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Module 04

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Small industry financing in developing

countries. Small industry is a term usually used for enterprises on

relatively engaged in smaller scale of output etc. Thedefinition differ from country to country but usually itis based on the index of investment, Plant &Machinery or output. In India any business investmentinvolving investment of 1 crore in Plant & Machinery issmall scale industry.

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Institutions Helping Entrepreneurs. Central Government.

Policies & Measures for Entrepreneurial

Developments, Extension of infrastructure facility for new

Entrepreneurs,

Establishment of Advisory board or Council forEntrepreneurial facilities,

Formation of a forum at National Level ofacademicians for timely advise.

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Other than Central Government.

(Central &) State Institutions that provide;

Assistance other than Finance,

Transportation, Warehousing, Insurance,Marketing channels, advertising, etc.

Assistance by means of Finance. Capital, Working Capital, short term, long term,

credit, bill discounting & Collecting, factoring etc.

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SIDBI. Small Industries Development Bank ofIndia.

It was established on 02.04.1990.

Objectives; Promotion of Industry,Financing Industries,

Development in small scale sector

Co-ordination of other institutions

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NABARD Roles & Functions. I. Credit Functions:

Developmental and Promotional Functions,

Supervisory Functions, Institutional and Capacity building,

Role in Training.

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Credit Function. NABARD credit functions cover planning,

dispensation and monitoring of credit. This activityinvolves:

Framing policy and guidelines for rural financialinstitutions

Providing credit facilities to issuing organizations

Preparation of potential-linked credit plans annuallyfor all districts for identification of credit potential

Monitoring the f low of ground level rural credit

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II. Development & Promotional Function. Help cooperative banks and Regional Rural Banks

to prepare development action plans forthemselves

Enter into MOU with state governments andcooperative banks specifying their respectiveobligations to improve the affairs of the banks in astipulated timeframe

Help Regional Rural Banks and the sponsor banksto enter into MOU specifying their respectiveobligations to improve the affairs of the RegionalRural Banks in a stipulated timeframe,

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Development & Promotional Function. Monitor implementation of development action plans of

banks and fulfillment of obligations under MOU

Provide financial assistance to cooperatives and RegionalRural Banks for establishment of technical, monitoring andevaluations cells

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Development & Promotional Function. Provide financial support for the training institutes of

cooperative banks

Provide training for senior and middle level executives

of commercial banks, Regional Rural Banks andcooperative banks

Provide financial assistance to cooperative banks forbuilding improved management information system,computerization of operations and development of humanresources

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III. Supervisory Function. As part of these functions, it

Undertakes inspection of Regional Rural Banks (RRB)and cooperative banks (other than urban/primarycooperative banks) under the provisions of BankingRegulation Act, 1949.Undertakes inspection of State Cooperative Agriculture

and Rural Development Banks (SCARDB) and apex non-credit cooperative societies on a voluntary basis

Undertakes portfolio inspections, systems study, besidesoff-site surveillance of cooperative banks and RegionalRural Banks (RRB)

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III. Supervisory Function.Provides recommendations to Reserve Bank of India on

opening of new branches by State Cooperative Banks andRegional Rural Banks (RRB)

Help cooperative banks and RRB to prepare developmentactions plans for themselves

Enter into MOU with state governments and cooperativebanks specifying their respective obligations to improve theaffairs of the banks in a stipulated timeframe

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IV. Training. maintain expert staff to study all problems

relating to agriculture and rural development andbe available for consultation to the Central

Government, the Reserve Bank, the StateGovernments and the other institutions engagedin the field of rural development.

provide facilities for training, for dissemination ofinformation and the promotion of researchincluding the undertaking of studies, researches,techno-economic and other surveys in the field ofrural banking, agriculture and rural development.

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Training. provide technical, legal, financial, marketing and

administrative assistance to any person engaged inagriculture and rural development activities;

may provide consultancy services in the field ofagriculture and rural development and other relatedmatters in or outside India, on such terms and againstsuch remuneration, as may be agreed upon;

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IDBI Industrial Development Bank ofIndia.

It was established on 01.07.1964,Objectives; Supplementing financial resource

to other institutions,Providing technical & Admin

Assistance,Undertake market & investmentresearch,Planning, Promoting & developingindustries of high importance.

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IDBI. It grants short term financial accommodation to

industries by accepting and discounting

commercial papers of industrial concerns, It grants direct finance to industrial concerns by

way of medium and long term loans & advances,

It underwrites the issue of shares and debentures

of industrial companies, It subscribes to the shares, bonds and debentures

of industrial concerns.

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IDBI. Refinances long term and short term loan granted by

various industrial finance corporations,

Refinances commercial & rural banks that haveadvanced loans & advances to industrial undertakings,

Also undertakes industrial research etc.

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SIDO Small IndustryDevelopment Organisation.

Established in 1954 on the recommendations ofFord Foundation. It is a department.

Objectives; Imparting greater vitality & growthimpetus to the small, tiny, village enterprise interms of output, employment & exports.

Instill competitive culture based on technology.

Business Domain; Are as follows:

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SIDO SIDO was established in October 1973 as a

organization under now Ministry of Trade, Industryand Marketing.

Its objective was to develop the small industry sector inTanzania.

It was expected to fulfill a very wide range of functions,from policy formulation to direct support to

industries, to hands-on involvement in theestablishment of SME in both rural and urban areas.

