Entrepreneurship Development

Role of financial Institutions

Contents

Preface

Acknowledgements

1 Introduction

2 The Concept of Entrepreneurship Development 30

3 Karnataka State Financial Corporation: A Profile 51

4 A Profile of Karnataka State and Case Study Area 89

5 Entrepreneurial Setting in Shimoga District 116

6 Financial Role of KSFC in the Development of 192

Entrepreneurship

7 Role of KSFC in Promoting the Entrepreneurship 261

8 Summary of Findings, Suggestions and Conclusion 276

Bibliography 299

Author Index 309

Subject Index 311

Introduction

Prelude

The economic development of any nation is dependent upon the purposeful human

activity, i.e., entrepreneurial function. Therefore, entrepreneur is sometimes referred to as the

fourth factor of production. The crucial role played by the entrepreneur in the process of

economic development through industrialisation has been acknowledged by many

economists. Meier and Baldwin described the entrepreneur as a catalyst or agent whose

activity results in development. According to Spengler "an economy's rate of growth depends

to a large extent; upon its capacity to give rise to innovators and their imitators, to individuals

who continually channel new know-how from the laboratory and engineering sectors of the

economy to the fields of production and marketing."

History is full of instances of individual entrepreneurs whose creativity has led to the

industrialisation of many nations. Entrepreneurs like Bolton in the eighteenth century, Henry

Ford and Emil Ratheneau in the twentieth century were responsible for the industrialisation

of their countries.) It has been hoped that industrialisation would bring social transformation

through social equality in higher levels of employment, more equitable distribution of income

and well-balanced regional development.

Since industrialisation 'has better potentiality to bring technological revolution

through innovation to attain higher rate of return on social investment and to generate

dynamism in social and political life, the developing countries have gone for quick industrial

development. The industrial revolution that took place in England was able to give fruitful

results to England, as Philip Wernette4 observed, because of the existence of entrepreneurs

who were capable of commercially exploiting the opportunities presented by the great

inventions of the time. The subsequent dethroning of Britain from its position as the greatest

industrial power of the world according to Wernette, was largely due to the decline m the

spirit of enterprise among its people particularly the business and industrial leaders.

Statement of the Problem

The industrial growth and economic development of the developing countries is

deterred by the lack of efficient entrepreneurs, lack of industrial environment, lack of

incentives for private initiatives, lack of technical knowledge, lack of resources, unhealthy

competition and absence of domestic market. In fact, the presence of entrepreneurs who act

as change agents heralding the growth of industries is of great importance. The slow growth

of industries in the developing countries as the United Nations Economic Commission for

Latin Americas has noted is "due to the absence of qualified entrepreneurial class prepared to

take initiatives and assume risks and to an inadequate economic policy on the part of the

government." Berna as mentioned that these countries do not necessarily require innovative

entrepreneurs of the Schumpeterian type. Imitating entrepreneurs who are capable of adapting

the innovations of others are sufficient to accelerate the pace of industrialization of these

countries. Therefore, for a nation like India, which aims to achieve a rapid and regionally

balanced economic growth through industrialisation, the emergence of large number of

entrepreneurs is a vital necessity. In the face of the massive unemployment, poverty and

backwardness in the country, the small entrepreneurs have a special role to play.

People suffer the most in the under-developed countries. Their involvement in

economic activities is marked by excessive concentration in unorganised sector (i.e.,

agriculture) of the economy and that too in low skill jobs. Their literacy rate, which itself is

the cause for their low economic status, creates a vicious circle of low social and economic

status. The inadequate economic policy on the part of government, as United Nations

Economic Commission for Latin America has noted, also affected the emergence of

entrepreneurial class in these countries. It is in this specific context that the emergence of

entrepreneurs is to be viewed as a socio-economic emancipation of the people belonging to

under-developed countries.

The status of people in some areas of India is an illustration of a paradox. At the

policy level or in the eyes of policy they are equal. The five year plans and industrial policy

resolutions passed since independence have given added thrust to the entrepreneurship

development. However, over the years, the position of people in those areas is downgraded.

Such parts of India, even now lack adequate number of entrepreneurs. For instance, for many

a years 'Bidar' district in Karnataka state was declared as 'No Industry District'. The post-

independence history of Karnataka state reveals that large number of big and medium

industries (both in the public and private sector) were concentrated in and around Bangalore,

Tumkur, Mysore, Kolar and Mandya. The continued negligence in all the fronts (i.e.,

industry, education, rural development programmes, irrigation, etc.) by the governments'

ruled the state of Karnataka since independence is resulting in demand for separate north

Karnataka state. At the national level, after the enactment of State Financial Corporations Act

in 1951, there was no state level financial corporation for financing the entrepreneurs in the

states of Nagaland Manipur, Tripura and Meghalaya. The entrepreneurs of Tripura and

Manipur were to get financial assistance from Assam Financial Corporation. The people of

these areas are the least beneficiaries of the schemes and programmes of the government and

financial institutions. The example of not availing the concessions and subsidies of the

government, which is available to small entrepreneurs, is available in this country. The reason

may be lack of awareness red-tapism and buck-passing/undue delay in the offices concerned,

dis-satisfaction with the bureaucratic style of government departments and financial

institutions. Besides this in 51 years of independence, an emphasis on the socialistic patter~

of the society and the role assigned to the public sector limited the scope for the growth of

private entrepreneurship. The first four decades of the post-independence period is described

as the decades of state sector/public sector. The liberalisation policy of the government,

which received boost after 1991 (when Dr. Manmohan Singh became the Finance Minister of

India), has thrown open a vast area of the country for private entrepreneurship. Under such

circumstances the need for entrepreneurship development is more keenly felt.

Concept of Entrepreneur

The meaning of the team entrepreneur has changed considerably from last four

centuries, because of variety of opinions among economists and social scientists about the

character and role of entrepreneurs in economic development. Much of the confusion arises

due to variety of definitions at different stages of development.

The word 'entrepreneur' is derived from the French verb enterprende. It means to

'undertake'. In the early 16th century, the Frenchmen who organised and led military

expeditions were referred to as 'entrepreneurs'. Around 1700 AD, the term was used for

architects and contractors of public works. The entrepreneur and his unique risk-bearing

function was first identified in the early 18th century by Richard Cantilton an Irishman living

in France, who defined an entrepreneur' as a person who buys factor services at certain prices

with a view to sell1ts products at uncertain prices in the future, thereby bearing a non-

insurable risk. J.B. Says expanded the Cantilton's ideas. According to him, the entrepreneur is

a person endowed with the qualities of judgement, perseverance and knowledge of the world

as well as of business.

Peter F. Drucker defines an entrepreneur as one who always searches for change,

responds to it and exploits it as an opportunity. He has aptly observed that "Innovation is the

specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a

different business or a different service. It is capable of being presented as a discipline,

capable of being learned, capable of being practiced. Entrepreneurs need to search

purposefully for the sources of innovation, the changes and their symptoms that indicate

opportunities for successful innovation. And they need to know and to apply the principles of

successful innovation."

To E.E. Haggen, an entrepreneur is an economic man who tries to maximize his

profits by innovations. Innovations involve problem-solving and the entrepreneur gets

satisfaction from using his capabilities in attacking problems.

According to Frank Knight, the entrepreneur is a bearer of uncertainty or risk for

which he receives the reward. There are two types of risks: Insurable and non-insurable.

Insurable risk can be calculated statistically and precautionary measures can be taken, while

the non-insurable risk cannot b~ calculated and therefore no precautionary measures can be

taken. Entrepreneur in such an uncertain situation has to play the role of a special functionary

and the success or failure depends on the foresight and judgement of the entrepreneur.

Leading economists of all schools, including Karl Marx, have emphasized the

contribution of the entrepreneurs to the development of economies, but Joseph A.

Schumpeter, who argues that the rate of growth in an economy depends to a great extent on

the activities of entrepreneurs, has probably put greater emphasis on the entrepreneurial

function than any other economists. His definition on entrepreneur is as below.

"The entrepreneur in an advanced economy is an individual who introduces

something new in the economy-a method of production not yet tested by experience in the

branch of manufacture concerned, a product with which consumers are not yet familiar, a

new source of raw material or of new markets and the like. He further states that entrepreneur

function is to perform or revolutionize the patter of production by explaining an invention

more generally an untried technological possibility far producing a new commodity".

Thus, it could be understood by the above definitions that the entrepreneur had been

defined in various ways - an innovator, a risk taker, a resource assembler, an organization

builder bearer of uncertainty and so on. An entrepreneur is all of the above combined into

one. He identifies opportunities available in his awn environment, exploits it /them to his best

advantage, introduces new ideas, carries new activities, innovates, co-ordinates the factors of

production and efficiently manages the business. Hence, an entrepreneur can safely be

defined as a person who identifies the opportunities in his environment and responds to it in

innovative ways so as to make economic surplus by engaging himself in efficiently

explaining the environment and opportunities it offers.

During the period when sale proprietorship form of business organization was the

norm, the entrepreneur was 1denuf1ed as the owner/manager of the enterprise. In the present

day industrial scenario, entrepreneurs can no longer be identified among the 'captains of

industry of yester years. With the emergence of joint stock campan1es the individual

entrepreneur has been increasingly replaced by a body of decision makers whom Galbraith

calls technocrats’.

With the changes in the perception of entrepreneurs, attempts were made to identify

the entrepreneurs within the large corporations.

Lewis, however, maintained that entrepreneurial function does not change just

because it is performed within the framework of a corporation instead of within a sale

proprietorship concern. The entrepreneur, occurring to Lewis is the final/ultimate agent of

production, co-ordinates with the labourer and capitalist of the traditional economic theory".

The entrepreneur can be identified by the fact that he bears uncertainties of the enterprise

which are different from the uncertainties borne by others in the sense that the entrepreneur is

not promised a fixed return on his investment by any functional agent. In a corporation, the

entrepreneur is located in those persons whose functional income is contingent and residual

in the sense that no. claim far income arises until all other functional incomes are discharged.

Typically, thus the corporate entrepreneur is located in the common stackholders or also in

the preferred stackholders provided, the holders of these securities meet the specifications

mentioned above.

Harbison has questioned the assumption that the entrepreneur is an individual.

According to him, the entrepreneur is in essence an organisation, which comprises all the

people/ group, required to perform entrepreneurial functions. Such functions include,

1. the undertaking or managing of risk and handling of economic uncertainty,

2. planning and innovation,

3. co-ordination, administration and control, and

4. routine supervision.

Harbison has emphasized that the ability to build an organization is the most crucial

among all entrepreneurial skills.

Similarly, Stauss also has proposed a theory that the "firm is the entrepreneur".

According to Stauss, the traditional assumption was that an entrepreneur exercised his

responsibility through the medium of the firm. This caused the firm to be assigned a

secondary role. Stauss shifted the frame of reference to the firm, an entity operating through

the medium of various functionaries having heterogeneous responsibilities and relationships

to it. Stauss prepared the theory that the firm centred on its decision making organization,

operates as the functionary in undertaking the entrepreneurial role through the medium of

individuals having relations with it.

Evans distinguished between three types of entrepreneurs. According to him, within

every private business concern one or more or all the following three types of entrepreneurs

are found:

1. Those who carryout more or less routine aspects of management.

2. Innovating, dynamic entrepreneurs-whose function is to "combine means of

production in new ways".

3. Controlling entrepreneurs whose function is to control or direct.

In a small concern all the three types of entrepreneurs can be found in the same

individual, the separation of types is generally observable only in large corporations.

Review of Literature

The study of entrepreneurship in India has attracted the attention of large number of

researchers. A special mention has to be made of the works by D.R. Gadgil, Pavlov,

Medhora, Bagchi, Brimmer, Acharya, Spoadek, Bhatia, Gaikwad and Tripathi, James Berna,

Pandit, Dwijendra Tripathi, Pathak, Baldwin, Vasanth Desai, M.U. Deshapande, R.A.

Sharma, S.G. Bhanushali, Lakhanpal and few others. The literature surveyed for this work

includes the studies, which have examined entrepreneurship in the pre-independence period,

post-independence period and studies on women entrepreneurship.

It is in the continuation of these works, a review of available literatures on factors

affecting the entrepreneurship, the role of government, financial and other institutions in the

development of entrepreneurship and other aspects of entrepreneurship has been made and

presented.

Pandit maintains that caste and religion are not an explanation for the emergence of

entrepreneurs. Rather, the process has to ~e viewed from a regional approach. She contends

that among Gujaratis, entrepreneurs have emerged from all castes and religions. The Gujarati-

setting put a prestige value on business, which no other region did. This led to a greater

occupational mobility among the people in these areas. This factor has made them innovators

in the field of modern methods of trade, banking and industry. Further, she proves that the

culturally homogeneous Gujarati community responded differently to the different settings of

Ahmedabad and Mumbai.

Hemalatha Acharya has disputed the contentions of Pandit. She maintains that the

regional analysis is lopsided because it does not take into account other variables like

geographical environment, religion, economic activities, political conditions, ethics, etc.

According to her, occupational mobility of caste hierarchy was not exclusive to Gujarat but

existed in other regions as well. Also, exceptions apart, businessmen and entrepreneurs have

sprung from certain castes who have a tradition of business in their families.

V.R. Gaikwad and R.N. Tripathi (1970) studied the small entrepreneurs of Tanuku

region of West Godavari District in Andhra Pradesh. It is an attempt to bring out the pre-

requisites for successful entrepreneurship. According to them, bold, dashing and pragmatic

personality, managerial competence, high motivation, dominant socio-economic power

enjoyed by the family and contacts at higher social and governmental level lead to

entrepreneurial development.

H.N. Pathak studied 12 units from industrial estates enjoying almost identical

overhead facilities and engaged in different lines of manufacture. He studied their problems

at inception, operational and expansion / diversification stage' and delineated the

requirements of entrepreneurial / managerial abilities at different stages. He found that factors

like contacts, education, finance, favourable and timely policies of the government and quick

adaptability by the enterprises are responsible for all-round growth of entrepreneurial talent.

Heggade has suggested that entrepreneurship among women could be developed

through encouraging self-employment and by organizing women's co-operatives. He

recommended that educational system should be modified to create increasingly diversified

skills among women-folk and that a separate policy should be formulated for promoting

entrepreneurship among women.

Gudi has listed out the type of assistance provided by the Karnataka State Social

Welfare Board for women entrepreneurs. She has recommended the establish men t of a

Marketing Advisory Centre for women entrepreneurs which would provide information

regarding marketing trends, consultancy services and also organize trade fairs to market their

products. She has also called for the establishment of a separate industrial estate/ complex for

women entrepreneurs which would include servicing centres, training facilities, testing

facilities for quality control, research and development support and marketing and counseling

centres.

Saravanavel identified the problems faced by women entrepreneurs. According to

him, attitude of the society towards women and the constraints in which they have to live and

work keep women away from entrepreneurship. Women also faced difficulties in obtaining

finance and due to lengthy procedures of obtaining bank loans. The delay and the running

around involved deter many women from venturing into entrepreneurship. He recommends

that in order to ensure adequate credit flow to women entrepreneurs a sub-goal may be fixed

under the priority sector advances by banks. Also, banks and financial institutions can waive

the insistence for provision of collateral security.

V. Lakshman Rao (1986) studied 51 entrepreneurs in a district of Andhra Pradesh.

The main aim of the study was to find out the impact of the government programmes and

policies for promoting industrial entrepreneurship. He was of the view that the government

schemes have certainly boosted the entrepreneurship in Andhra Pradesh.

Pillai has maintained that the emergence of women entrepreneurs in Kerala state was

facilitated by the financial and marketing assistance provided by the state government and

also by the training provided by the training centres. The loans grants and subsidies provided

by the nationalised banks, state financial corporations, Kerala State Handloom Development

Board and District Industries Centre helped the small business community from getting out of

the clutches of moneylenders and enabled women to get securely established in their

businesses. According to him, the problems encountered by women entrepreneurs include,

inadequate financial resources and working capital, insufficient arrangements for marketing,

shortage of raw materials and other inputs, heavy competition and high cost of production.

Sharadadevi maintained that the active encouragement of government and the

emergence of different official and non-official agencies at central and state level coupled

with new schemes, departments and institutions have greatly facilitated the emergence of

women entrepreneurs. She recommends that efforts should be directed towards encouraging

women entrepreneurs in rural areas.

Oamen (1972) examined the emerging pattern of entrepreneurship in small scale

sector of Kerala. His study focused attention on origin and growth of firms in light

engineering industry and impact of government programmes on entrepreneurship. The study

of 45 units revealed that single largest group of entrepreneurs consisted of engineers and

technicians and most of them were Muslims.

Bhatia investigated into the history and present situation of 50 manufacturing firms

having less than 50 workers functioning in Punjab. He studied the socio-economic

background of entrepreneurs, their attitudes towards industry, the ways in which they have

made the transition to industry and the problems encountered by them. He did not find any

relationship between the growth of the firms and the socio-economic background of the

entrepreneurs. However, he notes that the firms which continuously expanded, had gradual

growth and were started with a relatively favourable capital base and most of them were

established by merchants. The entrepreneurs showed the tendency to diversity instead of

expanding after a particular point since they lacked vital information about wider markets.

The Management Development Institute, in its study on the assessment of institutional

assistance in the states of Uttar Pradesh, Punjab and Himachal Pradesh, found that the facility

of institutional finance had a nominal impact in Himachal Pradesh but was quite significant in

Uttar Pradesh. The study team also found that about 98 per cent of entrepreneurs did not

receive any training in Punjab and yet most of them were successful mainly due to the natural

entrepreneurial skill of the Punjabi community. But in Uttar Pradesh and Himachal Pradesh

there seemed to be greater need for expanding training programmes to generate

entrepreneurial motivation.

Deshapande conducted a study of 90 entrepreneurs in Marathwada region of

Maharashtra. He comes to the conclusion that emergence of entrepreneurship is conditioned

by the political system and government policy. He found that people with little industrial or

commercial background immersed into entrepreneurship when suitable conditions were

created. Financial help from family and father's occupational status were significantly related

to entry. However, the institutional agencies created by the government to help prospective

entrepreneurs were not successful in developing entrepreneurs from all castes in the region.

R.A. Sharma evaluated the performance of 316 joint stock companies incorporated

after April 1947. In the familiar spheres the entrepreneurship was dispersed among various

communities and in other spheres it was thinly spread among socially well known

communities. Analyzing the factors affecting entrepreneurship, he found that strong desire to

do something independent in life, technical knowledge and/or manufacturing experience,

financial assistance from institutional sources, business experience in the same or related

lines and accommodation in industrial estates have induced the new and small entrepreneurial

class. He concludes that financial and developmental institutions have made a significant

contribution to the growth of new entrepreneurship.

Sadhak found that entrepreneurs have emerged from different socio-economic

backgrounds. He found that entrepreneurs who were formerly traders had better access to

financial resources and were less dependent on institutional finance than

technocrat/professional entrepreneurs. Entrepreneurs under study were self-motivated rather

than motivated by development and training programmes of institutions. However, financial

institutions played a very crucial role in inducing the potential entrepreneurs. The availability

of concessional finance and various incentives significantly influenced the location decision

of the units, particularly in the backward areas.

Anil Kumar Sarma studied the growth of entrepreneurship in the period up to the First

World War, First World War to independence and thereafter. During the first period,

entrepreneurial talent emerged mostly from a few communities like Parsis and Gujaratis. The

second period witnessed a change in the governmental attitude towards industrialization and

entrepreneurial growth was rapid and diversified. However, it was profit-oriented and without

planning or co-ordination. The emergence of state entrepreneurship is an important feature of

the third period. He discusses the emergence of state as an entrepreneur and the institutions it

has created for fostering new entrepreneurship. He feels that small entrepreneurship has

grown and suggests that these entrepreneurs should have new socialist outlook.

K.C. Chopra has added the motivational concept in the entrepreneurial development.

He felt that one of the most essential pre-requisites for the entrepreneurial development

among non-traditional businessmen is the identification of 'man'. He was of the view that

motivational training helps in changing the response of an individual so that he may react

with confidence to the existing economic situation. He further felt that an entrepreneurship

oriented education at the grass roots level is a must to motivate the prospective entrepreneurs.

The prospective entrepreneurs must be guided and training must be given to them.

Sharma and Singh envisaged that entrepreneurial growth comprised of four stages,

viz., entry into manufacturing, expansion of business, perception to business stability and

commitment to expand units and examined the effects of political, social and psychological

factors at each stage. They found that caste background (along with family background) of

the entrepreneurs had significant influence on the entrepreneurs' entry into manufacturing, the

expansion of business and perception of business stability. The political milieu was an

effective determinant of commitment to expansion of business. They also found that

government facilities are availed of largely by people with business background.

In a study of 125 entrepreneurs in Kolhapur, S.G. Bhanushali found that caste,

education and parental occupation ,had greater impact on attaining higher degree of

entrepreneurial success.

Ajay Lakhanpal examined the performance of the network of institutions in

entrepreneurial development in Himachal Pradesh. He categorized the institutions into three

broad groups, viz., financing institutions, promotional institutions and training institutions.

He studied 58 enterprises in Solan district to evaluate the influence of infrastructure on

entrepreneurship. He stressed the need to make certain adjustments in the institutional

framework and recommended the creation of a state level Single Window Industrial Support

System (SWISS).

Gangadhar and Reddy evaluated the women entrepreneurs scheme of the Andra

Pradesh State Financial Corporation. The study revealed significant gap between the loans

sanctioned and disbursed in terms of number as well as the amount. Nearly 65 per cent of the

amount sanctioned was not disbursed by the end of 1988-89 accounting year. Also, there was

a slight decline in the number of entrepreneurs financed in the said year as compared to the

previous year; whereas the amount of loan sanctioned increased substantially.

Birendra Narain Singh conducted a study of 25 firms of small size operating in the

light engineering industry in Agra. He examined the socio-economic background of these

entrepreneurs and the factors induced them to become entrepreneurs. He found that

engineering industry is dominated by Agarwal community and merchant groups and profit

motive is the main force which induced the entrepreneurs. He also found that there was no

relationship between the traditional business and the present manufacturing activity. None of

the firms had borrowed funds from the financial agencies, private as well as public or

received government aid for their initial financing are some of his other important findings.

Mishra and Bisht had studied 100 entrepreneurs in Nainital district of Uttar Pradesh.

They found that entrepreneurs have emerged mainly from the traditional enterprising

communities trade background. However, entrepreneurs from service background have also

made sizeable inroads into the entrepreneurial field. Availability of funds from the family

members and friends is the most important motivational factor that induced the entrepreneurs

to take up the entrepreneurial venture. The entrepreneurs felt that not only procedural lacuna

existed in the process of establishing units, but also malafide intention took a heavy toll of

upcoming entrepreneurial instincts.

Dr. N. Gangadhar Rao studied 81 entrepreneurs operating in 13 industrial estates of

coastal Andhra Pradesh. The object of the study was to measure the impact of industrial

estates on entrepreneurship. He came to the conclusion that the impact of industrial estates on

the emergence of entrepreneurship is found to be marginal.

V. Sarveshwar Rao and E.W. Nafzinger conducted a study of entrepreneurs operating

in Vishakpatna (Andhra Pradesh state) to find out the factors determining the supply and

success of industrial entrepreneurship. They found that socio-cultural features of the

traditional Indian society are no longer standing in the way of development of modern

entrepreneurship. The study underlined the importance of education, training and work

experience for successful development of modern entrepreneurship.

James J Berna (1960) studied the entrepreneurs engaged in various kinds of light

engineering production in and around Madras/Chennai and Coimbatore. He investigated into

the background and origin of entrepreneurs and found that the initial entry into industry was

open to persons of very different social standing and economic position. Surprisingly, he

finds that the entrepreneurs have grown from small beginnings. Interestingly, the largest

single group of entrepreneurs (exceeding 23 per cent) is composed of graduate engineers,

most of them young and nearly half of them possessing foreign engineering degrees.

Moreover, he states that the growth of enterprises have been achieved in the face of

formidable obstacles. He feels that the performance of the entrepreneurs could be improved

and their contribution to industrial progress can be increased, if certain help in techniques of

production and management is provided to them. Dr. Berna points out that medium scale

enterprises are neglected by the government as the developmental efforts are more focused on

small scale industries. He maintains that medium scale enterprises also should receive

intensive help, as such they have already demonstrated their capacity to grow and their

capability to speed up industrialization.

Vasanth Desai in his study on the role of EDP in accelerating industrialization,

suggested the agencies involved in the task to work with determination zeal and a sense of

dedication and commitment. He also recommended the redesigning of the education system

to identify the area of entrepreneurship and to motivate young people to start their own

ventures. In his study on the entrepreneurs in selected countries, he recommended the

governments' concerned to take industrial promotional measures to create what is usually

called the industrial climate.

From the review of literature reported above, it appears that financial functions and

need of institutional support for entrepreneurship development have received some attention

of the researchers. Some studies have focused on factors affecting the entrepreneurial growth,

some of them have studied the impact of government programmes and role of financial and

other institutions and EDPs in the entrepreneurship development and offered their own

suggestions. A few studies are witnessed on the link with costal religion/ education/ region/

family background and entrepreneurship. Some scholars have thrown light exclusively on

women entrepreneurs problems faced by them in starting/running their units/activities. Some

researchers have endeavoured to bring out the relationship between caste/family background

and source of finance/financial institutions. The studies have also thrown light on the growth

of entrepreneurship in different stages in India and factors that motivated the entrepreneurs to

bring into this field. Some researchers underlined the need for changing the education system

so as to create the spirit of entrepreneurship among young blood. The importance of

finance /capital also attracted the attention of the studies.

However, a comprehensive study on the role of Karnataka State Financial Corporation

(KSFC) m promoting and developing entrepreneurship in Shimoga district, has not been

documented. Since the planning exercise was taken up in independent India through the

financial institutions to facilitate private investment, a systematic investigation into the role

of KSFC in encouraging entrepreneurship, needs to be taken up. The present study is an

attempt to fill this gap with particular reference to Shimoga district in Karnataka state.

Justification of the Study

The study of the entrepreneurial history before independence reveals that as no

effective state assistance was available to the Indian entrepreneurs and no industrial

framework existed at that time, entrepreneurship became a close preserve of few wealthy

families and in the hands of a few communities an also the growth was imbalanced.

After independence the whole approach to the problem has undergone a complete

change. With the setting up of the Planning Commission, a systematic formulation of plans

and policies has been attempted. The Industrial Policy Resolutions of 1948 and 1956 have

given to the state an important direct entrepreneurial role, to make up for the lack of private

initiative in certain key areas. Emergence of broad-based entrepreneurship and balanced

regional development have become important goals of national development plan. To cater to

the needs of small, medium and big entrepreneurs a network of specialised financial and

developmental institutions like IFCI, ICICI, IDBI, SISIs, SFCs, etc., has been promoted. In

order to create a positive environment for private industrial investment, a policy of support

and incentives directed towards industrial growth has been introduced. Special concessions

and privileges are offered for attracting industries to backward areas. New and small

entrepreneurs, especially the technicians are encouraged to undertake industrial investment

through provision of machinery on hire purchase, accommodation in industrial estates,

factoring services, leasing finance, finance on liberal terms, free service facilities,

entrepreneurship awareness and development programmes, successful entrepreneurs meet,

PRC and PMC holders meeting, etc.

