism for changes in personality formation. Status withdrawal is the perception on the part of the members of some social group that their purposes and values in life are not respected by groups in the society whom they respect and whose esteem they value. Hagen identifies four types of events that can produce status withdrawal: (a) displacement by force, (b) denigration of valued symbols; (c) inconsistency of status symbols with a changing distribution of economic power, and (d) non-acceptance of expected status on migration to a new society.

Kunkel’s behavioural models is concerned with the overtly expressed activities of individuals and their relations to the previously and presently surrounding social structures and physical conditions. Behavioural patterns in this model are determined by reinforcing and aversive stimuli present in the social context. Hence, entrepreneurial behaviours is a function of the surrounding social structure, both past and present and can be readily influenced by the manipulative economic and social incentives.

Each of the above theories is incomplete and none of them is right or wrong Entrepreneurship is influenced by a multitude of factors and, therefore, no single factor by itself can generate entrepreneurship. Thus, entrepreneurship is the outcome of a complex and varying combination of socio-economic, psychological and other factors. The integrated contextual model developed by Abdul Aziz Mahmud is a good explanation of entrepreneurship. The economic political and legal factors can be quickly manipulated to make the environment conductive to the emergence of entrepreneurship. On the other hand, sociological and psychological factors take sufficiently long time to change. It may therefore, be concluded that given a degree of ambition and ability, external environment rather than personality or ego are the major determinants of whether or not an individual becomes an entrepreneur.

Check Your Progress 1. Gives notes on theories of entrepreneurship ……………………………………………...……………………………………………... ……………………………………………...……………………………………………... ……………………………………………...……………………………………………... ……………………………………………...……………………………………………...


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2.5 MODEL OF ENTREPRENEURSHIP

Entrepreneurship and the economic development compliment each other. An economic system of country determines the nature and scope of entrepreneurship. Entrepreneurship can bring about drastic changes in the very structure of the economy.

The Person

TheEnvironment

TheOrganisation

The Task

Entrepreneurship

Entrepreneurship works in different ways in different economic systems such as capitalism, socialism and mixed economy.

Capitalism - A capitalist, economy represents fees enterprise, means freedom to save invest, free competition, consumer sovereignty and very less interference from the government.

Price of the product will be determined on the basis of the force of demand and supply with reference to cost of production. The entrepreneur controls all the activities with reference to the process of production and distribution. Entrepreneurs play vital and prominent role in the enterprise because, he controls domestic market by assuming the role of a competitor.

Socialism–Private entrepreneurship is absent in a socialist economic system. Economic and financial experts play important role in the development of entrepreneurship in the system. Such entrepreneurship mainly to serve the society not to mint money or to make profit only.

Central Authority in the socialism economy is appointed by the Governmental to make policies, frame plans and procedures for the proper and efficient mobilization of resources, and mobilization and allocation of resources into those industries of national prominence. In this system of economy private entrepreneur has neither a role or responsibility.

Mixed Economy—The mixed economy is characterized by co-existence of both the private and public sectors in the same line of production. Consumer goods are left to the private enterprises. Government undertakes the production of capital goods.

In a mixed economy, restrictions are placed by the Government to eliminate the problems of monopoly capitalism. Government under this type of economy curbs the growth of monopolies and encourage competition.


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Mixed economy has built-in stabilisers which solve the problems of production, pricing and distribution in a better manner, apart from satisfying and helping in the various enterprise goals, mixed economy also helps in reducing of inequality of incomes among people, fixation of minimum wages etc. in an efficient and effective way.

Thus entrepreneurship plays a great and vital role in all major economic systems. Its importance stands beyond challenges and making of huge profit in every economic system.

2.5.1 Schumpeter's Definition of Entrepreneur According to Joseph A. Schumpeter, entrepreneur is one who innovates, raises money, assembles inputs, chooses managers and sets the organization going with his ability to identify them and opportunities which others are not able to identify and is able to fulfil such economic opportunities. Innovation occurs through (i) introduction of a new quality in a product of (ii) new product, (iii) discovery of fresh demand and fresh sources of supply and (iv) by change in the organization.

Introduction of a departmental store or a mail order department for sale of clean and unadulterated products properly weighed and packed would tantamount to the introduction of a new quality. When the prices of edible oils reached the higher levels, a few years ago a new edible oil viz., Palmolein was introduced by .the trade in Tamil Nadu. Similarly cottonseed oil is being promoted as a cooking medium. Traders are always keen to reach fresh segments in the market such as bulk-buyers. As the rice crop had failed in Tamil Nadu, a few years ago, new sources of supply have been identified in Gujarat, Madhya Pradesh and Rajasthan besides the usual sources in Andhra Pradesh. Similarly traders who have brought firewood from Andaman to the State when price parity was favourable. Intense competition exists and the traders endowed with entrepreneurship spirit dominate the market and try to appropriate a larger share of the total market demand. Besides, the trading process involves other entrepreneurial functions also.

In Schumpeter’s system entrepreneurship is essentially a “creative activity”. It consists in doing such things that are generally done in the ordinary course of business. It is essentially a phenomenon that comes under the wider aspect of leadership.

Schumpeter describes carrying out of new combinations as 'enterprise' and the individual who carries them as ‘entrepreneur’. These concepts are at once, broader and narrower. Independent businessmen are not only the entrepreneurs but also those whose, actually carry innovative functions such as managers, company directors etc., qualify to be called entrepreneurs. The definition, however, does not recognize all businessmen as entrepreneur in traditionally sense. Thus the managers and individuals who merely operate an established business and do not perform any innovative function will not be covered under this function. Entrepreneurs are also not as a class in themselves like professionals. An individual is an entrepreneur only when he actually carries out new combinations. He loses that character as soon as he settles down to running the established business like others.


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Schumpeter’s views are particularly relevant to developing economies where innovative functions need to be encouraged. The transformation of an agrarian society into an industrial one requires a great deal of initiative and risk bearing on the part of businessmen, executives and managers. Even reforms in agriculture would require innovation in the method of cultivation, varieties of seeds, plant protection devices, irrigation systems, etc.

A major criticism of Schumpeter’s views is the too much emphasis it gives on innovative functions. An entrepreneur is required not only to innovate, but also combine the resources, put them to optimum use and produce results.

Check Your Progress

1. Analyse critically schumpeteter’s views on entrepreneurship.

2. Explain model of entrepreneurship.

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UNIT- III

LESSON-3 ENTREPRENEUR

CONTENTS


3.1 Evolution of the Concept of Entrepreneur

3.1.1 Entrepreneur as a Risk-Bearer

3.2 Entrepreneur and Enterprise

3.2.1 Functions of an Entrepreneur

3.3 Entrepreneur and Manager

3.4 Characteristics of an Entrepreneur

3.5 Behaviour Patterns of Entrepreneurs

3.6 Development of Women Entrepreneurs

3.6.1 Growing Awareness in India

3.6.2 Women Entrepreneurs in Kerala

3.6.3 Problems of Women Entrepreneurs


In Unit III we discussed the typology, role theories models of entrepreneurship. After going through the Unit III you will be able to understand.

- Entrepreneurs and their traits

- Managers

- Behavioural patterns of Entrepreneurs

- Women Entrepreneurs.

3.1 EVOLUTION OF THE CONCEPT OF ENTREPRENEUR

The word ‘entrepreneur’ has been taken from the French language where it cradled and originally meant to designate an organizer of musical or other entertainments. Oxford


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English Dictionary (in 1897) also defined an entrepreneur in similar way as "the director or a manager of a public musical institution, one who ‘gets-up’ entertainment, especially musical performance”. In the early 16th century, it was applied to those who were engaged in military expeditions. It was extended to cover civil engineering activities such as construction and fortification in the 17th century.’ It was only in the beginning of the 18th century that the word was used to refer to economic aspects. In this way, the evolution of the concept of entrepreneur is considered over more than four centuries. Since then, the term ‘entrepreneur’ is used in various ways and various views. These views are broadly classified into three groups, namely, risk-bearer, organiser and innovator. Now, we are discussing below each of these views.

3.1.1 Entrepreneur as a Risk-Bearer

Richard Cantillon, an Irish man living in France, was the first who introduced the term ‘entrepreneur’ and his unique risk-bearing function in economics in the early 18th century. He defined entrepreneur as an agent who buys factors of production at certain prices in order to combine them into a product with a view to selling it at uncertain prices in future. He illustrated a farmer who pays out contractual incomes which are certain to the landlords and labourers and sells at prices that are 'uncertain'. He further states that so do merchants also who make certain payments in expectation of uncertain receipts. That they too are ‘risk-bearing’ agents of production.

Knight also described entrepreneur to be a specialised group of persons who bear uncertainty. Uncertainty is defined as a risk which cannot be insured against and incalculable. He, thus, draws a distinction between ordinary risk and uncertainty. A risk can be reduced through the insurance principle, where the distribution of the outcome in a group of instances is known. On the contrary, uncertainty is the risk which cannot calculated. The entrepreneur, according to Knight, is the economic functionary who undertakes such responsibility of uncertainty which by its very nature cannot be insure nor capitalised nor salaried too.

Check Your Progress 1. Define entrepreneurship

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3.2 ENTREPRENEUR AND ENTERPRISE

In the eighteenth century economists used the term ‘entrepreneur’ meant an individual providing the fourth factor of production namely’ ‘enterprise’. According to Noah Webster, Entrepreneur is “one who assumes the risk and management of business”


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Entrepreneurship comprises all those productive functions that are not thought to be rewarded by wages, rent or Interest; it Is not associated with routine human efforts (i.e., labour) it does not involve the use of indestructable natural resources (i.e., land); it does not imply the provision of capital funds (I.e., capital). In the words of Higgins, 'Entrepreneurship is meant the function of seeking investment and production opportunity, organising an enterprise to undertake a new production process, raising capital, hiring labour, arranging the supply of raw materials, finding site, introducing a new technique and commodities, discovering new sources of raw materials and selecting top managers for day-to-day operations of the enterprise”.

As the family is the basic unit for social organisation, so the enterprise is the basic unit for economic organisation. It transacts with other units in the economy; it produces a product worth more (hopefully) than the resources used. Most important for promotional purposes, it is within the framework and from the perspective of the enterprise that decisions are taken on exactly what is produced, how much, when, in exactly what quantities and using exactly what inputs. Thus any development effort, for it to bear fruit, must ultimately affect directly or indirectly Individual enterprise.

3.2.1 Functions of an Entrepreneur An entrepreneur does perform all the functions necessary right from the genesis of idea up to the establishment of an enterprise. These can be listed in the following sequential manner.

• Idea generation and scanning of the best suitable idea.

• Determination of the business objectives.

• Product analysis and market research

• Determination of form of ownership/organization.

• Completion of promotional formalities.

• Raising necessary funds.

• Procuring machine and material.

• Recruitment of men.

• Undertaking the business operations.

The functions of an entrepreneur has been mentioned under thirteen headings. While others can also add certain more functions to this list, the said functions appear to be major ones. For our convenience, we have classified all the entrepreneurial functions into three broad categories.

1. Risk-bearing

2. Organisation

3. Innovation


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Check Your Progress 1. Define entrepreneurship

2. Who is an entrepreneurs? Distinguish an entrepreneurs from a manager.

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3.3 ENTREPRENEUR AND MANAGER

Very often entrepreneur and manager are used as interchangeable terms. For instance, Kao's model of entrepreneurship does not treat the manager and the entrepreneur as distinct species within the business world. According to the model people may behave in a managerial or entrepreneurial style depending upon the demands of the task, the characteristics of the environment, and their own personal predispositions.

Strictly speaking, however, an entrepreneur is different from a manager. The main points of difference between the two may be described as follows:

1. Innovation: The entrepreneur does not live with the status quo. He works to change in accordance with his or her personal vision and values. He is more than an inventor. An inventor only originates the invention. But the entrepreneur goes much further by exploiting the invention commercially or by applying the invention. On the other hand, the manager keeps running a business on established lines. He is neither an inventor nor an innovator. An entrepreneur changes the factors combinations and thereby increases productivity and profit. But a manager only deals with day to day affairs of a going concern. An entrepreneur is a change agent while a manager is the product of change. An entrepreneur is not a mere executive though he may also be appointed as one for the promotion of his company.

2. Risk taking: An entrepreneur takes calculated risks. He is not a gambler but he faces uncertainty and assumes risk. He may jeopardise his own financial security and the security of others. By contrast, the manager is less tolerant of uncertainty. He does not face the uncertainty of a new venture with its potential for failure and financial loss. He does not share in business risks.

3. Reward: An entrepreneur is motivated by profits while the manager is motivated by externally imposed goals and rewards. The gains of an entrepreneur are uncertain and irregular and can at times be negative. The salary of a manager is on the contrary, fixed and regular and can never be negative.


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4. Skills: The roles of entrepreneur and manager demand different types of personal skills. An entrepreneur needs intuition, creative thinking and innovative ability among other skills. On the other hand, a manager depends more on human relations and conceptal abilities.

5. Status: An entrepreneur is self-employed and he is his own boss. On the contrary, a manager is a salaried person and he is not independent of his employer, the entrepreneur.

6. Response to authority. One of the main features that distinguish managers from entrepreneurs is their ability to identify in a positive constructive way with authority figures using them as role models. This type of behaviour is largely absent in entrepreneurs. Case histories of many entrepreneurs suggest that it was their inability to submit to authority and accept organisational roles that drove them to become entrepreneurs. In a sense they were ‘misfits’ “who had to enact their own environment.

Management involves combining or coordinating resources to produce whereas entrepreneurship involves combining to initiate changes in production. Management is an ongoing or continuous process while entrepreneurship is a discontinuous phenomenon. It appears to initiate changes in the production process and then disappears until it reappears to initiate another change.

Joseph Schumpeter also makes a distinction between entrepreneur and manager. According to him, a manager is one who deals with day-to-day affairs of a going concern. But an entrepreneur attempts to change the factor combinations and thus increases productivity and profits. An entrepreneur launches a new enterprise whereas a manager operates an existing enterprise.

The roles of entrepreneur and manager may , however , overlap in many cases. Entrepreneurs who start enterprises must use managerial skills to implement their innovation. Similarly managers must use entrepreneurial skills in order to manage change and innovation.

Points Entrepreneur Manager

1. Motive The main motive of an entrepreneur is to start a venture by setting up an enterprise. He understands the venture for his personal gratification.

But, the main motive of a manager is to render his services in an enterprise already set up by someoneelse.

2. Stutus An entrepreneur is the owner of the enterprise.

A manager is the servant in the enterprise owned by the entrepreneur.

3. Risk-bearing An entrepreneur being the owner of the enterprise assumes all risks and uncertainty involved in running the enterprise.

A manager as a servant does not bear any risk involved in the enterprise.


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4. Rewards The reward an entrepreneur gets for bearing risks involved in the enterprise is profit which is highly uncertain.

A manager gets salary as reward for the services rendered by him in the enterprise. Salary of a manager is certain and fixed.

5. Innovation Entrepreneur himself thinks over what and how to produce goods to meet the changing demands of the customers. Hence, he acts as an innovator also called a ‘change-agent’.

But, what a manager does is simply to execute the plans prepared by the entrepreneur. Thus, a manager simply translates the entrepreneur’s ideas into practice.

6. Qualification

An entrepreneur needs to possess qualities and qualifications like high achievement motive, originally in thinking, foresight, risk-bearing ability and so on.

On the contrary, a manager needs to possess distinct qualifications in terms of sound knowledge in management theory and practice.

After going through the above points of distinctions, it is clear that an entrepreneur differs from a manager. At times, an entrepreneur can be a manager also, but a manager cannot be an entrepreneur. After all, an entrepreneur is a owner, but a manager is a servant.

Check your progress 1. Distinguish between manager and entrepreneur.

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3.4 TRAITS` OF AN ENTREPRENEUR

If we go through the business history of India, we come across the names of persons who have emerged as successful entrepreneurs. For example, Tata, Birla, Mode, Dalmia, Kirlosker and others are well-known names of successful entrepreneurs in the country who started their business enterprises with small size and made good fortunes. What makes the entrepreneurs successful? Whether they had anything common in their personal characteristics? The scanning of their personal characteristics shows that there are certain characteristics of entrepreneurs which are found usually prominent in them. The principal ones are scanned and discussed here:


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1. Hard Work: Willingness to work hard distinguishes a successful entrepreneur from unsuccessful one. The entrepreneur with his tedious, swear-filled hours and perseverance revive their business even from averge of failure. In nutshell, most of the successful entrepreneurs work hard endlessly, especially in the beginning and the same becomes their whole life.

2. Desire for High Achievement: The entrepreneurs have a strong desire to achieve high goals in business. This high achievement motive strengthened them to surmount the obstacles, suppress anxities, repair misfortunes and expedients and only set up and run a successful business.

3. Highly Optimistic: The successful entrepreneurs are not disturbed by the present problems faced by them. They are optimistic for future that the situations will become favourable to business in future. Thus they can run their enterprises successfully in future.

4. Independence: One of the common characteristics of the successful entrepreneurs has been that they do not like to be guided by others and to follow their routine. They resist to be pigeonholed. They liked to be independent in the matters of their business.

5. Foresight: The entrepreneurs have a good foresight to know about future business environment. In other words, they well visualize the likely changes to take place in market, consumer attitude, technological developments, etc and take timely actions accordingly.

6. Good Organiser: Different resources required for production are divorced from each other. It is the ability of the entrepreneurs that brings together all resources required for starting up an enterprise and then to produce goods.

7. Innovative: Production is meant to meet the customers’ requirements. In view of the changing taste of customers from time to time, the entrepreneurs initiate research and innovative activities to produce goods to satisfy the customers’ changing demands for the products. The research institutes/ centres established by Tata, Birla, Kirloskar, etc. are examples of the innovative activities taken by the successful entrepreneurs in our country.

On the basis of the foregoing description, the qualities of a true entrepreneur may be classified as follows :

1. Capacity to take risk.

2. Capacity to work hard.

3. Above average intelligence and wide knowledge.

4. Self (Inner) motivation.


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5. Vision and foresight.

6. Willingness to defer consumption.

7. Imagination, initiative and emulation.

8. Inventive ability and sound judgment.

9. Flexibility and sociability.

10. Desire to take personal responsibility.

11. Desire to seek and use feedback.

12. Persistence in the face of adversity.

13. Innovativeness and future - orientation.

14. Mobility and drive.

15. Creative thinking.

16. Strong need for achievement.

17. Ability to marshal! resources.

18. High degree of ambition.

19. Will to conquer and impulse to fight.

20. Will to prove superior to others.

Check Your Progress 1. Mention some of the entrepreneurial traits.