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SIDO These programs were strongly supported by the

Government and by donors such as the World

Bank, and the Governments of the Netherlands,India and Hungary.

In the context of a centrally planned economy, thevirtual absence of a private sector, and an initially

very low level of industrial activity, SIDO effortsmade a key and well recognized contribution tothe development of the country.

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Issues addressed by SIDO. Technology development,

Business development - extension services,

Marketing and information,

Financial services

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Business Development

Extension Services. Entrepreneurship and Business Management

Training

Food Preservation and Processing Courses

Technical Training Courses

Capacity Building for Associations

Advisory services

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Financial Services. How to obtain finance from SIDO

Linkage to Financal Institutions SMEs Credit Guarantee Scheme

http://www.sido.go.tz/UI/FinancialSupportServices.aspxhttp://www.sido.go.tz/UI/LinkageToFinancialInstitutions.aspxhttp://www.sido.go.tz/UI/LinkageToFinancialInstitutions.aspxhttp://www.sido.go.tz/UI/FinancialSupportServices.aspx

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Marketing & Information. Marketing and market linkages

Developing programs that reduce the marketing andlinkage constrains

Training on marketing Management

Organizing and assisting participation of Small andMedium Entrepreneurs at Exhibitions and Trade Fairs

nationally and internationally.

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Marketing & Information. Promoting Tendering Programs

Promoting subcontracting and linkage undertaking

Development of Export support promotion programsand promote cross boarder trade.

Providing advisory services on packaging, promotionalmaterials and quality improvement of SME products.

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Marketing & Information. Information and Communication Development of promotional and information programs. Creating database information for the Small and Medium

sector. Publishing of product catalogues for the SME sector. Establishment of a showroom for the SME products. Development and maintenance of websites. Publishing of quarterly newsletter. Dissemination of information about the Small and

Medium Enterprises sector. Marketing of the Organisation through media,

development of promotional materials etc.

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IIE. Indian Institute ofEntrepreneurship.

Established in 1993 at Guwahati.

Objectives; Came with a aim to undertake training,development, research & consultancy activities inthe small industry sector focusing onentrepreneurship development by Department ofMinistry for small scale industries, Government ofIndia.

It now identify, design and conduct trainingprograms for existing entrepreneurs,

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IIE. To prepare, publish literature related to

entrepreneurship and industrial development,

To organize seminar, workshop, conference etc forproviding a forum for interaction and exchange ofviews by various agencies and entrepreneurs,

To act as catalyst for development of self employment.

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DIC District Industries Centre.

Established in May 1978.

Objectives; Economic investigations in local

resources,

Supply of Machinery &

Equipments,

Provision for raw materials,Consultancy & other services.

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Single Window. With increase thrust on promotion of industry, a number

of steps have been taken by the Government of India fromtime to time.

But however the fact remains that entrepreneurs need to

run pillar to post in order to obtain information areclearance from various State & Central GovernmentAuthorities.

To mitigate this hardship, there is a need to find some ways& means by which this issue is Addressed properly.

This has been evolved through a scheme called SingleWindow. Here guidance, assistance, advice etc are availableat one place.

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Latest Industrial Policy of GOI. As a part of the liberalization, a new industrial policy was

announced by the government of India in two parts, thefirst part on July 24, 1991 followed by the second part on

August was 6, 1991. Some of the major aspects of the

industrial policy were as follows; Industrial licensing dispensed with except in 18 items, Foreign direct investment up to 51% of equity was allowed

in high-priority industries, The threshold of the assets of MRTP companies and

dominant undertakings removed, Automatic clearance introduced for import of capital

goods, provided foreign exchange requirement for suchimport are met through foreign equity,

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Latest Industrial Policy of GOI. Automatic permission for foreign technology agreements

in high-priority industries up to a sum of Rs.1 croregranted,

Foreign equity proposals need not be accompanied byforeign technology agreement,

Existing and new industrial units provided with broad-banding facilities to produce any article so long as noadditional investment in plant & machinery is involved.Exemption from licensing will apply to all substantial

expansion and existing units. Pre-eminent role of public sector in eight core areas

including arms & ammunition, mineral oils, rail transportand mining of coal & mineral to continue,

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Latest Industrial Policy of GOI. Part of governments shareholdings in public sector is

proposed to be disinvested, which will be offered to mutualfunds, financial institutions, general public and workers,

Chronic loss-making public sector units to be referred tothe Board of Industrial and Financial Reconstructions(BIFR) for formulation of revival schemes,

A simplified procedure for new projects was introduced tomanufacture goods not covered by compulsory licensing.

Even a substantial expansion of a project requiressubmitting a memorandum in the prescribed form to thesecretariat for industrial approvals.

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Latest Industrial Policy of GOI. approvals. Decisive contribution was expected from foreign

investment including foreign corporate bodies,

foreign individuals and non-resident Indians, Industrial policy for the small-scale sector

announced in the second part providing a fourpoint scheme to provide financial support to this

sector. The New Industrial Policy, 1991 aims to unshackleIndias industrial economy from the cobwebs ofunnecessary bureaucratic control.

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1991 Resolution -U Turn Emphasis on rapid Industrialization as against

Agriculture,

Balanced Industrial Structure,

Prevention of concentration of Economic Power,

Free hand in International trading,

Withdrawal of restriction on industry location &

balanced Industrial growth. Simplified industry establishment procedures &

Institutional & agencies support for industry.