It can be observed from the review of literature that some of them have studied the

role of government and financial institutions in entrepreneurial development and a few

studies are concentrated on the impact of government programmes on entrepreneurship

development. Several studies also observed that the fruits of industrial progress is even today

bagged by entrepreneurs from trade and industrial background. Few studies concluded that

caste, education and family background causes entrepreneurship and this was contradicted by

some studies also. The researchers also offered suggestions for development of

entrepreneurship in the country / their study area. However, a comprehensive study on the

role of Karnataka State Financial Corporation in promoting and developing entrepreneurship

has not been documented. The present study is an attempt to fill this gap with particular

reference to Shimoga district of Karnataka state.

Objectives of the Study

The following objectives have been identified for the purpose of carrying out the

study with reference to the Role of Karnataka State Financial Corporation in Promoting and

Developing Entrepreneurship in Karnataka State-A Case Study of Shimoga

District:

1. To examine the purpose of establishing KSFC and various types of financial

assistance, incentives and concessions being offered and to evaluate the impact of

these on the entrepreneurs.

1. To study the various non-financial measures taken by the KSFC to develop and

promote the entrepreneurship and their effect.

2. To identify the problems being faced by the assisted entrepreneurs in getting the

assistance from KSFC and in setting up their projects.

3. To study the entrepreneurial setting in Shimoga district. It includes:

(a) The study of emerging entrepreneurial class and to bring out its social,

economic, educational and family backgrounds.

(b) To scrutinize environmental factors affecting entrepreneurship and find out the

factors that motivated the new entrepreneurs.

1. To offer suggestions for improving the role of KSFC in financing and promoting

the entrepreneurship in study area.

Hypotheses of the Study

In order to achieve the above objectives, the following hypotheses have been set for

the study:

1. Ambition factor rather than compulsion and encouragement factor is motivating the

entrepreneurs in the study area.

2. The coverage of EDP is not adequate and ineffective also.

3. The corporation played a major role in attracting more number of service

entrepreneurs than industrial entrepreneurs.

4. The entrepreneurs have opted for small sized units.

5. The corporation played a major role in the development of local entrepreneurship.

6. Women entrepreneurs play only a surrogate role in their Units.

7. The corporation has tailed to achieve balanced growth in the state of Karnataka as

well as case study area.

8. Category, education and family background have its own impact on the

entrepreneurial performance.

9. VISHWA scheme has failed to generate the entrepreneurs.

Methodology and Sample Design

To test the above hypotheses, the data is collected from both the primary and

secondary sources. Secondary data for study was collected from the annual reports,

operational statistics, booklets, scheme-wise brochures and other publications of KSFC. The

names and addresses of the entrepreneurs to whom the financial assistance is given in

Shimoga district, purpose of assistance and such other details are collected from the Annual

Sanctions Register maintained by branch office of KSFC in Shimoga. The materials have also

been collected from DIC and Lead Bank of Shimoga district, Small Industries Service

Institute, Bangalore and Department of Mines and Geology, Government of Karnataka,

Bangalore and Directorate of Economics and Statistics, Bangalore.

The impact of the promotional programmes and the commitment of KSFC to provide

finance can be judged from the extent to which the entrepreneurs in the study area have

utilised the benefits of such facilities. To test this, primary data was collected through the

administration of an interview schedule to a randomly selected sample of entrepreneurs and

EDP participants in Shimoga district. The interview schedule was pre-tested on a few

entrepreneurs in Sagar taluk and modified to suit the objectives of the study. The questions

framed covered almost all the main aspects of role of KSFC in entrepreneurial development.

The information was collected through personal interview method. With the help of the

above, 280 entrepreneurs to whom the financial assistance was given by KSFC (excluding

VISHWA beneficiaries) were selected in Shimoga district. Samples are drawn on the basis of

stratified random sampling method and using the following criteria:

1. Representative samples from all the three sectors (i.e., SSIs, transport operators

and other sectors) and category of entrepreneurs.

2. Representative samples from different forms of organizations.

3. Representative samples from all the nine tauks m Shimoga district. Proportional

representation was given to each taluk while selecting the sample.

4. Representative samples from different educational back-grounds and family

backgrounds.

The taluk-wise distribution of sample entrepreneurs/units is shown in the following Table

1.1

Table 1.1

Taluk wise Distribution of the Sample Units

Sl. No. Name of the Taluk Sample Entrepreneurs

1. Shimoga 110

2. Sagar 50

3. Bhadravati 50

4. Shikaripur 30

5. Honnali 15

6. Channagiri 15

7. Soraba 10

8. Thirthahalli 10

9. Hosanagara 10

Source: Survey Data

A profile of the sample entrepreneurs is given in the fifth chapter titled,

Entrepreneurial setting in Shimoga District.

The group survey of the VISHWA entrepreneurs was conducted in 4 villages of the

study area which is not included in the above Table 1.1.

Analysis of Data

In order to get the inferences, prove or nullify the hypotheses, the data collected were

analyses with the help of statistical techniques like percentages, ratios, averages, growth rate,

time series, correlation, ranking method and merit points method.

Scope of the Study

In order to test the above hypotheses, Shimoga district in Karnataka state has been

chosen. This study is confined to only Shimoga district as the researcher hails from the same

district and moreover, the problem can be better perceived.

Year of Reference

The study is spread over a period of eight years commencing from 1990-91 to 1997-

98. For the purpose of analysis, the financial assistance offered by KSFC from 1st April 1990

to 31st March, 1998 were only taken. However, latest information is included wherever

required and available.

Definition of Concepts/Terms

The definition of the terms used in the thesis are as follows:

Small Scale Industry

Small scale industry is one in which the investment in plant and machinery is less

than Rs. 60 lakhs; for an ancillary or 100 per cent export oriented units, the limit is Rs. 75

lakhs. The small scale units which undertake to export at least 30 per cent of annual

production by the third year, will be permitted to step up their investment in plant and

machinery to Rs. 75 lakhs.

Tiny Unit

Tiny unit is one in which the investment in plant and machinery is less than Rs. 5

lakhs and the unit is located in areas where the population is less than 50,000 as per 1991

census.

Term Loan

Term loan means the loan, which is provided by the KSFC for a period exceeding one

year for entrepreneurship development.

Working Capital

Capital required to meet the day-to-day expenses of the projects set up by the

entrepreneurs.

Working Capital Loan

Loan granted for a period of less than one year to meet the working capital

requirements of the entrepreneurs.

Limitations of the Study

The study has certain limitations. The entrepreneurs may not maintain proper

accounts relating to their annual turnover, actual production per annum in terms of quantity

and value of output. For measuring the size of the unit and growth of entrepreneurial

activities, the investment made, annual turnover and number of employees / labourers

employed as given by the entrepreneurs are taken as the basis. However, the actual figures

may be different. This is because, it is generally believed that small entrepreneurs do not

maintain proper books of accounts and do not have proper records. It is also believed that

some entrepreneurs deliberately avoid to furnish correct information due to various known

and unknown reasons, say for tax reasons.

The study is based on the personal interviews with the entrepreneurs who are assisted

by KSFC and those who have participated in the EDP conducted by KSFC and other

agencies. It could have been a more meaningful study, had it been based on personal

interviews with the officials of KSFC at various levels. But this was not possible' because of

time and resource constraint on the part of the researcher and busy schedules of KSFC

officials. The non-availability of EDP /EAP participants who have not started the

entrepreneurial activity after the programme has also affected the study.

It was noted that many women entrepreneurs assisted by KSFC did not actually

participate in the management of such units. Such units are actually managed by the male

family members. This has affected the researcher's goal of studying the role of KSFC in the

development of women entrepreneurship.

Lack of knowledge about the importance of research among the respondents has also

affected the interview. Secondary data is obtained from KSFC through published reports and

annual sanctions register. All calculations and analysis are based only upon the above said

data. Further, because of time and financial constraints, this study is confined only to

Shimoga district of Karnataka state.

Dimensions of the Study: Chapter Planning

The study is divided into eight chapters.

Chapter 1 (the present one) deals with the statement of the problem, the importance of

entrepreneur to the process of economic development, definitions of the term entrepreneur, a

review of literatures relating to entrepreneurship, the objectives, hypotheses, justification,

scope and limitations of the study, methodology used and sampling design, year of reference,

definitions of concepts / terms used and the chapter planning.

Chapter 2 makes a study of the concept of entrepreneurship development, brief study of the

various theories of entrepreneurial supply, entrepreneurial supply in pre-independent and

post-independent period, need for entrepreneurship development in India and the process of

entrepreneurship development.

In Chapter 3 the profile of KSFC is given. It includes the origin of KSFC, objectives of

KSFC, organization structure, terms and conditions of finance, various schemes for

entrepreneurs and promotional and developmental efforts of KSFC.

Chapter 4 presents the profile of the Karnataka state and the case study area, i.e., Shimoga

district.

Chapter 5 draws a profile of sample entrepreneurs in Shimoga district. The profile is drawn

taking into account the following factors:

1. The characteristic features of sample entrepreneurs such as age, marital status,

education level, family background, community-wise distribution, entrepreneurial

activity undertaken and the factors motivating them to establish units.

2. The type of units promoted by the entrepreneurs.

3. Performance of entrepreneurs.

4. Problems faced by the entrepreneurs.

The chapter also makes the study of relationship among various characteristic features

of entrepreneurs.

Chapter 6 assesses the financial role of KSFC in developing the entrepreneurship in

Karnataka state as well as Shimoga district.

Chapter 7 assesses the effectiveness of the promotional activities undertaken by

KSFC in promoting the growth of entrepreneurs. Assessment is made on the basis of data

obtained from the sample with regard to the extent of dependence on and the usefulness of

entrepreneurship development programmes.

Chapter 8 provides a summary of findings, suggestions and conclusion.

References

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and Policy, Asia Publishing House, Bombay, 1960, p. 299.

2. Spangler, Joseph., "Economic Factors in Economic Development", American

Economic Review (Proceedings), Vol. 47, p.4.

3. Encyclopedia of Social Sciences, Vol. 3-4, Macmillan and Company, New York, p.

218.

4. Wernette, Philip, The Future of American Prosperity, Macmillan and Company, New

York, 1955.

5. UNIDO, "Industrialization of Developing Countries: Problems and Prospects"

(Monograph-l7), United Nations, New York, 1969, cited in Sadhak, H., Role of

Entrepreneur in Backward Area, Daya Publishing House, New Delhi, 1989, p. 2.

6. Berna, James J., Industrial Entrepreneurship in Madras State, Asia Publishing House,

Bombay, 1960, p. 6.

7. Kilby, Peter, Entrepreneurship and Economic Development, The Free Press, New

York, 1971, p. 2.

8. Say, B. "Catechism, of Political Economy", New York, 1827, p. 295 cited in

Bhanushali, S.G., Entrepreneurship Development, Himalaya Publishing House,

Bombay, 1987, p. 2.

9. Drucker, Peter F., Innovation and Entrepreneurship-Practice and Principles. Affiliated

East-West Press Pvt. Ltd., New Delhi, 1991, p. 19.

10. Haggen, E.E., "The Economics of Development", p. 219, cited in Vasanth Desai,

Entrepreneurial Development, Vol. 1, Himalaya Publishing House, Bombay, in a 31.

11. Knight, Frank H., "Risk, Uncertainty and Profit" (ed. G.]. Stigler), University of

Chicago Press, Chicago, 1971, cited in Sadhak, H., op.cit., pp.5-6.

12. Schumpeter, ].A., "The Theory of Economic Development", Oxford University, New

York, 1967, cited in Vasanth Desai, op. cit., p. 31.

13. Bhanushali, S.G., op. cit., pp. 5-6.

14. Lewis, Ben W., "The Corporate Entrepreneur", Quarterly Journal of Economics, Vol.

51, No.3, May 1937, p. 535.

15. Ibid., p. 537.

16. Harbison, Frederick, "Entrepreneurial Organization as a Factor in Economic

Development", The Quarterly Journal of Economics, Vol. 70, No. 1, Feb. 1956, p.

365.

17. Stauss, James H., "The Entrepreneur-The Firm", Journal of Political Economy, Vol.

52, No.2, June 1944, p.117.

18. Ibid., p.120.

19. Evans, George Herbertson A, "The Entrepreneur and Economic Theory-A Historical

and Analytical Approach", American Economic Review (papers and Proceedings),

Vol. 39, No. 3, May 1949, pp. 336-48.

20. Pandit, D.P., "Creative Responses in Indian Economy-A Regional Analysis", The

Economic Weekly, Vol. 9, No. 8, Feb. 23, 1957, pp. 283-86, and Vol. 9, No. 9, March

2,1957, pp. 315-17.

21. Acharya, Hemalatha, "Creative Responses in Indian Economy -A Comment", The

Economic Weekly, Vol. 9, No. 17, April 27, 1957, pp. 547-49.

22. Gaikwad, V.R. and Tripathy, R.N., Socio Psychological Factors Influencing Industrial

Entrepreneurship: A Case Study in Tanuku Region of West Godavari, A.P., National

Institute of Community Development, Hyderabad, 1970.

23. Pathak, H.N., Small Scale Industries in Ludhiana, IIMA reprint series, originally

published in Economics and Political Weekly, Vol. VII, No. 48, November, 1972.

24. Heggade, Odeyar D., "Development of Women Entrepreneurship in India - Problems

and Prospects", Economic Affairs, Vol. 26, Qr. 1, Nos, 1-2,]an.-Mar., 1981, pp. 39-

50.

25. Gudi, Savithri M., "Karnataka State Social Welfare Board-Assisting Women to

Organise Industries", Report of the Third International Conference of Women

Entrepreneurs, 1984, pp. B36- B42.

26. Saravanvel, P., Entrepreneurial Development-Principles, Policies and Programmes,

Eee Pee Kay Publishing House, Madras, 1987.

27. Rao, V. Lakshmana, Industrial Entrepreneurship In India. Chugh Publications,

Ahmedabad, 1986, pp. 95-100.

28. Pillai, Karunakaran G., "Women Entrepreneurship in a Industrial Backward State",

cited in N.S. Bisht and others (Ed.), Entrepreneurship-Reflections and Investigations,

Chugh Publications, Allahabad, 1989.

29. Saradadevi, K., "Entrepreneurship of Women in India", Khadi Gramodyog, Vol. 35,

No. 6, March 1989, pp. 269-71.

30. Oamen, M.A., "Small Industry in Indian Economic Growth: A Case Study of Kerala",

S.B. Press, Trivandrum, 1972, pp. 171-88, cited in Ajay Lakhanpal, Entrepreneurial

Development-An institutional Approach, Common Wealth Publishers, New Delhi,

1990.

31. Bhatia, B.S., "New Industrial Entrepreneurs: Their Origins and Problems", Journal of

General Management, Vol. 2, No. 1, Autumn 1974, pp. 69-79.

32. Management Development Institute, New Delhi, "Small Scale Industries-An

Assessment of Institutional Assistance-Case Studies of Some Select States in India",

198;3.

33. Deshapande, Manohar U., Entrepreneurship o/Small Scale Industry-Concept, Growth

and Management, Deep and Deep Publications, Delhi, 1989.

34. Sharma, R.A., Entrepreneurial Change iri Indian Industry, Sterling Publishers, New

Delhi, 1980.

35. Sadhak, H., op. cit.

36. Sarma, Anil Kumar, "Growth of Industrial Entrepreneurship in India", The Indian

Journal o/Commerce, Vo1. l8, Part IV, No. 65, Dec. 1965, pp. 355-68.

37. Chopra, K.C., "Entrepreneurship and Promotion of Small Scale Industries in India",

The Banker, Jan. 1974, cited in Ajay Lakhanpal, op. cit., pp. 24-25.

38. Sharma, Krishnalal and Singh, Harnek, Entrepreneurial Growth and Development

Programmes in Northern India-A Sociological Analysis, Abhinav Publications, New

Delhi, 1980.

39. Bhanushali, S.G., op. cit.

40. Lakhanpal, Ajay, op. cit.

41. Gangadhara, V. and Reddy K., Rajeshwar, "Women Entrepreneur Development

Programme of APSFC-An Introspection", Indian Journal of Marketing, Vol. 21, No.5-

10, Jan-June 1991, pp. 3-6, 27-29.

42. Singh, Birendra Narain, "Pattern of Entrepreneurship in Agra with Special Reference

to Light Engineering Industry", Indian Journal o/Commerce, Vo1. l7, Part III, No. 60,

Sept. 1964, pp. 205-13.

43. Mishra, Ramesh C. and Bisht, Narendra S., "Entrepreneurial Paradox-A Diagnostic

Exercise", cited in N.S. Bisht and others, op. cit.

44. Rao, Gangadhar, Entrepreneurship and Growth of Enterprise in Industrial Estates,

Deep and Deep Publications, New Delhi, 1986, pp. 330-65.

45. Rao, Sarveshwar V., and Nafzinger, E.W., "Class" Caste and Community of South

Indian Industrialists: An Examination of the Haratio Alger Model", The Journal of

Development Studies, Vol. 1, No. 2, Jan. 1975, pp. 131-48, cited in Ajay Lakhanpal,

op. cit.

46. Berna, James J., op. cit.

47. Desai, Vasanth, op. cit., p.301.

48. Ibid., p. 370.

2

The Concept of Entrepreneurship Development

The importance of entrepreneurship as a major determinant of the rate of economic

growth is fully recognised by the academicians, economists, psychologists, sociologists,

political scientists and also the state. A fact that industrial enterprise and economic growth

are correlated and the activity of an entrepreneur is necessary for launching an industrial

enterprise has now become obvious to all. In view of the scarcity of entrepreneurial talents in

developing countries, attempts are now made to promote and develop entrepreneurship so

that it can act as the much needed stimulant in economic growth. This chapter deals with the

theories of entrepreneurial supply, the factors that necessitated the development of

entrepreneurship, need for entrepreneurship development in India and the process of

entrepreneurship development.

Theories of Entrepreneurial Supply

The emergence of entrepreneurs in a society has been studied by several researchers

who have put forward various theories analyzing their occurrence. Religious, socio-cultural,

psychological and economic factors are identified by these theories as the causes responsible

for the emergence of entrepreneurs. As such the theories explaining the sources of

entrepreneurial supply can be classified into three broad groups based on the factors to which

they attribute the emergence of entrepreneurs.

They are:

1. Theories emphasizing religious and socio-cultural factors.

2. Theories emphasizing psychological factors.

3. Theories emphasizing economic factors.

1. Theories Emphasizing Religious and Socio-cultural Factors Religion and its impact on

enterprising culture were first analysed by Max Weber in the Western context. Weber

postulated that entrepreneurial growth was dependent upon ethnic value system of the society

concerned, that rapid industrial growth was dependent upon a rationalised technology,

acquisition of money and its rational use, productivity and multiplication of money and that

entrepreneurship was dependent upon rational attitude towards action.

According to Weber, the 'spirit of capitalism' is a set of attitudes towards the

acquisition of money and the activities involved in it. Weber states that this 'spirit of

capitalism' cannot generate in itself where widely spread mental attitudes favourable to

capitalism are not present and that the Protestant ethic provides this mental attitude. Weber

extended his analysis to Indian conditions. According to him, the 'spirit of capitalism' was

absent in religious belief system of Hinduism.

Max Weber, at the same time, in interpreting the spirit of enterprise among Jains,

locates approximated 'Protestant ethics' amongst Jains. In Indian condition, Weber's analysis

for the presence of spirit of capitalism in Jain community fails completely. One thing is

certain, Jainisim with its stress on Aparigraha (non-attachment), Ahimsa (non-violence),

Aastey (non-stealing) and Brahmacharya (desirelessness) are neither less ascetic nor less

otherworldly than Hinduism. Therefore, the Weberian model is inadequate to explain the

entrepreneurship in Indian situation.

The importance of socio-cultural factors as the driving force behind entrepreneurial

emergence has been emphasized by Cochran, Stokes, Hoselitz, Kunkel and Young.

Cochran emphasizes cultural values, role expectations and social sanctions.

According to him, the entrepreneur represents society's nodal personality. His performance is

influenced by three factors, namely, his own attitude towards his occupation, the role

expectations had by sanctioning groups and the operational requirements of the job. Society's

values are the most important determinants of the first two factors.

Stokes has also emphasized the importance of social and cultural values which

channel economic action. According to Stokes, entrepreneurship emerges as a result of the

way in which the entrepreneurial role is perceived by the collectivities, which are held in high

esteem by the prospective entrepreneur. According to him, whether or not a person with high

need achievement chooses industrial entrepreneurship over other Possibilities depends on

cultural values and not psychological dispositions may be seen as conditions for an

individual's movement into industrial entrepreneurship, but it is the group generated value

matrix that channels him away from or towards such activity.

Hoselitz underlines the importance of culturally marginal groups in promoting

economic development. He hypothesises that marginal men, because of their ambiguity status

from a cultural or social standpoint with little bondage to tradition are ideally suited to make

adjustments in situations of change and become good entrepreneurs.

Kunkel has elaborated a behaviouristic model of entrepreneurship. It is pointed out

that entrepreneurs are not equally distributed in the population and minorities (religions,

ethnic, migrated, displaced elites) have provided most of the entrepreneurial talent. But all the

minorities are not important sources of entrepreneurship. Therefore, Kunkel argues that the

marginality does not guarantee entrepreneurship. There must b~ some additional significant

factors at work. According to him, the Industrial entrepreneurs hi p depends upon Jour

structures present within a society or community, viz., limitation structure, demand structure,

opportunity structure and labour structure. The limitation structure restricts the behavioural

pattern of a population segment, i.e., society limits specific activities to members of a

particular sub-culture. This limitation structure affects all the members of the society. The

demand structure is mainly economic in nature (also not static) and 'changes with economic

progress and government policies. Demand structure can be improved by providing material

rewards. By manipulating certain selected components of the demand structure, behaviour of

people can be shaped in an entrepreneurial way. The opportunity structure is necessary to

increase the probability of entrepreneurial activity. It includes the availability of capital,

management of capital, management and technological skills, information concerning

production methods, labour and markets, opportunity to learn directly or through imitation

and all the activities associated with the effective planning and successful operation of

industrial enterprise. Kunkel states that labour means 'men' and is a function of several

variables. The supply of labour is governed by available alternate means of livelihood,

traditionalism and expectations of life.

Frank W. Young is not ready to accept the entrepreneurial characteristic at the

individual level. His theory of entrepreneurial supply is a group theory. According to him,

instead of individuals, one must find clusters, which may qualify itself as entrepreneurial

groups, as the groups with higher differentiation have the capacity to react. He proposes that

a group experiencing low status recognition and denial of access to important social networks

and in possession of a greater range of institutional resources than other groups in the society

at the same level will become reactive to improve its position. Young defines reactiveness as

the degree to which the members of the group create, maintain and project a coherent

definition of their situation. Such reactiveness leads to the emergence of entrepreneurs.

2. Theories Emphasizing Psychological Factors

The impact of psychological factors in the emergence of entrepreneurs has been

emphasised by McClelland and Schumpeter.

McClelland, like Hoselitz, ascribes the innovative characteristics to entrepreneurial

role. He identified two characteristics of entrepreneurship, viz., doing things in a new and

better way and decision making under uncertainty. McClelland's theory can be looked as a

development of Weber's 'Protestant ethic' when he implicitly introduced the concept of need

for achievement as a psychological motive. McClelland, more explicitly, emphasized the

need for achievement or 'N-ach' in individual leads them to pursue entrepreneurial ventures.

According to him, achievement motive is inculcated through child rearing practices, which

stress standards of excellence, material warmth and self-reliance training and low father

dominance. McClelland believed that N-ach was difficult to he acquired during adulthood. If

economic growth had to be speeded up, individuals with high N-ach had to be developed.

This could be achieved through persuasion or education by introducing changes in the social

system and by early character training.

However, in a later study, he altered his proposition and ascribed changes in

motivation to the ideological arousal of latent need for achievement among adults typically

associated with a new sense of superiority. Thus, the need for achievement could be instilled

among adults through appropriate training.

Schumpeter's entrepreneur possesses special characteristics, such as an intuitional

capacity to see things in a way which afterwards proves to be true, a kind of effort of will and

mind to overcome fixed habits of thinking and the capacity to surmount social opposition

against doing something new. According to him, entrepreneurs occur randomly in any

ethnically homogeneous population. They are individuals motivated by the dream and the

will to a private kingdom, the will to conquer and the joy of creating or simply of exercising

one's energy and ingenuity.

3. Theories Emphasizing Economic Factors

The economists view is a counter-hypothesis to all the view-points of entrepreneurial

supply and is evident in empirical studies of G.F. Papanek.

Papanek maintains that the emergence of entrepreneurs is dependent on strong

economic incentives and disincentives. According to him, the psychological drive for

pecuniary gain or the desire to improve real incomes is present in all the societies, what

matters is the economic environment. In the face of strong economic incentives even groups

with little or no industrial background come forward to set up industries. If there is lack of

vigorous entrepreneurial response in manufacturing, it is due to various kinds of market

imperfections and inefficient policy making. He cites the case of Muslims in Pakistan who

had little entrepreneurial history before partition, but responding to economic incentives and

disincentives developed a vigorous entrepreneurial group.

The political economy paradigm of Flavia Derossi holds political power as a

paramount factor in entrepreneurship development in all new developing countries.

Proximity, though not necessarily in the geographical sense, or access to the sources of

power, may be the determinant factor of private investment.

The study of theory of entrepreneurial supply reveals that, majority of the theories

offer only a historical interpretation of how entrepreneurs emerge in a society without putting

forward a proposition as to the ways -in which the emergence of entrepreneurs can be

facilitated. But McClelland's theory suggests that entrepreneurs can be developed through'

training. An implication of Papanek's theory is that entrepreneurs can be induced to emerge

through the provision of economic incentives.

Entrepreneurial Supply and Need for Entrepreneurship

Development in India

Entrepreneurial activity needs an environment conducive to its growth. It involves

assumption of considerable risk by the entrepreneur. According to Cole the environmental

conditions which influence the origin of an entrepreneurial class include the stable

government, external security and internal security. An analysis of the industrialization

process within a country and of the concomitant behaviour of the entrepreneur needs,

therefore, a study of the interplay of host of such factors. A complex economic and social

behaviour such as entrepreneurship can scarcely develop in an unfavourable setting. The

purpose of this part is to give a picture of Indian entrepreneurial history in the pre-

independence period and post-independence period and need for entrepreneurship

development in India.