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3.5 BEHAVIOUR PATTERNS OF ENTREPRENEURS

The socio-economic background of an individual to a great extent the habits and attitudes of people and therefore, their perception. People with diverse backgrounds enter into different types of industry depending upon their habits and attitudes. According to Derossi28, men from an agricultural background would grative towards industry, where the technology is fairly elementary and the capital requirements modest. The sons of professional men or skilled craftsmen, on the other hand, will be attracted towards complex production methods because they are already familiar with specialized knowledge. People from agriculture and commerce are likely to set up large sized firms


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with the help of their accumulated wealth. Professionals and craftsmen have little opportunity for accumulation of wealth and, therefore, they are likely to begin on a small scale. People from commerce are unlikely to enter industries with a long gestation period and / or involving complex technology. However they are predisposed of considerable financial risks.

The above behaviour pattern of entrepreneurs is illustrated by entrepreneurial history in India. Industrialization in India began with the setting up of cotton textile and jute mills by Parsees and Gujaratis. These communities had earned enormous money through trade in cotton and jute and had become familiar with marketing of these commodities. Entrepreneurs with a mercantile background entered traditional industries like textiles, jute, sugar, etc. which involved comparatively low risks and promised quick returns but without involving complex technology. But they established large-seized firms. On the other hand entrepreneurs with a background in professions and handicrafts launched non traditional industries involving complex technology, higher risks and longer gestation periods. They set up comparatively small-sized firms. Agriculturists also entered traditional industries involving moderate risks and simple technology.

Check Your Progress

1. Write about behaviour patterns of Entrepreneurs.

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3.6 DEVELOPMENT OF WOMEN ENTREPRENEURS

Men have not been fair to the fair sex in economic life. Average women’s earnings in most countries is lower than those of men. In many developing countries, marriage is the only career for most women. Professionally women have confined their activities to such areas as education, office work, nursing and medicine. It is only rarely that they enter professions like engineering, business, etc. Though women constitute almost half of the world population, their representation in 'gainful employment is comparatively low. An I.L.0 report in 1980 states “that women are 50 per cent of the world’s population, do the two-thirds of the world's work hours, receive 10 per cent of world's income and own less than 1 per cent of world property. All because of an accident of birth”. As regards India, women constitute 60 per cent of the rural unemployed, and 56 percent of the total unemployed. The latter figure is likely to be an underestimate, because of the large number of qualified women who do not enter the employment market due to socio-cultural reasons. In short, women form the largest disadvantaged group of the country.


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For centuries, women have been victims of social prejudices and assumptions. Margaret Fenn has rightly observed that the assumption that men and women enter organisations equipped in the same way because they are born in the same world and reared and education in the same school system is mistaken. We all do undergo a sociological process that presumes certain sex linked differences such as men are strong, aggressive, thing oriented and independent, while women are weak, passive, people oriented and dependent. Assumptions become reality because society prepares males and females for performance in roles that reflect these realities. As a result men and women enter organisations equipped with different skill sets. Women have been taught to depend on others, to limit their time perspective and to avoid exposure and risk. Such orientations do not contribute to effective management. As a result of dependency and other directedness emphasised in female role prescriptions, women become trapped into psychological barrier of lack of confidence in self. They do not set goals, plan or prepare to achieve. Limited exposure and failure to understand and take risk further inhibit them. The net result is limited achievement. The negative self-image comes in their way to take up new jobs, new responsibilities and risks which are must for entrepreneurs.

In traditional societies women had been confined to the four-walls of home, children, household affairs and family rituals and customs. Very few had the opportunity to come out of the four walls and shine in different spheres. In Hindu scriptures women are described as the embodiment of shakti, the supreme power, but in practice they have been treated as Abla, the weak and dependent. In an age of equality women are still far from being treated as equal partners in society which is dominated by men.

In recent years women have come in forefront in different walks of life and are competing successfully with men despite the social, psychological and economic barriers. This has been possible because of education, political awakening, legal safeguards, urbanisation, social reforms etc. Today in India, some of the women have distinguished themselves in many unconventional fields. They are leading consultants, eminent scientists and mathematicians, distinguished doctors, interior decorators, artists, educationists, managers and administrators and business entrepreneurs. They have disproved the old theories and assumptions about the women. The very fact that the world’s largest democracy is headed by a woman is a big complement to the capacity and quality of women.

3.6.1 Growing Awareness in India

Having realized the importance of the role to be played by women in the nation’s development, in the Seventh Five Year Plan, a special chapter on women’s development has been included and it details the plan of action for “Integration of women in development”. The new Industrial Policy of Government of India has specially highlighted the need for conducting special entrepreneurship programmes for women, which would be in the nature of product/process oriented courses meant for women entrepreneurs to enable them to start small scale industries. It further adds that the objective of this course is to give representation to women in the field of small industry development with a view to uplifting their status in the economic and social fields.


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Due to the aforesaid fillip, growth of industrialisation, urbanisation, education and democratic system in the country, the tradition bound Indian society is now undergoing a change and women are now seeking gainful employment in several fields in increasing numbers. Still, it cannot be said that the women entrepreneurship movement has taken off the ground and it is felt that the movement is still in a transition period. It is only during the last 5-10 years women have started becoming entrepreneurs and started industries and businesses and they are yet to go a long way to be on par with men. The situation is quite understandable as women have to play a dual role as a housewife and also as an income earner. Thus arises a role conflict in many a woman, which prevents them from taking a prompt decision in entering the business. Despite the modernisation and other factors mentioned above, the weight of tradition and the responsibilities the women have to discharge to their children as mothers slows down this movement. Further, occupational backgrounds of the families and the educational attainment of the husbands have a direct bearing in the development of women entrepreneurship. The development of kindergartens, day nurseries and creches and limiting the size of the family help the women entrepreneur to some extent to enable them to enter business in such a manner that their husbands’ prestige is not affected in any manner.

It is believed that entrepreneurs are born and not made. However, some recent researches on promoting entrepreneurs seem to show that this view is not really correct. Entrepreneurship can be planned and developed and the need for providing appropriate environment “to promote entrepreneurship is of vital importance in the case of prospective women entrepreneurs. The spirit of entrepreneurship can be nurtured to some extent by an appropriate pattern of education and training programme. Such education should impart knowledge of facts on the one hand and motivation on the other. In this context, the curriculum design for women’s education needs re-orientation and the philosophy-of “Good enough for Women” should be given a go-by. For instance, the present emphasis in any women’s polytechnic is on stitching, embroidery, house decoration, etc., which are the women’s traditional roles rather than aiming at imparting new skills which would help them to become entrepreneurs by starting small scale industries or setting up business establishments.

Some recent researches conducted indicate that several women are now willing to become entrepreneurs due to various factors. These factors can be broadly classified under two headings, namely “Pull factors” and “Push factors”. Under the first category, the women entrepreneurs choose a profession as a cheallenge and adventure with an urge to do something new liking for business and to have an independent occupation. The other category of women takes up business enterprises to get over financial difficulties and responsibility is thrust on them due to family circumstances. However, the latter category forms a negligible percentage of the total women entrepreneurs.

The new thrust given to the process of economic development of the country by the new dynamic leadership has created an all round enthusiasm and the new slogan of “March towards the twenty first century” has gained popularity. But in this new enthusiasm a very vital sector of the society which can contribute substantially towards the economic development of the country is not given enough attention. And the vital sector is women


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entrepreneurs. In fact the Harvard School experts feel that the basic quality of efficient management is futuristic outlook and a capacity to nature and plan for the future or unknown. This comes naturally to women. Therefore they feel that successful managers will be those who combine this feminist attribute of nurturing, and futursistic planning with male aggressiveness. But this inherent management talent of woman an dher entrepreneurial skill go un recognised and unaccounted as it does not show profit or loss in monetary terms.

With the spread of education and new awareness, women entrepreneurs are spreading their wings to higher levels of 3 E’s, namely engineering, electronics and energy, though the number of such units is not as large as it should be. But the very fact that women are putting up units to manufacture solar cookers as in Gujarat, small foundries in Maharashtra and T.V. capacitors in the industrially backward area of Orissa shows that women if trained and given opportunities can venture in non-traditional industries. Even the so-called socially tabooed industrial activity of wine making and selling is being done by women entrepreneurs in Bombay. So today no field is unapproachable to trained and determined modern Indian women.

3.6.2 Women Entrepreneurs

In business field the entry of women is a relatively new phenomenon. The enterprises setup by them are mostly in small scale sector. The State of Kerala, where the literacy among women is highest in India, provides a good example of entrepreneurship among women. Under women’s industries programme, 358 units were set up in small scale sector by 1981. Out of this 216 units were registered proprietary concerns, 80 as women’s industrial cooperative societies, 29 as partnership concerns, 28 as charitable institutions and 5 as joint-stock companies. Women in Kerala, in large numbers, are skilled in traditional and self-acquired crafts like embroidery, lace, toys and doll making, mat-weaving and production of fancy-cum-utility articles out of screwpine, kora grass, palmyrah leaf, rotten, cane, bamboo etc. The dominant crops of the State are coconut, tapioca and rice. Other products of the State are pepper, betel nuts, cashewnuts, banana, tea and rubber. Most of the units started by women utilise raw materials which are locally available. Technicians and managerial personnel are hired by women entrepreneurs as most of them do not have requisite industrial know-how, though they are highly educated. The Government of Kerala, assists women entrepreneurs, through different agencies such as SISI, KITCO and District industries Centres etc., in preparing project reports, meeting the cost of machinery, building, and also training and hiring of managerial personnel. In certain cases 100% cost of technical expert is met by the State for a period of one year. Industrial enterprises started by women enjoy six years exemption from the payment of sales tax. Under its women’s industries programme the State expects to establish 1000 SSI units for women by the end of 1983. Industrial units set up by the women entrepreneurs are coming up in other parts of India also. The problems which women entrepreneurs are facing in starting a new venture, arranging the initial finance, marketing the products and complying with various rules and regulations arc basically the same as the men entrepreneurs are having.


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3.6.3 Problems of Women Entrepreneurs

The biggest problem or difficulty of a woman entrepreneur is that she is a woman. By this I mean the attitude of society towards her and constraints in which she has to live and work. Inspite of the constitutional equality and legal equality, in practice the attitude of men not only of tradition bound village men but even those who are responsible for decision making, planning and research is not of equality. They still suffer from male reservations about a women’s role and capacity.

This attitude or reservation creates difficulties and problems at all levels i.e. family support, training, banking, licensing and marketing. Women in non-urban areas have to suffer still further. They have to face not only resistance or reservation of men but also of elderly women who are ingrained with this attitude of inequality. In rural areas joint families are still the norm. The overbearing presence of elders restrain even young men from venturing out; so one can imagine how much a young girl needs to put up to become economically independent. Though in rural areas women are working along with men since times immemorial their contribution in monetary terms remain unaccounted, or if at all accounted, it is given a very low value. They are mostly engaged in low paid, back breaking agricultural activities or act as helpers in handicrafts.

It is not that women do not have skills or capacity but they are not properly trained or inculcated in craftsmanship because it is felt that if a skill is imparted to a girl it is wasted because when she gets married she takes away the skill with her. Therefore, a woman can only act as helper. She cannot function independently. Training and skill training is basic for any entrepreneurship. Facilities are available, many institutions are imparting training under various schemes but again social attitude keeps women away from them, both in urban and rural areas.

A mobile training centre will attract more women as sending women away from family for training is not liked by family members, nor do women like to neglect family. Secondly, part-time training facilities especially during afternoon will attract more women to acquire skills. To enable women to acquire a skill certain facilities like stipend, good hygienic creches for their children, transport facilities need to be given.

Surveys have found that uneducated women do have the knowledge of measurement as well as basic accounting. They may be totally illiterate but they have their own system of accounting and they do manage their small petty trader i.e. vegetable sellers, fisher women, bartan walls, etc., not only in urban areas but even in rural areas. They know where and how to buy, how much to buy and at what price it has to be sold. They also know how much they need to keep aside, for price fluctuations and are very cautious and take decisions after considering all pros and cons.

The second difficulty of women entrepreneurs is finance or capital. Money or finance is the blood stream of any enterprise. It has to be made available at the right time in right amount. It is true that one can borrow finance from banks and other financial institutions. But the biggest catch is that of collateral security which is required to get bank credit. And women generally do not have any property in their names. House or property is mostly in


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the names of fathers, brothers or husbands. Women may have some jewellery but even that they cannot give as security without consent of the husbands or male members of family. And family members do not like to risk their capital in ventures started by women. Basically, there is a lack of confidence in a woman’s ability. They may risk all family forturne for their sons or male member’s business. For this they even persuade women to part with their jewellery but are not ready to invest anything in the projects of women members.

Procedures of bank loans and delay and the running about involved deter many women from venturing. In banks too there is a misconception that women entrepreneurs are rich and they have nothing to do at home and therefore get into the fancy ideas of starting business or industry. And so women are dissuaded to start ventures or delay in providing credit are caused. To give just one example of this attitude, one young lady who had started a small factory to produce PVC wires with an assured market was made to run up and down for two months by the local branch manager just for opening her account ;n that branch of the bank inspite of the fact that all procedural formalities were complete and the loan had been sanctioned by the head office of the bank.

At the government level, the licensing authorities and labour officers and sales tax inspector ask all sorts of humiliating questions like what technical qualifications you have, how will you manage labourers, how will you manage both house and business, does your husband approve, etc.

The hurdles are not over as the biggest one comes now. And that is marketing-both of raw material and of finished goods. To market Tier product she has to be at the mercy of middlemen who eat up a big chunk of profit. Here the middlemen try to exploit women entrepreneurs at both ends. They deny her discount or give the minimum discount in the purchase of raw material and on the other hand try to extract maximum credit discount and commission on purchase of finished products from her.

If she decides to eliminate middlemen, it involves lot of running about. Secondly, in these days of stiff competition a lot of money is required for advertisement. If the product happens to be a consumer goods, then it takes time to win people away from other products and make this product popular. And then the tendency is to always question the quality of the product produced by women entrepreneurs, though many agree that women entrepreneurs are more sincere in maintaining the quality and time schedule.

Thus women have to fight against these attitudinal problems all the way. But fortunately they are realising that they will have to be united and organised independently and just not a part or wing of some greater organisation to fight for their rights. Thus organisations like Indian Council of Women Entrepreneurs, Awake, WIMA, Sewa have come up.

In most of the countries women entrepreneurs have organised and they also have world congress of women entrepreneurs, where they interact. If they are organised they can represent their cases to government. They can ask government for facilities like training, demand some ancillary units of public sectors for women entrepreneurs, ask government to make available industrial estates or sites for women entrepreneurs within comfortable


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distances, to allow larger number of installments in the purchase schemes of industrial sheds, help marketing of their products by giving preference to products of women entrepreneurs in governments purchasing policy.

In rural areas where agriculture is prominent activity, agro-based industry like food preservation, bakery, dairy, poultry could be taken up by women. They are helping men all these days without getting any credit or money. With little training they could do it on their own i.e. in Aurangabad experiment--women showed better grasp. In areas where forest predominates forest preservation, planting and looking after the trees can be entrusted to them as it is done better by women. Collection, assortment and classification of medicinal plants too can be done by women if they are given the opportunity. Weaving on power loom can be given to them, i.e. in eastern regions like Mizoram, Nagaland, etc., handloom is given to girls and weaving is taught at an early age.

In districts where industries are located spare parts and ancillaries units can be managed by women. But more than traditional industry women should also be encouraged in mechanical and electrical activities. Maintenance and repairs of all small machines can be taught to them and encouraged to start small workshops. Why when any mechanisation is introduced women are denied the chance to operate them. ITI cant rain girls and encourage them to start on their own.

In urban parts apart from teaching and nursing and other traditional areas, there are many new areas where women can start on their own. With modern technological revolution, field is vast open. Electronics, computer services and needed informative and consultative services, advertising agencies, etc., are the areas which women entrepreneurs can explore. What they need is little training, finance and large quantity of co-operation and encouragement from all men at home, in society and in governmental organisations. That will enable women entrepreneurs to enter the mainstream of country’s economy, which in turn will speed up the economic development of our country.

Check Your Progress

1. Women Entrepreneurs.


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UNIT– IV

LESSON-4 MOTIVATION

CONTENTS


4.1 Motivating Factors

4.1.1 Internal Factors

4.1.2 External Factors

4.2 Entrepreneurial Ambitions

4.3 Compelling Reasons

4.4 Introduction to Motivation

4.4.1 Meaning of Motivation

4.4.2 Definition of Motivation

4.4.3 Motivational Process

4.4.4 Motivation Theories

4.4.5 Maslow’s Need of Hierarchy Theory

4.4.6 McClleland's Acquired Need Theory

4.5 Search For Business Idea

4.6 Sources of Ideas

4.7 Idea Processing and Selection

4.7.1 Identifying a Business Opportunity

4.7.2 Steps in Identification of Business Opportunity


In Unit - III we discussed about the Entrepreneurs and managers, their traits and women Entrepreneurs.

After going through this unit, you will be able to understand.

- Factors motivating Entrepreneurs

- Factors facilitating Entrepreneurs

- Business Idea & Idea Processing


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INTRODUCTION The entrepreneur gets information regarding various numerable investment opportunities from the magazine. Internet, financial institution, government. commercial organisation, friends, relations and so on. To choose the best business opportunity from the information collected requires ingenuity, skill and foresight on the part of the entrepreneur.

As a entrepreneur, he has to select feasible and rewarding opportunity to choose such good business opportunity. For this purpose he has to evaluate following idea and understand gap between demand and supply.

1. Study government rules and regulations regarding different business opportunities.

2. Extensive study of promising investment opportunity.

3. SWOT analysis of business potential (strength, weakness, opportunities and threats)

4. Market survey.

4.1 MOTIVATING FACTORS

P.N. Sharma identified nine motivating factors which are as follows' :

1. Educational background

2. Occupational experience

3. Desire to work independently in manufacturing line

4. Desire to branch out to manufacturing

5. Family background

6. Assistance from Government

7. Assistance from financial institutions

8. Availability of technology/raw material

9. Other factors--demand of the particular product, utilisation of excess money earned from contractual estate business, started manufacturing to facilitate trading/distribution business since the product was in short supply, unstable policy of the foreign government for non-residents, and no chance for further promotion.