Pre-independent Scenario

The Indian entrepreneurial history, from time immemorial, has been characterized by

a kind of stratification on religious and regional basis. The social value system in India with

its rigid segregation of occupation on caste basis is said to have affected the growth of

entrepreneurship. Max Weber contended that religions belief system of Hinduism did not

encourage the spirit of capitalism and thus discouraged the growth of entrepreneurship.

Sharma is of the view that Hindu society was conceived as 'homo hierarchies' where caste

groups were rigidly separated from each other on functional basis-a feature which

perpetuated the practice of following the family occupation leaving little scope for mobility

between one occupation and another. Among the Hindus, the Bania was such a case, which

mainly dealt in commodities and carried on money lending business. The Banias, though

came third in caste hierarchy, enjoyed an enviable position in the urban centres. Where the

caste system was relatively loose, the danger of ostracisation absent and the trading castes

missing, people of other castes also moved into these occupations and came to be regarded as

members of the business community.

By the middle of the 19th century, the Parsis and Gujaratis trading castes became the

wealthiest Indian communities controlling whatever foreign trade was in the Indian hands. In

South India the trade and industrial activities were controlled by Chettis, Chettiars; Nagrani

Mappilas, Moplah and Konkanis. According to Sharma, the entrepreneurial history of a

hundred year preceding independence reveals that apart from Parsis, the Bania caste, whether

from Gujarat, Rajasthan or Tamil Nadu dominated the industrial scene. In the Eastern part,

the Subarna Banikas in Bengal participated in trade, industry and banking along with their

British principals. But with the consolidation of British political power, Subarna Banikas

gradually disappeared from the industrial scene. There was another important and fairly

developed business community called 'Marwaris' hailing from Marwar in Rajasthan. They

attained the, greatest development in Gujarat and Rajasthan. But even during first half of the

19th century, Rajaputana was ravaged by feudal strife and it was by no means an ideal place

for large scale trading and money lending operations, therefore, necessitated to seek new

opportunities beyond its borders. In the absence of Bania element in Maharashtra, Yajurvedi

Brahmins and Chitpavan Brahmins took considerable part in trading, banking and money

lending.

It is established that trading pursuits have been the source of entrepreneurial activity

everywhere, but once the roots of industrialization have been laid one expects that the

enterprising spirit permeates among people from other occupations also. The experience in

the UK and US suggests that a new element-men with technical skill entered

entrepreneurship. They set up shops-enterprises that often grew into sizeable factories. They

were neither engineers nor academically trained persons, but possessed useful instincts or had

acquired a practical skill.

The beginning of the 20th century witnessed the emergence of Marwaris and Chettiars

of Tamil Nadu on the industrial scene. The Marwari entrepreneur came to industry in large

numbers as a result of flush of post-war prosperity, whereas the Chettiars came to industry as

a result of being un-welcome elsewhere and wanted to find use for their accumulated

resources in their own country.

The Indian industry, which was basically a cottage and small scale, declined at the

end of 18th century for various reasons, such as the disappearance of Indian courts

competition from big units, establishment of an alien rule. With the influx of the many

foreign influences and absence of road-based market, the modern industry came to India in

the middle of the 19th century as an aftermath of the industrial revolution in England: The

British were looking for wider markets for mass production, of their factories and

consequently involved the Indian market with their factory products. In the process the Indian

handicraft industry was destroyed. The colonial regime was not serious about Indian

industrialization and never conceived of promoting widespread growth of entrepreneurship.

Vasant Desai, writes that "it 'was calculated discrimination, perpetrated against the Indian

industrial interests, which scuttled the growth of native entrepreneurship". However, the

Swadesi government which was launched by Indian political leadership m October 1905

aroused the sentiments and emotions of people and a serious feeling against the British

products was generated. As a result, many numbers of industries were established with the

help of Indian investment and under Indian management.

K.S.N. Bhat writes that "the British regime did not give enough stress for the

development of entrepreneurship. It IS only during the post-independence era that

government started proclaiming many concessional measures to give fillip for the growth of

industries."

The examination of the entrepreneurial history reveals that several factors are

responsible for the slow growth and absence of broad-based entrepreneurship in the pre-

independent India. They include caste system, colonial rule, Joint family system, cultural

traditions and the like. Besides these, the educational system was so geared as to turnout

clerks. No importance was attached to development of technical abilities or executive skills.

The legal profession and administrative services attracted the most brilliant and highly

ambitious young men. As the government did not ascribe any high value to the

entrepreneurial class, society continued to bestow the greatest prestige on intellectual or non-

material pursuits. This situation is continued in the post-independent period also. Further, as

the liberation movement gained momentum, many talented young men drifted towards

political activity.

The industrial development/entrepreneurial development depends on the availability

of economic incentives. Otherwise only the highly resourceful could think of launching an

industrial enterprise. Gadgil maintains that a number of factors such as lack of capital, lack of

organised banking, inefficient labour, lack of fund, difficulty in obtaining cheap power, lack

of working in metals, especially iron and steel, early development of railways which laid the

country open for foreign competition, lack of facilities for technical education and

indifference of the government to industrial development resulted in the slowness of

industrial development in pre-independent India.

Post-independent Scenario

In the post-independent period, the emergence of state as an entrepreneur through the

creation of the public sector is an important feature of the entrepreneurial growth in India.

This sector has discharged its entrepreneurial role by establishing many industries which

were not present in the country before independence. The state has also offered several

concessions, subsidies, privileges and established a network of specialised financial

institutions to create a positive environment for private industrial investment. The policy

resolution of the state also pointed out an important role to the small scale private sector for

the diversification of industry to the backward or underdeveloped areas and its ability to

generate employment opportunities.

The nationalisation of Life Insurance Corporation in 1955, however, created a

doubtful atmosphere in the private sector. Therefore, the government has come out with a

new industrial policy resolution and assured the existing private sector enough work in a

reserved sphere and also stressed the need for state stimulation for the growth of private

sector, As a result, in the private sector, the family based entrepreneurs like Tata, Birla,

Goenka, Mafatlal, Kirloskar, Dalmia and others established new frontiers and abnormally

expanded the existing units. These entrepreneurs diversified the industrial base of the

economy m this period. Also a new class of entrepreneurs has emerged and set up large

business houses.

The pre-independent entrepreneurial picture reveals that entrepreneurship is a

prerogative of certain communities/ castes and family background much influences the

emergence of it. But the role played by the state in the post-independent period has resulted

in the emergence of entrepreneurs m the small scale sector from diverse social and economic

backgrounds. The studies conducted by Sharma, Oamen, Berna, Mishra and Bisht have

confirmed that entrepreneurship is no longer confined to the trading communities and that the

entrepreneurs have emerged from varied backgrounds.

On the contrary, the studies conducted by Deshpande, Sharma and Singh, Bhanushali

and Acharya have reported that in post-independent India, entrepreneurs still emerge mainly

from trading castes and families with a business or industrial background. In a study of 90

entrepreneurs in Marathwada region of Maharashtra, Deshpande found that as much as 55 per

cent came from business castes. Sharma and Singh found that caste background of the

entrepreneurs had significant influence in the entrepreneurs' entry into manufacturing (along

with family background), the expansion of the business and perception of business stability.

In a study of 125 entrepreneurs m Kolhapur, Bhanushali found that caste, education and

parental occupation had greater influence on attaining higher degree of entrepreneurial

success. Acharya has reported that exceptions apart, entrepreneurs mostly hail from certain

castes who have a tradition of business in their family.

The post-independence era has thus seen the emergence of new class of entrepreneurs,

expansion and diversification by old industrial houses, the growth of state entrepreneurship

and also the entrance of multinational corporations on the industrial scene. Despite all this,

the fruits of industrial progress have not reached all sections of the society and all regions of

the country. Poverty and unemployment continue to plague the Indian populace. This can be

partly attributed to the absence of a broad-based entrepreneurship in the country, which has

particularly affected the development of modern small scale industry.

The importance of small entrepreneurs to the economic development of the country

Cannot be underestimated. A broad-based entrepreneurship is essential for India to achieve a

de centralised industrial structure. It will also help to alleviate many economic and social

problems like widespread unemployment, growing terrorism, growth of anti-national

elements, non-utilization of existing natural resources, lopsided regional development and

poverty. The importance of small entrepreneurs is stressed by Berna who maintains that given

the high propensity to imitate in developing countries, these entrepreneurs can set in motion a

chain reaction which leads to cumulative progress.

The apparent scarcity of small entrepreneurs in India and the need for large number of

small entrepreneurs to meet the nation aspirations of rapid industrialization and balanced

regional growth, coupled with the fact that the country lacks a broad-based entrepreneurship,

thus underlines the need for entrepreneurship development in India.

The Process of Entrepreneur hip Development

Entrepreneurship-Concept

The term 'Entrepreneurship' is often used synonymously with the entrepreneur.

Though they are the two sides of the same coin conceptually they are different.

Entrepreneurship is the mission whereas the entrepreneur is the missionary. The entrepreneur

is essentially a business leader and the functions performed by him is entrepreneurship. In

other words, entrepreneurship is the quality or attitude of being an entrepreneur. While

entrepreneur is an individual, entrepreneurship is an attribute possessed and practiced by an

entrepreneur. It is a creative and innovative response to the environment.

Entrepreneurship is a multidimensional task defined differently by different

authorities. The few such definitions are as below.

A.H. Cole defined: "entrepreneurship is the purposeful activity of an individual or a

group of associated individuals, undertaken to initiate, maintain or organise a profit-oriented

business unit for the production or distribution of economic goods or services."

Benjamin Higgins has defined entrepreneurship as "the function of foreseeing

investment and production opportunity, organising an enterprise to undertake a new

production process, raising capital, hiring labour, arranging for the day to day operation of

the enterprise"

Thus, entrepreneurship can be defined as the process of doing the innovation, taking

the decision, assuming the risk, bearing the uncertainty, making the organisation, skillfully

managing the enterprise and making the enterprise a success.

Entrepreneurship Development

Development of entrepreneurship has become a movement in India. It is cardinal and

more crucial to industrial development than any other economic factor. It has got added

relevance due to massive unemployment of both educated and uneducated.

In a broad sense, "development of entrepreneurship refers to all those activities

undertaken to encourage a prospective entrepreneur to set up an industrial unit. In a narrow

sense, it refers to the process of bringing out the 'entrepreneur' in an individual. In other

words, instilling in a person the urge to set up an industrial unit or undertaking the

entrepreneurial activity and providing him with training in all aspects of establishing and

managing an industrial enterprise. Entrepreneurship development is the outcome of the fact

that individuals can be developed and their ideas can be converted into action through an

organised and systematic programme for the entrepreneur.

It includes all activities aimed at encouraging the growth of entrepreneurship and can

be grouped into two types, indirect approach and direct approach.

1. Indirect Approach to Entrepreneurship Development

The indirect approach to entrepreneurship development includes all those measures

which are intended to create a suitable environment for the entrepreneur to operate in. These

measures include provision of financial assistance, financial incentives like tax concession,

subsidies, concessional finance, preference in government purchase, creation of

infrastructural facilities, encouraging capital formation, etc.

The assumption underlying this approach is that the various financial facilities

available would induce people to set up industrial units. The availability of adequate

infrastructural facilities would make their endeavour easier.

In India, lack of adequate sources of long term finance was the major deterrent for

new entrepreneurs. To rectify this lacuna, financial institutions like the Industrial

Development Bank of India (IDBI), the Industrial Finance Corporation of India (IFCI), the

Industrial Credit and Investment Corporation of India (ICICI) and the State Financial

Corporations (SFCs) were established to provide long term loan as well as loans to meet seed

capital requirements. These institutions underwrite the issue of shares and debentures to

enable corporate entrepreneurs to raise capital. They have devised several schemes under

which finance is made available on concessional terms. Some of these schemes are specially

devoted to meet the financial requirements of first generation entrepreneurs. In recent years

the government and the financial institutions have formulated the schemes like hire purchase

assistance, factoring services and leasing finance to meet the requirements of the

entrepreneurs.

The government has established industrial estates throughout the country to encourage

new entrepreneurs. An industrial estate is "a group of factories constructed on a economic

scale in suitable sites with facilities of water, transport, electricity, banks, post-offices,

canteen, watch and ward and first-aid provided with special arrangements for technical

guidance and common service facilities".

The other facilities provided to entrepreneurs include marketing assistance, equipment

leasing, sale of machinery on hire purchase basis, proto type development and R&D facilities

through various government sponsored institutions.

An EDP is a device through which people with latent entrepreneurial traits are

identified, motivated to take up an industrial venture, trained in managing the unit, viz.,

locating a suitable project, testing its economic viability and technical feasibility, complying

with government rules and regulations and obtaining finance.

The credit of sowing the seed for EDP in India can be given to Dr. D.C. McClelland,

a noted psychologist from the Harvard University. After extensive research he had concluded

that the economic development of a nation depends mainly on the inner decision and

entrepreneurial aspirations of the people. Inspired entrepreneurs utilise the resources and

become instrumental to economic growth of the nation. He called it "The Achievement

Motivation Syndrome"

EDP was first introduced in 1970 in Gujarat and was sponsored by the Gujarat

Industrial Investment Corporation (GIIC). Afterwards, several financial corporations,

government departments and organisations started such a promotional programme.

2. Direct Approach to Entrepreneurship Development

The direct approach focuses on the development of the man rather than the

environment. The aim is to train people to perform the role of the entrepreneur. It consists of

developing entrepreneurial aptitude among those people with identifiable entrepreneurial

traits. Training is provided to these potential entrepreneurs in all aspects of establishing and

managing an industrial enterprise. The training agency even assists them in selecting a project

and setting up the unit.

In the early seventies, the Indian Government had realised that the fruits of

development were concentrated in a few areas and classes and that the income and regional

disparities had increased. Also, that merely providing the fiscal and financial incentives was

not adequate for promoting new entrepreneurs. It was felt that for cultivation of first

generation entrepreneurs a more systematic effort was required. Under the Fifth Five Year

Plan the government made provision for entrepreneurship promotion by providing a package

of consultancy services through a network of Technical Consultancy Organisations. In

addition to that, the government adopted the Entrepreneurship Development Programme as

an important instrument to develop small entrepreneurs in the country.

Entrepreneurship Development Programme (EDP)

An Entrepreneurship Development Programme has been defined as "a programme

designed to help a person in strengthening his entrepreneurial motive and in acquiring skills

and capabilities necessary for playing his entrepreneurial role effectively"

Objectives of Entepreneurship Development Programme

The objectives of EDP which have been identified areas follows:

1. To foster entrepreneurial growth in the country, particularly in the small sector

and to secure wider dispersal of entrepreneurship.

2. Optimum use of available resources.

3. To let the trainee set or reset the objectives of his business and work individually

and along with his group for their realization.

4. To develop a broad vision to see the business as a whole and to integrate his

function with it.

5. To enable the trainee to cope with and coordinate the different types of paper

work, most of which are statutorily obligator.

6. To strengthen the trainee's passion for integrity, honesty and compliance with law

which is the key to success in the long run.

7. Generation of employment opportunities.

8. Development of backward regions and expansion of non-training activities in rural

areas and improving the economic status of socially disadvantaged groups like rural

poor, tribal and women.

9. Widening the industrial base through setting up of small and medium scale

industries.

Structure of a Typical EDP

A typical EDP consists of three distinct phases, viz., pre-training phase, training phase

and post-training phase or follow-up phase. The duration of an EDP may vary from one day

to several weeks. It is characterized by an emphasis on operational rather than academic

training and flexible design of training programmes to meet the specific needs of the

participants.

The contents of a typical EDP are summaries ere.

1. Pre-training Phase of the Programme

The initial stage of an EDP includes the selection of candidates for the programmes.

The agencies conducting the EDP advertise in the local media regarding the programme and

call for applications from candidates. The selection of the trainees is based on several traits

like the need for achievement motivation, ability to take risk, information seeking attitude in

seizing the opportunities, decision making ability, problem solving capacity, clarity about

goals and priorities and planning a time-bound programme of tasks to attain chosen goals,

etc.

The selection of candidates is carried out, sometimes, after they are subjected to a

written test and interview. A number of techniques like Bio-data Questionnaire, Assessment

of Motives and Entrepreneurial Competencies are used to select the prospective trainees.

2. Training Phase of the Programme

The EPD training has normally three components, viz., Achievement Motivation

Training, Business Opportunity Guidance and Management Education Component.

The aim of the Achievement Motivation Training is to develop the latent motivation

of the trainees. The motivational inputs include psychological games, goal-setting exercises

and role play. The objective of these inputs is to enable the participants to understand their

own entrepreneurial personality and behaviour and bring about through self study, changes in

self concept, values and skills leading to positive entrepreneurial behaviour. The aim is to

develop entrepreneurial competencies like initiative, information seeking, orientation towards

systematic planning, persistence, concern for quality work, commitment, efficiency

orientation, assertiveness, problem solving and decision making.

The Business Opportunity Guidance aims at providing the information to the trainees

about various opportunities available and guiding to select a project suitable to them. The

trainees are exposed to the actual problems of running an enterprise by conducting field trips

to successful industrial units in the area. Sometimes they are provided in-plant training to

gain familiarity with the production process. The trainees are helped in conducting the

techno-economic feasibility study of the project they have selected, preparation of project

report and in conducting the market surveys. It also aims at providing guidance with regard to

the preliminary work to be completed before setting up an enterprise. Information on

government policies and guidelines, source of finance, schemes of assistance, rules and

regulations to be complied with are provided to the participants.

The Management Education Component is important because the typical small

entrepreneur will have to manage the unit himself. This component will help the

entrepreneurs to understand the concepts and principles of management and apply them in the

day-to-day management of the industrial unit. This component includes training in various

aspects of management such as production management, inventory control, labour laws,

taxation and book-keeping.

3. Post-training Phase of follow-up Phase

This phase includes follow-up support, guidance and counselling provided for

preparing applications for financial assistance, getting sanction of loans, selecting and

securing suitable locations, getting governmental approvals and registration under various

statutes. The training organization helps the trainees in the actual establishment of the units

by providing assistance in getting water, electricity and necessary licenses.

The follow-up programme is as important as the first two phases. If adequate follow-

up is not provided, there is every possibility that trainees, even highly motivated ones, may

run into problems with bureaucracy or lending agencies and discard the idea of setting up an

industrial unit.

The study of the financial role or indirect approach of KSFC in the development of

entrepreneurship and its promotional role or direct approach in Shimoga district is made and

presented in the sixth and seventh chapters respectively.

References

1. Weber, Max, "Protestant Ethic and the Spirit of Capitalism", Translated by Talcott

Parsons, 1930, cited in H.S. Verma, Industrial Families in India, Concept Publishing

Company, New Delhi, 1985, p.9.

2. Weber, Max, "Religion ofIndia", Translated by H. Gerth and D. Martindale, Glencoe,

1960, in Ibid., p. 9.

3. Cited in M.U. Deshpande., op. cit., p. 47.

4. Cohran, Thomas c., "The Entrepreneur in Economic Change", Explorations in

Entrepreneurial History, Vol. 3, NO.1 Fall 1965, cited in R.A. Sharma op. cit., p. 7.

5. Stokes, Randall G., "The Afrikaner Industrial Entrepreneur and Afrikaner

Nationalism", Economic Development and Cultural Change, Vol. 22, No. 4, July

1974, pp. 557-59, cited in R.A. Sharma, op. cit., p. 8.

6. Hoselitz, Bert F., "A Sociological Approach to Economic Development" in D.

Novack and R. Lekachman (Ed.) Development and Society, New York, 1964, cited in

R.A. Sharma, op. cit., pp. 7-8.

7. Kunkel, John H., "Society and Economic Growth: A Behavioural Perspective of

Social Change", Oxford University Press, London, 1970, pp. 260-274, cited in M.D.

Deshpande, op. cit., pp. 45-46.

8. Young, F.W., "A Micro Sociological Interpretation of Entrepreneurship" in Peter

Kilby, op. cit., pp. 139-147 and also cited in M.U. Deshpande, op. it., pp. 38-39.

9. McClelland, David C., "The Achieving Society", D . Van N orstrand Co. Inc., New

York, 1961, pp. 210-15, cited in M.U. Deshpande, op. cit., pp. 40-41.

10. McClelland, David C., "The Achieving Society", The Free Press, New York, 1961,

pp. 44-46,211-32, cited in R.A Sharma, op. cit., p.6.

11. Schumpeter, J.A., op. cit., cited in R.A. Sharma, op. cit., p. 6.

12. Papanek, Gustav F., "The Development of Entrepreneurship", The American

Economic Review (papers and Proceedings), Vol. L 11, No. 2, May 1962, pp. 46-48,

cited in R.A. Sharma, op. cit., p. 8.

13. Derossi, Flavia, "The Mexican Entrepreneur", Development Centre of the

Organisation for Economic Co-operation and Development, Paris, 1971, cited in R.A.

Sharma, op. cit., p. 8.

14. Cole, Arthur H., "Entrepreneurship and Entrepreneurial History", The Institutional

Setting, p. 99.

15. Weber, Max, op. cit., p. 9.

16. Sharma, R.A., op. cit., p. 43.

17. Sharma, R.A., op. cit., p. 66.

18. Sharma, R.A., op. cit., pp. 52-53,

19. Sharma, R.A., op. cit., pp. 54-55.

20. Desai, Aravindrai N., Environment and Entrepreneur, Ashish Publishing House, New

Delhi, 1989, p. 39.

21. Bhat, K.S.N., "Concept of Entrepreneurship"-Old Wine in the New Bottle", KSFC

News, Bangalore, Vol. 18, Issue No.1, April 1996, p. 5.

22. Gadgil, D.R., The Industrial Revolution of India in Recent Times, Oxford University

Press, Bombay, 1965, pp. 190-91.

23. Shrama, R.A., 1980, op. cit.

24. Oamen, M.A., op. cit.

25. Berna, James J., op. cit.

26. Mishra and Bisht, op. cit.

27. Deshpande, M.D., op. cit.

28. Sharma and Singh, op. cit.

29. Bhanushali, S.G., op. cit.

30. Acharya, op. cit.

31. Berna, James J., op. cit.

32. Chatterjee, Anjana, "Entrepreneurship Development Programme and Self-

Employment", Yojana 36(16), September 15,1982, p, 12.

33. Cole, A.H., InternationaL Encyclopaedia of Social Sciences, Vol. 5. Macmillan and

Company, New York, cited in Vasanth Desai, op. cit., p. 146.

34. Higgins, E.E., "Entrepreneurship and Economic Development", The Free Press, New

York, 1971, pp. 191-92, cited in Vasanth Desai, op. cit., p. 147.

35. Chatterjee, Anjana, op. cit.

36. Alexander, P. C.,'lndustrial Estates in India, Asia Publishing House, Bombay; 1963,

p. 5.

37. Palia, S.M., "Managing, Training and Extension Services for Small Scale Industries-

Indian Experience"', DeveLopment News, Vol. 4, 1984, Industrial Development

Bank of India, Bombay, cited in Sadhak, H., op. cit., p. 53.

38. Sarwate, Dilip M., Entrepreneurial DeveLopment-Concepts and Practices, Everest

Publishing House, Pune, 1996, pp. 15-16.

39. Information regarding the structure of a typical EDP is collected from the officials of

KSFC, DIC Shimoga, CEDOK Dharwad and also from: Romijin, H.A.,

"Entrepreneurship Training for Small Business in Developing Countries-some

issues", Economic and PoLiticaL Weekly, Vol. 24, No.8, Feb. 25, 1989, pp. M8-

M14.

3

Karnataka State Financial Corporation:

A Profile

The development of entrepreneurship is dependent upon the policies,

programmes/approach of the government. The government can discharge its entrepreneurship

development role through providing financial assistance and by undertaking various

promotional activities. These are categorized as indirect approach and direct approach to

entrepreneurship development as mentioned in the last chapter. The present chapter throws

light on origin of KSFC, organization structure, financial incentives provided by KSFC,

terms and conditions and promotional and developmental efforts of KSFC in the development

of entrepreneurship.

Origin of KSFC

The financial institutions have a very important role to play in determining the

structure of industry, ownership pattern of capital and dispersal of industries and subsequent

benefit of industrial development. For this, financial institutions need to be established both

at all-India level and state level. To enable this; various Industrial Policy Resolutions have

been passed, which have a number of provisions under which the government can give

financial assistance to small, medium and large scale industries. An Act called SFCs Act was

passed in the year 1951 for industrial entrepreneurship in all the states of India, leading to the

success of the Industrial Policy Resolutions. This Act provides provision for all state

governments to give industrial credit. Prior to the enactment of this Act, the governments'

were directly providing loans to start industries or for the expansion/modernization of the

existing units and to undertake various entrepreneurship development activities. However,

this method was not effective and an alternative method which could dispense credit to

industries followed by entrepreneurship development in the country expeditiously was

Imperative.

Karnataka State Financial Corporation (KSFC) was established in the year 1959 (and

it was known as Mysore State Financial Corporation prior to 1972) under the State Financial

Corporations Act, 1951 for promoting industrial entrepreneurship in the small and medium

sectors in the state of Karnataka. Since its inception in 1959 till March 1998, KSFC has

assisted 1,40,705 units in the state to the extent of Rs. 5,085.36 crores.

Objectives of KSFC

KSFC was established with the basic objective of promoting industrial development

in Karnataka which has a high potential for industrial growth and which is endowed with

abundant natural resources. KSFC was expected to give particular emphasis on small and

medium scale industries keeping in line with IDBI and other specialised financial agencies of

the government. It was felt that no important industrial project should perish due to lack

ohimely and adequate finance.

The corporation pursues the following broad objectives:

1. To provide financial assistance in the form of term loans to tiny sectors, SSIs,

ancillary industries and medium scale industries in Karnataka.

2. To encourage the dispersal of industries to backward areas and to provide inducement

to industries to more away 'from the areas of high concentration to achieve balanced

industrialization in the state.

3. To accord preference to local entrepreneurs.

4. To extend special concessions to entrepreneurs belonging to Schedule Caste,

Schedule Tribe, women, minority community, physically handicapped and Ex-

servicemen.

5. To introduce office automation in every office of the corporation with a view of

enhancing efficiency and speed of operations.

6. To increase its share of financial assistance to tiny, small scale and ancillary industries

including transport sector with a view of providing more employment opportunities.

7. To diversify its business including the following new areas of operation:

(a) Equipment leasing in the form of short term and medium term financing.

(b) Providing working capital assistance to assisted units.

(c) Extending financial support to R&D activities.

(d) Hire purchase assistance to the qualified.

(e) Factoring.

8. To undertake various EDPs and EAPs, entrepreneurs' meet, etc.

Special Incentives of KSFC

KSFC extends lease financial assistance and hire purchase assistance for acquisition

of machinery/ equipments/transport vehicles. It has 'a Merchant Banking Department and it is

approved as a category / merchant banker by the Security Exchange Board of India (SEBI).

This department takes up the management of public issues, underwriting of shares, project

report preparation, deferred payment guarantee, syndication of loans, etc. The fund based

activities like bill discounting, investment in shares, subscription to the non-convertible

debentures, factoring services are also considered.

KSFC gives preference to the projects which are:

1. Promoted by technician entrepreneurs,

2. in the small scale sector,

3. Located in growth centres and developing areas of the state,

4. Promoted by entrepreneurs belonging to Scheduled Caste and Scheduled tribe,

backward class entrepreneurs an other weaker sections of the society,

5. having high employment potential,

6. capable of utilization of local resources and

7. in tune with the declared national priorities.

Organization Structure

The KSFC functions as an autonomous body under the supervision and guidance of a

board of directors consisting of 12 members including a chairman and a managing director,

assisted by an executive committee. The Board consists of representatives of the Government

of Karnataka, the RBI, the IDBI, commercial and co-operative banks, insurance companies,

financial institutions and other shareholders (as per section 10 of the SFCs Act). The

management of day-to-day activities of the corporation is looked after by the Managing

Director who is the Chief Executive.

The corporation has its head office in Bangalore. Under this head office there are

seven zonal offices situated at selected district headquarters (except Hubli zone office) in the

state of Karnataka. Under these zonal offices, there are three types of branch offices. They

are: (1) Grade' A' branch offices, (2) trade 'B' branch offices, and (3) Field offices. They are-

situated m selected towns and districts spread all over the state of Karnataka.

Head Office

The Head Office is situated in Bangalore, the capital cit~ of Karnataka. The function

of the Head Office is overall planning, direction and control of activities of the zonal offices

and branches. It is concerned with final accounts, investments, personnel, system, audit,

general administration, management services, corporate planning, etc.

Zonal Offices

There are seven Zonal Offices in the state headed by Deputy General Managers (DGMs).

They operate under the control of Head Office. The primary function of this office is to see

development of business and its administration including supervision of branches in its

jurisdiction. The Zonal Managers have got the power to sanction loans up to Rs. 25 1akhs.

Under SLAC" they will also have the power to set the target for branch offices with regard to

sanctions, disbursements and recoveries.

Branch Offices

There are three types of branch offices:

1. Grade ‘A' Branch Offices

There are 16 such branch offices spread over the state of Karnataka operating under the

respective zonal offices. Assistant General Manager (AGM) is its chief. The AGM has got

power to sanction loans between Rs.5,000 and Rs. 8 1akhs. He also assists in sanctioning

loans beyond the above limit by zonal offices.

2. Grade 'B' Branch Offices

There are 18 such branch offices in the state. They operate under the control of DGM of

respective zonal offices. They are headed by a Manager. He also assists the respective DGM

of zonal offices in sanction, disbursement and recovery.

3. Field Offices

The field offices operate under the control of branch offices. Here Deputy Manager (DM) is

the head. There are four such field offices in the state. The Deputy Manager has no power to

sanction the loan independently. His job is to assist the branch office in sanctioning loan,

disbursement of loans to the entrepreneurs and its recovery. He is also expected to do the job

of plant visit, certification, seizure of units, issuing of legal notices sent by the branch to the

defaulters, making arrangements for conducting EDPs/EAPs, liaison with local statutory and

NGOs, etc.

SLAG: Small Loan Advisory Committee is a committee headed by Deputy General Manager at respective zonal office. The Assistant General Manager at respective branch office, the Joint Director of District Industries Centre and the Manager of the Lead Bank are the other members of this committee. The Appraisal Officer of KSFC will be the convener, The SLAC will hold the meeting once in a month. It has power to sanction (the loan for the first time to an entrepreneur but not subsequent loans) loans between Rs. 8 lakhs and Rs. 25 lakhs.

Finance from KSFC: Terms and Conditions

1. Types of Assistance

KSFC offers long term and medium term financial assistance in the following fashion:

1. Loans and advances with a liberal repayment period (normally up to 8 years)

including moratorium.

2. Loans in collaboration with other financial institutions.

3. Subscription to share capital of companies promoted by small entrepreneurs (special

capital scheme) by way of soft loan.

4. Bridge loan.

2. Limit of Accommodation

The corporation assists to the tune of Rs. 240 1akhs (formerly it was Rs. 90 lakhs and

Rs.150 lakhs) in the case of registered cooperative societies and companies (whether private

or public limited); and RS.90 lakhs in other cases like proprietary or partnership concerns or

Joint Hindu Family firms. This excludes the soft loan, seed capital, bridge loan against

subsidy.

Usually, the corporation has a maximum limit of sanctioning Rs. 240 1akhs (formerly

Rs. 150 1akhs). But sometimes it can finance up to RS.10 crores (formerly Rs. 5 crores)

independently or jointly with other financial institutions, such as IDBI, SIDBI and jointly

with KSSIDC or bank wherever necessary under the exposure policy.

Exposure policy is a policy of KSFC which aims at providing finance jointly with

KSSIDC and bank to a group of companies which are under same management.

3. Additional Loan Facility

The corporation also considers applications for additional loan facility to already

financed projects in their expansion, modernization, diversification, meeting cost escalation,

etc., provided such assistance is justified in terms of profitability and technical feasibility.

4. Areas of Operation

Industries established or proposed to be established in the state of Karnataka are

eligible for assistance from the corporation. An industrial concern incorporated outside the

state is also eligible for assistance, provided it shifts its registered office to the state of

Karnataka.

5. Purpose of Assistance

It provides financial assistance to existing industrial concerns for expansion or

renovation or modernization or diversification in any line of manufacture and for new

projects. It will also assist in the rehabilitation of sick units. It provides assistance for the

acquisition of capital assets in the form of land, buildings and plant and machinery.

6. Industrial Concerns Eligible for Assistance

KSFC provides financial assistance to industrial concerns as defined under SFCs Act,

1951. Accordingly, assistance from the corporation is available to the industrial concerns

engaged or to be engaged in different types of activities. The details about the same is given

in the ensuing pages under the heading schemes for entrepreneurs.

7. Concerns Ineligible for Assistance

The corporation will not assist the concerns engaged in trading activity and in which

directors of the corporation or their relatives have any interest.

8. Financial Security

No financial institution can survive if adequate security is not obtained before

disbursing the loan. Similarly, KSFC does not advance any unsecured loans. Security for the

loan will usually be the land and building, plant and machinery acquired/proposed to be

acquired out of the loan. In places where stamp duty exemption is available, land, buildings,

plant and machinery will be got secured by a registered mortgage deed. In other places land

and buildings will be got secured by equitable mortgage by deposit of title deeds for the

entire loan amount earmarked towards land and building and hypothecation of plant and

machinery. In such cases 0.1 per cent will have to be paid as legal charges. Collateral security

is obtained in the case of transport loans and in certain other circumstances.

9. Security Margin

The security margin is the difference between the value of the assets offered as

security and the amount of loan sanctioned against the secured asset.

The security margin charged by the corporation varies from 10 per cent in the case of

technicians, modernisation, computerisation, and D.G. set scheme to 40 per cent in case of

scheme for industrial estates and hotel industry in Bangalore metropolitan area. Relaxations

are, however, made in case of small scale industries coming up in backward area of the state.

Similarly, no security margin is prescribed on the loans (up to Rs. 50,000) to units promoted

by SC/ST and physically handicapped entrepreneurs and assistance under National, Equity

Fund Scheme.

10. Rates of Interest

The rate of interest charged by the corporation on the loan varies depending on the

location of the unit, size of loan, the type of industry, and special concessions are available to

certain categories of entrepreneurs. The rate of interest ranges from 11.5 per cent p.a. to 20

per cent p.a. (w.e.f. 1. 9.1997). However, concessional rate is charged with respect to units

located in industrially backward districts. The rate of interest is reduced Ly 1 per cent p.a. in

respect of loans sanctioned to SC/ST and backward community entrepreneurs except for term

loan under ISO 9000 schemes, national equity fund scheme and soft loan facility/special

capital scheme.

In case of default, 2.5 per cent penalty will be levied for the period and amount in

default. However, such penal interest will not be levied on loans up to Rs. 50,000 granted to

SC/ST entrepreneurs, physically handicapped and on composite loans to artisans,

village/cottage and tiny units.

11. Procedure to Procure Financial Assistance

The procedural way to KSFC's financial assistance is explained in the following

paragraphs.

(a) Application Form

The entrepreneur who is in need of financial assistance shall give an application in the

form prescribed by the corporation. The application form can be collected from the

corporation by paying the prescribed fee by way of demand draft drawn in favour of

corporation or by cash.

(b) Application Processing Fee

The entrepreneur in need of assistance have to pay the processing fees amounting to

Rs. 100 on the loans between Rs. 10,000 and Rs. 40,000. Loans above Rs. 40,000 and up to

Rs. 2,00,000 carry fees at the rate of 0.25 per cent of loan amount and loan above Rs.

2,00,000 carries fees at the rate of 0.50 per cent of the loan amount.

No fee is charged for soft/seed .capital loans. However, processing fees will be

collected for bridge loans against state subsidy at the above rates.

(c) Checklist

To avail himself of the assistance, the entrepreneur has to submit some

documents/information in triplicate including originals. Some of them are as follows:

1. Permission! Approval/Licence from the authorities concerned.

2. Information regarding the financial status.

3. Project report.

4. Bio-data of the applicant.

5. A temporary registration certificate issued by the office of Industries and Commerce

(in case of SSIs).

6. Allotment letter (in case land is allotted by the government).

7. No objection certificate from local authorities.

8. In case the land has been allotted by KIADB/BDA/KSSIDC, then;

(a) Allotment letter,

(b) Acquisition certificate,

(c) Duplicate of, rent or sales certificate,

(d) Possession and unencumbrance certificate and,

(e) Plan of site, which is given as security.

12. Commitment Charges

If the loanee concern fails to complete all the formalities regarding drawal of money

and draws the installments according to the schedule of drawal prescribed at the time of

sanction, a commitment charge at 1 per cent will be levied on the undrawn amount. This rate

is reduced to 0.5 per cent on rupee loans in respect of projects coming up in industrially

backward districts. In the event of failure to draw any part of the loan within 6 months from

the date of communication of sanction, the loan is liable to be cancelled. If the loan amount

exceeds Rs. 2 lakhs then ½ per cent up-front fee will be levied.

13. Promoter's Minimum Contribution

KSFC will not provide entire financial requirement of any entrepreneur. He is

expected to contribute certain portion of the cost of the proposed project. The promoter's

minimum contribution is shown in the Table. 3.1.

Table 3.1

Table Showing the Promoter's Minimum Contribution

S1. No. Category Promoter's Minimum

Contribution (in %)

1 Units situated in category A and B districts/regions 17.50

2 Units situated in category C districts 20.00

3 Units situated in non backward areas 21.50

4 SRTOs including one to six vehicle owners 15.00

5 Co-operatives and companies of Ex-servicemen 10.00

6 Projects setup by women entrepreneurs (irrespective of

the location) except the assistance under Mahila

Udyama Nidhi Scheme,

15.00

Source: Karnataka State Financial Corporation-A Booklet.

Note: The scheme-wise rate applicable is given under each scheme.

14. Recall of Loan Amount

The corporation will recall the entire loan amount in the following cases:

1. Misuse of funds.

2. Misapplication of funds.

3. Proved misrepresentation for obtaining loan assistance.

4. Undue delay in implementation of the project.

5. A deliberate default in repayment of dues.

6. Act of loanee which is harmful to the interest of the corporation or the state.

7. Failure to properly maintain and safeguard the secured property.

8. Breach of the agreement entered into at the time of sanction of loan.

15. Disbursement of Loan

Loans up to Rs. 25 lakhs will be disbursed at the branch office concerned where the

loan is sanctioned. Loan in excess of Rs. 25 lakhs sanctioned by head office will be disbursed

at the branch office concerned.

The promoter can draw the amount only after satisfying the First Investment Clause,

submission of income tax clearance certificate, approved building plans, power sanction

letter, working capital sanction letter and clearance of legal department of the corporation and

other requirements as applicable in each case.

16. Release of Loan Amount

Loan amounts are released either in lumpsum or in installments so as to coincide with

the commitments for acquisition of fixed assets as per the conditions bid down while

sanctioning the loan. As far as the machinery is concerned the loan is released to the suppliers

of machine against their invoices in proportion to the loan sanctioned towards machinery.

The releases are made only after the execution of the security documents in favour of the

corporation.

17. Repayment of Loan

Repayment of loan advanced is generally spread over a period of 5-8 years.

Amortization period of loan (i.e., period of repayment) and the number of installments are

based on estimated cash generation and profitability in the proposed industry. A moratorium

ranging from 4 months to 3 years is allowed from the date of first release of the loan amount.

During this period only interest is to be paid quarterly. Installments are fixed and the

repayment schedule is drawn up depending on the requirements and nature of each case.

Moratorium means time gap between the date of disbursement of loan and the date of

the commencement of repayment of loan. If the balance amount of loan (after a few

installments) is paid at a stretch prior to the due date, the interest would let be proportionately

reduced.

18. Assistance to Special, Types of Industries

Certain activities, though they cannot be categorized as industries literally, are eligible

for assistance from the corporation. They are hotels and restaurants, industrial estates,

transport vehicles (not more than 6 vehicles), small hospitals and nursing homes, medical

equipments required by hospitals and doctors, amusement parks, weigh bridges, fishing

vessels, etc.

19. Recovery Procedure/Strategy

The KSFC follows the under mentioned ways with regard to the recovery of the dues

from the entrepreneurs:

1. The officials of KSFC visit the project site to know what is exactly taking place in the

loanee industry (that are in red), so that they can help those industries in overcoming

their problems.

2. KSFC officers discuss with the banker of the entrepreneur if any pari-passu or second

charge is involved (i.e., excess borrowing is made).

3. The corporation will make frequent correspondence with defaulting unit so that urgent

correction measures can be adopted.

4. Review meetings with the persons or organisations concerned is held.

5. The phase of implementation of project is verified regularly.

6. Frequent study of financial statements.

7. Repayment position is verified regularly.

8. The corporation will get information about other projects so as to make comparative

study.

9. Precaution is also one of the measures so that it clearly spells out the reason for delay

in repayment. KSFC officers strive to convince the promoters regarding timely

settlement of dues.

10. Finally, the default review meeting is held to decide as to recalling loan given and/or

to issue legal notice to promoters/ entrepreneurs.

Apart from the above strategies some of the statutory rights to enforce the claims of

corporation are as follows:

1. The corporation has the right to take over management or unit or both as per section

29 of the SFCs Act.

2. As per section 31 of the SFCs Act, the corporation can enforce its claims against the

property mortgaged/ hypothecated in favour of the corporation either by the borrower

or by surety/co-obligant.

3. The KSFC can enforce its claims under section 3 of KPM(R) Act of 1979.5

4. It has right to sell under certain circumstances as contained in section 69 of the

Transfer of Property Act of 1882. When this takes place, the court cannot intervene.

Schemes for Entrepreneurs

Sharing of economic opportunity on the widest possible base is a national objective

besides being a social necessity. Entrepreneurship in our country has been in existence in one

form or the other and it is being practiced by a section of the society from time immemorial.

A large portion of our population is outside the ken of industrial ownership. It faces the

problem of proper training, finance supply, favourable environment for entrepreneurship

development, etc. To overcome this, the KSFC offers a versatile range of schemes to the

existing and potential industrial entrepreneurs. It has also designed various non-financial

entrepreneurship development programmes and doing ED activities to foster entrepreneurship

in the state.

A detailed note of variegated schemes offered by the corporation have been explained

in the following pages.

1. Technician's Scheme

The Technician's Scheme is meant to attract technocr<l,ts and professionals in various

disciplines who are working in many responsible positions in manufacturing, commercial,

financial and business undertakings and who are intending to set up viable non-traditional

industrial projects. This scheme also enables technocrat entrepreneurs to join hands with

professional entrepreneurs, so that pooled expertise would contribute considerably to the

success of the project.

The promoters who want to avail themselves of assistance under this scheme should

either be technocrats or professionals. Professionals include persons having

postgraduate/diploma professional qualifications of any recognised or statutory professional

bodies and institutions. The beneficiaries under this scheme should have served at least for a

period of 5 years in a reputed industrial, financial or commercial undertaking in responsible

positions. In case of partnership firm, all the partners should either be technocrats or

professionals and the majority of the partners should be of age-group between 25-45 years

(relaxable up to 50 years in the case of persons with outstanding R&D experience). This

scheme is preferably applicable to small industries interested in introducing latest production

techniques.

The financial assistance up to a maximum of Rs. 7.50 lakhs is granted for the

following purposes under this scheme:

1. Acquisition of industrial land.

2. Industrial sheds together with water, sanitary and electrical serVIces.

3. Buildings required for the industry.

4. Plant and machinery including the erection and' commissioning expenses pertaining

to production activity. The promoter is required to contribute 17.5 per cent of the

project cost. The margin of security is relaxable up to 10 per cent depending on the

merits of each case.

However, following types of industries are not eligible for the assistance under this

scheme:

1. Traditional industries such as rice and oil mills, cotton ginning and pressing mills,

handlooms and power looms.

2. Hotel industry.

3. Industrial estates.

4. Transport of goods or passengers.

2. Scheme for Educated Unemployed Youths

The main objective of this scheme is to encourage qualified and trained unemployed

youth to take up small and tiny industrial projects towards their self-employment. The

applicant should have passed SSLC and should have completed the following:

1. Industrial management training conducted by the small industries services institute.

2. Special training course on a specific industry conducted by a specialised institute of

the state government.

3. Apprentice courses as per government schemes and regulations.

4. Training by any specialized training institution recognized by KSFC.

5. Long term entrepreneurial development programmes conducted by the government

and other agencies in the state.

The applicant should have experience in the proposed industry for at least one year

and he should be between 20 and 40 years of age. The maximum assistance has been limited

to RS.20 lakhs for acquisition of fixed assets such as land and building, plant and machinery.

Moreover, the corporation will have primary hold or charge on all tangible assets proposed to

be acquired out of loan amount through hypothecation or mortgage of such assets. The

personal guarantee and collateral security is insisted upon wherever essential. The promoter

is expected to contribute 17.5 per cent of the project cost.

The margin of security is relaxable up to 10 per cent depending upon the case. The

repayment period is between 6 and 8 years with a moratorium of up to 2 years.

3. Composite Loan Scheme

This scheme is designed to meet the complete financial requirements for equipment

and working capital of the artisans, village and cottage industries. This scheme prevents the

entrepreneurs from approaching different financial institutions for assistance. The scheme is

applicable to SSIs and village industries situated in village and town having a population not

exceeding 5 lakhs and the original investment in plant and machinery should be less than Rs.

1 lakh.

The maximum amount of loan that can be granted under this scheme is Rs. 50,000

which includes both equipment finance and working capital. The working capital should not

exceed 50 per cent of loan amount.

The important feature of this scheme is that no penal interest will be charged on the

entrepreneurs for their failures/lapses due to reasons beyond their control. The loan

sanctioned under this scheme will be under zero margin.

The working capital will be released after acquisition of fixed assets through the bank

designated for the purpose. If any subsidy is receivable from agencies such as SC/ST and BC

Development Corporation towards the intended activity, then the loan sanctioned will be

reduced by the amount equivalent to the subsidy receivable.

The loan repayment period and moratorium period will be assessed depending on cash

generation. The repayment period is normally between 6 and 8 years, with a moratorium of

one year.

4. Scheme for Disabled Entrepreneurs

KSFC is extending financial assistance to physically disabled persons. Deaf, blind,

dumb and orthopaedically handicapped entrepreneurs are eligible to avail themselves of

financial assistance up to a maximum of Rs. 50,000. The Government of Karnataka is

providing 25 per cent subsidy as seed money. However, subsidy" is available to loans up to

Rs. 25,000 only. The loan amount includes both the cost of plant and machinery and working

capital. The promoter is not required to contribute any amount under this scheme and security

margin is nil.

The repayment and moratorium periods will be assessed depending on the cash

generation. The repayment period is normally between 5-8 years, with a moratoriurn of

ranging from 1 to 2 years.

5. Finance for Hotel and Tourism Industry

Tourism is a major source of foreign exchange in our economy. The hotel industry

provides basic infrastructure for the promotion of tourism.

Under this scheme, assistance is extended to both the established and new hotels

catering to the needs of tourists in acquiring assets like land, building and equipment. Loans

will not be sanctioned for working capital or for the repayment of loans.

The minimum financial assistance for hotel projects is Rs. 2 lakhs in the case of new

hotels and Rs. 1 lakh for existing ones. The maximum financial assistance provided to this

industry is Rs. 90 lakhs. Loan repayment is generally spread over a period of 6 years with a

moratorium of 12 to 24 months. This loan carries interest at 17.5 per cent per annum.

6. Scheme for the Development of Industrial Estates

The basic infrastructure for small industrial units is provided by industrial estates.

They form the backbone of any economy. KSFC recognizes the role played by industrial

estates and it provides financial assistance for the development of industrial estates. The

following conditions are to be met by those who want to avail themselves of the assistance

under this scheme:

1. There should be adequate demand and scope for expansion at a later stage.

2. The construction cost should ensure that the rent charged is reasonable.

3. Basic facilities like roads, power, water, drainage as required by the occupants of the

sheds, must be ensured.

4. A minimum of three sheds should be constructed.

5. In the case of companies and co-operative societies promoting industrial estates, it is

desirable that all the buyers of sheds become shareholders of the company or society.

The promoter is required to contribute 22.5 per cent of the project cost and a security

margin of 40 per cent is maintained by the corporation. The loan carries interest at the rate of

17.5 per cent per annum. The repayment is spread over a period of 6 to 8 years with a

moratorium of up to 2 years.

7. Modernization Scheme

Under this scheme, financial assistance is provided for the modernization of tiny

units, small scale industries including ancillary units and medium units which are already in

existence for at least 5 years. Modernization may include replacement or renovation of plant

and machinery, additional equipments purchased for fuller utilization of installed capacity.

To have this assistance, following eligibility criteria are laid down by the corporation:

1. The unit may be engaged in upgrading its process, technology or product.

2. It may be an export-oriented unit or it may be producing items for import substitution.

3. It may install machinery for energy saving or for controlling pollution or for the

conservation or substitution of raw material and other inputs, including recycling and

recovery of wastes and bye-products.

4. It may be looking for improvements in capacity utilization within the existing

capacity by higher productivity.

5. It could be improving its material handling.

Since the assistance under this scheme will be need-based, there will be no minimum

limit for assistance, but the maximum limit is Rs. 90 lakhs. The promoter is required to

contribute 10 per cent of the cost of modernization which could also be internal generation

during the period when the project is implemented; but no security margin is insisted upon.

The repayment period is 8 years with a moratorium of 6 months to 2 years.

8. Equipment Finance Scheme

This scheme is designed by KSFC for providing quick finance under a simplified

procedure to well established small and medium scale industries to acquire original/new

equipment/ capital goods both indigenous and imported. Under this scheme, term loan

assistance is given to exiting industrial units with good performance record for expansion,

diversification, modernization, balancing, etc. The unit should be 10 existences for at least 4

years and it should be regular in its repayment to financial institutions. Such units should

have made cash/ divisible profits in the preceding two years. The promoter is required to

contribute 20 per cent to 22.50 per cent of the cost.

The loan carries interest at the rate of 17 per cent per annum. The repayment period is

normally 5 years, with a moratorium of 6 to 12 months. The loan should be utilized by the

loanees within six months from the date of sanction.

9. Finance to Electro-medical Equipments

The corporation acknowledges the growing importance of electro-medical equipments

in the world of medicine and It offers financial assistance for acquiring CT -scanners,

endoscopy, gastroscopy, X-ray and other electro-medical equipments required by medical

practitioners and hospitals. This scheme 1.S introduced with a view to create special facilities

to the semi-urban and rural areas, where there is a dearth of qualified medical practitioners

and sophisticated equipments.

The medical practitioners with relevant qualification to general medicine, dentistry,

radiology, etc., are eligible for assistance. Assistance is also available for private hospitals.

The maximum assistance under this scheme is Rs. 90 1akhs to proprietary concerns and

partnership firms and Rs. 1.50 1akhs to private and public companies. A minimum margin in

between 25 per cent to 30 per cent will be retained by the corporation. The loan carries

interest at the rate of 17.5 per cent p.a. The loan repayment period is from 6 to 8 years, with a

moratorium of up to 2 years.

10. Finance to Hospitals and Nursing Homes

The corporation gives a shot in the arm to the medical industry by extending term

loans for setting up of small hospitals and nursing homes through a special scheme by the

corporation. The loan carries interest at the rate of 17.5 per cent per annum. The repayment is

spread over a period of 6 to 8 years with a moratorium of up to 2 years.

Under this scheme, financial assistance up to Rs. 150 lakhs for hospitals and nursing

homes promoted by private and public limited companies and Rs. 90 lakhs for those

promoted by proprietary and partnership concerns or trusts is provided. The assistance is

available for land, building and equipment for diagnosis, monitoring and therapeutic use and

air-conditioners (for operation theatres and intensive care units), ambulances, etc. Only 75

per cent the cost of the above assets is given as assistance with a security margin of 25 per

cent. The loan carries interest at the rate of 17.5 per cent per annum. The loan repayment

period is 8 years including moratorium of up to 2 years.

11. National Equity Fund Scheme

The KSFC provides equity type support to the small entrepreneurs for establishing

new projects in the tiny and small scale sector and rehabilitation of potentially viable sick

units in the SSI sector. The project cost (including working capital margin) should not exceed

Rs. 10 lakhs. The maximum assistance that is available under this scheme is 15 per cent of

the project cost, subject to a ceiling limit of Rs. 1,50,000 per project. No security margin is

insisted upon. The promoter is required to contribute 10 per cent of the project cost (including

normal working capital margin). Service charge at the rate of 1 per cent per annum is payable

as interest on the equity assistance by the entrepreneurs. The repayment is to be made in 6 to

8 years with a moratorium of 3 years.

12. Finance to Ex-Servicemen

Under this scheme, the corporation assists ex-servicemen for their resettlement by

enabling them to set up small industrial projects for self-employment. Ex-servicemen,

widows of ex-servicemen and disabled persons below 60 years of age and those who have

undergone EDP training (optional) will be eligible for assistance under this scheme. The

maximum assistance that can be given is Rs. 11.50 lakhs per project. The promoter is

required to contribute 10 per cent of the project cost. The term loan will be repayable within a

period of 10 years including a moratorium of 2 years. Transport loans will be repayable in 5

years, including a moratorium of 4 months.

13. Scheme for Transport Industry

The corporation considers financial accommodation to transport operators in

recognition of the vital role of transport in the promotion of industry and tourism. Under this

scheme, entrepreneurs can avail themselves of loans to acquire vehicles like lorries, mini

trucks, tippers, tempos, taxis, vans, auto-rickshaws, cars, cargo vessels and buses (stage

carriers). Barges and ropeways for transporting goods and passengers are also eligible for

loan.