The above nine factors were grouped into two major categories – internal and external. First five motivating factors were termed as internal and the last four factors as external.. The internal motivating factors like education, occupational experience, family background, the desire to do something independently together make the personality of the entrepreneur. These factors generate an inclination to adopt entrepreneurial activity.


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The presence of internal factors is no doubt a necessary condition for entrepreneurial activity to take place. But entrepreneurial ideas cannot fructify without a propitious environment which provides support in terms of financial assistance, technology and raw material and infrastructural facilities. These facilities or assistance are the external motivating factors and serve as a spark in the lightening of the entrepreneurial idea. These factors also provide a momentum to the entrepreneurial activities.

P.N. Sharma also examined the importance of different motivating forces by assigning weights on the basis of preferences given by the entrepreneurs. The study covered 125 manufacturing companies. It revealed occupational experience as the most significant internal motivating factor. "This experience was accumulated by entrepreneurs either as business executives in industrial concerns, or as traders/merchants, consultants, etc. in the related fields. Occupational experience shows that the entrepreneure had knowledge about the product, industry and technology applied before promoting the present unit.

Explaining the reasons for the ranking of occupational experience as the main motivating factor, P.N. Sharma observes: "Business experience provides confidence to the entrepreneurs which helps reduce the element of uncertainty regarding demand of the product, technology, raw material, etc. Further, traders/merchants generally have surpluses to provide initial finance required by the financial institutions as promoters' contribution. Most important is the fact that traders/merchants are already sensitive to market incentives, and used to taking risk; in the trading/business fields: "Relationship between occupational experience of the entrepreneur and nature of enterprise promoted also suggests that occupational experience is an important motivating factor.

Technically or professionally qualified entrepreneurs considered educational qualification as the main motivating factor. Most of the technically qualified persons had established enterprises in the fields of their specialization which shows that such entrepreneurs were prompted by their qualification or specialisation to undertake the industrial activity. Desire to work independently in manufacturing line came out as another important motivating factor. An entrepreneur in this category expressed a desire to have important share in the decision-making and control in the overall working of an organisation.

Some of the entrepreneurs wanted to change their occupation and started manufacturing activities for various reasons. No further scope in trading, greater respect in manufacturing, etc. were the main reasons.

Among the external motivating factors assistance from financial institutions and assistance from government emerged as the most significant factors. Almost all the entrepreneurs were of the opinion that they would not have perhaps been able to implement the project without financial assistance, infrastructural facilities, etc. These factors are not the prime motivators but play the role of contributing factors in the implementation of the entrepreneurial idea. Availability of technology either from indigenous sources or from foreign collaborators also attracted a few entrepreneurs to take up manufacturing activities. In his pioneering study, R.A. Sharma classified the factors which prompted the new entrepreneurs to enter industry, as follows:


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A. FACTORS INTERNAL TO THE ENTREPRENEUR (a) Strong desire to do something independent in life

(b) Technical knowledge and /or manufacturing experience

(c) Business experience in the same or related line.

B. FACTORS EXTERNAL TO THE ENTREPRENEUR (a) Financial assistance from institutional sources

(b) Accommodation in industrial estates

(c) Machinery on hire purchase

(d) Attitude of the Government to help new units

(e) Financial assistance from non-government sources

(f) Encouragement from big business

(g) Heavy demand

(h) Profit margin

(i) Unsound units available at a cheap price.

After analysing the relative importance of the above factors, Prof. Sharma concluded: From the foregoing analysis, it is evident that a vast majority of the new entrepreneurial class was prompted to enter industry mainly because of three factors: first, they had a strong desire to do some thing independent in life; second, they possessed technical knowledge or trading or manufacturing experience in the same or related line and third, governmental and institutional assistance became available to those who would have, perhaps, otherwise not taken to entrepreneurial activity. There is another class of people who had no inclination but came just fortuitously."

Some studies indicate that at small scale level, profit motive inspired small scale entrepreneurs. Ambition for independent working in industry also motivated non-corporate level entrepreneurs. Sharma's study also revealed that motivating factors varied according to the occupational background of entrepreneurs. Business executives, engineers, consultants, traders, considered occupational experience as most important. According to McClelland, executives generally have higher need for achievement than men in other occupations. On the other hand, government servicemen, contractors and entrepreneurs from agricultural activities considered assistance from government and financial institutions as the most important factor.

Most of the entrepreneurs in Sharma's study had successful record in their previous occupations. They might have been motivated by their achievements in previous occupations.


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After making different studies on technical and new entrepreneurship, Cooper concluded that there are three main groups of factors which influence an entrepreneur. These are (i) the characteristics of the entrepreneur including many aspects of his background (family, education, age, occupational experience, etc.) which make him more or less inclined towards entrepreneurship. These might be called 'internal factors', («') the organisation for which he has been working earlier which might be termed as the incubator organisation (Hi) a complex of 'external influences' including the availability of venture capital, collective attitudes and perceptions leading to entrepreneurship, and the accessibility to suppliers, personnel and markets.

Check Your Progress 1. Highlight the various motivating factors

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4.2 ENTREPRENEURIAL AMBITIONS

(a) To make money

(b) To continue family business

(c) To secure self-employment / independent living

(d) To fulfil desire of self / wife/ parents

(e) To gain social prestige

(f) Other ambitions-making of a decent living, self-employment of children desire to do something creative, provide employment to others, circumvent Land Ceiling Act, etc.

Check Your Progress 1. List some of the entrepreneurial ambitions.

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4.3 COMPELLING REASONS

(a) Unemployment

(b) Dissatisfaction with the job so far held or occupation pursued

(c) Make use of idle funds

(d) Make use of technical / professional skills

(e) Others-Maintenance of large families, revival of sick unit started by father, etc.

Check Your Progress 1. List some of the compelling reasons.

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4.4 INTRODUCTION TO MOTIVATION

The basic function of an entrepreneur is to secure maximum performance for the attainment of organisational objectives, the performance of an entrepreneur depends mainly on their ability to perform and willingness to perform. Ability is a function of education and experience and skill. Willingness to perform depends upon the level of motivation.

In order to motivate entrepreneur, an entrepreneur must understand and satisfy their needs and aspirations and ambitions. Human behaviour is governed by needs and desires. Entrepreneurs feel motivated when their needs and expectation are satisfied as a result of working for the enterprise.

4.4.1 Meaning of Motivation

The term ‘motivation’ has been derived from the word motive. “Motive’ may be derived as an taker state of our mind that moves or activates or energies and directs our behaviour towards our goals. Motives are expression of a person’s goals or needs. They give direction to human behaviour to achieve goals or fulfill needs, motive arouse and energize a persons activities.


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Motivation may be defined as a process of stimulating someone to adopt a desired course of action. In order to intensify the willingness of a person to work hard for achievement of organisational objectives, his motives must be satisfied by offering incentives. An incentive is something an individual perceives as helpful towards achieving his goals. Incentives exist to satisfy human needs.

4.4.2 Definition of Motivation According to Robert-Dubin “something that moves the person to action and continues him in the course of action already initiated”.

According to Dalton E McFarland “motivation refers to the way in which urges, drives, desires, striving, aspirations or needs direct control or explain the behaviour of human being”

4.4.3 Motivational Process Motivation is the result of an interaction between human needs and incentives. A person feels motivated when available incentives lead to the satisfaction of his motives or needs. Various steps in the process of motivation are desired below.

Fig. 1.4 Motivational Process

Awareness of need is the first step in the motivational process. Motives are directed towards the realisation of certain goals, which in turn determine human behaviour. This behaviour leads to goal directed behaviour. In, order to satisfy and achieve goal. Individual looks for a suitable action. He develops certain goals and makes an effort to achieve them.

4.4.4 Motivation Theories

Motivation explains about human nature and human needs. Maslow’s needs of hierarchy and Mcdellands acquired needs theory are prominent theories among these theories which has relevance to entrepreneurship.

Motive

Behaviour Goal


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4.4.5 Maslow’s Need of Hierarchy Theory Maslow classifies needs into a sequential priority from the lower to the higher. According to him human needs are classified into the five need Five needs with hierarchy are as follows

1. Psychological needs – Psychological needs influence human behaviour. These needs are basic to human life such as food, clothing and shelter and various necessities of life. Being a human being entrepreneur also have psychological needs for survival in the business world, prosper and satisfy his need and societies need. Entrepreneur is motivated to work in the enterprise to receive economic rewards to meet his basic needs.

2. Safety and Jiecurity needs – These needs are felt as soon as first basic needs are satisfied. Economic security and protection from physical danger. As an entrepreneur to work in the enterprise he needs more money in turn to earn more money to satisfy safety and security needs. He is promoted to work more in the enterprise.

3. Social needs – Man being a social animal these needs are belongingness needs. Belongingness recognition and acceptance by others likewise, an entrepreneur is motivated to interact with fellow entrepreneurs and his employees and others.

Fig. 1.5 Maslow’s Need of Hierarchy

4. Esteem needs – These are also known as Ego or status needs. It consists of self esteem, esteem of others, achievement competence, knowledge and independence. Entrepreneurship and self control over enterprise satisfies entrepreneurs esteem needs by providing recognition, status, respect, reputation and independence.

5 Self-actualisation

Needs

4 Esteem and Ego or status need

3 Social needs

2 Safety and security needs

1 Psychological needs


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5. Self Actualisation – The financial and important step under the need hierarchy model is the need for self actualisation. This refers to self fulfillment. Entrepreneur may achieve self actualisation in being a successful entrepreneur. Self actualisation needs which motivate them to work more and more for satisfying them.

In Maslows theory, needs are arranged in a lowest to the highest hierarchy. The second need does not dominate unless first is reasonably satisfied. This process goes on till the last need is achieved. This is because man is never. Once a need is satisfied i.e. creases to be a motivating factor.

For entrepreneur it is mainly social esteem and self actualisation needs which motivate them to work more and more for satisfying them.

4.4.6 Mcdelland's Acquired Need Theory

As a result of ones life experience a person experiences three types of needs.

1. Need for affiliation – It refers to establish and maintain healthy, friendly and warm relations with others.

2. Need for power – These means the ones desire to dominate and influence others by using physical objects and actions.

Desire to accomplish something with own efforts. This implies ones will to excel in his or her efforts.

Mcdelland suggests an entrepreneur the importance of high need for achievement is found dominating one. In his view, the people with high need for achievement are characterised by the following.

1. They decide moderate, realistic and attainable goals for them.

2. Prefer to situations in which they can find solutions for solving personal responsibility.

3. They need concrete feedback about their performance.

4. They have need for achievement for attaining personal accomplishment.

5. They look for challenging task.

Check Your Progress

1. Describe facilitating factors for achievement motivation

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4.5 SEARCH FOR BUSINESS IDEA

The task of promotion begins with the search for a suitable business idea or opportunity. The idea may originate from various sources e.g., success story of a friend or relative, demand for certain products, chances of producing a substitute for an imported article, visits to trade fairs and exhibitions, study of project profiles and industrial potential surveys,, meetings with Government agencies, etc. The idea may relate .to the starting of a new business or to takeover of an existing enterprise. The idea should be sound and workable, so that it may be exploited. It should yield a reasonable return on investment and the one which can be converted into a business. The promoter has to be imaginative and foresighted to discover a business idea.

Check Your Progress 1. What is business idea?

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4.6 SOURCES OF IDEAS

A business idea may be discovered from the following sources:

(i) Observing Markets: Careful observation of markets can reveal a business idea. Market surveys can also reveal the demand and supply position for various products. It is necessary to estimate future demand and to take into account anticipated changes in fashions, income levels, technology, etc. In this connection, it will be useful to ascertain whether the demand is elastic or inelastic and whether the product is repeat purchase or not. Attempt should be made to determine the trend of demand and the composition and pattern of potential users of the product. A survey of the available channels of distribution should also be made so that "the selling campaign can be properly planned well in advance of the production. Advice of professional experts like dealers, commercial consultants, bank managers, advertising agencies may also be obtained to supplement product analysis and market surveys.

Competition and price trends can also be found through market surveys. From the data collected through market observation, one can identify the products/industries which are in demand and which require increase in supply. A promoter can then find out the most profitable line of business. For example, the scarcity of edible oil prompted many firms to enter into the production/supply of edible oils in India.


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(ii) Prospective Consumers : Consumer knowns best what he wants and the habits/tastes which are going to be popular in the near future. Contacts with prospective consumers can also reveal the features that should be built into a product/service. These days good business firms generally conduct a survey among prospective consumers before choosing the product to be manufactured. These firms also conduct a market test of the prototype product before launching it into the market. The customer is the foundation of a business and it is he who keeps it going. Therefore, data on consumer needs and preferences must be collected. Initially, a new enterprise should concentrate on one or a limited range of products. More products can be added to complete the line later on as the business becomes well established.

(iii) Developments in other nations : People in underdeveloped countries generally follow the fashion trends of developed countries. For example, video, washing machines, micro ovens, etc. which are now the 'in things' in India were being used in the United States and Europe before the eighties. Therefore, an entrepreneur can discover good business ideas by keeping in touch with developments in advanced nations. Sometimes, entrepreneurs visit foreign countries in search of ideas for new products/processes. Trade delegations of various chambers of commerce, etc. visit foreign markets to explore foreign collaborations and other types of business ideas.

(iv) Study of project profiles : Various Government and private agencies publish periodic profiles of various projects and industries. These profiles describe in detail the technical, financial and market requirements and prevailing position. A careful scrutiny of such project profiles is very helpful in choosing the line of business. Technical and other types of experts may be employed to carry out a specialised study of project profiles and to suggest the most promosing projects/industries for further evaluations.

(v) Government organisations : Several Government organizations nowadays assist entrepreneurs in discovering and evaluating business ideas. Development banks, state industrial development/investment corporations, technical consultancy organisations, investment centres, export promotion councils, etc. provide advice and assistance in technical, .financial, marketing and other areas of businesss. Government also identifies the priority sectors for investment through five year plans, industrial policy resolutions and guidelines for industry. In this connection government publications on trade and industry can also be helpful in discovering business ideas. Items reserved for small sector will also indicate the potential areas.

(vi) Trade Fairs and Exhibitions : National and international trade fairs are a very good source of business ideas. At these fairs, producers and dealers in the concerned industry put up their products for display and/or sale. A visit to these fairs provides information about new products/machines. Negotiations for the purchase, production, collaboration, dealership, etc. may also be made at these fairs.


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Trade Fairs have now become a regular feature. The Trade Fair Authority of India (TFAL) established in December 1976 is the apex agency for the organisation and control of trade fairs and exhibitions in India and abroad. It periodically organises trade/industrial fairs at Pragati Maidan in New Delhi. Trade fairs and exhibitions provide opportunities for.

1. Assessing the market trends in terms of demand potential and type of products required.

2. Meeting a large number of buyers from different States/countries.

3. Assessing the attitude of the competitors in a particular product or marketing area.

4. Comparing the price and quality of similar products.

5. Establishing personal contacts with dealers/importers/customers.

6. Projecting new ideas on commercial publicity for promoting sales in the country and abroad.

In addition to the above, business ideas can be discovered from other sources like a new invention awaiting commercial exploitation, an unexploited resource, an unsatisfied demand, an inferior product, etc. For example, housewives need a product that can tell them the quantity of gas left-in the cylinder. But no such product is available in India at the moment.

Check Your Progress 1. List sources of ideas.

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4.7 IDEA PROCESSING AND SELECTION

1. Preliminary Evaluation and Testing of Ideas : Once business ideas are discoverd, screening and testing of these ideas is done. The following considerations are significant in the evaluation and testing of business ideas.

(a) Technical feasibility : It refers to the possibility of producing the product. Technical feasibility of an idea is judged in terms of availability of necessary technology, machinery and. equipment, labour skills and raw materials. The advice and assistance of technical experts may be necessary to judge the technical feasibility of various business ideas.


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(b) Commercial viability : A cost-benefit analysis is required to ascertain the profitability of the ideas. An elaborate study of market conditions and prevailing situation is made to assess the viability and prosepects of the proposed project. This is known as feasibility study of the project. A number of calculations have to made about the likely demand, expected sales volume, selling price, cost of production, break-even point, etc. The services of market analysts and financal experts may be necessary for this propose.

There is a difference between a business idea and a business opportunity. While the idea for a product or service may be workable (technically feasible), the proposed business built on this may not profitable. It is normal for an entrepreneur to have several ideas for business that have to be rejected before finding one that is not only workable but worth while. In order to judge the workability and profitability of the proposed business, feasibility analysis has to be conducted.

2. Detailed Analysis: After preliminary evaluation of the idea, the promising idea is subjected to a thorough analysis from all angles. Full investigation is carried out in the technical feasibility and economic viability of the proposed project. Financial and managerial feasibility of the idea are tested. At this stage a lot of information is required. Consultations with experts in various areas of the industry may be necessary to carry out the detailed analysis. Due care .should be exercised at this stage because the idea is finally accepted or rejected at this stage.

After the evaluation of a business idea is completed, the findings are presented in the form of a report known as 'feasibility report' or 'project report. This report helps in the final selection of project. It is also useful for procuring licenses, finance, etc. from governmental agencies.

4.7.1 IDENTIFYING A BUSINESS OPPORTUNITY

An entrepreneur is said to be an opportunity seeker. For the potential entrepreneur his first-task is to identify, explore and then select an attractive business opportunity.

Opportunity can be defined as an attractive and excellent project idea which an entrepreneur search for and accepts such idea as a basis for his investment decision. A good business opportunity must be capable of being converted into feasible projects.

Two major characteristics of a business opportunity should be highlighted.

1. Good and wide market scope i.e. gap between present or likely demand and supply.

2. An attractive, acceptable and reliable return on investment.

Business opportunity need to be analysed from the view points of production, commercial, managerial, potential and prospective demand for the product, technical viability etc.


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4.7.2 STEPS IN IDENTIFICATION OF BUSINESS OPPORTUNITY

Identification of opportunity involves following steps.

1. Preliminary evaluation

II. Selection of product or service

III. Conduct a market survey

IV. Contractual programmes to collect sufficient information about proposed venture

V. Succeeding in the market

I PRELIMINARY EVALUATION

As soon as entrepreneur realises regarding business opportunity, he has to evaluate investment opportunities against set of specific criteria to select those project ideas which are commercially feasible. The criteria are:

1. Is opportunity compatible with the promoter.

2. Is opportunity compatible with government regulations and priorities.

3. Whether raw materials are easily available.

4. What is the size of the potential market.

5. Whether cost justifies the project.

6. What is the risk inherent in the project.

1. Compatible with the promoter – The entrepreneur must conform that the project undertaken should be compatible with men, material, money market available at his disposal. Project beyond the capacity of the entrepreneur are bound to fail.