The corporation offers two types of loan schemes for this industry.

1. Single Vehicle Operator Scheme (SVO): Under this scheme, financial assistance is

provided for a maximum of two vehicles only to an entrepreneur.

2. Small Road Transport Operator Scheme (SRTO): Under this scheme, loan is given

only if the entrepreneur acquires two to six transport vehicles.

In both of the above schemes, the costs of chassis and body building are included in

the cost of the vehicle. The security margin of 20 per cent for the SVO and 25 per cent for

SRTO scheme is maintained.

The entrepreneur is required to repay the loan in 50 equal monthly installments. The

repayment will commence 4 to 6 months after the first installment of the disbursement of the

loan. However, the owners of cargo vessels are required to repay only in 8 monthly

installments in a year, excluding monsoon months.

The eligibility criteria to get this facility are as follows:

1. The applicant must have experience in the transport industry.

2. Applicants with regular transport contracts or inter-state permits will be given

preference.

3. The vehicle proposed to be purchased should be registered as a public carrier with the

RTO concerned in Karnataka.

4. If the loan is for stage carriers, applicant must possess route permits.

14. Finance for Quality Control Equipments

Under this scheme, loan assistance is available to SSI units, new and existing, for

acquiring quality control equipments. Loans are also available for small and medium. scale

units to acquire instruments for energy audit and monitoring energy consumption. These

equipments should provide facilities comprising of testing and quality evaluation of all raw

materials, other inputs and finished products. In the case of new projects, both the normal

component of term loan and loan for testing and quality control components will be covered.

The maximum amount of loan that can be provided under this scheme is Rs. 7.50

lakhs per project with a promoter's contribution of 25 per cent of the project cost. The loan is

repayable within a period of 6 to 8 years with a moratorium of up to 3 years.

15. Finance for Generators

Small and medium scale industrial units intending to manufacture power for their

captive use are eligible to obtain term loan from the corporation for acquiring diesel

generators. Diesel generators established by a group of SSI units or medium scale units for

their captive and collective use are also eligible for assistance. The maximum assistance

under this scheme is Rs. 90 lakhs. The corporation insists on 10 per cent security margin. The

repayment period is between 6 to 8 years with a moratorium of 2 years.

16. Computer Loan Scheme

With a view to supplementing the effort of improving the productivity and operational

efficiency, the KSFC is financing for acquisition of computers (including accessories like

primes and to install software) up to Rs. 5 lakhs per unit. All industrial units in the SSI sector

are eligible for assistance under this scheme. It is applicable to computers for production and

office automation. Assistance under this scheme is also available to small hotels, hospitals

and nursing homes and tourism related activities with project cost not exceeding Rs. 45 lakhs.

The promoter is required to contribute 10 per cent of the project cost and a security margin of

10 per cent is insisted upon. The loan repayment period is 5 years with a moratorium of 6

Months.

17. Mahila Udyam Nidhi Scheme

For years Indian women have displayed rearable entrepreneurial skills, managing

experience and moblhsmg m a way a prudent man entrepreneur would. This scheme is

designed by KSFC to promote women entrepreneurs in the state.

Under this scheme, new industrial projects with project cost up to Rs. 10 lakhs to be

set up in the SSI sector by first generation entrepreneurs are eligible for assistance. Women

entrepreneurs who want to avail themselves of term loan assistance under this scheme should

possess necessary managerial and/or technical skills to run the new unit and they should be

the active chief promoters of the proposed new umt. Women who are inactive partners in

existing units holding not more than 25 per cent of the equity can be treated as first

generation entrepreneurs for the purpose of setting up their own units.

Promoter's minimum contribution is as low as 10 per cent of the project cost. Seed

capital assistance amounting to 15 per cent of the project cost at a service change of per cent

is available by way of soft loan to meet the gap m equity after tabking into account the

promoters contribution. The loan repayment penod is spread over a period of 5 to 8 years

with a moratonum of upto 02 years.

18. Assistance for Maintenance, Development and

Construction of Roads

KSFC offers an innovative scheme under which it provides financial assistance up to

Rs. 90 lakhs for acquiring capital goods and equipment required for the development, repair,

maintenance and construction of roads. The assistance under this scheme is given subject to

the following conditions:

1. The borrower must be engaged in the said line for at least 3 years.

2. They should have earned profits in the preceding 2 years and they should not have

committed any default to bank or financial institution.

3. They should be registered bodies with a government agency.

The borrower has to give collateral security of 30 per cent of the term loan in addition

to primary security. The repayment period is spread over 5 years including a moratorium of

12 to 18 months.

19. Assistance to Qualified Professionals

Under this scheme, financial assistance is available to qualified professionals in

management, accountancy, medici ne, architecture, engineering, law, etc., for acquiring fixed

assets required to set up their own professional practice, business enterprise and consultancy

services in their line of expertise. The assistance is extended to the partnership concerns only

if all the partners are qualified professionals and at least 50 per cent of them have the

requisite experience. Both new and exi~ting practising professionals are eligible for

assistance under this stheme. The promoter is required to contribute 25 per cent of the project

cost. The loan repayment period is spread over 5 years, with a moratorium of up to 1 year.

The interest structure of the above schemes (from Scheme Serial No. 13 to 19) is

shown in the below Table 3.2.

Table 3.2

Loan Amount and Rate of Interest

Loan Amount (in Rs.) Rate of Interest (in %)

Up to Rs. 25,000 12.5

Rs. 25,000 to Rs. 2,00,000 14.5

Above Rs. 2,00,000 17.5

20. Single Window Scheme

This is a novel scheme introduced by the KSFC on 15th August, 1988. This scheme

has been formulated with the prime objective of providing term loan as well as working

capital finance simultaneously to the new tiny and small scale units through a single agency.

This scheme will ensure availability of adequate working capital for tiny and small scale units

initially and to facilitate commencement of production soon after the completion of the

project.

New tiny and small scale industrial units whose projec cost (excluding working

capital margin) does not exceed Rs. 35 lakhs and the working capital requirement at the

normal level of operation is up to Rs. 15 lakhs are eligible for assistance under this scheme.

Normally 75 per cent of the requirement is considered for assistance. A minimum of 25 per

cent security margin is insisted upon. In case of technician entrepreneurs, the security margin

is relaxable up to 10 per cent depending on the merits of each case. In addition to the above, a

collateral security in the form of fixed deposit with the corporation equal to 30 per cent to 50

per cent of the working capital loan sanctioned has to be offered.

The interest structure on this assistance is as per Table 3.3. The term loan is repayable

in 6-8 years with a moratorium of 2 years. The repayment of the working capital loan will

start at the commencement of the 31st month and will be spread over a period of 5 years.

Table 3.3

Loan Amount and Rate of Interest

Loan Amount

in Rs.)

Rate of Interest (in %)

Term Loan Working CapitaL Loan

Up to Rs. 25,000 12.5 12.5

Rs. 25,000 to Rs. 2,00,000 14.5 15.5

Above Rs. 2,00,000 17.5 18.0

Source: Scheme Brochure.

21. Finance to Tourism related Facilities

Tourism-related facilities such as setting up of amusement parks, cultural and

conventional centres, restaurants, 'travel, transport and tourist service agencies are eligible for

financial assistance from the corporation.

Under this scheme, a financial assistance up to a maximum of Rs. 90 lakhs is

available per project in case of registered co-operative societies and private or public limited

companies and Rs. 60 lakhs in other cases like proprietary or partnership firm.

The promoters are required to contribute 22.5 per cent of the project cost for

amusement parks, convention centres and tourist service agencies and 20 per cent of the cost

for travel and transport. A security margin of 20 per cent for travel and transport and 25 per

cent for others-is also insisted upon. The repayment of loan is generally spread-over a period

of 5 to 8 years, including a moratorium ranging from 6 months to 18 months.

22. Assistance for Acquiring Indigenous or Imported Second - hand Machinery

With more and more industries concentrting on precision and accuracy, machinery

and automation systems are assuming a greater role. Machineries have a direct effect on an

industrial unit's productivity and profitability.

By recognising the importance of it, the corporation now provides assistance to

industries for acquiring reputed Indian or imported second-hand machine. The unit seeking

this assistance should be at least 2 years old and should have made profit. It should also have

a good track record or regular in repayment to commercial banks and financial institutions.

The loan carries interest at the rate of 18.5 per cent p.a. The loan repayment period is

spread over 6 to 8 years with a moratorium of up to 1 year.

23. Scheme for Rehabilitation of Sick Units

Under this scheme, any sick unit capable of being revived within a reasonable period

of time is eligible for financial assistance. All units in tiny, small scale and medium sector

which have gone sick and fall within the purview of the definition of IDBI are eligible for

rehabilitation assistance under this scheme. The promoter is required to contribute 20 per cent

of the total cost of rehabilitation of a SSI unit, 10 per cent of a tiny unit and 20 per cent to 30

per cent in the case of medium scale unit. The loan carries interest at the rate of 17.5 per cent

per annum irrespective of the location of the unit. The loan repayment period varies

depending on the magnitude of the problems faced and projected cash flows.

24. Assistance to Tissue Culture Activity

Under this scheme, both new and existing units in the SSI sector promoted by the

entrepreneurs with adequate/relevant background and experience are eligible for financial

assistance up to a maximum of Rs. 90 lakhs per unit. Term loans up to 75 per cent of the cost

of land, building, laminar flow work stations, culture room, misting chamber, green house

and other essential facilities of tangible assets will be provided under this scheme.

25. Scheme for Research and Developmenl Activities

This scheme has been designed to provide assistance to Research and Development

activities either by units themselves or by national laboratories particularly in small scale

sector. The scheme encourages to go in for advancement in technology in product/process

having commercial application and for adopting imported technology generally not yet

exploited on a commercial scale anywhere in the country.

Both existing and new SSI units are eligible for assistance. In the case of existing

units, they should be regular in repayment of dues to the financial institutions and banks and

they are in commercial production for at least 5 years. Units assisted by the corporation

which have become sick due to the failure of the basic technology are also eligible for

assistance provided they satisfy the criteria stipulated in the scheme.

The research project should be such that entire research activities should be completed

in two years. The innovations should lead to energy conservation, cost reductions, adoption,

modification of transferred technology, import substitution, export market enhancement, etc.

The maximum amount of term loan available under this scheme is Rs. 7.50 lakhs per project.

The period of repayment of principal shall be fixed on the basis of repaying capacity of the

loanee concerned.

26. Seed Capital Scheme

Under this scheme interest free financial assistance up to Rs. 15 lakhs per project is

available. However, nominal service charges of 1 per cent will be charged for the first five

years and normal interest rate thereafter for the remaining period.

The objective of this scheme is to provide financial assistance on liberal terms to new

entrepreneurs who do not have adequate resources of their own for setting up industrial

projects and with a view to bringing about wider dispersal of ownership and control of

industrial undertaking, thus resulting in quicker industrialisation. The scheme is intended to

induce and encourage setting up of small and medium scale industrial units which are eligible

for assistance from IDBI or SIDBI.

To be eligible for assistance under this scheme, the entrepreneurs should either be

technically or professionally qualified or they should possess relevant experience or skill in

industry, business or trade and should have traits of an entrepreneur for setting up and

running the enterprise successfully. Basically, the applicant should be a new entrepreneur,

i.e., one who intend to set up industry for the first time but lacks resources. The norm of new

entrepreneur would be relaxed in the case of applicants intending to achieve better viability of

the projects in the medium scale sector by undertaking diversification or who intend to take

over the running of a closed or sick unit under rehabilitation programme drawn up and

approved by financial institutions.

27. Special Capital Scheme/Soft Loan Facility

This scheme is meant to assist financially week entrepreneurs. Preference will be

given to units set up by technically qualified entrepreneurs, craftsmen, artisans and other

individuals, who though are not technically qualified, have practical experience or skill in the

industrial activity they intend to go for.

However, traditional industries, industrial estates, hotel industry, transport operators,

mining and power generating units are not eligible for assistance under this scheme.

The loans under this scheme are extended on concessional terms not only in regard to

the rate of interest but also in regard to the promoter's contribution, debt-equity ratio, initial

moratorium and repayment period. The loan carries interest at the rate of 1 per cent p.a. in all

cases. The amount of soft loan granted to individuals and partnership firms, participation in

equity or in cumulative redeemable preference shares in public/private limited companies

respectively per project shall not exceed 10 per cent of the cost of the project or Rs. 4.00

lakhs whichever is less (cost of project includes all tangible assets).'

The interest on soft loan during the initial period of 3 years from the date of

disbursement is payable quarterly. If the borrower fails to pay the principal amount and

interest amount, then he has to pay enhanced interest at the rate of 2.5 per cent per annum

over and above the normal rate of interest from the date of default.

28. Assistance for Marketing

There are two schemes in operation for marketing purposes. They are:

1. Scheme of Assistance for Purchase of Mobile Sales Van: Under this scheme, term

loans to all institutions approved by Khadi and Village Industries Commission (KVIC) for

purchase of mobile sales van is provided. The mobile sales van purchased should be utilised

exclusively for promotion, display and sale of cottage and village industries products. The

maximum assistance that can be provided under this scheme is Rs. 3 lakhs per vehicle subject

to a maximum of 6 vehicles per borrower.

2. Assistance for Marketing Entrepreneurs: This scheme is designed to improve

marketing infrastructure for the products of small, cottage and village industrial units. Under

this scheme term loan to the extent of 75 per cent .of the cost of the project is provided to the

entrepreneurs engaged or to be engaged in distribution/sales of products of small cottage and

village industries. Assistance under this scheme, is provided for acquisition of land, building,

showroom facilities, margin money for working capital and reasonable expenses on publicity.

To enjoy this assistance the cost of the project should not exceed Rs. 25 lakhs.

29. Finance for Hatcheries and Poultry Farms

This scheme is designed to promote poultry farming and breeding units in the state by

providing financial assistance to the entrepreneurs. A company, partnership firm or

proprietary unit which has its own land can get this assistance to erect building, acquire

equipment as well as cages for birds and for initial running expenses.

The assistance up to 75 per cent of the cost of fixed assets, subject to a maximum of

Rs. 150 1akhs (formerly Rs. 90 1akhs) for companies and Rs. 90 lakhs (formerly Rs. 60

1akhs) for partnership firms and proprietary concerns is given under this scheme. The loan

carries interest at the rate of 12.5 per cent p.a. on up to Rs. 25,000 and 14 per cent p.a. on

loans above Rs. 25,000 but below Rs. 2,00,000. The loan in excess of Rs. 2,00,000 carries

interest at the rate of 18 per cent p.a. The loan repayment is spread over a period of 6 to 8

years with a moratorium of 1 to 2 years.

30. Equipment Lease Finance

Lease financing is nothing but provision of financial assistance to the lessee to acquire

the fixed assets on lease basis followed by making the payment of lease rentals. Lease finance

is widely used in Western countries and is of recent development in our country.

The KSFC by recognising the need and importance of it to the entrepreneurs with the

increasing cost of fixed assets provides the financial assistance between Rs. 5 lakhs and Rs.

150 lakhs. Under this scheme, profitably run industrial units, which are engaged in

production for last 2 years and have good track record can have the services of plant and

machinery without making investment or incurring debt obligation.

31. Hire Purchase Assistance

Fixed assets like plant and machinery involve huge cash outlay. Financially capable

entrepreneurs can easily purchase them. But a good number of entrepreneurs are financially

weak, thus, they need hire purchase assistance.

The corporation, by recognising the need and importance of this assistance,

introduced a novel scheme recently. This scheme provides for a fast, easy alternative to ready

cash. Under this scheme, assistance ranging from Rs. 1 lakh to Rs. 150 lakhs is available to

industrial concerns in commercial production for last 2 years and they have earned profits and

are regular in their repayments to financial institutions and banks. Professionals and

commercial transport operators can also enjoy this assistance.

32. Factoring

Factoring is a system of financing under which the factor (i.e., the financial agent or

institution) undertakes to collect the accounts receivable of the seller and forward the same to

the seller; and also to advance money to the seller against the security of accounts receivable

in case the seller needs funds immediately. This is a new scheme of the KSFC and the criteria

for providing assistance under this scheme are as below:

1. SSI/MSI units who have a minimum 3 years track record with consistent profitability

and positive networth.

2. The goods must be sold on credit basis.

3. The unit should not be in default to institutions.

4. Bills to be discounted must relate to domestic trade debts arising in the usual course

of supplier's business.

5. Based on credit sales of the company for the last 3 years, limit will be fixed for

utilisation for each individual case to be reviewed every year.

6. The customers of the company should be reputed or the company should have

dealings with these customers for a minimum period of 2 years regularly.

Under this scheme, financial assistance up to 80 per cent of the invoice value

including insurance, freight and taxes as upfront payment subject to a maximum of Rs. 150

lakhs per unit, including all other fund based limits is given to the eligible entrepreneurs. This

assistance carries interest at the rate of 20.5 per cent p.a. inclusive of interest tax to be

collected upfront.

33. VISHWA Scheme

VISHWA scheme is not a KSFC sponsored scheme. This scheme was introduced by

the Karnataka state government in the month of October 1991 aiming at building up the rural

entrepreneurship and strengthening the economic base of rural Karnataka. Under this scheme,

certain entrepreneurship development institutions like Karnataka Handlooms Development

Corporation (KHDC), Khadi and Village Industries Commission (KVIC) will undertake the

responsibility of supplying the required raw materials to the tiny, cottage and small units.

They also undertake the task of selling the products manufactured by them through

exhibitions or government sponsored/ owned stores. KSFC provides financial assistance

(both term loan and working capital) to the sponsored units.

It is important to note that the organisational structure of KSFC, maximum amount of

loan that can be given by KSFC, eligibility criteria, procedure to get the loan, security

margin, moratorium, application processing fee, rate of promoter's minimum contributions,

rate of interest on the loan, provisions relating to sanction, disbursement, release, recall and

repayment of loan, concessions and various schemes of loan are subject to change from time

to time. In this chapter an effort is made to incorporate the changes to a maximum extent

besides giving the details relating to the above, prior to change. As far as the schemes for

entrepreneurs is concerned, some schemes are discontinued by KSFC, but incorporated in this

chapter, since entrepreneurs who have borrowed loan prior to discontinuation are available in

the study area.

Promotional and Developmental Efforts of KSFC

Besides the above schemes of financial assistance, the corporation

provides/undertakes a wide range of services/activities with the objective of developing

entrepreneurship in the state of Karnataka. Few such services of the corporation are as below.

1. Merchant Banking Services.

Merchant banking is a British concept. In India, it was first introduced by National

and Grindlays Bank in the year 1969. Now, banks and financial institutions have set up a

separate merchant banking division manned by qualified and experienced staff.

KSFC has been approved as category I merchant banker by the Security Exchange

Board of India (SEBI). Under this service scheme, the corporation can take up management

of public issues, underwriting of shares, undertaking deferred payment guarantee, project

report preparation, syndication of loans, pre issue appraisals, opening foreign letter of credit,

OTCEI sponsorship, etc., on behalf of eligible entrepreneurs. The fund based activities

comprises bills discounting, investment in shares, subscription to non-convertible debentures,

factoring services, etc.

To provide the above services the corporation has opened a 'separate Merchant

Banking and Financial Services department.

2. Business Development Department (BDD)

This department was started by the corporation to mobilise business by providing

unique and distinct services to Non resident Indians, as well as established medium and SSIs

in Karnataka and prospective entrepreneurs who propose to set up industries in Karnataka. It

has its own data bank and through it, providing information on technologies available in

various fields, socio-economic conditions of the state and the country, infrastructural

facilities available in the state an.] competitive environment in local, national and

international market. It also provides services to prospective and established entrepreneurs in

identifying new opportunities and new vista with the help of various national and

international research institutions and laboratories.

In addition to the above, it operates two schemes of the corporation,' viz.,

management consultancy services and financial assistance for research and development

activities. The services under the first scheme is restricted to the KSFC assisted units with

good track record in performance and repayment of term loan. The main feature of the second

scheme is to provide the finance for small scale units with an objective of encouraging

advancement of technologies of products/processes having commercial applications and for

adopting import technology and also development of indigenous technologies for commercial

application.

3. The Entrepreneurs Guidance Cell

This cell is created by the corporation to guide the promoters for getting the financial

assistance. This cell is headed by an Assistant General Manager. The prospective

entrepreneurs who are in need of financial assistance should approach this cell with a brief

project report, biodata, location proposed for the unit, networth of the project, extent of term

loan required, etc.

The loan applications will be evaluated by a screening committee for forwarding or

rejection. The committee wi11100k for feasibility of the project, the promoter's technical

qualification, his experience in handling similar or related project, location of the unit,

securities offered by the promoter(s) before accepting or rejecting the application.

4. Women Entrepreneurs Guidance Cell

The corporation attaches more importance to the development of entrepreneurship

among women. To cope with this aim, it has created separate cell to guide women

entrepreneurs in both the head office and branch offices. The cells headed by dedicated

professionals provide single window assistance to women to tackle the myriad problems

associated with setting up and running an enterprise. It maintains a data base regarding the

schemes available for women with various NGOs and government departments as well as

with the KSFC. It organises EAPs, closely monitors assistance flowing to women

entrepreneurs, conducts interactive sessions with them and formulates fresh proposal on the

basis of the feedback received.

5. Project Identification Cell

This cell was started in 1984-85 with a view to identify projects of high technology

through in-house skills and with the assistance of external consultants. Sponsored

consultancy service is offered as an incentive-cum-reward to good units of the corporation to

enable them to identify and implement the schemes which will enhance their viability.

6. Public Grievances Cell

This cell is created by the corporation to deal with the grievances of the entrepreneurs

which they experience while dealing with KSFC. This cell is functioning at the head office.

The entrepreneur can send his grievances in writing either to this cell d1rectly or to the

branch office concerned. At the branch level a complaint/grievance box is kept by the

corporation which is opened by a responsible officer once in every month. This cell will go

through the grievances of the entrepreneur and take needful measures to overcome them.

7. Other Activities

The other organisational efforts of KSFC to promote the entrepreneurship are as

follows:

1. For identification of entrepreneurs, the corporation organ1ses:

(a) Industrial motivation campaigns at taluk levels.

(b) Entrepreneurship Development Programmes (EDPs) for specific group of

entrepreneurs like women engineering students, agriculturists, technical

professionals, physically handicapped, etc.

(c) Long duration EDPs (6 weeks) are conducted as a nodal agency.

(d) Enterprise Development Programmes by professional industrial consultants in

specified districts.

(e) District level industrial seminars.

(f) Entrepreneurship Awareness Programmes (EAPs).

(g) Entrepreneurs' meet.

(h) Conducting training courses in specified areas.

2. Provides special emphasis to women entrepreneurs.

3. Accord preference to local entrepreneurs.

4. The corporation introduced office automation in every office with a view to enhance

efficiency and speed of operation.

5. It identifies new projects for investment and assists local people to set up industries in

backward areas.

6. It provides industrial information and project profiles of the products which are

having good marketing potential to entrepreneurs.

7. It tries to strengthen its own data bank on industrial information.

8. Information on new products and technologies available with various research

institutions are provided by the corporation.

9. Special studies are carried out to assess problems and prospects of particular types of

industries in the state.

10. Research and development activities are encouraged and supported financially.

11. Seminars and conferences are conducted to create industrial awareness and to solve

the problems confronted by the industries.

12. Industrial potential survey of district is conducted to assess the availability of local

resources and industrial opportunities.

References

1. Operational Statistics, 1997-98, Karnataka State Financial Corporation.

2. Banarjee, Gautham, Law Relating to State Financial Corporations, UDH Publishing

House, Delhi, 1988, p. 5.

3. Legal Manual, Karnataka State Financial Corporation, Bangalore, pp. 82-83.

4. Ibid, p. 85.

5. The Karnataka Acts and Rules, Vol. 17, Karnataka Public Moneys (Recovery of

Dues) Act, 1979, Lawyers Law Book, pp. 326-27.

6. Mitra, B.B., Transfer o/Property Act, 15th Edition, Kamal Law House, Kblkata, 1988,

pp. 535-36.

7. Scheme-wise brochures of KSFC.

Other References

Assistance to Industry-A Publication of KSFC, Bangalore. Karnataka State Financial

Corporation-A Booklet.

4

A Profile of Karnataka State and Case Study Area

Before trying to give a profile of entrepreneurs in Shimoga district and

entrepreneurship development in the study area, it is imperative to know the geographical

conditions and' entrepreneurial scenario prevailing in the state of Karnataka in general and

Shimoga district (i.e., case study area) in particular. Again, to know Shimoga district better it

will not be out of place to describe the socio-economic setting in the state of Karnataka.

Hence, this chapter consists of two divisions, viz., the first part describes the general

characteristics of the state of Karnataka, present industrial structure, infrastructure for

entrepreneurship development, resources for entrepreneurship development and the second

part consists of a resume of these things in the district of Shimoga.

PART-A

A PROFILE OF KARNATAKA STATE

General Characteristics of the State

Karnataka is one among the twenty-eight of Indian Union. It is a region inhabited

predominantly by Kannada speaking people. Karnataka with its variety in topography, rich

cultural heritage, eventful history and scenic excellence occupies a place of pride in the map

of the country. Besides, Karnataka has contributed significantly to the promotion of science

and technology in the country. Its achievement in the field of industrial development is by no

means insignificant.

Location

Karnataka occupies central position in the South India. It is situated between 11

degree 31 and 18 degree 45 North latitude and 74 degree 12 and 78 degree 40 East longitude

and lies in the west central part of peninsular India. Its length from north to south is about

700 kms and from east to west is 400 kms. It is bounded by Maharashtra, Goa, Tamil Nadu,

Andhra Pradesh and Kerala.

Physical Features

The state is broadly classified into coastal region and Karnataka plateau. Coastal

region is further sub-divided into coastal plains and western ghats. Similarly, Karnataka

plateau is further sub-divided into Malnad and Maidan.

Greater part of Karnataka lies between 450 and 900 metres above sea level. In some

places, however, the height reaches 1,800 metres, the highest peak being Mullaiyyanagiri at

1,913 metres in Bababudan ranges followed by Kuduremukh at 1,882 metres.

Area

Karnataka state covers an area of 1,91,791 square kilometres or it occupies 5.35 per

cent of the total geographical area of the country. Bijapur (before the creation of Bagalkot

district in November 1997) is the biggest district in the state with an area of 17,069 sq. kms

covering 8.90 per cent of the area of the state. Kodagu is the smallest district in the state with

an area of 4,102 sq. kms covering an area of 2.14 per cent of the total area of the state.

Administrative Arrangement

Before reorganisation of the states in 1956, there were only 9 districts in the state.

After reorganisation of the state in 1956, 10 districts which earlier formed part of Madras,

Bombay and Hyderabad states were included in the new state. Further, Bangalore district has

been divided into two separate districts. During November 1997 seven more districts were

created. Thus, there are at present 27 districts in the state.