2. Compatible with government regulations and rules – Entrepreneur should not violate government regulations and priorities. He must carefully take into account all related rules and regulations of the government regarding investment, license, reservation of certain categories of items etc.

3. Easy availability of raw materials – Cost and availability factors of raw materials should be considered carefully. Scarcity of raw materials will cause delay in production process.

4. Potential market – Potential market, nature of competition, competitors, availability of substitutes, barriers and the possibility of entry of substitutes and technological developments taking place in the industry should be assessed and evaluated by the entrepreneur.


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5. Cost of the project – The cost of the project should be reasonable in the sense that a desired profit margin can be realised from a competitive price. A study of the cost structure under raw material cost, labour cost, direct expenses, factory overheads, administrative expenses, selling and distributive overheads, and after sales services costs ill give a good idea regarding different types of cost.

6. Inherent risk in the project should be analysed – Risk related to the project such as changes in demand, technological developments, entry of substitutes, competition and seasonal variations should be assessed before working on a project.

II -SELECTION OF PRODUCT OR SERVICE

Entrepreneur should identify the product which he wish to manufacture. While deciding about the product following points should be considered:

1. Potential demand for the product or service.

2. Estimated volume of demand for the product.

3. Assess potential of existing competitor and estimate about probable competitors.

4. Study the scope for future demand.

5. Infrastructural facilities - power, transport etc.

6. Current status of technology and scientific development in the field.

7. Availability of raw material and required labour.

8. Government policies, legislation, controls.

9. Environmental factor.

10. Degree of profitability for the product.

11. Information regarding particular line of product.

12. Locational advantage of the product.

13. If product belongs to an ancillary unit and serves as major component for the parent industry. It provides a ready demand hence selection of this type of product entails easy marketability.

14. Selection of a product would also be assessed in favour of availability of skilled and unskilled labour.

15. Study the various characteristic of the proposed product to be produced.


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III CONDUCT A MARKET SURVEY OR PURPOSE OF MARKET SURVEY

Market survey with reference to the availability of raw material, equipments, marketing and distribution and consumer behaviour should be conducted.

1. Raw material availability:

a. Search for leading suppliers of raw material required for the concerned product.

b. Study the price policy of various suppliers and analyse impact of price fluctuations on production.

c. Fix time for order execution.

d. Study local and outside source of raw materials—the advantages and disadvantages.

e. Thorough analysis of credit facilities, advance payments, terms and conditions for suppliers.

2 Equipment, availability:

a. Identify major manufacturer here and abroad.

b. Comparative features of various manufacturers.

c. Price structure of different brands.

d. Repair maintenance and after sales service facilities.

e. Guarantees and warranties by suppliers.

f. Technical and skilled staff requirement.

g. Machinery and delivery schedules.

3. Marketing and Distribution:

a. Selection of best channel of distribution.

b. Advertising and publicity programme for the product.

c. Product positioning.

d. Outstanding features of product or service.

e. Market features and practices—credit facility, minimum order, incentives.

f. Business terms, commission, stocks, warehouse facilities.


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4. Consumer Behaviour:

a. Motivate buyers to buy new product.

b. Analyse the buyers purchasing power.

c. Analysis of consumption pattern to capture the major market share.

d. Understand the preference for durability, service, economy.

e. Understand consumer characteristics of different region and devise appropriate sales message, accordingly.

IV CONTACTUAL PROGRAMMES TO COLLECT SUFFICIENT INFORMATION ABOUT PROPOSED VENTURE

Entrepreneur often need information and guidance, particularly in the initial stages, on product potential, raw materials, policies, facilities, procedures, finance formalities, incentives etc. It can be collected through State Government agencies.

Contact with central and state level agencies set can be helpful in collecting sufficient information about proposed venture. Industrial Finance Corporation of India (IFCI) in collaboration with Industrial Development Bank of India (IDBI) Industrial Credit and Investment Corporation of India (ICICI), state organisations and banks, have set up a network of state level technical consultancy agencies. They offer a package of professional and consultancy services to stimulate industrial growth.

Entrepreneurship development programmes of 6 weeks duration are designed to impart following information:

1. How to develop entrepreneurial capabilities.

2. Identify viable projects for potential entrepreneurs.

3. Impart managerial skills.

4. Help and secure necessary financial and infrastructural related assistance. These technical consultancy agencies also monitor the progress of the unit.

V SUCCEEDING IN THE MARKET

There is no way your business will earn money and profit unless customers buy product or service. The secret formulae for an entrepreneurs success is to produce what customers will buy.


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Following are the important characteristics which help the entrepreneur to succeed in the market;

1. Study people and their needs before starting any project.

2. Identify unsatisfied needs.

3. Design product in such a way that it should satisfy the customer better than the competitors product.

4. Ensure that what customer feel about the product which entrepreneur is offering.

5. Always look for newer and more effective ways of reaching a customer.

6. Entrepreneurs must have clear vision, goals and objectives, well defined mission, and employees participation about the proposed project.

7. Constant feed back of results as well as setting and adherence of high standards gives an organisation a cutting edge over others. Planning, foresight and analysis are also important qualities.

8. The process of systematic market research is used to develop products or process and to provide value for money to the customers. This helps to gain the market share.

9. Another important characteristic for successful business is a commitment to innovation which is vital in keeping ahead of the competition and perhaps the most difficult one to achieve yet most of the organisations just do not give due importance for the same.

Check Your Progress

1. What is idea processing?

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UNIT–V

LESSON-5 ALL INDIA FINANCIAL AND INVESTMENT INSTITUTIONS

CONTENTS 5.0 Contents 5. 1 All India Financial And Investment Institution

5.1.1 Institutional Framework 5.1.2 Industrial Finance Corporation of India (IFCI) 5.1.3 ICICI 5.1.4 Industrial Development Bank of India (IDBI) 5.1.5 Industrial Reconstruction Bank of India (IRCI) 5.1.6 NIDC 5.1.7 SIDBI 5.1.8 LIC 5.1.9 GIC 5.1.10 UTI 5.1.11 SFC’S 5.1.12 SIDCs 5.1.13 SIPCOT 5.1.14 TIIC

5.2 Institutional Set-Up 5.2.1 District Industries Centres

5.3 Small Industries Development Organisation (SIDO) 5.4 SISIs 5.5 Tamilnadu Small Industries Development Corporation (SIDCO)


In Unit IV we discussed about the factors motivating, facilitating Entrepreneurs After going through this unit, you will be able to understand.

- All India Financial &Investment Institution

- Institutional Infrastructure.


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5.1 ALL INDIA FINANCIAL AND INVESTMENT INSTITUTION

5.1.1 INSTITUTIONAL FRAMEWORK To provide financial assistance to entrepreneurs the Government has set up a number of special financial institutinos besides commercial banks. They may be classified into two categories.

1. All India Financial Institutions and

2. State level Financial Institutions

The State Level Institutions are further divided into two categories, i.e., State Financial Corporations (SFCs) and State Industrial and Investment Corporations.

Besides the two types of institutions, in some states there are state industrial corporations which are engaged in the development of the industrial estates and providing financial assistance like equity support. The All India Level Finance Institutions are as follows :

(a) Industrial Finance Corporation of India

(b) Industrial Credit and Investment Corporation of India

(c) Industrial Development Bank of India

(d) Industrial Reconstruction Bank of India

(e) EXIM Bank of India

(f) Unit Trust of India

(g) LIC,GIC,etc.

(h) National Small Industries Corporation.

(i) Small Industries Development Bank of India.

5.1.2 INDUSTRIAL FINANCE CORPORATION OF INDIA (IFCI)

Established in 1984 with the objective of providing medium and long-term credit to eligible industrial concerns, the IFCI has the distinction of being the first development bank of the country. IFC's primary role is to provide direct financial assistance to eligible medium and large industrial projects in the corporate and co-operative sector in the country. In its promotional role, it has been endeavouring to take such steps as are considered necessary for strengthening the base for deepening the process of industrialisation in the country in its multi-faceted form. IFCI has now been converted into a joint stock company.


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Main Activities

Direct Financing Direct financing is IFCI's main business, the assistant under which can be in one or more of the following forms:

— Rupee loans;

— Sub-loans in foreign currencies out of the foreign exchange lines of credit made available to it,

— Underwriting of and/or direct subscription to the shares and debentures of public limited companies;

— Guaranteeing of

i. deferred payments for machinery imported from abroad or purchased within the country;

ii. foreign currency loans raised by industrial concerns from foreign institutions; and

iii. rupee loans raised by industrial concerns from Scheduled Banks State Co-operative Banks or in the public market.

Incidental Activities. IFCI has been authorised by the Industrial Finance Corporation (Amendment) Act, 1982, to undertake certain incidental activities, such as:-

— Undertaking research and surveys for evaluating or dealing with marketing or investments and undertaking and carrying on techno-economic Studies in connection with the development of industries;

— Proving technical and administrative assistance to any industrial concern for the promotion, management or expansion of any industry; and

— Undertaking merchant banking operations.

Promotional Activities Under promotional activities, the objective of IFCI has been (a) to fill in gaps in the institutional infrastructure for promotion and growth of industries,(b) to provide much needed guidance in project identification, formulation, implementation, operation, etc., to the new, tiny, small scale or medium scale; entrepreneurs, and (c) to improve the productivity of human and material resources, giving at the same time a better deal to the weaker and underprivileged sections of the society in consonance with the socio-economic objectives laid down by the Government of India.

Eligibility for Assistance under Direct Financing Industrial concerns which are eligible for direct financial assistance under the IFCI Act, as amended from time to time are -


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i. limited companies (whether in private, joint or public sectors) incorporated in India

ii. Co-operative societies registered in India, which are engaged or propose to engage themselves in any of the following activities :

a. Manufacture, preservation or processing of goods;

b. shipping;

c. fining;

d. Hotel industry;

e. generation or distribution of electricity or any other form of power;

f. transport of passengers or goods by road or by water or by air or by ropeway or by lift;

g. Maintenance, repair, testing or servicing of machinery of any description or vehicles or vessels or motor-boats or trailers or tractors;

h. assembling, repairing or packing any article with the aid of machinery or power;

i. development of contigeous area of land as an industrial estate;

j. fishing or providing shore facilities for fishing or maintenance there-of;

k. Providing special or technical knowledge or other services for the Promotion of industrial growth ; or

l. search and development of any process or product in relation to any of the matters aforesaid.

Purpose For which Financial Assistance is Available

Assistance from IFCI singly or jointly with other institutions is available for a) setting up of new industrial projects, (b) expansion of existing units or for diversification into new lines of activity, and (c) for renovation and modernization existing units

IFCI does not ordinarily grant assistance for purposes of working capital as a normal function of the commercial banks to provide such capital. IFCI does not also allow its funds to be utilized for meeting existing liabilities of the industrial concern Save in exceptional circumstances, or for acquisition of capital goods for commercial or trading purposes. Likewise, sub-loans in foreign currencies are granted only for the import of raw materials or maintenance spares or payment of royalties, dividends etc.

5.1.3 THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA (ICICI)

The ICICI was set up in 1955 to encourage and assist investment and industrial development in India. The idea of establishing the ICICI was first crystallized as a result


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of certain deliberations among the Government of India, the World Bank and certain American financiers. Unlike other development banks the ICICI was organised as a wholly owned private institution.

Objectives The major objective of the ICICI was to meet the needs of the industry for permanent and long-term funds in the private sector. Its objectives include:

a. To assist in the creation, expansion and modernization of industrial enterprises in the private sector;

b. To encourage and promote the participation of private capital, both internal and external, in such enterprises; and

c. To encourage and promote the private ownership of industrial investment and expansion of markets.

Forms of Financial Assistance In pursuit of its objectives of promoting industrial development, ICICI provides financial assistance to enterprises in various forms, such as:

a. Underwriting of public and private issues and offers of sale of industrial securities—ordinary shares, preference shares, bonds and debenture stock;

b. direct subscription to such securities;

c. providing similar loans in foreign currencies for payment for imported capital equipment and technical services;

d. guaranteeing payments for credits to indigenous manufacturers for promotion sale of industrial equipment on deferred payment terms;

e. leasing of equipment.

The primary purpose of ICICI's assistance is to provide long-term funds to capital assets like land, buildings and machinery. Of the alternative types of assistance provided by ICICI, the one best calculated to assure the success of the enterprise is chosen in each case.

Eligibility Criteria

Any company with limited liability (or the promoter of such a company), any sole proprietary concern, partnership firm and any co-operative society may approach ICICI for assistance in financing a sound proposal for establishing, expansion or modernization of an industrial enterprise.

The applicant's plan may provide for investment in any part of India; he may require assistance in any form. He must, however, be prepared to make a reasonable


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contribution to the resources required for his proposal. The enterprise should have, or. should undertake to obtain, experienced management and expert technical personnel. Special consideration is given to projects promoted by new entrepreneurs and to those established in backward areas.

There are no firm limits on the size of the enterprises ICICI is prepared to assist, nor is there a maximum or a minimum limit on the assistance that it may offer. In practice, the lower limit on the finance provided by ICICI is set at Rs. 10 lakh as there are other institutions which provide assistance of smaller amounts. However, to meet the requirement of industry for loans in foreign currency, ICICI may offer assistance below this limit. At the upper end, prudence requires that ICICI limit the proportion of its resources which it can safely invest in a single enterprise. However, no proposal is loo large for ICICI to handle; it is prepared to enlist the co-operation of other financing institutions, in India and abroad, to share in the investment.

Promotional Activities ICICI has set up a Project Promotion Department in order to provide promotional services and assistance to individual projects on selective basis. It also participates in the coordinated efforts of the all-India financial institutions. State-level finance and promotion agencies and nationalised banks in identifying and developing projects and entrepreneurs in backward regions, in preparing techno-economic surveys for backward States, conducting feasibility studies and implementing identified projects.

Financial Services ICICI has established a Merchant Banking Division which advises clients on various finances in suitable manner. It provides guidance on restructuring of finances for existing companies, assists in preparing proposals for submission to financial institutions and banks and serves managers to capital issues. It has established two subsidiaries, viz.. Technology Development and Information Company of India Ltd. and Credit Rating and Information Services of India Ltd. (CRISIL), in order to assist technology development and take up credit rating services in India.

5.1.4 INDUSTRIAL DEVELOPMENT BANK OF INDIA (IDBI)

IDBI was set up in July 1964 as an apex term lending financial institution in India. However, it was restructured and designed as the principal financial institution of the country in 1975 for coordinating the activities of other institutions, deluding banks, engaged in financing, promoting or developing industry in conformity with the national priorities.


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Resources The sources of funds for IDBI are (i) paid-up capital, (ii) reserves, (iii) National Industrial Credit (Long Term Operations) Fund of the RBI; (iv) market borrowing; (v) temporary borrowing from the RBI, and (vi) World Bank.

Schemes of Assistance i. IDBI provides direct assistance to industrial concerns in the form of loans,

underwriting of and subscribing to shares and debentures, and guarantees.

ii. It provides soft loans for modernisation, replacement and renovation.

iii. It refinances industrial loans granted by banks and other financial institutions.

iv. It rediscounts bills arising outof sales of indigenous machinery on deferred payment basis.

v. It finances exports in the form of direct loans and guarantees to exporters in participation with commercial banks and refinances medium-term export credit provided by commercial banks and overseas creditors.

vi. It assists other financial institutions by way of subscription to their shares and bonds, and;

vii. It engages in promotional activities for bringing about industrial development.

Eligible Units for Assistance IDBI can assist all types of industrial concerns. However, as far as direct financing is concerned, it extends its financial assistance mainly to large and complicated projects which require huge capital outlay or sophisticated technologies or to those projects located in less developed areas or promoted by technocrats. As a coordinating agency, IDBI seeks to supplement the activities of other financial institutions through refinancing. Normally it prefers not to assist units whose needs could be met by other institutions.

Terms of Lending

The present normal lending rate is 14 per cent. A commitment charge of 1 percent is payable on the undrawn amount of the loan for the first year (from the commencement of the 181 st day of the date of letter of sanction); beyond the first year the commitment charge is 0.5 per cent. Loans are generally repayable in half-yearly instalments after an initial grace period of about 2 years. Loans are typically secured by a first legal mortgage of all the fixed assets of the borrower.


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Soft Loan Scheme The soft loan scheme of all India financial institutions is to provide finance assistance on soft terms to units in selected industries. The purpose of this scheme is to encourage units to undertake modernisation, replacement and renovation plant and equipment to achieve higher productive capacity and improve competitiveness. Industrial concerns registered as public or private limited companies or co-operatives are eligible for assistance under this scheme.

The principal criterion for assistance under this scheme is lack of viability of the unit due to obsolescence of its plant and equipment. It should be clearly established that modernisation would lead to viability within a reasonably short period. While IDBI has overall responsibility for the scheme the task of processing sanction of assistance is shared by three all-India financial institutions. Units in sugar and jute industry may apply to IFCI, units in cement and cotton textiles to IDBI and units in engineering industry to ICICI.

Backward Area Development IDBI provides concessional assistance to projects set up in notified backward areas in participation with IFCI and ICICI. The salient features of the concessional assistance are lower interest rate, longer initial grace period, extended repayment period, reduced commitment fee, greater participation in equity and preference capital, reduced underwriting commission and lower promoter's contribution.

Refinance Scheme Loans sanctioned by commercial banks, SFCs and SIDCs, to small and medium units and those promoted by weaker sections and small entrepreneurs are eligible for refinancing by IDBI. Units located in backward areas get top priority.

Bills Rediscounting Scheme This scheme enables the industrial units to buy capital equipment on a deferred payment basis, the deferred payment period is normally less than five years.

IDBI is the apex financial institution. It holds monthly inter-institutional meetings of the senior executives of the all-India financial institutions. These meetings help to develop a common approach with respect to policies and priorities in the area of industrial financing and assistance, and for evaluating Proposals for assistance on a consortium basis. They have evolved a common implication form and introduced a common appraisal system. Inter-institutional coordination has quickened the process of sanction and disbursals.


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5.1.5 INDUSTRIAL RECONSTRUCTION BANK OF INDIA Industrial Reconstruction Corporation of India Ltd. (IRCI), set up as a primary agency for rehabilitation of sick industrial units, has been constituted and renamed as the Industrial Reconstruction Bank of India (IRBI) by an Act of Parliament with effect from March 20, 1985. IRBI has been set up with a view to enabling it to function as the principal credit and reconstruction agency for industrial revival by undertaking modernisation, expansion. reorganisation, diversification or rationalisation of industry and to coordinate similar work of the other institutions engaged therein and to assist and rehabilitate industrial concerns.

Functions The IRBI is empowered to grant loans and advances to industrial concerns underwrite stocks, less shares, bonds and debentures; guarantee loans/deferred payments and performance obligations of any contract undertaken by industrial concerns and act as an agent of Central and State Governments, Reserve Bank State Bank, scheduled commercial banks and State co-operative banks, public financial institutions, State financial corporations and such other Government or person as Central Government may authorise. Its broad-ranging functions also include such developmental activities as providing infrastructural facilities, raw materials, consultancy, managerial and merchant banking services for reconstruction and development of industrial concerns and providing machinery and other equipment on lease or hire-purchase basis etc.

Resources IRBI's resources consist of paid-up capital, interest-free loan from the Government of India and debt capital by issuing bonds; in addition, it has resource accommodation from the RBI and IDBI.

Special Fund The IRBI Act, infer alia, has constituted a special fund called the “Reconstruction Assistance Fund” to be operated by IRBI for industrial reconstruction, revival, rehabilitation or development for which the banking and other financial institutions are not likely to grant loans and advances in the ordinary course of business. The fund is to be operated by the Bank with the prior approval of the Central Government. Under IRBI's special powers, it can take over management or possession or both and can transfer by way of lease and sale the property of defaulting industrial concerns. In case of amalgamation, merger, modernisation, expansion of any undertaking, the provisions of Part III of the Monopolies and Restrictive Trade Practices Act (MRTP Act) shall not apply.


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5.1.6 NATIONAL INDUSTRIAL DEVELOPMENT CORPORATION LIMITED (NIDC)

The NIDC was registered as a private limited company on 20th October, 1954. It was conceived as a Government agency to secure balanced and integrated development of industries, both in the private and public sector.

Objects The main object of the NIDC is to encourage and assist such medium and large scale industries whose development is essential for the economy of the country. According to its Memorandum of Association, the Corporation has been established: 1) to promote, establish and execute industries, projects or enterprises manufacture and

production of plant, machinery, tools, implements, materials, etc.; 2) to aid, assist and finance industrial undertakings owned or run by government or

private persons or companies with capital, credit, means or resources for prosecution of its work and business;

3) to promote and establish companies for the prosecution of industrial undertakings whether of a private or public character which, in the opinion of the Corporation, would contribute to the industrial development of India and to acquire and dispose of shares in such companies; and

(4) to procure capital for or to provide machinery, equipment, etc., to any company whose activities relate to the industrial development of the country and subscribe for or underwrite or otherwise deal with shares, debentures, securities.

Functions While carrying on its objects, the NIDC is to put emphasis upon the manufacture of capital goods, machinery and equipment. The Corporation is to investigate industrial schemes and has to procure the co-operation of private enterprise, where possible. The purpose of the Corporation is to develop such essential industries of the country as are unable to attract private initiative. This may be either due to the magnitude of the outlay or the rate of return. Accordingly, the general functions of the NDIC are to encourage, promote, establish and/or operate such industries as are vital to the industrial development of the country.

Main Forms of Assistance In actual operations, however, the Corporation has been a Government agency to finance rehabilitation and modernisation of jute and cotton textile industries and the expansion of Machine Tools industry. The main forms of assistance available from the NIDC are : (a) loans and advances; (b) subscription to shares and debentures; (c) underwriting and guarantee of securities; and

(d) management, control or supervision of an industrial unit.


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Besides, it can also supply machinery, technical advice or any other facility to industrial units. Further, the Corporation can execute an industrial project either (i) itself. or (ii) by a fully owned subsidiary company, or (iii) in collaboration with private enterprise.

Thus the main function of the NIDC is to promote or assist such industrial units which are conducive to the economic growth of the country. It is to assist such industrial units-which fail to be attractive either to the private entrepreneurs or the capital market.

5.1.7 SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI) The SIDBI was set up as a subsidiary of the IDBI by a special Act in 1989 to function as the principal financial institution for the promotion, development and financing of industry in the small scale sector, and for coordinating the functions of institutions engaged in similar activities. It has taken over the responsibility administering Small Industries Development Fund and National Equity which were earlier administered by the IDBI. However, it started functioning from April 2, 1990. The initial authorised capital of SIDBI is Rs. 250 crores which can be increased by IDBI up to Rs. 1000 crores.

Functions The SIDBI has outlined seven activities as its functions and three areas at 'Immediate Thrust Areas'. The seven activities are:

1. Refinancing of loans and advances extended by primary lending institutions;

2. Discounting and rediscounting of bills;

3. Extension of seed capital/soft loan assistance under National Equity Fund Seed Capital under Mahila Udyam Nidhi Scheme;

4. Granting direct assistance and refinance for financing exports of SSI sector

5. Providing of factoring and leasing services;

6. Extending financial support to State Small Industries Development Corporation (SSIDC), and

7. Extending financial support to National Small Industries Corporation (NSIC)

The important thrust areas of SIDBI are technological upgradation and modernisation, extending the channels for marketing the products of the SSI sector, and promotion of employment-oriented industries especially in semi-urban areas. This bank will cater to the needs of more than 20 lakh small scale units in our country. The problems of SSI entrepreneurs are multifarious in nature. Certainly, this exclusive development bank for SSI units will minimise the problems of small and medium entrepreneurs in the years to come. Government hopes to minimize the sickness in the small industry with the help of maximum services of SIDBI to the small entrepreneurs. The new and innovative roles of SIDBI for SSI are outlined as under:


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Marketing Entrepreneurship The heartening feature of the newly created SIDBI is the special emphasis and new schemes of assistance for marketing support to the small sector. For the firs time, the concept of marketing entrepreneurship as against manufacturing entrepreneurship has been recognised. The SIDBI plans to assist service organisations oriented towards marketing. This is indeed a promising approach and a move which will be watched with interest as to its impact. At Bangalore, it was stated that the outstanding payment as on December 1987 to small scale units represented 64 per cent of the total outstandings. Schemes such as “factoring” introduce SIDBI itself are helpful to some extent. The SIDBI is also offering bill discounting facility to SSIs. Yet another idea which needs consideration is making SSIs for available to large industry for the specific purpose of timely payment to their supplies.

5.1.8 LIFE INSURANCE CORPORATION OF INDIA The Life Insurance Corporation of India (LIC) came into being in 1956 after nationalization and merger of about 250 independent life insurance, societies. It is headquartered at Mumbai. The primary activity of LIC is to carry on life insurance business, but it has gradually developed into an to industry all-India financial institution which provides substantial support industry. It works in close liaison with the other all-India financial institutions in providing finance directly and in helping industrial concerns by its its underwriting support. Thanks to its massive resources, LIC is one of the two largest institutional investors in the country. By law it is required to invest 25 per cent of its funds in Government securities and a further 25 per cent in “approved securities”.

5.1.9 GENERAL INSURANCE CORPORATION (GIC) The GIC was founded when the management of general insurance business in India was taken over by the Government in 1971 and subsequently nationalised in, 1973. Its headquarter is in Mumbai. In addition to investing in “socially-oriented” sectors, where the bulk of its investible resources are required to be invested, GIC provides substantial assistance to industrial projects by way of term loans, subscription to equity capital and debentures, and underwriting of securities.

5.1.10 UNIT TRUST OF INDIA (UTI)

The UTI was set up in 1964 with the principal objective of mobilising public savings and channeling them into productive corporate investments. UTI raises its resources primarily through the sale of small denomination units. UTI subscribes to industrial securities and also purchases outstanding securities in the secondary market. In its investment activity, UTI is naturally governed by considerations of yield and security as it has an obligation to earn a reasonable rate of return for its unit holders in its various schemes, without exposing them to undue risks. UTI has emerged as one of the two largest institutional investors in India.


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5.1.11 STATE FINANCIAL CORPORATIONS (SFCs) The SFCs set up under the State Financial Corporations Act, 1951, render assistance to medium and small scale industries in their respective States. There are at Present 18 SFCs including the Tamilnadu Industries Investment Corporation Limited (TIIC) which was set up in 1949 before the passage of the SFCs Act.

Resources Under the provisions of SFCs Act, SFCs are authorised to raise resources by issue of share capital, issue of bonds and 'debentures guaranteed by State governments accept medium and long-term deposits from the public and borrow from financial institutions. Hence, the financial resources of SPCs consist of paid-up capital, reserve funds, bonds, refinance from IDBI and borrowings from the RBI and other financial institutions.

Forms of Assistance Financial assistance from State Financial Corporations takes the following forms:

a. granting of loans and subscribing to the debentures of industrial concerns repayable within a period of not exceeding twenty years;

b. guaranteeing loans raised by the industrial undertakings in the capital market or from scheduled banks or State Co-operative Banks;

c. guaranteeing deferred payments due from any industrial concern in connection with its purchase of capital goods within India;

d. subscribing to the stocks, bonds, or debentures of an industrial concern out of the funds representing the special class of share capital subscribed by the State government and the Reserve Bank in accordance with the provisions of Section 4A of the SFCs Act, 1951.

If the technically qualified people find it difficult to bring in enough funds as their contribution, SFCs assist them with a unique scheme known as the Seed Capital/Soft Loan Scheme. Under this scheme assistance up to Rs. 2 lakhs will be given at an incredibly nominal interest rate of 1% per annum. Higher quantum of assistance will also be considered in deserving cases under this scheme.

They also assume the role of promotional agency rather than being a financing institution only by diversifying their activities to fill in the role of fullfledged development banks. Few SFCs have already set Entrepreneurial Guidance-cum- Assistance Bureaux to help the entrepreneurs, particularly the first generation entrepreneurs.

Eligibility for Assistance The SFCs render assistance to small and medium sized industrial concerns (i) which are organised on proprietary or partnership basis or as companies or cooperative societies, and


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(ii) which are engaged or to be engaged in the manufacture, preservation or processing of goods, mining, the hotel industry; the transport of passengers or goods by road or by water or by air; the generation or distribution of electricity or any other form of power; the maintenance, repair, testing servicing of machinery of any description or vehicles or vessels or motor-boats trailers or tractors, assembling, repairing or packing any article with the aid of machinery or power; the development of any contiguous area of land : industrial estate; fishing or providing shore facilities for fishing or maintenance thereof; and providing special or technical knowledge or other services promotion of industrial growth.

Terms of Financial Assistance The maximum financial assistance by way of loans, guarantees, underwriting (including direct subscription to shares/stocks) available to a company (private or public) and a co-operative society in of the order of Rs. 30 lakhs, whereas ceiling for other forms of organisations has been placed at Rs. 15 lakhs.

In terms of the SFCs Act as amended in 1972, SFC is prohibited from granting any financial assistance to any company whose aggregate paid-up capital and free reserves exceed one crore of rupees and to any industrial concern in which any of the directors of the SFCs hold substantial interest.

The loans given by the SFCs are usually for a period up to 10 or 12 years and are secured by a first charge on the fixed assets of the borrowers. The SFCs normally keep a margin of 40 to 50% in giving loans against fixed assets. The margin requirement is, however, relaxed to some extent in respect of loans to small-scale industries which are covered under the Government of India's Credit Guarantee Scheme for small-scale industries as also in respect of assistance granted to technician-entrepreneur units in backward districts, etc.

Lending Rates The lending rates of the SFCs vary between 12.5% and 14.5% depending on the type of borrower and the nature of industry, and are mostly linked to the rates at which refinance is made available by the IDBI. A concessional rate of interest is charged in the case of small-scale industries and units set up in backward areas as also units set up by qualified technician entrepreneurs. This concession generally varies between 0.5% and 2.5% over the normal lending rate of Corporation concerned.

5.1.12 STATE INDUSTRIAL DEVELOPMENT CORPORATIONS (SIDCs) State Industrial Development Corporations (SIDCs), wholly owned by State Governments, have been set up under the Companies Act to promote and provide facilities for rapid industrialisation in the respective States.


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Functions The major functions of these Corporations include :

(i) Providing risk capital to entrepreneurs by way of equity participation and seed capital assistance;

(ii) Granting financial assistance to industrial units by way of loans, guarantees and, of late, lease finance by some Corporations;

(iii) Administering incentive schemes of Central/State Governments;

(iv) Promotional activities such as identification of project ideas through industrial potential surveys, preparation of feasibility reports, selection and training of entrepreneurs; and

(v) Developing industrial areas/estates by providing infrastructure facilities.

Since the actual range of activities being undertaken by individual SIDC depends upon the specific responsibilities entrusted by the respective State/Union Territory, there is considerable diversity in activities among different SIDCs.

Resources The financial resources of SIDCs consist of paid-up capital, loans from the State Government, borrowings from the market by way of bonds and debentures, refinance from IDBI and borrowings from banks and other financial institutions.

5.1.13 THE STATE INDUSTRIES PROMOTION CORPORATION OF TAMIL NADU LIMITED (SIPCOT)

SIPCOT was set up in 1971 as a public limited company wholly owned by the Government of Tamilnadu, with a specific objectives of playing a catalytic role in the promotion and development of medium and major industries in the private sector and to hasten the industrial dispersal in backward and underdeveloped areas of the State. The Corporation commenced its activities in January 1972 with a comprehensive promotional programme designed to stimulate entrepreneurship. Ever since, SIPCOT has been playing an admirable role in the promotion and development of medium and major industries in Tamilnadu.

SIPCOT's role is to plan, promote and develop medium and major industries and its promotional activities comprise the following :

i. Provision of financial assistance on liberal terms to medium and major industries.

ii. Implementation of a package scheme of incentives for the benefit of entrepreneurs.

iii. Development of potential growth centres and provision of developed lands at reasonable cost on easy payment terms.

iv. Provision of various ancillary services for the entrepreneurs.


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SIPCOT's Financial Assistance. SIPCOT's financial assistance for medium and major industries are in the form of (a) Term loan under IDBI refinance scheme, (b) IDBI's seed capital scheme, (c) Underwriting the capital issues, (d) To guarantee loans from commercial banks. Underwriting of capital issues is, however, normally restricted to projects to be set up in the backward areas of the State. SIPCOT is the second State level institution eligible for refinance in Tamilnadu under the IDBI refinance scheme.

The following arrangements have been evolved between Tamilnadu Industrial Investment Corporation Limited (TIIC)and SIPCOT in regard to lending term loans to industrial units under the IDBI refinance scheme.

(a) All SSI units will be within the purview of TIIC.

(b) In respect of medium and major scale industries,

i. TIIC can be approached if the term loan requirement is Rs. 301 or less in the case of companies with limited liability, and if the loan requirement is Rs. 15 lakhs or less in the case of proprietary or partnership firm.

ii. SIPCOT will sanction the balance of loan, if the loan above Rs. 30 lakhs in the case of companies with limited liability or above Rs. 15 lakhs in the case of proprietary or partnership.

iii. If the paid-up' capital arid reserves of the company are more than Rs. 1 crore, they will apply only to SIPCOT.

Project Identification and Supply of Project Profiles. As a promotional institution SIPCOT recognises that its role should be as wide as is necessary for fulfilling objectives of rapid industrial growth and industrial dispersal in backward areas. Recognising that identification of a profitable project is the foremost step an entrepreneur has to take while venturing into medium or major industry, SIPCOT's project investigation section has been preparing project profiles giving sufficient details to enable the entrepreneur to take preliminary investment decision. SIPCOT has prepared project profiles for a number of feasible projects and these are made available to entrepreneurs at a nominal cost.

Entrepreneurial Guidance. Any entrepreneur who likes-to set up a new industry requires various data as also procedural guidance for going ahead with the implementation of the selected project. In order to help the entrepreneurs in this regard SIPCOT has built up a data bank containing classified information on various procedures to be gone through, forms to be filled up and compliance with the various regulations for setting up the industries. It also helps entrepreneurs in assessing the merits of alternative locations for the proposed projects with reference to the source of raw materials, market potential and facilities available in particular areas.


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Business Development. SIPCOT does not wait for the applicants to knock at its door but rather goes after the potential entrepreneurs and provides them with all the information and services required to see that they implement their projects. One of the first steps SIPCOT has taken in this regard is to build up and update the list of entrepreneurs holding letters of intent and licences in the State. It contacts these entrepreneurs regularly with a view to find out the stage of implementation. It also identifies their problems and helps to overcome these problems and go ahead with the implementation. It provides guidance to new entrepreneurs on location of plant, economic size of the unit, foreign collaboration and technical know how, supply of machinery, etc. The business development department guides entrepreneurs in supplying for licences and registrations to the Central Government, approval on aboration, import licence, allocation of scarce raw materials and clearance from local authorities or financial institutions. It also helps entrepreneurs to get necessary commiment for supply of power and construction materials for putting up the Project.

5.1.14 THE TAMILNADU INDUSTRIAL INVESTMENT CORPORATION LIMITED (TIIC)

TIIC sponsored by the Government of Tamilnadu, has the distinction of being the first state-level financial institution in the country. It was incorporated in March 1949 and it commenced its operations on 1st September 1949. Its area of operation extends over Tamilnadu State and the Union Territory of Pondicherry. Its authorized capital is Rs. 40 crores and the paid-up capital as on 31-3-85 was Rs. 29.94 Crores. The Government of Tamilnadu holds more than 53% of the shares and the rest is held by the Industrial Development Bank of India, Government of Pondicherry and other public institutions.

The Corporation, since its inception, has played a very significant role in catalysing the industrial development of the State. It has been quick to respond to the needs of the time and to reorient and enlarge its operations to serve the overall national and socio-economic objectives like the development of backward areas assistance to the priority sectors, etc. TIIC has been laying increasing emphasis on assisting and developing small-scale industries which generate larger employment opportunities. It has also, over the years, evolved new schemes to assist the technocrats, educated unemployed and to promote self-employment and develop the backward areas.

With its 15 branch offices spread over the entire State of Tamilnadu, TIIC endeavours for the industrial development of the State by providing long-term loans for acquisition of land, building, plant and machinery, to eligible tiny, small and medium-scale units. Term loans are sanctioned up to Rs. 30 lakhs for new units besides modernisation, expansion and diversification of existing units on liberal .terms. In addition, deferred payment guarantee up to Rs. 30 lakhs; underwriting of shares; special schemes and concessions for economically weaker sections (SC/ST entrepreneurs/physically handicapped) for loans up to Rs. 25,000 are also granted.