The state has been further sub-divided into four revenue divisions with headquarters

at Bangalore, Belgaum, Gulbarga and Mysore. There are 175 taluks, 745 hoblies, 5,706 Gram

Panchayats, 27,066 inhabited villages, 254 towns/cities and urban agglomerations and 177

municipality corporations in the state.

Climate and Rainfall

Different parts of the state have different types of climate. Coastal areas, western

ghats and malnad areas have received maximum rains. Interior central and northern districts

have semi-arid climate. Bellary, Bijapur region have arid and very warm climate.

The average annual rainfall is 1,181 mm in the state. However, the average rainfall is

4,307 mm in Dakshina Kannada, 2,485 mm in Kodagu, 2,717 mm in Uttar a Kannada and

1,707 mm in Chikmagalur. Kolar, Gulbarga, Mandya, Bijapur and Chitradurga districts

receive the lowest average annual rainfall of 879 mm, 978 mm, 827 mm, 713 mm, and 439

mm respectively.

Rivers

Karnataka is blessed with abundant water wealth as there are many rivers and streams.

Ground water is also available to some extent. Cauvery and Krishna are the principal rivers

flowing in the state. A number of tributaries of these two major rivers also flow in the state.

Ghataprabha, Malaprabha, Bhima, Tungabhadra, Vedavathi, Hemavathi, Kabini, Manjra,

Kali, Sharavathi, Aghanashini, Bedti, Netravathi, Uttar Pinakini, Dakshina Pinakini and Palar

are the other important rivers flowing in the state.

Forests

Karnataka has rich forest wealth. The state had an area of 38,723.56 sq. kilometres

under forests in 1993-94. The percentage of forest area to geographic area was 20.29 as

against the all India average of 23 per cent and 33 per cent prescribed in the National Forest

Policy. Thus, the percentage of forest area in the state is less than all India average and far

less than the standard prescribed in the National Forest Policy. Of the total area, 28,610.53 sq

kms are under reserved forests, 3-,932.17 sq kms are under protected forests, 5,748.24 sq kms

are under unclassed forests, 124.42 sq kms are under village forests and 308.42 sq kms are

under private forests. Among the districts, Uttar Kannada has the largest area under forests

(8291.51 sq kms) followed by Dakshina Kannada (5,182.30 sq kms), Mysore (4,129.62 sq

kms), Shimoga (3,270.16 sq kms) and Belgaum (2245.67 sq kms). Sandal wood, rose wood,

teak, eucalyptus are the major forest products of the state.

Population

Karnataka state had in 1991 population of 44.8 million. There were 22.8 million

males and 22 million females. Karnataka accounts for 5.31 per cent of the total population of

the country. The population of Karnataka is close to that of Iran (37 million) or Republic of

Korea (39 million) and greater than that of Canada (23 million). Of the total population, 31

million are in rural areas and 13.8 million are in urban areas. Percentage of urban population

to total population is 31.

The density of population per sq km in the state is 234 persons in 1991 as against 194

in 1981. The density of population varies considerably from district to district. Bangalore

district has the highest density of 2,210 persons while it has a density of 618 persons in 1981.

The districts of Southern Maidan, viz., Bangalore, Mandya, Dakshina Kannada, Kolar are

generally the areas of comparatively higher density. The districts of Uttar Kannada, Kodagu,

Chikmaga1ur have the lowest densities. The density of population is 119 per sq kms in Uttar

Kannada and Kodagu districts.

The population of the state according to 1981 census was 3,71,35,714 while that

recorded in 1991 census is 4,48,17,398. There has been thus an increase of 76,81,684 persons

during the decade under review representing an increase of 30.69 per cent over 1981

population. The corresponding growth rate during the decade 1971-81 was 26.75 per cent.

The rate of growth of population in the country as a whole during the decade was 23.50 per

cent.

The sex ratio in the state of Karnataka (as per the 1991 census) is 960 females per

1,000 males as against 963 at the time of 1981 census. The all India sex ratio according to

1991 census is 934 while that of 1981 was 929.

Industrial Structure of State

'Industrialise or Perish' was the popular slogan which was coined, in Karnataka state

(Mysore state as it was then called) by the outstanding Engineer-Administrator, Bharat Ratna

Sir M; Visveswaraiah long before independence. This sums up the concern and efforts of the

state for promoting industrial activities. And truly, industrial activities in the form of small

and tiny ventures like making of agricultural implements, earthen pots, silk reeling and

weaving, bullock cart making, bras5 and copper utensils making, etc., were sustained in the

state before independence. But organised efforts to promote and develop modern small scale

industries can be said to have been started in the state after independence only. So far as

registered small scale industries are concerned, the benchmark period started from 1961 only

because it was only in 1960 the system of registration with the Directorate of Industries and

Commerce started.

But statistical data relating to the amount of productiv:e capital employed and the

number of persons employed in the registered 'small sale industrial units have been

systematically compiled by Directorate of Industries and Commerce only from 1969-70. It is

estimated that 2,23,311 units were registered up to 31st March, 1998 in the state and they

have generated 13,47,974 employment with fixed investment of Rs. 3,29,039.42 1akhs.

There are 746 medium and large scale industries in the state with an investment of Rs.

6,028 crores employing nearly 3 lakh workers.

Infrastructure for Entrepreneurship Development

Availability of adequate infrastructure such as land, industrial estates, transport, credit

facilities, etc., is essential for the development of entrepreneurship. The Karnataka

government is making efforts to provide all these facilities with the help of Industrial Policy

Resolutions and various institutions. The Industrial Policy Resolution has put a major

emphasis on this sector. A brief picture of the infrastructural facilities in the state is given in

the following paragraphs.

Land

Karnataka Industrial Areas Development Board (KIADB), since its inception has

acquired 47,331 acres of land (up to 31-3-98) and it has formed 70 industrial areas covering

all the districts. The board is taking initiative in developing the Hassan and Dharwad growth

centres. The board has also developed and allotted land for single unit complexes (24,150

acres up to 31-03-1998) at various places in the state.

Industrial Estates

Karnataka State Small Industries Development Corporation (KSSIDC) has

constructed 151 industrial estates and 5,511 industrial sheds in the state. It has developed

1,368 plots and allotted 828 plots to entrepreneurs in the state. To provide efficient services

to entrepreneurs it has 20 Raw-material depots, 3 Raw-material stockyards, 37 branch offices

throughout the state of Karnataka and one outside branch at Cochin in Kerala.

Transport

(a) Railways

Karnataka is not well served by railway network. This has affected the industrial

development of the state. There has been no significant addition of new railway lines in the

state since independence. Kodagu district has no railway line at all. The ~tate has a total

railway line of 3,079 kms of which broad gauge 1S 1,195 kms, meter gauge 1,735 kms and

narrow gauge 149 kms. Length of. railway line is highest in Bangalore and Bellary distrits,

V1Z., 331 kms each followed by Dharwad district (321 kms).

(b) Road and Road Transport

Roads are the arteries through which economic life of the state moves. As on 31st

March, 1997 total road length in the state is 1,37,520 kms out of which 32.42 per cent roads

are unsurfaced. Therefore, there is urgent need for surfacing them to facilitate easy movement

of traffic. An express highway from Bangalore to Mysore and Tumkur to Honnavar has been

planned and work in this direction is going on.

The state is well served by road transport. Major cities of the state are having bus

services. Auto-rickshaws ply in all district and taluk headquarters. However, bullock carts

continue to be the main means of transport in rural areas of the state.

(c) Air Transport

There are two major airports in the state one each at Bangalore and Mangalore. There

is a proposal to develop an international airport in Devanahalli near Bangalore.

Banks and Financial Institutions

Metaphorically, finance is the lubricant of the process of economic growth, when

finance becomes available entrepreneurship development is initiated and new investment

opportunities arise. The supply of finance has to be canalised through banks and specialised

financial and developmental institutions, which act as pump-primers rather than simply

conducts for the factors of production and draw more and more people from different walks

of life into the vortex of industry. These institutions have not only to make finance available

but also perform an allocative function.

Before independence, India also had a fairly developed banking system. But it was

organised on the basis of orthodox banking practices followed by the British banks which

advanced assistance of self-liquidating nature.

History of modern commercial banking in Karnataka started with the establishment of

a branch of Madras Presidency Bank in 1864 at Bangalore followed by State Bank of Mysore

by Sir M. Visveswaraiah in 1913. Development of banking has gained momentum since the

nationalisation of 14 commercial banks in 1969. Bangalore, the capital of Karnataka, has

emerged as a major banking centre in India. Industrial Development Bank of India, Export

Import Bank, Small Industries Development Bank of India and Reserve Bank of India have

their offices in Bangalore.

As on 31st March, 1997, there were 3,431 branches of Commercial Banks, 1,078

branches of Grameena Banks, 544 branches of Urban Co-operative Banks, 177 branches of

Primary Land Development Banks and 1,101 Employees Credit Societies in the state.

Resource for Entrepreneurship Development

The state is having abundant supply of resources for entrepreneurship development.

The important material resources of the state are as below.

Agricultural Crops

Karnataka is rich in agricultural resources. There is, therefore, good scope for the

establishment of agro-based industries. They include Paddy, Furfural, Ragi, Jowar, Bajra,

Maize, Wheat, Gram, Tur, Groundnut, Sugarcane and Cotton.

Horticultural Resources

Karnataka is rich in horticultural resources. Climate of south Karnataka districts such

as Mandya, Mysore, Bangalore, Hassan and Kolar is ideally suited for growing horticultural

crops. Two lakh hectares of land are under fruit crops in the state and annual production is

3.7 million tonnes of fruit. The state produces 8.8 per cent of the 34 million tonnes of fruit

produced in the country annually. One lakh nine thousand hectares of land are under

vegetable crops in the state. Of the 42 lakh tonnes of vegetables grown in the country

annually, Karnataka produces 3.6 per cent of vegetables. Fruits and vegetables grown 10 the

state are at present mostly used for consumption and are not much put into industrial use.

Sericulture

Karnataka is very rich in sericulture resources. It was introduced into the state about

two hundred years ago. Since then, sericulture has prospered in the state. Silk industry

comprises of agriculture activities such as mulberry cultivation and milk worm rearing and

industrial activities which include silk reeling, twisting, weaving, dyeing and finishing.

India stands second in the world with 12,000 tonnes of silk production per annum and

Karnataka with 7,147 tonnes of silk production accounts for 54 per cent of the total silk

production in the country.

There are 16,593 sericulture villages in the state, where 1 59 304 hectares of land was

under mulberry cultivation in 1994-95.

There is vast scope for small scale units to make silk scarves, dress materials, carpets

and readymade garments. There is very good export market in western countries for various

products made out of silk.

Mineral Resources

Karnataka is very rich in mineral resources. The major minerals available in the state

are Bauxite, Chromite, Copper, Gold, Iron-ore fines, Iron-ore and Manganese-ore. The minor

minerals include China clay, Dolmite, Felsite, Fire clay, Quartz Green, Kaynite, Lime shell,

Limestone, Magnesite moulding sand, Quartz, Red ochre, Silica sand, Sleatite yellow clay

and Red oxide.

The availability of above mineral resources has created an ample opportunity for

industrialisation in the state. The mineral based industries that could be set up in the state are

building bricks, roofing tiles, mosaic tiles, stone crushing, stone polishing, LT insulators,

crockery, fire clay bricks, stone ware pipes, glass bottles, RCC pipes, chalk crayons, etc., by

using the mineral resources available in the state.

Institutions for Entrepreneurship Development

The success of entrepreneurship depends solely on the well established institutional

set up. In order to meet the requirements of the rapidly expanding entrepreneurship,

particularly in the SST sector in the country, the government gave adequate institutional

support and it may well claim to have achieved some success in this sphere. The role of

various institutions set up specially to promote the growth of entrepreneurship is quite

unique. Key institutions serving in Karnataka for the cause of entrepreneurship development

are as follows:

1. Small Industries Service Institute (SISI).

2. Field Testing Stations.

3. National Small Industries Corporation (NSIC).

4. Karnataka State Small Industries Development Corporation

(KSSIDC).

5. Karnataka Industrial Areas Development Board (KIADB).

6. Karnataka Small Industries Marketing Corporation Limited (KSIMC).

7. Technical Consultancy Services Organisation of Karnataka (TECSOK).

8. Karnataka State Electronics Development Corporation Limited.

9. Karnataka State Khadi and Village Industries Board.

10. Karnataka State Social Welfare Advisory Board.

11. Karnataka Leather Industrial Development Corporation.

12. Karnataka State Handicrafts Development Corporation

(KHDC).

13. National Productivity Council (NPC).

14. Bureau of Indian Standards.

15. Vishveshwaraiah Industrial Trade Centre.

16. Electronic Testing Development Corporation.

17. Centre for Entrepreneurship Development of Karnataka

(CEDOK).

18. Science and Technology Entrepreneurs Park (STEP).

19. Commercial, Co-operative and Grameena Banks.

20. Financial Institutions such as IDBI, IFCI, ICICL

21. Directorate of Industries and Commerce

The District Industries Centres (DICs) in the respective districts and Taluk Industries

Centres are subordinate to the Directorate.

22. Karnataka State Financial Corporation (KSFC).

Karnataka State Financial Corporation is a premier money-lending institution

assisting the entrepreneurs in the state. The present study is to evaluate/assess the role of

KSFC in the promotion and development of entrepreneurship with a particular reference to

Shimoga district in Karnataka state. A detailed picture of the origin of KSFC, objectives,

organisation structure, various schemes extended to entrepreneurs, promotional and

developmental efforts of KSFC has been presented in chapter 3.

PART-B

A PROFILE OF SHIMOGA DISTRICT

General Characteristics of the District

Origin of the Name of the District

Shimoga district, like most of other districts in the state, has had its name from its

administrative head, quarters Shimoga. There are various traditional derivations of the origin

of the name of 'Shimoga'. Three of them pertain to God Shiva, viz., 'Shiva Mukha' (the face

of Shiva) , 'Shivana Mogu' (the nose of Shiva) and 'Shivanamogge' (bunches of flowers

meant for Shiva).

According to a legend, the place had the Ashram of the famous sage Durvasa noted

for his sharp temper. He used to keep a pot with sweet herbs to be boiled. Once, some

cowherds who chanced upon it tasted the beverage out of curiosity and called the place

'Sihimoge' '{Sweet pot) which was later called Shimoga. The name is written and pronounced

in Kannada as Shivamogge. Its anglicised form is 'Shimoga'.

Location

Shimoga district is situated roughly in the mid-south western part of the state and

southern transitional agro-climatic zone in Karnataka. The western part of the district has

mountainous terrain and the eastern part consists of malnad, semi-maidan and maidan areas.

Malnad area consists of Sagar, Hosanagar, Thirthahalli and Sorab taluks. The malnad taluks

are characterised by thick forests and mountainous terrain and they receive heavy rainfall.

Bhadravati, Shimoga and Shikaripur taluks have natural characteristics of both' malnad and

maidan areas. The district lies between the latitudinal parallels of 13° 27' North and 14° 39'

North and longitudinal parallels of 74° 38' East and 76° 4' East. The district has got the

enchanting mountain range of 'Sahyadri' and Kodachadri happens to be the highest mountain

range (about 4,441' above sea level). The district is bounded by Uttar Kannada, Davanagere,

Chickmagalur, Udupi and Haveri districts.

The district has a total geographical area of 10,563 sq kms and it occupies 9th place in

area among the districts of the state.

Administrative Set up

The district had nine taluks before Channagiri and Honnali taluks were attached to

Davangere when the latter became a district headquarter in 1997. Even then, the aforesaid

taluks have been included in the study as any techno-economic survey aimed at performance

evaluation remains incomplete if it does not undertake an indepth analysis of the past trends

in various sectors involving time series analysis, interpretation, etc.

For the sake of convenient administration, Shimoga has been divided into two sub-

divisions, viz., Shimoga and Sagar. Shimoga sub-division comprises Shimoga, Bhadravati,

Thirthahalli, Channagiri and Honnali taluks; Sagar sub-division consisting of Sagar,

Hosanagar, Soraba and Shikaripur taluks. The district has 15 towns, 52 Hoblies and 1,785

inhabited villages. Under the Zilla Panchayath Act introduced in 1993, there are 364 Gram

Panchayaths. The district development administration is under Zilla Parishad that came into

effect with 1st April, 1987 and at present it is called Zilla Panchayath. Shimoga, the district

headquarter is situated at a distance of 271 kms from Bangalore on Bangalore-Honnavar state

highway.

Climate and Rainfall

Shimoga district has a moderate climate with temperature ranging from 23.2°C to 37°

C. The mean dally maximum temperature hovers around 15°C during winter season. After

February, there is a steady increase in temperature and the summer season lasts up to May.

Summer is followed by pre-monsoon and monsoon rains go up to September. The rainfall is

very heavy in the region of the western ghats. Agumbe in the south western corner of the

district on the western ghats gets an annual rainfall of 8,275.7mm. The average rainfall of the

district is 1,569mm with an average number of 80 rainy days.

Soil

The district has three major types of soil, viz., laterite soil in ~he west, sandy loam red

soil iJiJ. the east and in north-western region and red loam in the central region. The soil

found in the district by and large is highly fertile which constitutes agricultural prosperity of

the district.

Income Distribution

A study of the income distribution of the district vis-a-vis that of the state is the best

indicator of economic growth in any district. The economy of Shimoga district is

predominantly influenced by agriculture. Majority of the population depends upon agriculture

(directly or indirectly) for its livelihood. Although the district is endowed with rich soil,

favourable climate and infrastructural facilities, the industrial development in the district is

somewhat lopsided with the concentration of industries mainly in Shimoga, Bhadravati and

Sagar taluks.

The sectoral composition of income of Shimoga district and Karnataka state during

the year 1994-95 at constant prices is shown in Table 4.1.

Table 4.1

Sectoral Composition of Income of the Shimoga District and Karnataka State

Income Share (Rs. in o/Total lakhs) Income

Shimoga District Karnataka State

Income (Rs. In lakhs)

Share of total income

( in %)

Income (Rs. In lakhs)

Share of total income ( in %)

1. Agriculture and animal

husbandry

2. Forestry and logging

3. Fishing

4. Mining and quarrying

5. Manufacturing

6. Construction

7. Electricity, gas & water supply

8. Communication

9. Trade, hotels and restaurants

10. Railways

11. Transport by other means

12. Banking and insurance

13. Real estate, ownership of

dwellings and business service

14. Storage

15. Public administration

16. Other services

Total

Source: Karnataka State Profile, 1997-98, SISI, Bangalore and District Industrial Potential

Survey Report, DIC, Shimoga.

An analysis of Table 4.1 shows that agriculture is the major source of income in the

district as well as in the state. But compared to the contribution of agriculture sector to the

total income of the state (i.e., 34.72 per cent), the sector's contribution to the total income of

the district (i.e., 42.81 per cent) is more. This figure reveals the dependence of the district on

agriculture or agrarian nature of the district. The contribution of manufacturing, construction,

electricity, gas and water supply, trade, hotels and restaurants, railways, transport by other

means, banking and insurance, real estate, ownership of dwellings and business services and

other services to the total income of the district is less to that of their share in the total income

of the state. The shortfall in the income in these sectors when compared to income

distribution at the state level is mainly due to the continued dependence of the people in

Shimoga district on agriculture even after 51 years of independence and large scale

unemployment. This stresses the need for diverting the people depending on agriculture

towards entrepreneurship.

The per capita income in the district is Rs. 2,704 which is higher than the state per

capita income which is Rs.2,467 in 1994-95 at constant prices. In 1994 the district has

contributed 4.66 per cent of the state's total income.

Resources for Entrepreneurship Development

The development of entrepreneurship is greatly influenced by the resources available

in any area and their effective utilisation. The resources available in Shimoga district can be

classified into the following categories.

1. Human Resources.

2. Material Resources.

Human Resources

Development of entrepreneurship is largely attributed to the availability of human

resource especially skilled manpower. It is the human resource that shapes and controls the

material resources in the industrial development. Any amount of material resources do not

guarantee industrial development unless it is backed up by a right dose of manpower for its

effective exploitation. A brief picture of human resources base in the study area is as follows:

Population

As per 1991 census, the district had a population of 19,06,523 accounting for 4.25 per

cent of the state's population. The district ranks 11th in the state as regards to population. Out

of which 73.47 per cent were ruralites and 23.53 per cent urbanites. The density of population

in the district is 181 persons per sq. km. The district recorded a decennial growth rate of 15

per cent during 1981-1991. The percentage of males and females was 51 and 49 respectively.

Taluk-wise population of the district as per 1991 census is given in Table 4.2.

Table 4.2

Taluk-wise Population ofShimoga District

Sl.

No.

Taluk Population as

per 1991 Census

% to Total Population of

the District

1 Bhadravati 3,24,460 17.02

2 Channagiri 2,56,234 13.44

3 Honnali 1,99,903 10.48

4 Hosanagar 1,02,333 5.37

5 Sagar 1,77,092 9.29

6 Shikaripur 1,88,605 9.89

7 Shimoga 3,64,920 19.14

8 Soraba 1,62,208 8.51

9 Thirthahalli 1,30,768 6.86

TOTAL 19,06,523 100.00

Source: Census 1991, Karnataka.

Table 4.2 shows that Shimoga taluk has the highest population (3,64,920) followed by

that of .Bhadra~ati, Channagiri, Honnali, Shikaripur, Sagar, Sorab, Thirthahalli and

Hosanagar.

Literacy

Literacy is an important factor promoting entrepreneurship among any people. It is

the literacy factor that enables the people of an area for starting entrepreneurial activities. As

per 1991 census, the literate population of Shimoga district was 9,91,695 people accounting

for 52.05 per cent. Out of 9,77,206 males m the district, 5,85,479 males are literates

accounting for 60.22 per cent of total male population. The literate female population in the

district is 4,06,216 constituting 43.48 per cent of the total female population which is

9,34,317. The literacy ratio between man and woman in Shimoga district is 1000: 694.

Occupational Pattern

As per 1991 census, 2,73,050 persons accounting for 37.86 per cent of the total

population are cultivators, 2,53,254 persons accounting for 35.11 per cent of the total

population are agricultural labourers followed by 17,314 persons constitutin 2.40 per cent of

the total population are engaged in household industry. These figurers reveal that majority of

the people in the district are engaged in agricultural related activities. It is also evident that

industrial sector has not developed much, as it provides employment to only 2.40 per cent of

the total main workers.

Material Resources

Agriculture

The economy of Shimoga is predominantly dependent on agrarian sector. It

(Shimoga) is even called Karnataka 'Granary'. The three main regions (namely Malnad,

Semi-Malnad and Maidan) enable the cultivation of different kinds of crops. Out of the total

geographical area of 10,57,554 hectares, the net area cultivated is 3,33,420 hectares which

works out to 31.52 per cent of the total geographical area. The mainstay of the population is

agriculture as 72.97 per cent of the labour community are engaged in agricultural pursuit. The

lion's share of 40.23 per cent of the total income of the district is from this sector.

Because of the variety in soils and climate in the district, the cropping pattern differs

from area to area. Crops like Paddy, Ragi, Cereals and Pulses are grown in almost all taluks

of the district, whereas commercial crops such as sugarcane, cotton, arecanut and groundnut

are grown only in a few areas.

Agricultural Marketing

With a view of providing better marketing facilities to the farmers and ensuring

attractive prices for their products, six main and eighteen sub-regulated markets are

established in the district.

Forest

The total areas coming under forest in Shimoga district is 3,27,433 hectares which is

30.96 per cent of the total geographical area of the district. This is slightly short of 33 per

cent laid down by the National Forest Policy of the Government of India. Teak, Sandalwood,

Rose wood, Soft wood, Pulp, Match wood, Eucalyptus, etc., are the important species of trees

available in forests of the district. But man's greediness which has led to mad deforestation

has come in the way of forest based small scale industries and their growth in the district.

Horticulture Resources

Shimoga district is fairly rich in horticulture resources. The important vegetables

grown in the district are Tomato, Brinjal, Beans, Cabbage, etc. The major portion of

vegetables grown in the district are consumed in the local area itself.

Plantation crops like Arecanut, Coconut and Cashew are commercial crops in the

district. Coconut and Arecanut are grown in a few taluks of the district. Thirthahalli, Sagar

and Channagiri are the leading producers of arecanut in the district. Besides these, flower

cultivation is also undertaken in the district. The opening up of economy and demand for

natural oil has motivated the farmers to go in for cultivation of various flowers.

Apiculture is also seen in the district. As on 31st March, 1998, 2,448 persons in 404

villages with 5,656 boxes and 2,556 bee were engaged in apiculture and they extracted 2,948

kgs. But it has not taken the form of a big industry owing to lack of skill, marketing problems

and unremunerative process.

Rivers

The important rivers flowing through the district are Tunga, Bhadra, T ungabhadra,

Sharavathi, Varada and K umadvathi. The other rivers are Malathi, Varahi and Chakra. The

Sharavathi valley project, AB site and Mahatma Gandhi Hydro Project across the river

Sharavathi are the major hydro projects in the district. Sharavathi plunges from a height of

960 feet creating the famous Jog Falls in turn and it is a famous international tourist

attraction.

Fisheries

The district has no coastal lines or backwaters. There are about 629 major tanks and

4,408 minor tanks, 12 reservoirs and 8 rivers in the district where fishing is done. It is

estimated that more than 2,000 families derive their income from fisheries. The total fish

caught is 4,635 tonnes in 1993-94, 4,217 MT in 1995-96 and 3,732 MT in 1996-97. During

1997-98 the Department of Fisheries also introduced the cultivation of fresh water prawn.

The fish caught in the district is consumed locally itself. But considering the availability of

resources and infrastructure, it is inferred that there is scope for developing fishing industry

in the district.

Dairy

Dairy industry is a recent addition to the economy of the district, after the

establishment of Shimoga Co-operative Milk Union Limited affiliated to Karnataka Milk

Federation (KMF) in 1991. The establishment of this society has reduced the partial and full

unemployment problem in rural areas of the district to a considerable extent. This industry

has led to the proper utilisation of manpower, development of new breed of livestock and it

has created a kind of time conciousness among the rural mass. There are 377 milk collection

centres and 3 chilling plants collecting 12,000 liters of milk per day. Various milk products

such as peda, ghee, toned milk and cheese are made out of milk.

Mineral Resources

The district is endowed with many materials. Iron-ore deposits are located in

Hosanagar, Thirthahalli, Bhadravati and Channagiri taluks. Besides this, Manganese-ore is

also found in the district. However, no commercial exploitation of these is done so far.

Sericulture

The development of sericulture is not significant in the district. Areas covered under

mulberry cultivation is a paltry 466.30 hectares. There are 7 technical service centres and one

silk reeling unit. Besides this, 7 filature basin and 10 charkhas exist in the district. The

production of cocoon during 1996-97 in the district was to the tune of 4,605 tonnes.