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Soft Loan for New Technician/Entrepreneur. Sanction of assistance is provided to any concern which is engaged or proposed to engage in the business of manufacturing, processing or refrigeration of goods or in the hotel industry or the business of transport or transport services or in the development of industrial estates/areas or in providing special or technical knowledge or other services for promotion of industrial growth or providing shore facilities for fishing or maintenance thereof or to any concern for purchase of clinical and surgical instruments and or for setting up of nursing home or veterinary clinic.

Scheme of Assistance. Financial assistance is considered by the Corporation in respect of the following schemes: (i) Medium-scale units, (ii) Small-scale units,(iii) Technocrats, (iv) Soft loan/seed capital assurance, (v) Generators, (vi) Hotels, (vii) Registered medic practitioners, (viii) Transport operators, (ix) Composite (mini) loans (loans less Rs. 25,000), (x) Fishing Trawlers/mechanised boats.

Eligibility : (a) Joint stock companies, partnerships, proprietary concerns co-operative units are

eligible for financial assistance from the Corporation.

(b) In the case of Public Limited Companies, the paid-up capital shoud not less than Rs. 1 lakhs

(c) Limited Companies .having paid-up capital and free reserves exceeding Rs. 1 crore are not eligible for financial assistance.

(d) The Corporation will not consider financial assistance when the cost exceeds Rs. 3 crores.

(e) The Corporation will not grant any form of assistance to any concern in which the Directors of the Corporation are beneficially interested. The Corporation will not also entertain any application for financial assistance from the concern whose directors/partners/proprietors are/is in any way related to the directors of the Corporation.

(f) Loan for working capital purpose in not considered.

Quantum of Assistance, (a) Loans : Minimum limit is Rs. 5000, Maximum is Rs. 30 lakhs. For partnership and

proprietary concerns, the maximum is Rs. 15 lakhs

(b) Deferred payment guarantee : The maximum limit is Rs. 30 lakhs.

(c) Underwriting : Underwriting assistance is considered on a more selective basis. The maximum limit is Rs. 25 lakhs or 25% of the issue not exceeding promoters whichever is lower.


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However, the total assistance in respect of the above three facilities shall not exceed Rs. 65 lakhs for a single industrial unit.

Table 5.4: Rate of Interest

Categories

New units in

backward areas

%

Units in other than backward areas and

existing units in. backward areas%

1. SS1 units and technocrats 12.50 13.50

2. Medium scale units and hotel industry

12.50 14.00

3. Composite mini loans :

(a) SC/ST

(b) Others

10.25

10.25

10.25

12.50

4. Transport:

(a) single vehicle-owner driven

(b) Non-owner driven

12.50

15.00

12.50

15.00

5. Trawlers:

(a) Up to Rs. 5 lakhs

(b) More than Rs.5 lakhs

12.50

12.50

14.00

6. Soft loan 1.00 1.00

7. Registered medical practitioners

13.50 13.50

Conditions for Sanction (a) Repayment Holiday. Normally repayment holiday of 1 to 2 years is considered. In

exceptional cases, enhanced repayment holiday may be considered on merits depending on the gestation period of the project, in the case of units in backward area.

(b) Repayment Period: Normally the loan is made repayable in 8 to 10 half-yearly installments depending on the merits of the project and also its cash accrual position Enhanced repayment period may also be considered on merit in respect of units situated in backward areas. The half-yearly interest and half-yearly instalments of principal are normally repayable in alternative quarters.


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(c) Deferred Payment Commission : A guarantee commission of 2% p.a payable half yearly on deferred payment guarantee outstanding.

(d) Underwriting Commission : An underwriting commission of 2.5% payable on the amount underwritten by the Corporation in respect of units situated in other than backward areas; in respect of units situated in backward area the commission chargeable is 1.25%.

(e) Commitment Charges : A commitment charge of 1% in the case of units situated in non-backward areas (1/2% in the case of units situated in backward areas) will be levied on the amount undrawn by the borrower on the loan sanctioned after 3 months from the date of acceptance of the Corporation resolution by the borrower or after one month from the date of sanction of refinance by the Industrial Development Bank of India, whichever is later or latest. If the borrower does not communicate his acceptance within 30 days of receipt of the resolution sanctioning the loan, the Corporation sanction will no longer be valid.

(f) Various Financial Norms: (1) Debt Equity Ratio; In the case of medium scale units and small scale units the Corporation normally permits the debt-equity ratio of2:l and 3 : 1 respectively. (2) Promoter's Contribution : The following are the minimum promoters’ contribution prescribed both for small and medium scale units.

(i) Units promoted by technician-entrepreneur—5%

(ii) Units promoted in backward areas—17.5%

(iii) Units promoted in non-backward areas—20%

However, the Corporation may stipulate higher promoters' contribution, wherever considered necessary.

The project cost will include cost of land, buildings, plant and machinery, technical know-how, if any, contingencies, cost of other assets, pre-operative expenses which include formation expenses, interest during construction, start up expenses, etc., and margin for working capital. Central/State Government investment subsidy is considered as equity for the purpose of computation of debt-equity ratio; but will not be considered as promoter's contribution. (3) Margin of Security : In case of term loans to small-scale units the Corporation normally stipulates 25% security margin on fixed assets. In case of medium scale units the Corporation normally stipulates 25% to 50% on fixed asset. In deciding on the amounts of the loans eligible the Corporation takes into account not only the value of the existing assets but also the value of the assets acquired. But generally, the loan disbursed will at no time exceed stipulated advance/margin on the value of assets existing plus, the value of assets acquired. Book value or market value (of fixed assets) whichever is lower will be arriving at the value of security. The income-tax rates for depreciation with basis for arriving at the value. A suitable certificate from the applied about the value of security based on the original value as reduced by depreciation according to the income-tax rates should be produced by the applicant company. and sent along with the application. The security margin may be relaxed in certain cases wherever considered


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necessary on the merits of the case. Wherever the industrial assets are not considered adequate, the Corporation may stipulate collateral securities also wherever considered necessary.

Deferred Payment Guarantee : In respect of deferred payment guarantee, the margin of security will be 25% of deferred payment guarantee, or 25% of the guarantee amount kept by way of cash deposit. Higher margin will be stipulated wherever considered necessary.

Personal Guarantee : The Corporation normally takes the personal guarantee of all or any of the promoter /directors depending on the merits of the case and no commission shall be payable to the guarantors in this regard.

Security documents: The Corporation sanctions financial assistance on the first charge by means of registered mortgage on fixed assets viz; land, building, plant and machinery) of the industrial units. In the case of joint loans with others, participating financial institutions, financial assistance may be considered on pari passu charge basis wherever considered necessary. The company may accept equitable mortgage wherever permissible in such cases. The small-scale industrial units are exempted from levy of stamp duty in respect of mortgage deeds to be executed in favour of the Corporation. The Corporation also accepts hypothecation in respect of loans less than Rs. 5 lakhs and involving only the purchase of machinery, when the unit is put up in a lease/rental premises.

COMMERCIAL BANKS

Commercial banks assist in providing the financial requirements of entrepreneurs for their projects. The total bank borrowings may take the form of term loan or working capital loan. The Indian commercial banks generally do not make advances for longer periods. Banks appear to be of the opinion that, with their present resources, they cannot make advances to entrepreneurs on a long-term basis, However, the rapid industrialisation is advocated for increased long-term participation by commercial banks.

The Government of India, to encourage term financing by commercial banks, sponsored a formal scheme of term loans in 1958, under which the banks were to be provided refinancing facilities against approved term loans from the Refinance corporation of India Ltd. (RCI) created in June 1958. The RCI was merged with IDBI with effect from September 1, 1964.

Refinance Facility to Commercial Banks

Refinance to commercial banks is granted only against those term loans which fulfill the following eligibility requirements:


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1. The loans should be for a period ranging between three and ten years.

2. The maximum amount of loan not exceed Rs. 1 crore (outstanding) but the IDBI is prepared to consider applications for largest amounts on merit. The minimum limit is fixed at Rs. 5 lakhs, but this is lowered to Rs. 1 lakh in the case of small-scale industries, provided the loan is covered under the Credit Guarantee Scheme.

3. The loan should have been granted for the purpose of increased production in industries which are listed for development in the Five Year Plans or which serve the purpose of the Plans.

Participation Loans

The commercial banks also take part in the financing of large industrial projects in participation with other term lending institutions and IDBI. Such participation loans have a common term loan agreement. The participating banks decide on the amount of contribution by each bank and other terms and conditions for the loan repayment programme. The banks charge an agreed uniform rate of interest from the entrepreneurs availing the loans.

Situations for Term Financing

Term financing is mainly availed of by entrepreneurs for the establishment of new industrial units, acquisition of fixed assets, expansion in plant capacity or modernisation and renovation of an existing unit. Also, margin money for working capital in the case of new entrepreneurs is sometimes required on a long-term basis. Funds for acquiring these assets remain invested for a number of years till the investment is repaid in full out of the surplus generated through the use of the assets acquired as per agreed repayment programme.

Commercial Banks' Method of Sanctioning Term Loans

Commercial banks have devised an application form to be filled by aspirant borrowers. The bankers on receipt of the application make a preliminary examination of the project proposal and whether it has an acceptable purpose and falls in line with Government's policy. They also check whether the promoters are in possession of industrial licence, approval for foreign collaboration, if any, capital goods clearance for import of equipment and clearance under the MRTP Act. The banker's next step is the appraisal of the loan proposal.


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APPRAISAL OF TERM LOANS

There are four broad aspects of appraisal of term loans; they are: (1) Financial Feasibility (2) Technical Feasibility (3) Economic Feasibility, and (4) Management Competence.

(1) Financial Feasibility. The banker examines the statements given with the project proposal in respect of (i) Cost of project, (ii) Cost of production and profitability, (Hi) Cash flow estimates (sources and application of funds) during the currency of the loan and (iv) Proforma balance sheets at the end of each financial year during the period of the loan.

(i) Cost of the project. This includes capital cost and working capital requirements for start up and operation of the project. The project cost also includes the anticipated cash loss due to delay in reaching a projected level of output. Next, the banker ascertains all the sources of financing the whole project. The banker, in this respect, makes note of the Debt-Equity ratio. If the total debts are disproportionate to owned funds it means to the banker that the business is run on lent funds and creditor's stake in the business is high. A commercial banker would prefer a declining debt-equity ratio over the years as it indicates financial strength of a unit.

(ii) Costa/production and profitability. Quantity and price of inputs, transport cost and other variable costs, selling and bank expenses and contingency provisions are looked into in the cost of production and profitability statement. Break-even analysis is also made after taking into account fixed and variable costs on the basis of full capacity.

(iii) Cash Flow estimates. A study of the cash flow estimates indicates to the banker all movements of funds from acquisition of assets till the final stage of sale of product. The following points are analysed in detail: a. Sources of finance during the construction period and the schedule of drawings. b. The disposition of funds. c. Gross profit after depreciation. d. Bank borrowings with reference to acceptable current assets less margin. e. Loan repayment instalments with the use of Debt Service Coverage ratio. A ratio or

2 : 1 is usually aimed at for this purpose. f. Capital expenses on replacement/renovation in later years.

(iv) Proforma Balance Sheets. There is a difference in the financial appraisal of new projects and that of existing concerns requiring funds for expansion. In the case of new projects, assessment is based on calculated estimates and expectations, while in the case of existing concerns, past records of the borrower's performance are available and future forecasts are based thereon. The proforma balance sheets i" both the cases are subject to


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Ratio Analysis. The following are the broad categories of ratios used in analysis of balance sheets: Liquidity ratios, Net worth ratios, Turnover ratios and Profitability ratios.

(2) Technical Feasibility. Technical feasibility examines the project with reference to (i) Location, (ii) Land and Buildings, (iii) Plant and Machinery and (iv) Technical competence.

(i) Location. Locational advantages/disadvantages of the project such as sources of raw materials, labour, power, markets and transport facilities are scrutinized here.

(ii) Land and Buildings. The bankers examine the particulars of the existing or Proposed buildings whether the land is freehold or leasehold. If the land is on lease, the terms and conditions of the lease are carefully examined.

(iii) Plant and Machinery. It is ensured that the cost of equipment is based on proper quotations from suppliers and that suitable provision has been made for insurance, freight, duty, erection charges and other expenses. The position regarding the spare parts is also ascertained.

(iv) Technical Competence. The banks ensure that suitable technical personnel are available and necessary arrangements have been made for training the staff.

(3) Economic Feasibility. The first step in this regard is to consider the present position, taking into account the total supply and demand. The bankers also look into the price level and the prevalence of controls. A market survey is also conducted to test the product suitability to the economic environment. The competition faced by the enterprise in terms of capacity, production, scope for expansion, etc., are also scrutinised.

(4) Managerial Competence. The management's competence to have perception of the vulnerability of the enterprise to any given foreseeable situation and the ability to conceive appropriate solutions therefore, and whether there are adequate expertise in specified fields in the management are examined.

MOST SUITABLE AGENCY FOR ASSISTANCE

An existing or a prospective entrepreneur needs to keep the following factors in view in order to decide the institution or institutions to be approached for financial assistance:

(a) Amounts of term loans and various types of working capital facilities required.

(b) Terms and conditions of various institutions for the grant of loans and more importantly the time taken for sanctions and disbursement of the same.

Term loans: Terms and conditions governing grant of facilities for acquisition of fixed assets by various institutions like State Financial Corporations, Commercial banks, National Small Industries Corporation, State Industrial Development Corporations, etc., vary from institution to institution. It may be noticed that there are variations in their margin requirements, scale of assistance, rate of interest and duration of repayment.


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Keeping these variations in view, the decision to approach a particular credit institution for term assistance should depend upon the following situation:

(a) Items to be manufactured : A new product line brings in the maximum return when competition is lacking, therefore any delay in undertaking the production is likely to wipe away any initial gains that the unit may have in view. Thus a costly term loan would be cheaper if it could be obtained expeditiously. In the case of a conventional item, where competition has already reduced the profits a minimum, the entrepreneur can bear with delay in commissioning the projects without any particular disadvantage.

(b) Rise in the Cost of Construction and Price of Machinery: There had been a general price rise throughout the economy though there were variation between different groups and sub-groups of industrial products. The prices of cement, iron and steel, bricks and labour had been rising continuously; similar had been the situation in the case of machinery and equipment. Therefore, unless an entrepreneur had already entered into a contract for the supply of machinery and undertakes to get the delivery of the same according to terms of agreement, there was every likelihood that delay in undertaking construction or purchase of machinery would increase the cost of the project. Accordingly, during such periods when prices are rising, the loans which are sanctioned are disbursed belatedly, even if cheaper according to interest rate, would prove to be costlier.

(c) Amount of Assistance Required: Time taken in the sanction and disbursement of loan varies either with the amount of loan required or the type of agencies being approached for assistance. The effort and expense involved in the follow-up of the application are more or less the same, excepting some marginal differences, irrespective of the amount of term loan asked for with State Financial Corporations, National Small Industries Corporation and State Small Industries Corporations. The time taken by commercial banks is, however, reported to be comparatively less, particularly if the assistance can be sanctioned by the branch manager. Accordingly, if the amount of term loan required is small, it would be convenient if it is obtained from commercial banks.

(d) Backward Areas : In backward areas, term loans for expansion or setting up a new unit are available at concessional terms which, among others, include lower effective interest rate varying from 8 to 9 per cent, a longer repayment period and extended initial repayment holiday if the credit institutions avail of refinance facilities from Industrial Development Bank of India. It would, therefore, be appropriate to ascertain the names of institutions which avail of refinance facilities and obtain assistance from those agencies. As at present. State Financial Corporations obtain refinance from Industrial Development Bank of India, commercial banks are reported to be making a beginning in this regard. If the commercial banks do not seek refinance from IDBI, then the interest rate is likely to range between 13 and 15 per cent per annum.

(e) Areas other than backward: In these areas, terms for grant of assistance, both by commercial banks and State Financial Corporations, are more or less the same as in the case of backward areas except that effective rate of interest ranges from 10 to 10.5 per cent per annum, provided these institutions avail of refinance from IDBI. In case of


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commercial banks, grants assistance without seeking refinance, they are likely to charge an interest rate of 13 to 15% per annum.

(f) Capital Contribution by Entrepreneur: All credit institutions expect the “borrower to have a stake by making some contribution towards the cost of the Project. In the case of small- scale industries, commercial banks generally prescribe Margin of 30% to 35%, while State Financial Corporations with the exception of two or three, grant assistance with a margin of 25%. This margin requirement is further relaxed in the case of units in backward areas. State Financial Corporations also finance a part of installation expenditure and investment on moulds and dies, etc., national small Industries Corporation, on the other hand, supplies machinery on hire purchase an earnest deposit of 15 to 20 per cent of the cost of machinery and equipment. In the case of technocrats and educated unemployed persons, credit institutions have relaxed their margin requirements. State Governments also help the entrepreneurs by grant of seed capital/margin money to the extent of 10% of the project cost.

(g) Replenishment of Resources: Some of the State Financial Corporations consider assistance for replenishment of resources if the units have acquired fixed assets from their own resources or by recourse to temporary borrowings even prior to the date of application. Such loans are also granted either for repayment of debts obtained on onerous terms, or, where investment in fixed assets has depleted the working capital of the unit.

APPROACHING AN INSTITUTION FOR ASSISTANCE

After choosing the suitable agency and estimating one's needs, the next course is to approach the respective institution in order to obtain required credit facilities This includes obtaining application form, filling up the same, its follow-up and sanction and disbursement of assistance, these steps are described below in brief:

1. Application Form. Application forms of National Small Industries Corporation and State Small Industries Corporations are available from headquarters or regional offices of state department of industries both at its headquarters and district offices. In case of State Financial Corporations, forms and detailed terms and conditions can be obtained from the head office of the Corporation or its branch offices. Application forms of NSIC and of some other agencies are available at a nominal price. In the case of banks, forms are available free of cost from the bank's branch offices. The applicant can discuss the proposal with the branch manager to determine his eligibility and the scheme under which he can be assisted.

2. Filling up of Application Form. The application form, in whatever form it is devised, in the case of small-scale industrial units, artisans and craftsmen, require information about the organisation of the unit (whether proprietary, partnership, co-operative society, etc.), year of establishment, items of manufacture, production, sales, and profits and assets and liabilities for three previous years (copies of profit and loss account statements and balance sheets are required to be enclosed by existing small-scale industrial units; not by craftsman or an artist); and projected financial statements; list of machinery and


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equipment, if any; availability of water, power, raw materials, and sales arrangements, and requirements of credit facilities. In the case of other small borrowers, e.g., self-employed persons an professionals, transport operators, agriculturists, etc., the application form is tailored as to obtain information relevant to a particular activity or vocation Properly and adequately filled in application accompanied by relevant documens and information solves most of the problems. It is, therefore, preferable to fill in the application form, collect all the connected papers and contact a person familiar with this job or an official in the agency itself. With his help, the application form should be filled in properly and completed in all respects.

If loan is required for a new project and it is intended to approach state Financial Corporations for term loan and the loan is required urgently, it would be desirable to forward title deeds in respect of immovable property to be mortgaged along with the application with a request that title to the property and its encumbrance or otherwise may be verified. This formality takes some time and thus the disbursement of loan, after it is sanctioned, is expedited if the title to the property, etc., has been investigated beforehand. It may, however, be borne in mind that the amount spent towards investigation of title would prove futile if the loan is declined.

3. Follow-up of the Application. Application to National Small Industries Corporation is routed through District Level Officer to Directorate of Industries and then to the Regional Office of the Corporation. In the case of State Financial Corporation, application is routed by the branch office of the Corporation, if any, to its head office. These Corporations more often refer the case for technoeconomic reports to the Director, Small Industries, and for credit reports to the bankers of the unit. Sometimes, the proposal is referred to technical consultants. Banks generally entertain the proposal through their branch offices; they may refer the case to Director, Small Industries Service Institute when installation of machinery is involved or a new unit is proposed to be set up. Follow-up of the loan proposal would be helpful in expediting its disposal as it makes the applicant aware of the deficiencies in the proposal and enables him to take care of the same well in time. At the time of appraisal, officials of the lending agencies meet with the entrepreneur and raise many questions, which may seem to be personal. One should not feel embarrassed at these questions; correct answers to these queries would help the agency to process the case expeditiously.

4. Disposal of the Application. After the application is processed and considered by the competent authority, the loan is either sanctioned as applied for, or reduced facilities are granted or the case is rejected. Normally a proposal is rejected when it is not feasible economically, technically or otherwise. If it is considered that an application has been wrongly rejected, the causes for rejection may be ascertained and the credit institution may be requested to reconsider the application after additional information/documents are furnished to remove the discrepancies


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Sometimes, it is likely that these agencies may grant reduced facilities than asked for. It would be appropriate to approach the branch manager or official of the concerned agency and explain to him his need-based requirements and a formal request is then made to that effect.

5. Sanction, Documentation and Disbursement. The credit institutions Worm the applicant about the grant of assistance, and the terms and conditions governing the same. After the acceptance of these terms and conditions by the prospective borrower, documents are got executed from him and assistance disbursed.

Check Your Progress 1. Name the various financial investment institutions ……………………………………………...……………………………………………... ……………………………………………...……………………………………………... ……………………………………………...……………………………………………... ……………………………………………...……………………………………………...

5.2 INSTITUTIONAL SET-UP

In order to accelerate the small industries development. Governments at the Central and State levels have set up a number of development agencies/institutions such as District Industries Centres (DICs), Small Industries Service Institutes (SISIs) and Small Industries Development Organisations, etc. All India Financial Institutions — IDBI, IFCI, ICICI — have promoted/sponsored a number of Technical Consultancy Organisations (TCOs) to assist small entrepreneurs in different ways. In 1986, the Small Industries Development Fund was set up in-IDBl in order to assist small scale, village and cottage industries and tiny sector units in the rural areas. Recently, the Small Industries Development Bank of India (SIDBI) has been established to help small-scale units. In addition to these institutions there are agencies like National Science and Technology Entrepreneurship Board, Khadi and Village Industries Commission, Commercial Banks, EXIM Bank and Cooperative Banks who undertake promotional activities aiming at facilitating industrial development.

5.2.1 DISTRICT INDUSTRIES CENTRES

Governments — both Central and State — have in the past taken a number of measures for the development of small and village industries, but the actual achievements have been far below the expectation. Also the focus of attention for industrial development was mainly on large cities and State capitals to the neglect of district areas. In addition, multiplicity of institutions involved in small industries development and complicated systems and procedures made the job of promoting the industrial units an uphill task for


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small entrepreneurs. Hence, it was felt necessary to establish a development agency which could provide all services and facilities to village and small industries under one roof. Accordingly, the DICs were established in May 1978 in order to cater to the needs of small units.

Each district has a DIC at its headquarters. And the main responsibility of DIC is to act as the chief coordinator or multifunctional agency in respect of various Government departments and other agencies. The prospective small entrepreneur would get all assistance from DIC for setting up and running an industry in rural areas. Up to 1991 about 422 DICs have been set up throughout the country. These DICs have assisted more than 1.5 lakh units generating employment for more than 10.3 lakh persons. The metropolitan cities of Delhi, Mumbai, Calcutta and Chennai have been kept outside the purview of the DIC.

Organisational Set-up. Each DIC has one General Manager of the rank of Joint Director of Industries as the head and seven managers each looking after separate functional area as follows:

(1) Manager (Economic Investigation)

(2) Manager (Machinery and Equipment)

(3) Manager (Research, Extesion and Training)

(4) Manager (Raw Materials)

(5) Manager (Credit)

(6) Manager (Marketing)

(7) Manager (KVIC and RAP).

The General Manager has to provide an effective leadership and coordination. Hence, the success of the centre largely depends upon the functioning of General Manager and his team of managers and other personnel.

Functions of DIC

Identification a/Entrepreneurs. DIC develops new entrepreneurs by conducting entrepreneurial motivation programmes throughout the district especially in Panchayat Union Headquarters and small towns.

Selection of Projects. DIC offers technical advice to new entrepreneurs for, the selection of projects suitable to them.

Provisional Registration under SSI. After the selection of projects, entrepreneurs are issued with provisional SSI Registration which is essential for obtaining assistance from the financial institutions.


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Purchase of Fixed Assets. DIC sponsors the loan applications to TIIC, SIDCO and Banks for the purchase of land and buildings and sanctions margin money under Rural Industries Project Loan Scheme payable to other financial agencies or the purchase of plant and machinery.

Clearances from Various Departments. It takes the initiative to get clearances from various departments and takes follow-up measures to get speedy power connection.

Assistance to Raw Material Suppliers. It makes necessary recommendations to the concerned raw materials suppliers and issues the required certificates for the import of raw materials and machinery, wherever necessary.

Assistance to Village Artisans and Handicrafts. DIC arranges for the financial assistance with the lead bank of nationalised banks of the respective areas.

Interest-free Sales Tax Loan. SSI units set up in rural areas can get IFST) up to a maximum limit of 8% of the total fixed assets from SIDCO. But the sanction order from the same is being issued by DIC. The DIC also recommends the SSI units to NSIC for registration for Government Purchase Programme.

Subsidy Schemes. DIC assists SSI units and rural artisans to get subsidies such as power subsidy, interest subsidy for engineers, subsidy under IRDP, etc. from various institutions.

Training Programmes. DIC gives training to rural entrepreneurs and also assists other units giving training to small entrepreneurs.

Self-employment for Unemployed Educated Youth. This scheme was introduced in 1983-84 for youths between 18 years and 25 years with SSLC, technocrats and women are given preference.

District Industries Centres are supposed to provide pre-investment, investment and post-investment assistance to entrepreneurs under one roof. These centres have done commendable work in the promotion of small industries development of entrepreneurship and generation of self-employment. But there is need to suitably restructure the district industries centres for playing a leading role in district level industrial development.

5.3 SMALL INDUSTRIES DEVELOPMENT ORGANISATION (SIDO)

SIDO is a policy-making coordinating and monitoring agency for the development of small scale entrepreneurs. It maintains a close liaison with government, financial institutions and other agencies which are involved in the promotion and development of small scale units. It provides a comprehensive range of consultancy services and technical, managerial, economic and marketing assistance to SSI units. It has a network of 25 small Industries Service Institutes, 20 branch SISIs, 41 Extension Centres, four Regional Testing Centres, one Product and Process Development Centre, three Footwear Training Centres and five Production Centres.


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Functions The main functions of the SIDO are. coordination, industrial development an industrial extension service. Some important functions are :

(1) To assess the requirements of indigenous and imported raw materials and components for the small-scale sector and to arrange their supplies;

(2) To collect dataxm consumer items which are imported and encourage the setting up of new units by giving them coordinated assistance;

(3) To prepare model schemes, project reports and other technical for prospective entrepreneurs;

(4) To assist and advise the Controller of Capital Issues in regard to the issue of import licences and the imposition of import restrictions on various whose manufacture has already been undertaken indigenously by the new units;

(5) To secure reservation of certain products for the SSIs.

NATIONAL SMALL INDUSTRIES CORPORATION LIMITED (NSIC) The NSIC was set up in 1955 with the objective of supplying machinery and Equipinent to small enterprises on a hire-purchase basis and assisting them in procuring Government orders for various items of stores.

The Corporation's Head Office is at Delhi and it has four regional offices at Delhi, Mumbai, Chennai and Calcutta, and eleven branch offices. It has one centralliaison office at Delhi and depots and sub-centres. The main functions of NSIC are:

(1) To develop small-scale units as ancillary units to large-scale industries ;

(2) To provide SSIs with machines on hire-purchase basis;

(3) To assist small enterprises to participate in the stores purchase programme of the Central Government;

(4) To assist small industries with marketing facilities;

(5) To distribute basic raw materials through their depots;

(6) To import and distribute components and parts to actual small-scale users in specific industries; and

(7) To construct industrial estates and establish and run prototype production-cum-training centres.

The NSIC has taken up the challenging task of promoting and developing small-scale industries almost from scratch and has adopted an ‘integrated approach’ to achieve the socio-economic objectives.


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DIRECTORATES OF INDUSTRIES OF THE STATE GOVERNMENTS The small-scale industries is a State subject and, therefore, the development and implementation of the schemes of assistance to SSIs is the primary responsibility of the State Government. Directorates of Industries in each State do the work relating to the development of industries in general and small-scale industries in particular. Each directorate is staffed with administration and technical officers at State headquarters and by a District Industries Officer with supporting staff in each district. The State Directorates run various training schemes, production schemes and common facilities schemes. They also provide facilities of developed industrial land 2nd factory sheds in industrial estates, allocate quotas of scarce raw materials, certify import requirements and organise industrial co-operatives. Their functions are varied and have grown with the development and diversification of the small- scale sector.

STATE SMALL INDUSTRIES CORPORATIONS Many State Governments have set up Small Industries Corporations in order undertake a number of commercial activities. The most important of these Cities are distribution of scarce raw materials, supply of machinery on hire-purchase basis, constitution and management of industrial estates, procurement of orders from Government Departments, assistance in export marketing and in certain cases provision of financial, technical and managerial assistance to small enterprises.

5.4 SMALL INDUSTRIES SERVICE INSTITUTES (SISIS)

Established in 1956 this institute — one in each State — has been rendering very useful service to small-scale industries. The assistance rendered by the institute and its extension centres in Tamilnadu may be listed as follows :

1. Technical Consultancy and Advisory Service. This relates to selection of profitable small enterprises, choice of appropriate machinery and equipment, appraisal of the technique of manufacture, processing of raw materials, adoption of recognised standards of testing, quality performance of the small industry products and encouraging small units to participate in Government Stores Purchase Programme. The institute explores the possibility of setting up small-scale units to supply parts/components to large-scale industries.

2. Common Facility Service. This includes supply of designs and drawings and provision of workshop facilities for. the manufacture of dies, tools, jigs and fixtures and components.

3. Training Facilities. Training is provided for workers in basic trades in the workshops attached to this Institute and its extension centres, to increase their productivity and this helps to encourage development of small-scale industries in rural areas.


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Training in various aspects of industrial and business management is also provided for the benefit of small industrialists.

A training course in small industries entrepreneurship and management to young engineers with emphasis on the practical aspects of small industries management is conducted. This has been instrumental in creating a new class of qualified entrepreneurs.

4. Testing facilities. Basic testing facilities (both physical and chemical) are provided in the laboratories and workshops attached to this institute at concessional rates.

5. Marketing Assistance. Economic information on the nature and extent of the market for specific products is collected and furnished to small industrialists at their request. The institute offers export promotion service by counselling on export procedures and trends in foreign markets.

Market survey for specific products of small enterprises is also undertaken on a regional basis to enable the small industrialist to increase the sales of his products in the region.

The special information bureau, called the Tamilnadu Sub-Contract Exchange, is a central information centre where machine capacities of small-scale industries are registered and enquiries from large industries for the manufacture of different components are passed on to registered small-scale units having spare capacity, so as to enable them to feed the requirements of large-scale units.

The institute conducts economic survey of particular areas to ascertain their industrial potentialities.

5.5 TAMILNADU SMALL INDUSTRIES DEVELOPMENT CORPORATION (SIDCO)

In Tamilnadu SIDCO is the State Small Industries Corporation. It plays a lead role in developing small-scale sector. It provides the following facilities to small- scale units :

a. Provision of constructed sheds/plots in industrial estates. These are sold to entrepreneurs on hire-purchase basis or given on rental basis.

b. Assistance in procuring some scarce key raw materials like iron and steel, paraffin wax, potassium chlorate, fatty acids, etc., through its various distribution centres.

c. Financial assistance in the form of subsidies to industrial units in backward areas like Central Investment Subsidy, State Capital Subsidy; Interest-free Sales Tax Loans, Power Tariff Subsidy and Margin Money Assistance for the rehabilitation of the sick small-scale industries

d. Marketing assistance to small entrepreneurs.


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STATE INDUSTRIES PROMOTION CORPORATION OF TAMILNADU LIMITED (SIPCOT)

SIPCOT was set up with the specific objective of playing a catalytic role in the promotion and development of medium and major industries and to hasten the industrial dispersal in backward and underdeveloped areas of the State.

SIPCOT's role is to plan, promote and develop medium and major industries and its promotional activities comprise the following :

i. Provision of financial assistance on liberal terms to medium and major industries under IDBI Refinance Scheme.

ii. Implementation of a package of incentives for the benefit of entrepreneurs.

iii. Development of potential growth centres and provision of developed lands at reasonable cost on easy payment terms.

iv. Provision of various ancillary services for the entrepreneurs.

SIPCOT's financial assistance for medium and major industries will be in the form of:

1. Term loan under IDBI's Refinance Scheme.

2. Seed Capital under IDBI Seed Capital Scheme.

3. Underwriting the capital issues and participation in equity.

4. Loan for employing repatriates.

INDIAN INVESTMENT CENTRE (IIC)

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

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

The centre functions as a close link between the Government of India and foreign business enterprises. It brings the problems and'reactions of entrepreneurs to the notice of the Government in an informal manner and explains to prospective investors the rationale of Government policies and procedures.


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ENTREPRENEURIAL GUIDANCE BUREAU (EGB)

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

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

NATIONAL ALLIANCE OF YOUNG ENTREPRENEURS (NAYE) National Alliance of Young Entrepreneurs (NAYE) sponsored an Entrepreneurial Development Scheme with Bank of India in August 1972 on pilot basis. This scheme, known as BINEDS, is operative in the States of Punjab, Rajasthan, Himachal Pradesh, Jammu and Kashmir and Union Territories of Chandigarh and Delhi. NAYE entered into similar arrangements with a few other banks as are described below:

1. Dena Bank ... NAYE : For promoting ancillary units and small-scale enterprises in Chennai.

2. Punjab National Bank.... NAYE: Entrepreneurship Assistance Programme launched in the States of West Bengal and Bihar in March 1973.

3. Central Bank of India ... NAYE : Entrepreneurship Development Programme being implemented in Maharashtra.

4. Union Bank of India .... NAYE : Entrepreneurship Development Programme inaugrated in June 1975 in Tamilnadu with an intention to adopt 200 entrepreneurs.

The main objective of the scheme is to help young entrepreneurs in identifying investment and self-employment opportunities; securing proper arrangements for their training including development of their manufacturing capabilities; providing necessary financial assistance on the basis of properly prepared reports; securing package of consultancy services on appropriate terms and arranging for all possible assistance, facilities and incentives being extended to young entrepreneurs by Government and other institutions.


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Financial assistance, which is granted by the commercial banks is generally restricted to Rs. 2 lakhs in the case of individual entrepreneurs and Rs. 3 lakhs for two or more entrepreneurs and is worked out on 'need basis'. The term loans (for acquisition of land, building, plant and machinery) are repayable out of cash generation of the unit. Suitable repayment holiday concessions for repayment of principal and interest are provided during the gestation period. The extent of entrepreneur's own investment is decided on the basis of resources available at his/her family's disposal and in deserving cases full cost of the project is financed by the bank.

SMALL INDUSTRY EXTENSION TRAINING INSTITUTE (SIETI)

SIET Institute entered the field of consultancy en ad hoc basis mainly to support the activities of State Governments and development corporations. SIETI's consultancy services have recently become broad-based in terms of both the types of assignments undertaken and area covered. The activities have been operative in Jammu and Kashmir, Karnataka, Nagaland, Meghalaya, Manipur, Assam, Maharashtra, and Andhra Pradesh. The assignments in the earlier years pertained to (1) identification of industrial opportunities, (2) identification of growth centres, (3) preparation of regional development plans, (4) industrial profiles, (5) feasibility studies, (6) organisational development, and (7) designing information system. They now include entrepreneurial development training and counselling of the educated unemployed; management counselling for sick industrial units and training of trainers and consultants for entrepreneurial development. Particular attention is given to industrialisation in backward areas.

NATIONAL PRODUCTIVITY COUNCIL (NPC)

Recently National Productivity Council has started a Package Consultancy Service to Small Industries. This service is in three stages.

a. Train young and prospective entrepreneurs;

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

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


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NATIONAL RESEARCH DEVELOPMENT CORPORATION OF INDIA

(NRDCI)

NRDCI makes available processes which have been developed by various laboratories in the country. It brings out periodically a publication, entitled 'NRDC ' Processes’, which gives in brief particulars of the various processes, uses of the products, raw materials required and capital outlays. If an entrepreneur is interested to adopt a process, he is expected to pay a lumpsum premium; royalty is also payable bi-annually for a specified period after starting production. The concerned institute or laboratory releases the process details to the licensee after he has executed an agreement. NRDC also provides technical appraisals on a few projects, which are variously priced at Rs. 25 to Rs.750 per copy.