Present Industrial Scenario

A study of current industrial scenario will enable us in understanding the extent of

industrial development, type of industries existing, the areas where they are concentrated in

the district, the investment made, employment generated, etc.

In the light of what has been said above an attempt is being made in the ensuing pages

to give a fine picture of current industrial scenario in the district of Shimoga.

Medium and Large Scale Industries

There were 13 medium and large scale industries in the district as on 31-3-98. Among

them, 7 units are located in Shimoga taluk, 5 in Bhadravati taluk and 1 in Sagar taluk. These

units are manufacturing steel items, pig iron, refractories, paper, news-print, craft paper, milk

products, sugar, cylinder liners, sandal-wood oil, etc.

Small Scale Industries

Small scale sector forms the backbone of the industrial development in the district. As

on 31-3-1998 there were 10,450 small scale units registered in the district. Table 4.3 gives the

year-wise registration of units after 1992, the investment made and the employment

generated.

Table 4.3

Table Showing Number 01551 Units, Investment Made and

Employment Generated

Year April to March CumulativeNo. of SSI

UnitsFixed

investment(Rs. inlakhs)

Employment(Nos.)

No.oj SSi Units

Fixed investment

(Rs. inlakhs)

Employ-ment

(Nos.)

1992-93 512 452.35 1,660 6,916 5,926.71 31,614

1993-94 501 505.76 1,679 7,417 6,432.47 33,293

1994-95 503 706.15 1,645 7,920 7,138.62 34,938

1995-96 513 1,094.88 1,905 8,433 8,233.50 36,843

1996-97 508 1,292.24 2,051 8,941 9,525.74 38,894

1997-98 1,509 1,703.79 4,297 10,450 11,229.53 43,191

Source: DIC, Shimoga.

It can be seen from Table 4.3 that from 1992-93 to 1996-97 almost equal number of

units (roughly 510 units every year) were registered every year. But in 1997-98 there is a

sudden increase in the number of units registered (1,509 units) with DIC. The growth rate in

1997-98 over the previous year is 297.05 per cent. However, there is mismatch between the

number of units registered every year and fixed investment made. When compared to 1996-

97, in 1997-98 there is 297.05 per cent increase in the number of units registered but the rate

of increase in investment is just 131.85 per cent. This shows that large number of small sized

units with low investment were established in 1997-98. The number of employment

generated by these units is almost stable from 1992-93 to 1994-95. But there is a steady

increase in 1995-96 and 1996-97 over the respective previous years. In 1997-98, however,

there is a big jump in the employment generated by these units. During this year the growth

rate is 209.50 per cent over the previous year.

An analysis of taluk-wise registration of small scale units gives a clear picture of the

extent of industrialisation in different taluks of the district. Table 4.4 gives the taluk¬wise

registration of small units as on 31-3-1998, the total investment made by these units and the

number of employment generated.

Table 4.4

Taluk-wise Registration of Small Scale Industries

Sl.No.

Name o/the Taluk

No. 0/551 Units

(Rs. in iakhs)

FixedInvestment

(Nos.)

EmploymentGenerated

1. Bhadravati 1,588 2,070.00 8,922

2. Channagiri 845 718.00 2,697

3. HonnaJi 828 720.00 2,552

4. Hosanagar 572 560.00 2,280

5. Sagar 1,548 1,436.00 5,927

6. Shikaripur 991 1,072.00 2,913

7. ,Shimoga 2,607 3,348.00 12,808

8. Soraba 645 580.53 2,253

9. Thirthahalli 826 725.00 2,839

Total 10,450 11,229.53 43,191

Source: DIC, Shimoga.

It can be seen from Table 4.4 that Shimoga, Bhadravati and Sagar taluks are leading

in terms of industrialisation. As on 31¬3-1998, these three taluks have 5,743 small scale

industries which constitutes 54.96 per cent of total number of units registered in the district.

When the analysis is made in terms of fixed investment made, it is evident that the

small entrepreneurs in Shimoga, Bhadravati, Sagar and Shikaripur taluks have made huge

investments in their units when compared to small entrepreneurs of the other taluks. This

shows the establishment of little big units with huge investment within the SSI sector in the

above 4 taluks. The 10,450 units in the district have generated 43,191 number of

employments in the district with an investment of Rs. 11,229.53 lakhs.

Tourism Industry

It is of paramount importance to develop tourism industry in the state as there is

constant flow of foreign exchange and of late it is on the rise too. Hotel and tourism industry

provides direct and indirect employment to a large number of people. Some-of the important

places of interest in the district are Jog falls, Agumbe, Ikkeri, Keladi, Varadhahalli, Belligavi,

Gudavi and Honnemaradu. If proper facilities are extended, there is considerable tourism

development potential in the district.

Infrastructure for Entrepreneurship Development

Availability and accessibility of infrastructure facilities such as transport and

communication, power, water, fuel, financial institutions, research and technical institutions

are essential for speedy growth and development of industries. Areas with these facilities

attract entrepreneurial skills and investments. It is a fact that all these facilities are not

available in all the areas and this leads to unbalanced growth and concentration of industries

in a few pockets; These facilities are considered inevitable to attract investment and exploit

the locally available raw materials and for ushering industrial growth.

This section focuses attention on the infrastructure facilities available in the district

for entrepreneurship development. As such, the infrastructure facilities can be classified into

two broad categories. They are as below:

1. Physical Infrastructure.

2. Social Infrastructure.

Physical Infrastructure

Land

Availability of sufficient and suitable land at reasonable price facilitates industrial

growth and development of an area. There are 22,463 hectares of uncultivable land and

51,551 hectares of fallow land in Shimoga district which can be effectively used for starting

industries.

Factory Accommodation

The availability, of factory accommodation in the form of ready built sheds

faccilitates the establishment of SSI units. In the study area, there are. 4 industrial estates

owned by KSSIDC at Shimoga, Kallur-Mandh, Bhadravati and Sagar. These estates are

developed in 59 hectares of land by KSSIDC. The estate has 175 sheds of different

dimensions and 95 plots. There is a proposal to establish industrial estates ~t Hosanagar,

Shikaripur, Honnali, Channagiri and Thirthahalh. Bes1des this, Karnataka Industrial Areas

Development Board (KIADB) has developed the industrial areas at Machenahalli on

Banagalore-Honnavar state highway. Of the 360 acres of land available in the industrial area,

200 plots are developed of which 160 plots are allotted and remaining 40 plots are yet to ~e

allotted. Among the allotted, 39 units are working and 5 are Sick. The KIADB has acquired

an area of 381.59 acres of land for developing another industrial area at Kallur-Mandli near

Shimoga. Recognising the importance of the district in the auto-components industry the

Karanataka government has acquired a total area of 19.35 acres in Shimoga on Sagar road for

the proposed auto complex. In this complex, 278 plots of different sizes have been developed

and are ready for allotment.

Power

Electric power is a major input for the progress of industrial, agricultural and general

improvement in the standard of living of the people. There is power shortage in Karnataka

state in general and Shimoga district is not an exception to this. All types of industrial

consumers are facing the problem of insufficient power and low voltage. Tiny and small scale

units are the worst hit because of inadequate and erratic supply of power.

There are 3 hydro-electric power projects in the district and 632 hamlets have been

electrified as on 31st March, 1997. All the 3 projects are connected to state electricity grid for

distribution of the power generated. The power requirements in the district are met through

the receiving stations, sub-stations set up at different places in the district.

Transportation

A good transportation network is essential for speedy economic development and a

well laid railway network facilitates speedy transportation of men and material. There is only

one railway line passing through the district, viz., Banagalore-Talaguppa line. The railway

line between Bangalore and Shimoga has been converted into broad gauge. Conversion of

Shimoga to Talguppa railway line into broad gauge is a long standing demand of the people

in the district. The continuation of this line up to Honnavar or Bhatkal will link it into

Konkan railway. This will provide direct access to Mumbai for marketing the products

manufactured by entrepreneurs of the district. There is also a need for direct rail connection

between Shimoga and Harihar to pave way for quick development of trade and industries.

The district has road connections connecting all the towns. Out of the total road length

of 8,442 kms, only 2,420 kms constituting 29 per cent of the total road length are surfaced

roads.

Transportation by road is the major mode of conveyance in the district. Out of the

total number of vehicles as on 31-3¬1997 (95,139 vehicles), 6,919 vehicles come under

transportation entrepreneurs category.

Others

There are 474 post offices, 112 telephone exchanges, 29,621 telephone connections,

12 hospitals, 52 dispensaries and 57 primary health centres.

Social Infrastructure

Lending Institutions

Finance is the other basic requirement besides man and material. It is indispensable

for any entrepreneurial activity. A good network of lending institutions help in mobilising

saving and utilising savings in an effective manner. The Shimoga district is well served by

lending institutions, comprising Commercial Banks, Co-operative Banks, Regional Rural

Banks and financial institutions.

There are 153 Commercial Banks, 27 Regional Rural Banks, a branch office of

NABARD, one Grade 'A' branch office of KSFC at Shimoga and a field office at Sagar.

Commercial banks include nationalised commercial banks, State Bank of India and its

subsidiaries and limited banks. Canara Bank is the Lead Bank of the district with 39

branches.

Besides this, a large number of private financial institutions are also assisting the

entrepreneurs in the district.

Technical Skills and Training Facilities

Availability of sufficient skilled labour is an added advantage and it facilitates speedy

development of industries in any area. The traditional craftsmen like potters, carpenters,

blacksmiths, weavers, rope makers and artisans constitute the major share of skilled labourers

at the grassroots level in the district. There are about 7,400 artisans in the district. Pottery

makers are concentrated in Honnali, Channagiri, Shimoga and Bhadravati taluks. Handloom

weavers, sandalwood carvers popularly called 'Gudikars' are concentrated in Sagar and Sorab

taluks.

The skilled labour force is required for production of sophisticated and qualitative'

products. Hence, the need for technical training institutions cannot be over emphasised.

The following training institutions provide training facility to artisans in the district:

1. Model Carpentry and Smithy Centre, Shimoga.

2. Artisans Training Institute, Sagar.

3. Agriculture Machinery, Sagar.

4. Industrial Training Institute for Women, Shimoga.

5. Industrial Training Institute, Bhadravati.

6. Junior Technical School, Bhadravati.

There are one engineering and 8 polytechnic colleges in the district. These institutions

impart training in various fields such as mechanical engineering, electrical engineering,

metallurgy, sugar technology, civil engineering, paper technology, computer science,

architecture, costume design and dress making, commercial practice, telecommunication etc.

Besides these, there were 2,411 primary schools, 302 high schools, 89 pre-university

colleges, 38 degree colleges, one dental college and 2 medical colleges of Indian systems

during the year 1996-97.

District Industries Centre (DIC) is the nodal point for the industrial development of

the district. Imparting training, monitoring credit facilities, providing raw materials,

marketing arrangement of products of small scale industries, conducting EDPs/EAPs, etc.,

are some of the important activities of DIC. Besides this, the scheme like PMRY, TRYSEM

and VISWA are also being administered by DIC.

References

1. Karnataka State Gazetteer, Government of Karnataka, Shimoga District, 1975.

2. Karnataka State Profile, 1997-98, SISI Bangalore.

3. Census Report, 1991, Karnataka.

4. District Industrial Potential Survey Report, DIC Shimoga.

5. Varshika Pragathi Varadi (Annual Progress Report) From 1-4-1997 to 31-3-1998.

Zilla Kaigarika Kendra, Shimoga and Zilla Panchayat, Kaigarika Vibhaga, Shimoga.

5

Entrepreneurial Setting in Shimoga District

This chapter owes much to the primary data collected in the field survey. The purpose

of this chapter is to study the various facets of entrepreneurship in Shimoga district, which is

the case study area. It studies the social profile of entrepreneurs, units promoted by them,

factors motivating them to become entrepreneurs, the relationship among various variables,

the performance of entrepreneurs and the problems faced by them to discharging their

entrepreneurial functions.

Social Profile of Entrepreneurs

The emergence of entrepreneur is conditioned by socio-cultural and economic

variables. Pareek and Nadakarni observed that the four factors influencing entrepreneurial

growth are the Ind, lvH1Uall- socio-cultural tradition, support system and environment. For

the successful emergence of any entrepreneurs, these vanables playa greater role. In a study

conducted by Knshnalal Sharma and Singh, it was found that caste background and family

background of entrepreneurs had a significant influence on the entrepreneurs. They also

found that government facilities are enjoyed largely by people with business background. In a

study of 125 entrepreneurs in Kolhapur, S.G. Bhanushah found that caste, education and

parental occupation had greater Impact on attaining higher degree of entrepreneurial success.

The success of any entrepreneurship, as history shows, changes from area to area,

community to community and people to people. For example, Tatas, Birlas and Ambanees

(all from Parsee community) are successful in heavy industries, Shettys from Andhra Pradesh

are in gold and jewellary business, Bhant Shets of Dakshina Kannada district are in hotel

business (Non-vegetarian) and Kamaths and Udupi Brahmins are successful in hotel business

(Indian cuisine only).

Entrepreneurship in India is even today prerogative of a section of the society. These

classes are the major beneficiaries of entrepreneurial schemes and programmes of the

government and financial institutions. It has been proved time and again that those who have

come from trade and industrial background get easy access to non-institutional finance, but

those who have come from professional background mainly depend on institutional finance.

Sadhak found that those who were formerly traders had better access to financial resources

and were less dependent on institutional financial resources than technocrat professional

entrepreneurs. Manohar U. Deshpande found that the institutional agencies such as IDBI,

SFCs and Commercial banks created by the government to help prospective entrepreneurs

were not successful in developing entrepreneurs from all castes in the Marathwada region of

Maharashtra state.

It is in the light of above analysis, the study of the social background of entrepreneurs

assumes importance. The knowledge of socio-economic factors is therefore of great help in

formulating future policy regarding schemes of financial assistance, concessions, subsidies,

etc. In order to ascertain the type of people who have taken to entrepreneurship in the district,

biological and social factors such as age, marital status, educational qualification, category of

entrepreneurs, family background, relationship among these factors and the factors which

motivate them to become entrepreneurs have been gone through. Such a study revealed the

following:

1. Age and Marital Status of the Entrepreneurs

Data collected from the entrepreneurs under study revealed that 81.79 per cent of the

entrepreneurs were married while 7.14 per cent of the entrepreneurs were unmarried.

Majority (70 per cent) of the unmarried entrepreneurs were of less than 30 years of age and

the remaining 30 per cent unmarried were in the age group of 31-40 years.

The largest group of entrepreneurs comprising of 33.22 per cent of the total were in

the age group of 31-40 years followed by 27.86 per cent in the age group of 41-50 years, 15

per cent were less than 30 years of age and as much as 12.85 per cent of the entrepreneurs

were over 50 years of age. 31 units are owned by partnership firms, where there is a wide gap

between the age of active partners, hence not included in the above.

Table 5.1 incorporates the distribution of entrepreneurs under study according to the

age and marital status.

Table 5.1

Age and Marital Status of Entrepreneurs

Age (years) Marital Status Total Percentage

Married Unmarried

Less than 30 28 14 42 15.00

31-40 87 6 93 33.22

41-50 78 78 27.86

Above 50 36 36 12.85

Sub Total 229 20 249 88.93

Entrepreneurs with different age group

31 11.07

Total 280 100.00

Source: Survey Data.

2. Educational Level of Entrepreneurs

Some amount of education/wordly knowledge has always been considered as

important asset of an individual in building his occupational career in a bureaucratised

society. It is said in Rigveda that knowledge is power. It helps him not only in the acquisition

of required skills for a job demanding non-traditional skills but also in imparting knowledge

about the different occupational opportunities. Just in an underdeveloped economy the

education is always looked upon as a means to improve one's socio-economic position in the

society. Now doubts are being expressed about the effect of formal education on

entrepreneurial supply. This is because, in an underdeveloped country the educated are likely

to take up positions in the bureaucracy as it commands more respect in the society and also

generates assured income. The present trend among the educated youths in India is an

illustration to this. It is also possible that the entrepreneurs with higher level of education may

have chosen entrepreneurial pursuits because of their failure in getting the government jobs.

Several studies on' entrepreneurship have examined the relationship between level of

education and entrepreneurial growth. A.S. Rao in a study of chemical industries in Baroda

city, found that the firms owned by graduates and entrepreneurs with technical background

are better than other firms. Oamen has attributed the lesser proportion of entrepreneurs in

Kerala State to inadequacy of education and technical knowledge.

Table 5.2

Level of Education of Entrepreneurs

Level of Education No. of Entrepreneurs Percentage

Primary Education 50 17.86

Matriculation 85 30.36

Collegiate Education 106 37.86

Technical Education' 39 13.92

Total 280 100.00

Source: Survey Data.

1. Entrepreneurs with PUC, general degree and Postgraduation.

2. Entrepreneurs with Engineering, Diploma, ITT, B. Pharma, B. Arch. and Medical

education.

An examination of the level of education of entrepreneurs under study (Table 5.2)

indicates that around 17.86 per cent of entrepreneurs had only primary education, 30.36 per

cent of the entrepreneurs had education up to matriculation, 37.86 per cent had obtained

collegiate education and 13.92 per cent were technically qualified. Thus a total of 51.78 per

cent of the entrepreneurs under study had collegiate education (which includes technical

education). It is important to note that in 14 partnership firms and joint stock companies

(where the partners and directors have varied educational qualifications) the education level

of Managing Partner and Managing Director respectively is considered.

Table 5.2 shows the education level of entrepreneurs under study in Shimoga district.

3. Community-wise Distribution of Entrepreneurs

The background of any community and its business acumen have their own influence

on the entrepreneurial supply. This has been observed by Everett Haggen who studied the

origin and background of entrepreneurs of several countries and regions which include

England, Japan, former Soviet Union and Latin America. In most of the countries,

entrepreneurs have emerged from a particular socio-economic class.

In India, the industrial entrepreneurship has often been analysed in terms of

entrepreneur community and the pursuits associated with the community. The community

system has been found to be exercising its own impact on the occupational mobility. Some

communities like the Parsees, Marwarees and Sindhees seem to have an inclination towards

industrial activity. However, it is true that certain communities have imbibed a spirit of

entrepreneurship. Hence the community factor should invariably be examined while studying

the entrepreneurship.

Table 5.3 shows the community-wise distribution of entrepreneurs under study.

It may be seen from Table 5.3 that 47.14 per cent of the entrepreneurs in study area

hailed from general category. The entrepreneurs belonging to backward community (16.79

per cent), minority community (15 per cent), women entrepreneurs (13.21 per cent) and SC

and ST (7.86 per cent) entrepreneurs are ranking second, third, fourth and fifth respectively.

The above figures depict that significant number of entrepreneurs have hailed from either too

neglected and exploited class of the Indian society and a class which is not seriously

considered for an activity which requires skill, talent, risk-bearing and uncertainty bearing

capacity, expertise,' etc., such as women, backward community and SC/ST.

Table 5.3

Community-wise Distribution of Entrepreneurs

Community/Category No. of Entrepreneurs Percentage

Schedule Caste and Tribe 22 7.86

Women Entrepreneurs 37 13.21

Minority Community 42 15.00

Backward Community 47 16.79

General Category 132 47.14

Total 280 100.00

Source: Survey Data.

It is important to note that, of the 37 units owned by women entrepreneurs, 12 units

are actually owned and managed by women and the remaining 25 units are only in the name

of the women, but actually managed and controlled by the male counterparts, i.e., husband,

father and family members. Further, in the general category 11 partnership firms with women

partners is included since the male partners constitute majority in the said 11 firms.

4. Family Background of the Entrepreneurs

The influence of family background on the emergence of entrepreneurs has been

documented by several research studies. Study conducted by Manohar U. Deshpande

revealed that caste, family occupation and father's occupational status are important for entry

into the business of manufacturing. But, several studies have revealed that entrepreneurs are

increasingly emerging from diverse social groups.

In view of the above, the occupational pattern of the fathers and husbands of the

entrepreneurs under study have been examined (Table 5.4).

Table 5.4

Family Background of the Entrepreneurs

Family Background No. of Entrepreneurs Percentage

Trade or Industrial Background 140 50.00

Agricultural Background 64 55.85

Service/Employment Background 76 27.15

Total 280 100.00

Source: Survey Data.

Table 5.4 reveals that, trade or industrial background was the family background of

highest number of entrepreneurs (50 per cent) followed by service/employment background

(27.15 per cent) and agricultural background (22.85 per cent).

Considering the dominance of agriculture in the district, the corporation failed to

attract more and more number of entrepreneurs from the overcrowded agriculture sector

when compared to entrepreneurs from trade or industrial background. The above analysis

reveals that entrepreneurs with trade or industrial background continued fo bag the resource

of KSFC and are dominating the entrepreneurial field. However, equal number of

entrepreneurs (140 entrepreneurs) are drawn from non-industrial and non-trade background.

5. Factors Motivating an Entrepreneur

The entrepreneurs under study were asked to rank the various factors which motivated

them to become entrepreneurs. Since man is a product of his own environment, the prevailing

socio-economic, psychological and the cultural factors naturally influence him and act as a

source of inspiration to become an entrepreneur. As such the ambition or aspirations,

compellings factors and facilitating factors make an entrepreneur.

Ambitions or aspirations motivates men, activise them, broaden their vision and make

the life meaningful. Ambition is an index of one's own resourcefulness. Like individual,

nations or regions or families may have their own ambitions which speak of their

resourcefulness. The intentions and initiative of a man are directed by his ambitions. The

common saying "aimless life is a goal-less game" emphasises the importance of ambition in

life. Various ambitions which motivate a person to become an entrepreneur are desire to

achieve something in life, need for independence, desire to get gainfully occupied, to garm

Social prestige, continuing family business, etc S. Ahok Kurrarlo in his study on the

entrepreneurship in small industry industrial estates of Andhra Pradesh, found that the

ambition of becoming self-reliant was ranked first and ambition of giving shape to their ideas

and skills received second rank make money, to continue the family business and gammg

Social prestige and power are the other influencing factors. However, many a times it is the

compulsion rather than the ambition that leads men to success. Sometimes initial ambition

and the opportunities may dash with each other. Then the dosing destiny is shaped by the

compulsion of the situations. Some times all of a sudden one may be thrown out of the

present occupation and he is forced to pursue a different occupation. There are cases of

people trying their level best to seek petty employment position and as a matter of last resort

becoming a petty trader or employee and ultimately entering entrepreneurial activities on

disproportionate scale and making millions of rupees and providing employment to others.

Such is the role the element of compulsion plays in one's life. In a study of entrepreneurship

in two industrial estates of Andhra Prasdesh, S. Ashok Kumar found that 10 out of 20

entrepreneurs wed compelled by dissatisfaction with the previous jobs and unemployment.

Ambition or compulsion alone may not make a man an entrepreneur. At times, the

encouragement of family members, friends and relatives, the experience gained in

employment, the skill acquired or inherited, availability of finance from banks and financial

institutions, subsidies and concession given by government, EDP /EAP /industrial meets /

trade fairs and exhibitions conducted by various agencies, success of others, etc., also

facilitate the exercise of entrepreneurship In a study on entrepreneurial process and promises

conducted by BEVVN

Murthy and others in Andhra Pradesh, it was found that previous association in the

same or other line of activity, success stories of entrepreneurs and advice or influence of

family members/friends/relatives facilitated the entrepreneurship. S. Ashok Kumar found that

previous job experience and the education and training received by the entrepreneurs

facilitated the entrepreneurship in Marripalem and Autonagar industrial estates of

Vishakapatnam city in Andhra Pradesh state.

In the present study, the entrepreneurs surveyed were asked to rank the different

factors which motivated them to become entrepreneurs in the order of importance listed in

Table 5.5. The factors indicated by them were rated by weighted score by according five

points to the factors ranked first, four points to the factor ranked second, three points to the

factor ranked third, two points to the factor ranked four and one point to the factor ranked

five. The factors which influenced the entrepreneurs in the study area have been shown in

Table 5.5.

It can be seen from the Table 5.5 that need for independence has driven most of the

entrepreneurs to the threshold of entrepreneurship (596 points). The next important factor

influenced the entrepreneurs was desire to get gainfully occupied (564 points). Any other'~

factor was ranked third (532 points), desire to achieve something in life was ranked fourth

(356 points), the availability of finance from KSFC was ranked fifth (95 points), success of

others ranked sixth (65 points), to get social prestige was ranked seventh (60 points) and

entrepreneurship development programmes/awareness programmes was ranked eighth or

last weighing 48 points.

Any ocher: It is impossible to prepare a long list of many factors which influence entrepreneurship. To meet such contingencies 8th factor titled "Any Other" was given. Entrepreneurs opting this factor were requested to specify the influencing factor. As such, unemployment problem, experience in same line, initiative taken by the husband or father (in case of women entrepreneurs), interest in becoming an entrepreneur, dissatisfaction in the previous job held, to facilitate the parent unit, question of leading the life, to start one industry in life, availability of raw materials, to give employment to a few, encouragement by friends, opportunities available, dispute with the previous management and requirement of less working capital were the other factors which motivated the entrepreneurs.

Table 5.5

Factors motivating the entrepreneurs

Units Promoted by Entrepreneurs

An attempt has been made here to study the sector in which the entrepreneurs are

concentrated in the study area, type of activity, form of organization, location of the units,

market for the product/ service, investment made, turnover, commencement of

entrepreneurship and the relation among these variables.

1. Sector-wise Distribution of Entrepreneurs

The corporation is assisting entrepreneurs in SSI sector, transport entrepreneurs and others.

Others include nursing homes, lodges, marketing entrepreneurs and STD/ISD booths. Table

5.6 shows the sector-wise distribution of the entrepreneurs surveyed.

Table 5.6

Sector-wise Distribution of Entrepreneurs

Sector No. of Entrepreneurs Percentage

SSI 200 71.43

Transport 55 19.64

Others 25 8.93

Total 280 100.00

Source: Survey Data.

During the study period the corporation has assisted loan to 1,107 small scale

industries, 932 transport entrepreneurs and 176 entrepreneurs in the other sectors. The

corporation has also sanctioned 1,246 loans to tiny units under the VISHWA scheme of the

Karnataka state government. But they are not included in Table 5.6. As it is difficult to

survey all the 2,215 entrepreneurs to whom the financial assistance was given, a

representative sample from each sector was chosen. With a view to make the sample

unbiased and fully representative, more number of entrepreneurs were chosen from the SSI

sector. Transport entrepreneurs though form significant number (932 during the 8 years

period under study), only 55 entrepreneurs were chosen, since it represents a single activity.

But SSI sector includes different types of industrial activities, hence 200 SSI units out of

1,107 assisted units were chosen. From the other activities sector 25 entrepreneurs out of 176

entrepreneurs assisted during the 8 years period under study were chosen.