KHADI AND VILLAGE INDUSTRIES COMMISSION (KVIC)

KVIC was established in 1953 with the primary objective of developing Khadi and village industries and improving rural employment opportunities. Its wide. range of activities include training of artisans, extension of assistance for procurement of raw materials, marketing of finished products and arrangement for manufacturing and distribution of improved tools, equipment and machinery to producers on concessional terms.

KVIC provides assistance to Khadi and village industries which are characterised by low capital intensity and ideally suited to manufacturing utility goods by using locally available resources. There are about 26 specified village industries such as processing of cereals and pulses, leather, cottage matches, gur and khandsari, palm gur, non-edible oils and soaps, bee-keeping, village pottery, carpentry and blacksmithy, gobar gas, household aluminium utensils, etc.

KVIC’s policies and programmes are executed through 30 State Khadi and Village Industries Boards, 2,320 institutions registered under the Societies Registration Act, 1960 and about 30,600 Industrial Co-operative Societies registered under State Co-operative Societies Act. Activities involving pioneering types of work, such as developing new industries in hilly, backward and inaccessible areas are undertaken by KVIC directly.

TECHNICAL CONSULTANCY ORGANISATIONS (TCOs)

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


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Activities of TCOs. The activities of TCOs cover all the stages of project cycle starting from the stage of identification of project ideas by entrepreneurs to project implementation and operation. Thus, their activities include : i. Industrial potential surveys ii. Preparation of profiles and feasibility studies iii. Evaluation of projects referred to them by financial institutions iv. Conduct of entrepreneurship development programmes v. Provision of technical and administrative assistance to small/medium enterprises,

where necessary vi. Assisting such entrepreneurs in their modernisation, technical upgradation and

rehabilitation programmes, etc.

Additional Services. Apart from providing consultancy services, TCOs are now entering into the field of transfer of technology, rural industrial development, merchant banking and retainer consultancy services. Some of the TCOs have completed or have on hand training assignments for setting up small and medium industrial projects.

In line with the national priorities, TCOs have been giving special attention to development of industries in backward areas of the country and are intimately involved in the institutional efforts for industrialisation of no-industry districts and adoption of Integrated Rural Development Programmes for rural industries with accent on improved technology.

Table 5.1: LIST OF TECHNICAL CONSULTANCY ORGANISATIONS (TCOs)

Name of TCO Year of establishment

Area of operations Lead sponsoring financial institution

I. Andhra Pradesh Industrial & Technical Consultancy Organisation Ltd. (APITCO)

1976

Andhra Pradesh

IDBI

2. Bihar Industrial & Technical Consultancy Organisation Ltd. (BITCO)

1974

Bihar

IDBI

3. Gujarat Industrial & Technical Consultancy Organisation (GITCO)

1978 Gujarat

ICICI

Haryana-Delhi IFCI 4. Haryana-Delhi Industrial Consultants Ltd. (HARDICON)

1985

Himachal Pradesh IPCI 5. Himachal Consultancy Organisation Ltd. (HIMCON)

1977


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Tamil Nadu ICICI 6. Industrial & Technical Consultancy Organisation of Tamil Nadu Ltd. (ITCOT)

1979

7. Jammu & Kashmir Industrial & Technical Consultancy Organisation Ltd. (J & KTTCO)

1977 Jammu & Kashmmir

IDBI

8. Kerala Industrial & Technical Consultancy Organisation Ltd. (KTTCO)

1972

Kerala

IDBI

9. Madhya Pradesh Consultancy Organisation Ltd. (MPCON)

1979 Madhya Pradesh IFCI

10. Maharashtra Industrial & Technical Consultancy Organisation Ltd. (MITCON)

1982 Maharashtra, Goa, Daman & Diu

ICICI

11. North-Eastern Industrial Consultants Ltd. (NECON)

1987 North-Eastern Region

IDBI

12. North-Eastern Industrial & Technical Consultancy Organisation Ltd. (NEITCO)

1973 Nagaland, Manipur, Tripura & Mizzoram

IDBI

13. North India Technical Consultancy Organisation Ltd. (NITCO)

1984 Punjab & Chandigarh

IDBI

14. Orissa Industries & Technical Consultancy Organisation Ltd. (ORITCO)

1976 Orrisa IFCI

15. Rajasthan Consultancy Organisation Ltd. (RAJCON)

1978 Rajasthan IDBI

16. Uttar Pradesh Industrial Consultants Ltd. (UPICO)

1974 Uttar Pradesh IFCI

17. West Bengal Consultancy Organisation Ltd. (WEBCON)

1979 West Bengal, Sikkim, Andaman & niccobar Island

IDBI

18. Technical Consultancy Services Organisation of Kamataka. (TECSOK)

1977 Kamataka IDBI

Source: Report on Development Banking in India, 1991 -92, p. 204.


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TCOs Table 5.2: Summary of Operations of Technical Consultancy

Organisations

Type of service Number 1. Feasibility studies/ project reports / profiles 3,4852. Project appraisals 563. Surveys/studies Industrial potential surveys, market surveys, area

development surveys and others

81

4. Modernisation/diagnostic studies 3485. Functional industrial complexes/turnkey assignments 116. Other assignments/specific studies 242

Total 4,2237. Entrepreneurship Development Programmes (EDPs) a) Programmes conducted b) Persons trained

248

7,1978. Entrepreneurship Awareness Camps/ Gramodaya

EDPs/Skill Upgradation Programmes /MEGSAT/ Nehru Rozgar Yojana,

36

9. SEEUY Training Programmes 11

INDUSTRIAL AND TECHNICAL CONSULTANCY ORGANISATION OF TAMILNADU (ITCOT)

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

During the six Five-Year Plan periods ITCOT has conducted about six EDPs of two weeks duration giving training to about 216 entrepreneurs. The EDPs are conducted by ITCOT on no-loss, no-profit basis and all expenses are reimbursed, the sponsoring institutions. It has professional experience in counselling the entrepreneurs, identifying the project ideas and preparing detailed project reports. Its activities reveal that entrepreneurial skills must be learnt, understood and digested by every prospective entrepreneur. The man behind a project is more important than the physical facilities.


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The performance of ITCOT during 1984-89 is given below :

Table 5.3 : The Number of Reports Prepared by ITCOT During 1984-89

Description 1984-85 1985-86 1986-87 1987-88 1988-89 1. Project reports 37 37 38 87 98 2. Pre-investment studies 22 22 d0 78 27 3. Market survey studies 9 9 16 22 5 4. Diagnostic studies 5 5 13 22 5 5. Project apparaisal &

Special studies 19 19 6 5 13

6. Plant visit reports 24 24 36 33 21 7. Energy conservation

studies NIL NIL NIL NIL 2

Source: Annual Reports of ITCOT.

SPECIALISED INSTITUTIONS

The Government has also set up a number of specialised institutions in order to engineer the growth of small-scale industries in the country. Some of the institutions are as follows :

(i) National Institute of Entrepreneurship and Small Business Development ( NIESBUD)

This institute was set up in 1983 at New Delhi as a national level apex institution. The main functions of the institute are :

i. To coordinate research and training in entrepreneurship development.

ii. To impart specialised training to different classes of entrepreneurs; and

iii. To serve as a forum for the exchange of views between various agencies in activities relating to entrepreneurial development.

ii) National Institute of Small Industries Extension Training (NISIET)

This institute was set up in 1956 at Hyderabad. The main objective of this institute is to develop the required manpower for running small-scale units. Its functions are as follows :

1. To provide training to the persons engaged in small-scale industries.

2. To involve in research studies for the development of small-scale units.

3. To involve in consultancy services at national and international levels and extend such services to small-scale units in the country.


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The institute also conducts business management courses for the benefit of entrepreneurs and managerial persons of small-scale industries.

(iii) Central Institute of Tool Design

This institute was set up in 1969 at Hyderabad with the help of UNDP and ILO. Its main purpose is to impart specialised training to the personnel working in the design and manufacture of tools, jigs, fixtures, dies and moulds in small-scale units. This institute also renders a few services such as:

a. It offers consultancy and advisory services and assistance in the design and development of tools.

b. It suggests measures to improve the standard of tools, tooling elements, jig components, jgEtures, dies, etc.

c. It also provideslSK required tool room facility.

(iv) Central Tool Room Training Centres

The Government has set up four tool room training centres at New Delhi, Calcutta, Bangalore and Ludhiana. These centres provide the needed tool room services and facilities in design manufacture and training to small-scale industries.

The Government has also, set up the following institutes to render specialized services for the development of small-scale industries.To mention a few are:

1. Central Institute of Hand Tool, Jalandhar, to provide improved technology, raw materials, design and testing for handloom industry.

2. Institute for Design of Electrical Measuring Instruments, Mumbai to provide technical consultancy services in the matters relating to design and development of electrical and electronic instruments, tool designing and fabrication and training.

3. Electronic Training and Service Institute, Nainital.

4. Central Institute of Plastics Engineering and Tools, Chennai

5. Central Machine Tools, Bangalore.

Industrial Estates

Industrial estates have played an important role in the development of small scale industries. They have acted as an effective institutional measure to promote industrialisation and to decentralise industrial activity to backward and rural An industrial estate has been defined as a group of factory sheds constructed economic scale at suitable sites with facilities of water, transport, electricity steam, bank, post office, canteen, watch and ward and first aid and provided special arrangement for technical guidance and common service facilities. It is a planned cluster of enterprises, offering standard factory


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buildings constructed in advance of demand with a variety of services and facilities made available to the occupants. Thus, an industrial estate is a place where the needed factory accommodation and other infrastructure facilities are made available to the entrepreneur for starting their industrial units.

Classification of Industrial Estates

Industrial estates may be classified into different types. On functional basis they niay be as composite or conventional industrial estate and special type industiral estate. In India, majority of the industrial estates belong to the conventional type where factory sheds and the other facilities are made available to a wide range of industrial units. On the other hand, special type industrial estates are established for specific industries which are vertically or horizontally interdependent.

Depending upon the nature of organisational set-up, industrial estates may be classified as Government Industrial Estates, Private Industrial Estates, Co-operative Industrial Estates and Municipal Industrial Estates. Sometimes only those small-scale units attached to a large industrial unit are housed in industrial estate which may be called as Ancillary Industrial Estate.

Role of Industrial Estates

Industrial estate is an effective institutional measure to promote industrialisation in the country. It is particularly used to develop small-scale industries in the country. It is an effective tool to decentralise industries to the rural and backward areas and to develop entrepreneurship by creating a congenial climate to run the industries in specified estates/areas/ townships, etc.

Through this programme the small-scale units are provided with readymade building/factory at subsidised rates, infrastructural facilities and the proximity of other industrial units. The objectives of the programme included to disperse industry outside the metropolitan towns, to relocate Misting units operating in congested areas, to provide subcontracting opportunities to small industry and to improve operational efficiency of small its through common facilities.

COMMERCIAL BANKS AND ENTREPRENEURIAL DEVELOPMENT

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


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State Bank of India (SBI)

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

i) Initiation phase for creating awareness about entrepreneurial opportunities.

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

iii) Support phase counselling, encouragement and infrastructural support for establishing and running an enterprise.

In 1967, the SBI launched a liberalised scheme for providing financial assistance to technically qualified or trained entrepreneurs to the extent of 100 per cent, if necessary. The target group is the technocrats who lack the financial capability to meet the normal margins stipulated by the Bank. Under its Equity Fund Scheme, the Bank may grant interest-free loan for the 25 % of the project cost which is the minimum contribution of an entrepreneur.

Recently, SBI has set up a Research and Development Fund of Rs. 5 crores for, inter alia, assisting entrepreneurial development. SBI and its group offer Package of financial arrangement and assistance to small- scale units in their promotional and expansion activities and act as bankers to capital issues

Punjab National Bank

Through its Merchant Banking Division it offers similar package of assistance to small-scale units.

The package of measures include the following:

1. The banks study the economic viability and technical feasibility of the proposals and help in preparation of market survey report with the assistance to technical consultants.

2. They provide assistance to entrepreneurs in obtaining various government consents required for industrial projects right from the time the application for letter of intent is made.

3. They assist the entrepreneur in raising rupee resources in the form of debentures, term loans, deferred payment guarantees from financial institution.

4. They assist in raising foreign exchange resources required for import of plant and machinery, components, raw materials, etc., by arranging through Bank's foreign correspondents, suppliers' credit, buyers' credit and foreign currency loans.


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5. They determine the capital structure, assist in obtaining consent of controller of Capital Issues, finalisation of syndication of underwriting arrangements. handling of share applications and relative allotment in consultation with stock exchange, etc.; finance export of capital equipment on deferred payment terms.

6. They suggest strengthening the capital base of small scale industries, which intend to expand/diversify by conversion of partnership firms into private limited company, or conversion of private limited company into public limited company.

Indian Bank—Entrepreneurship Service Cell

The bank provides consultancy services to persons who graduate from colleges and institutions of engineering technology, etc. and unemployed engineers, diploma holders and other graduates or business executives. The consultancy is provided through the personal of the bank and panels of expert specialists. For this purpose, the cell after preliminary discussion with a prospective entrepreneur arranges a meeting with the appropriate pane! member. The cell and the appropriate panel member then assist the entrepreneur. This service was inaugurated on 3rd October, 1973 and is available only at Chennai and a few other selected centres.

Bank of Baroda—Entrepreneurial Banking Service

Bank of Baroda has started what is known as ‘Entrepreneurial Banking’ in collaboration with Uttar Pradesh Small Industries Corporation to assist technician entrepreneurs to set up their own units at Rae Bareli Industrial Complex for building and hardware materials. Under this scheme, the Corporation assists the technician Wine acquisition of fixed assets, and Bank of Baroda arranges in-plant training in established industrial units and provides working capital facilities to the entrepreneurs.

Bank of Baroda has also started a Multi Service Agency at Mumbai to provide Clinical assistance to self-employed persons about feasibility of their Projects/proposals, guide the entrepreneurs in regard to availability of raw materials, marketing prospects, etc.

Bank of India—Entrepreneurial Clinic-cum-Guidance Service

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

i. assistance in selection of industry, preparation and evaluation of project report and market survey;

ii. Practical training in the line, if necessary;

iii. assistance in obtaining government clearance, procurement of machinery and equipment and marketing of products;

iv. assistance and guidance in implementation of the project.


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

CanaraBank—Industrial Information and Guidance Service

The bank has set up an industrial information and guidance service to provide information and advice to its clients on matters, such as, scope for establishment of industries, technical and marketing facilities, taxation, export and accounting and management and to prepare project reports on proposed industries.

Grindlays Bank Ltd.

It has two wings. Small Scale Consultancy Service and Merchant Banking Division. Small Scale Consultancy Service Division is located in Calcutta. This division offers assistance in preparing project feasibility reports, conducting overall industry studies, a detailed in-depth study of the existing system and procedure in various functional areas for idea problems and other deficiencies, to develop tailor-made solutions. The Division also helps the management in implementing the suggestions.

The Merchant Banking Division located at Mumbai, Chennai, Calcutta and New Delhi manages public issues for raising capital, helps to establish liaison with government lending bodies for raising capital, helps term development finance assesses the strengths and weaknesses of the company through management audits and suggets tailor-made solutions to eliminate the weaknesses.

Syndicate Bank

Small Scale Industries Department of the Bank with a technical cell of engineers working at the head office at Manipal (Karnataka) and at different 'industrial growth centres, besides appraising the viability of credit proposals from small scale industries sector, offers counselling services to the entrepreneurs, including helping them to prepare project reports.

United Bank of India

The Bank's Technical Cell at Calcutta provides assistance to persons about feasibility of their projects and technical as well as non-technical guidance.

United Commercial Bank

The Bank has a cell in head office at Calcutta to provide technical assistance/guidance to self-employed persons about feasibility of their projects. It also renders them advice in regard to sources about availability of raw materials, and marketing of their products.


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New Entrepreneur Development Agency, 1986

The New Entrepreneur Development Agency has been created in order assist educated unemployed graduates to set up SISI units in urban and metropolis areas. The Agency will choose candidates only from among those sponsored Government Guidance Bureau, etc.

The selected candidates will be assisted in selecting the projects suitable to their aptitude background. The candidates on identifying the projects will undergo an Entrepreneur Development Programme to be conducted by Agencies SISI. ITCOT, etc. Practical training will also be arranged in industries, wherever possible.

Projects with credit requirement up to Rs. 5 lakhs are only eligible for finance under the scheme. Hundred per cent finance will be provided in the beginning and the margin will be build up to 20 percent over a period of time depending the profitability of envisaged project. Assets created with bank finance and personal guarantees of parents will be sufficient securities for the loans given.

The maximum amount of loan will be Rs. 5 lakh and the repayment of term loans will be based on the profitability projection and within seven years. The interest rate for medium term loan is 13.5 per cent p.a. and for working capital 14 percent p.a. up to Rs.2 lakhs and 15.5 per cent p.a. above Rs. 2 lakhs up to Rs.5 lakhs.

The candidate will be assisted in getting marketing tie-up with user industries, wherever possible. Their units will have to be registered as small scale industries with the Directorate of Industries and Commerce or the DICs as the case may be.

Indian Overseas Bank— Bank's Small Business Aid Agency

The agency specialises in the field of small business and offers necessary guidance to those persons who wish to start the same. It also offers consultancy to professionals, like doctors, engineers, lawyers, etc., to enable them to start their practice. The operations of this agency are presently restricted to Chennai city and Madurai, though the bank plans to establish similar agencies in other centres in due course.

Check Your Progress 1. Explain about institutional infrastructure

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B.B.A DEGREE EXAMINATION

ENTREPRENEURSHIP

Time : 3 hours Maximum : 100 marks

Answer Any Five Questions From the Following

All Questions carry equal marks (5x20=100)

1. Define Entrepreneurship and explain its main characteristics.

2. Analyze critically Schumpeter’s views on Entrepreneurship

3. Who is an Entrepreneur? Distinguish between entrepreneur and enterprise

4. Explain the various types of Entrepreneurs giving examples

5. Explain the different sources of ideas?

6. Explain the role of Tamilnadu small industries corporation (sidco)

7. Describe the functions of district industries centre.

8. Distinguish between the following:

a) Innovation and innovation.

b) Drone Entrepreneur and flab in Entrepreneur.

B.B.A ENTREPRENEURSHIP

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