2. Form of Organisation

A majority of the entrepreneurs under study, 74.64 per cent, had opted for sole

proprietary form of organisation. An interesting type which existed was that of family

ownership, a stage in between sole proprietorship and partnership, in the sense it was being

run as a sole trading unit, i.e., the partnership consisting of the members of the family who

were usually the sleeping partners. In most of the cases it was found that the spouse of the

entrepreneurs lent her name and for all practical purposes the business was being run by a

single person. Out of the 66 partnership firms surveyed, 47 units consisting 71.21 per cent of

total number of partnership firms surveyed or 16.43 per cent of the total number of

entrepreneurs surveyed belong to this type. Remaining 19 entrepreneurs (6.79 per cent) have

formed their units with outsiders as partners. Only 5 entrepreneurs consisting 1.79 per cent

were joint stock companies.

Table 5.7 describes the ownership type of entrepreneurs.

Table 5.7

Form of Organisation of Entrepreneurs

Form of Organisation No. of Entrepreneurs Percentage

Sale proprietorship

Partnership

(a) with family members

(b) without family members Joint

stock company

209

47

19

5

74.64

16.78

6.79

1.79

Total 280 100.00

Source: Survey Data.

3. Location of the Units/Entrepreneurial Activities

An ever-ready willingness to move from one place to another and risk taking ability

can be gauged from the choice of location of units by the entrepreneurs. Normally, the

location of units or activities of the entrepreneurs are influenced by various factors such as

availability of raw materials, transportation facilities, power and other infrastrctural facilities,

proximity to markets and the like. A study conducted by Panandikar14 in Poona city revealed

that a woman entrepreneur chooses to locate her unit in her house or nearby places because of

the dual role she has to playas homemaker and entrepreneur.

The location chosen by the entrepreneurs under this study was examined to verify if

they preferred home, rented/ leased premise, owned premise or industrial estate. All the 9

taluks of Shimoga district have been included in the study in order to have a clear picture of

the growth and development of entrepreneurship in the district. Token sample is selected

from all the nine taluks. Table 5.8 shows the classification of units or entrepreneurial

activities according to location of the unit.

Table 5.8

Location-wise Distribution of Entrepreneurs

Location No. of Entrepreneurs Percentage

At home 23 8.21

Owned premised 94 33.57

Rented / Leased premise 63 22.50

Industrial estate 45 16.07

Transport entrepreneurs 55 19.65

Total 280 100.00

Source: Survey Data.

Table 5.8 reveals that 33.57 per cent of the sample units were running their

entrepreneurial activities in owned premises followed by 22:50 per cent in rented/leased

premises, 16.07 per cent. In industrial estates and 23 entrepreneurs representing 8.21 per cent

at home. 55. entrepreneurs representing 19.65 per cent of the sample size are in the

transportation sector. Out of them, 10 operators are marketing their services at the national

level, 34 entrepreneurs at the Karnataka state level and 7 entrepreneurs marketing locally. 4

transport entrepreneurs are not marketing their services. Out of the 45 units located in

industrial estates, 36 units are concentrated in industrial estates of Shimoga, the district

headquarter, 8 units are located at Sagar and one at Bhadravati industrial estate. It proves the

fact that the entrepreneurs do tend to move towards the areas with good market and

infrastructural facilities. Industrial estates in Shimoga are ahead of the industrial areas in

Sagar and Bhadravati (as far as infrastructural facilities and market are concerned) and they

have attracted significant number of entrepreneurs to set up their units.

4. Type of Market

The market in which the entrepreneurs under study are selling their products or

services varies from local market to national market. Table 5.9 indicates the type of market in

which the entrepreneurs in the study area operate.

Table 5.9

Type of market of entrepreneurs

Type of Market No. of Entrepreneurs Percentage

Local market 164 58.57

State-wide market 77 27.50

National market International

market

35 12.50

Not marketing the service 04 1.43

Total 280 100

Source: Survey Data.

Table 5.9 reveals that majority of the units, 164 (58.57 per cent) to be precise, hold

the local market, 77 entrepreneurs (27.50 per cent) are marketing their products throughout

the state of Karnataka and 35 entrepreneurs (12.50 per cent) operate in market spread outside

the state. N 0 entrepreneur ha~ the access to international market yet. In a few cases money

borrowed from KSFC has not been properly used. Thus, while the largest group of

entrepreneurs, comprising 58.57 per cent of the total are marketing their products within the

limited spheres of local markets, as much as 40 per cent has wider market extending outside

the local market.

5. Classification of Units based on Investment, etc.

The success of entrepreneurs is usually judged on the basis of the varying capital over

a period of time, its turnover, etc. Three different criteria are employed in the present study

for measuring the size of the units. These are-quantum of investment, average annual

turnover and number of workers employed. Individual criterion analysis is as follows:

Quantum of Investment-Initial and Latest

The size of the units can be measured on the basis of capital invested. Hence an

attempt has been made to examine this aspect here. The analysis has been made on the basis

of the capital employed figures relating to the initial year, i.e., the year of commencement of

entrepreneurial venture and at present, i.e., as on 31st March 1998.

In the present study, 71.43 per cent of the total sample size (i.e., 200 out of 280

entrepreneurs) are SSIs and the rest are transport entrepreneurs and entrepreneurs engaged in

other activities. There are no medium and large scale industries operated by the

entrepreneurs. Table 5.10 shows the initial investment figure and investment at present.

Table 5.10 reveals that, out of 280 units, 89 units had the investment limit ranging

from Rs. 3 lakhs to Rs. 10 lakhs. 64 units (22.86 per cent) were established with an

investment ranging from Rs. 1lakh to Rs. 3 lakhs, 49 units (17.50 per cent) with an

investment of less than Rs. 50,000, 43 units (15.35 per cent) with investment ranging from

Rs. 50,000 to Rs. 1 lakh, and 28 units (10 per cent) with investment ranging from Rs. 10

lakhs to Rs. 25 lakhs. Only 7 units (2.50 per cent) had the investment above Rs. 25 lakhs.

Table 5.10

Investment-wise Distribution of Entrepreneurs

Investment Limit (Rupees)

At the Time of Establishment At Present (i.e., as on 31-03-1998)

No. of Entrepreneurs

% No. of Entrepreneurs

%

Less than 50,000 49 17.50 11 3.93

50,000 to 1 lakh 43 15.35 21 7.50

1 lakh to 3 lakhs 64 22.86 41 14.64

3 lakhs to 10 lakhs 89 31.79 88 31.43

10 lakhs to 25 lakhs 28 10.00 42 15.00

25 lakhs to 60 lakhs 7 2.50 25 8.93

Above 60 lakhs 10 3.57

Units closed 42 15.00

Total 280 100.00 280 100.00

Source: Survey Data.

The above analysis shows that majority of the entrepreneurs have an investment of

less than Rs. 3 lakhs. It constitutes 55.71 per cent of the total sample (156 units out of 280

units). Out of these, in 92 units the initial investment ranges between Rs. 5,500 and Rs. 1

lakh. This group consists of 32.85 per cent of the total sample. This shows that initially the

investment is less due to the risk involved and the financial limitation. Those who had

sufficient money (with trade or industrial background) opined that it is very easy to make the

initial investment.

Taking into account the total investment made at present (i.e., on 31st March, 1998) it

is found that, there has been a sizeable increase in the size of entrepreneurs units. It is

observed that the number of units with less than Rs. 50,000 initial investment is reduced from

17.50 per cent (49 entrepreneurs) of the total unit the time of establishment to 3.93 per cent

(11 entrepreneurs) of the units at present. Those units with total investment ranging from Rs.

50,000 to Rs. 1 lakh is cut down from 15.35 per cent (43 entrepreneurs) at the time of

establishment to 7.50 per cent (21 entrepreneurs) at present and total investment ranging from

Rs. 1 lakh to Rs. 3 lakhs is reduced from 22.86 per cent (64 entrepreneurs) to 14.64 per cent

(41 Entrepreneurial Setting in Shimoga District entrepreneurs) at present. At the same time,

number of units with investment ranging from Rs. 10 lakhs to Rs. 25 lakhs is raised from 10

per cent (28 entrepreneurs) of the total units at the time of establishment to 15 per cent (42

entrepreneurs) at present, registering an increase by 150 per cent. Similarly, the number of

units with investment ranging from Rs. 25 lakhs to Rs. 60 lakhs has increased considerably

from 2.5 per cent (7 units) of the total units at the time of establishment to 8.93 per cent (25

units) at present constituting an increase by 257.14 per cent. It is Important to note that no

unit was started with an initial investment above Rs. 60 lakhs. However, 10 units have

investment above Rs. 60 lakhs at the latest year under study i.e., as on 31st March, 1998).

These units have crossed the investment limit for SSIs prescribed by the government (i.e., Rs.

60 lakhs). This indicates a positive growth in the size of units operated by the entrepreneurs.

Size of Employment

Table 5.11 shows the number of workers/employees employed m the units at the time

of establishment of the unit and at present.

Table No. 5.11

Table showing the size of employment

Number of

Employees

At the Time of Establishment At Present (i.e., as on31-03-1998)

Frequency

(Units)

Percentage Frequency

(Units)

Percentage

No employees 52 18.57 33 11.79

One 28 10.00 18 6.43

2-5 136 48.57 87 31.07

6-10 39 13.93 51 18.21

11-20 15 5.36 34 12.14

21-50 9 3.21 12 4.29

More than 50 1 0.36 3 1.07

Closed the unit 42 15.00

Total 280 100.00 280 100.00

Source: Survey Data.

Table 5.11 reveals that there were no employees in 52 units at the time of

establishment of units. These units are managed by the entrepreneurs themselves. 10 per cent

of the units (28 units) had only one employee/worker, 48.57 per cent (136 units)' had 2-5

employees, 13.93 per cent (39 units) had 6-10 employees, 5.36 per cent (15 units) had 11-20

employees, 3.21 per cent (9 units) had 21-50 employees and only one unit had more than 50

employees.

Taking into account the number of employees at present, in the case of as much as

37.5 per cent of the units (105 units), the total number of employees is less than five, with

6.43 per cent of the units (18 units) having only one employee and 31.07 per cent (87 units)

of the units having employees ranging from 2-5.18.21 per cent (51 units) of the units had

employees ranging from 6-10, 12.14 per cent (34 units) had 11-20 employees, 4.29 per cent

(12 units) had 21-50 employees. The number of units employing more than 50 employees

increased from 1 to 3 units.

Thus, the size of the units measured by number of employees can also be said to be

small. However, those units with no employees came down from 52 to 33, units with only

one employee from 28 to 18 and unit with 2-5 employees numbering 136 cam to 87.

It is thought or believed by many that women entrepreneurs prefer their own sex to

men as the former is supposed to be quite pliable and easy going. In fact, the government had

stipulated that, in order to be eligible for various subsidies and concessions available for

women entrepreneurs, the units promoted by them had to employ female labourers/employees

up to at least 50 per cent of the total labour force. However, this precondition has since been

practically scrapped. This is because out of the 37 units owned by women, 25 units are

actually/ practically controlled by male members of the family. The remaining 12 units are

managed by women entrepreneurs themselves. Of the 25 units having hired labour force, only

4 units are established with 11 female employees, whereas the remaining 21 units owned by

women have either male employees or they have been practically managed by male

counterparts (i.e., husband, father and other male members of family).

Annual Turnover

Annual turnover may be taken as one of the criteria for measuring the size and growth

of entrepreneurial activities. Table 5.12 indicates the annual turnover of many entrepreneurs

in the first year of their establishment and at present (i.e., 31st March, 1998). Information

regarding initial turnover was not available from 20 entrepreneurs and even on 31st March,

1998 it was not available with 12 entrepreneurs. Four entrepreneurs who have borrowed loan

to buy a vehicle are not running the vehicle commercially. Information as to annual turnover

at present is not available from 42 entrepreneurs (besides the 12 entrepreneurs mentioned

above) since their entrepreneurial activity is closed now.

Table 5.12

Turnover-wise Distribution of Entrepreneurs

Annual Turnover (Rupees)

At the Time of Establishment

At Present(i.e., as on 31-03-1998)

No. of Entrepreneurs

% No. of Entrepreneurs

%

Less than 25,000 36 12.86 10 3.57

25,000 - 50,000 25 8.93 12 4.29

50,000 - 1 lakh 33 11.79 19 6.79

1 lakh - 2 lakhs 54 19.28 29 10.36

2 lakhs - 5 lakhs 56 20.00 51 18.21

5 lakhs - 10 lakhs 25 8.93 33 11.79

10 lakhs - 25 lakhs 19 6.79 29 10.36

2,00,000 - 1 crore 7 2.50 22 7.86

Above 1 crore 1 0.35 17 6.07

Not sent on hire 4 1.42 4 1.42

Not available/Refused to give 20 7.15 12 4.28

Closed the unit 42 15.00

`Total 280 100.00 280 100.00

Source: Survey Data.

Table 5.12 shows the annual turnover of many entrepreneurs. It is observed that in the

first year of starting the production or servicing, the annual turnover of a majority of the units

under study is quite negligible. In the case of 12.86 per cent (36 units) of the units, the

turnover was less than Rs. 25,000 and between Rs. 25,000 and Rs. 50,000 in the case of 8.93

per cent (25 units) of the total units, between Rs. 50,000 and Rs. 1 lakh in the case of 11.79

per cent (33 units) of the total units, between Rs. 1lakh and Rs. 2 lakhs in the case of 19.20

per cent (54 units) of the total units and between Rs. 2 lakhs and Rs. 5 lakhs in the case of 20

per cent (56 units) of the total units. In total, 72.86 per cent of the total units are having the

annual turnover of less than Rs. 5 lakhs.

The annual turnover of the entrepreneurs at present reveals that the size of the

operations of the entrepreneurs has increased substantially. As on 31st March, 1998 the total

number of units having turnover of less than Rs. 5 lakhs was only 121 which comprises of

43.22 per cent of the total units. Whereas at the time of establishment, this number was 204

(72.96 per cent) units. Concurrently, those with a turnover of more than Rs. 5lakhs increased

from 52 units (18.57 per cent) at the time of establishment to 101 units (36.08 per cent) at

present. These figures explain that the number of units in each frequency of turnover of less

than Rs. 5 lakhs is reduced considerably and their number in each frequency of turnover

above Rs. 5 lakhs is increased substantially. On an average, 49 units have crossed the initial

stage.

6. Commencement of Entrepreneurship

In the course of establishing a unit, the entrepreneur has to perform several

preliminary functions such as finding a suitable site for establishing the unit (except. the

transport operators, they have to decide the area of operation), completing various statutory

requirements, hiring of labourers, raising capital and so on. The entrepreneurs under study

were asked to indicate whether the unit is established by themselves or by the family

members, inherited from father or an existing unit (good or sick) is taken over by them. The

object is to see the first generation entrepreneurs who are motivated financially by the KSFC.

Table 5.13 shows the details about the establishment of units or commencement of

entrepreneurial activities.

Table 5.13

Table Showing the Details about the Commencement of Entrepreneurial Activities

Commenced by Whom? No. of Entrepreneurs Percentage

Established by the entrepreneur 232 82.86

Established by the family members 25 8.93

Inherited from father 14 5.00

Taken over a good/sick unit 09 3.21

Total 280 100.00

Source: Survey Data.

A study of the persons responsible for the establishment of unit indicates that 82.86

per cent (232 entrepreneurs) of the entrepreneurs have established the unit on their own and

8.93 per cent (25 entrepreneurs) had received all the types of assistance from the family

members in floating the unit. It is important to note that all these 25 units are owned by the

women entrepreneurs. Another 5 per cent of the entrepreneurs (14 units) have inherited from

father (that means continuation of the management of the unit established by the father) and

3.21 per cent (9 units) of the total units are taken over (existing good/ sick) units. (That

means managing a unit which was established by some other persons.)

It is observed that a large majority of the units are established by the entrepreneurs

themselves with the financial assistance of KSFC. However, it is found that 67.56 per cent of

the women entrepreneurs (25 out of 37 units owned by women) had obtained assistance from

their husbands/ fathers/ relatives in establishing the unit.

Performance of Entrepreneurs

The performance of the entrepreneurs under study is analysed by taking into account

the changes introduced by the entrepreneurs in their units, the average annual return on

investments, the proportion of profits re-invested in business, influence of education, family

background, category and type of ownership on their performance and such other criteria.

1. Changes Introduced by the Entrepreneurs

A study regarding changes introduced by the entrepreneurs had made us to see the

innovative character of the entrepreneurs' in the study area. Peter Drucker defines an

entrepreneur as one who always searches for change, respond to it and exploits it as an

opportunity. He aptly observed that "Innovation is the specific tool of entrepreneurs, the

means by which they exploit changes as an opportunity for a different business or a different

service. It is capable of being presented as a discipline, capable of being learned and

practiced. Entrepreneurs need to search purposefully for the sources of innovation, the

changes in their symptoms that indicate opportunities for successful innovation. And they

need to know and to apply the principles of successful innovation." According to him,

systematic innovation consists in the purposeful and organised search for changes and in the

systematic analysis of the opportunities. The entrepreneurs in the present study were asked to

indicate the changes made by them. The change may take the form of addition of new

product or service, improvement of the existing product or service, expansion of the unit,

installation of modern machinery and establishment of a new unit. Table 5.14 indicates the

type of changes introduced by the entrepreneurs under study.

It can be seen from Table 5.14 that a majority of the entrepreneurs under study (84.65

per cent) had introduced some improvements/changes in their units. Only15.35 per cent (43

entrepreneurs) of the entrepreneurs had made no changes in their activity after the

establishment of the unit, out of them 24 entrepreneurs are transport operators. Many among

them had mentioned/ opined that unlike SSIs, type of work undertaken by them does not offer

any scope for introducing changes.

Table 5.14

Changes Introduced by the Entrepreneurs

Type of change introduced No. of Entrepreneurs

Percentage in total entrepreneurs under

study i.e. 280Addition of new product/service 88 31.42

Improvement of existing product/service 144 51.42

Expansion of unit 27 9.64

Installation of modern machinery 112 40.00

Establishment of new unit 25 8.92

No changes 43 15.35

Total 439 156.75

Source : Survey data

Note : Total exceeds 100 per cent due to multiple answers

It is observed that 31.42 per cent of the entrepreneurs (88 entrepreneurs) had

diversified their activity towards a new line of product or service, 51.42 per cent of the

entrepreneurs (144 entrepreneurs) improved the quality of their product or service, 9.64 per

cent (27 entrepreneurs) had carried out expansion of their units, 40 per cent (112

entrepreneurs) had installed modern machinery in their units and 8.92 per cent (25

entrepreneurs) of the entrepreneurs had established a second unit.

Further, as much as 39.64 per cent of the entrepreneurs had introduced mare than one

of the above mentioned changes. While 19.28 per cent (54 entrepreneurs) had introduced two

changes, 11.78 per cent (33 entrepreneurs) had introduced three changes, 7.14 per cent (20

entrepreneurs) had introduced four changes and 1.07 per cent (3 entrepreneurs) had

introduced all the five changes mentioned above. Thus, it can be inferred that entrepreneurs

in Shimoga district have been innovators.

2. Return on Investments

The performance of an entrepreneur can be measured on the basis of the return on

capital employed. The entrepreneurs were asked to indicate the average annual returns earned

by their units. The quantum of profits earned by the entrepreneurs under study is recorded in

Table 5.15.

Table 5.15

Return on investments earned by entrepreneurs

Range of Average

Annual Profits Earned

No. of entrepreneurs Percentage

6 - 10 per cent 109 38.93

11 - 15 per cent 48 17.15

16 - 20 per cent 34 12.14

21 - 25 per cent 40 14.29

Sub Total 231 82.51

No profit No loss 35 12.50

Loss 5 1.78

Not marketing the service 4 1.43

Not available/Refused to give 5 1.78

Total 280 100.00

Source: Survey Data.

Table 5.15 shows that around 82.51 per cent of the entrepreneurs under study (231 out

of 280 entrepreneurs) reported that their units had earned profits. The study reveals that 38.93

per cent of the total units (109 entrepreneurs) earned an average annual return of 6-10 per

cent on their investments, 17.5 per cent (48 entrepreneurs) earned average annual profits

ranging between 11-15 per cent on their investment, 12.14 per cent (34) of entrepreneurs

earned returns ranging from 16-20 per cent on their investments and 14.29 per cent of the

entrepreneurs (40) earned average annual returns ranging from 21-25 per cent on their

investments. Thus, a large majority of the KSFC assisted units were profit yielding ventures.

Further, 12.50 per cent (35) of the entrepreneurs were running their units on no profit

no loss basis and 5 units are running under loss. Four entrepreneurs who have borrowed loan

to buy a Maruti Omini are not marketing the service (using for personal purpose only) and 5

entrepreneurs refused to give the details.

3. Profit Re-invested in Business

The entrepreneurs were asked to/indicate the average amount of profit which they re-

invested in business each year. Around 51.94 per cent of the total entrepreneurs who are

earning profits (120 Out of 231) ploughed back the profits earned to their businesses. Among

them, 55 per cent of the total entrepreneurs (66) re-invested less than 20 per cent of the total

profits earned into their businesses, 10 per cent of the entrepreneurs (12) re-lllvested 21-30

per cent of the profits, whereas 35 per cent of the entrepreneurs (42) ploughed back more

than 30 per cent of the profits earned. Table 5.16 indicates the quantum of profits re-invested

in business by the entrepreneurs under this study.

Table 5.16

Profits reinvested in business by entrepreneurs

Percentage of profits reinvested in business

( average, annual)

No. of entrepreneurs Percentage

Less than 20 per cent 66 55.00

21-33 per cent 12 10.00

Above 30 per cent 42 35.00

Sub total 120 100.00

Not necessary 26 -

To repay the loan 27 -

For personal use/ to lead the life 58 -

Total 231 -

Table 5.16 also indicates that 26 entrepreneurs reported that the nature of the

entrepreneurial activity carried out by them (such as Xerox centres, STD/ISD booths and a

few transport operators) do not require the ploughing back of the profits. 27 entrepreneurs

opined that profit earned by them is used to repay the loan borrowed from KSFC and the

remaining 58 entrepreneurs are using the profits earned by them to meet day- to-day

expenses.

4. Performance vis-a-vis Education

Education is said to be the important variable which influences the supply and

performance of entrepreneurship. While enough evidence is accumulated in the industrialized

economies to show the importance of education as a factor in economic development, such

evidence has not been coming forth in considerable depth in respect of developing economies

such as India. There has been enormous expansion of educational facilities in the post-

independent period. Studies are being undertaken by economists, sociologists and planners to

throw ' light on the relationships between the educational attainment of individuals and its

effect on their earnings and performance.

Education plays an important role in day-to-day activity of entrepreneur from

installation to managing the plant and marketing the products or service. Although personal

possession of technical knowledge by the entrepreneur is not essential to effective

entrepreneurship, in under-developed countries, it is likely to be useful to some extent,

because good technicians are difficult to find and hard to retain them with the small scale

units. The personal possession of knowledge attains greater importance in case of modern

industries. In the absence of education and technical know-how, the entrepreneurs have to

depend on expert consultants for various decisions which is not always possible and a costly

affair. Many studies conducted in India and abroad have indicated that entrepreneurial

development depends on education, work experience and technical know-how. In a study of

95 chemical industries in Baroda of Gujarat, A.S. Rao16 finds that the entrepreneurs with

technical background are performing better when value added or average profit rate is taken

as a criterion.

With the help of the ensuing' tables, an attempt is made to study the relationship

between education and type of ownership, sector, marketing area and profit. The relationship

between education and schemes of development is presented under the heading Performance

vis-a-vis Schemes of development.

Education and Type of Ownership

The education level sometimes influences the choice of form of organization. The

tendency to widen the scope of the ownership of the unit may be based on the level of

education. To test this, an attempt is made with the help of ensuing Table 5.17.

Table 5.17

Education and Type of Ownership

Education Form of Organisation Total

Sole

proprietorship

Partnership Joint stack

company

No. % No. % No. % No. %

Primary 40 80.00 9 18.00 1 2.00 50 100

Matriculation 65 76.47 19 22.35 1 1.18 85 100

Collegiate 82 77.36 22 20.75 2 1.89 106 100

Technical 22 56.41 16 41.02 1 2.57 39 100

Total 209 - 66 - 5 - 280 -

Source : Survey Data

An analysis of the education level of the entrepreneurs and ownership structure of the

units included in the study reveals the following features:

1. Large majority of the entrepreneurs who have primary, matriculation and collegiate

education (80.00 per cent, 76.47 per cent and 77.36 per cent respectively) preferred the sole

proprietary type of ownership and those who have technical education (43.59 per cent)

showed a preference for partnership and company form of organisation.

2. Normally, the less educated entrepreneurs should have relied more on the partnership and

company form to make-up their own deficiencies in general education and technical

knowledge. But there appears to be a very prominent tendency among the less educated to

restrict their ownership in one's own family on the implicit assumption that it assures smooth

running and continuity.

3. The level of formal education of the entrepreneurs and their preference for a particular type

of ownership reveals some relationship. The tendency to widen the scope of ownership of the

unit increases with the level of education. But it is more among technically qualified

entrepreneurs. Almost equal percentage of entrepreneurs with collegiate education (77.36 per

cent) and matriculation (76.47 per cent) have preferred sole proprietorship type and this is

more in case of entrepreneurs with primary education (80 per cent).

Education and Sector

The education background influences the area of entrepreneurial activity unless the

entrepreneur had any background of family. In this context an effort is made to study the

relationship between education and area of entrepreneurial activity.

Table 5.18

Education and Sector Relationship

Sector SSI Transport Others Total

Education No. % No. % No. % No. %

Primary 37 74.00 8 16.00 5 10.00 50 100.00

Matriculation 57 67.05 22 25.89 6 7.06 85 100.00

Collegiate 72 67.93 23 21.69 11 10.38 106 100.00

Technical 34 87.17 2 5.13 3 7.70 39 100.00

Total 200 - 55 - 25 - 280 -

Source: Survey Data.

Table 5.18 reveals that 87.17 per cent of the entrepreneurs with technical education

background are concentrated in the SSI sector and rest in transport (5.13 per cent) and other

activities (7.70 per cent). The concentration of the entrepreneurs with collegiate education in

the SSI sector is 67.93 per cent, that of matriculation level is 67.05 per cent and primary

education is 74 per cent. Of the 55 entrepreneurs in the transport sector, large majority have

primary (14.54 per cent), matriculation (40.00 per cent) and collegiate education (41.8 per

cent). The same position is noticeable in the area of other sector. It is important to note that

managing an industrial unit, whether big or small, requires technical knowledge than

transport and other sectors. Thus, technical graduates had chosen right area of activity, which

is suitable to their education.

Education and Marketing Area

Some amount of education is helping the entrepreneurs in acquiring the skill of

management, including the marketing of goods or services. With this end in view an attempt

is made to study the relationship between the education and area of marketing with the

ensuing Table. 5.19

Table. 5.19

Education and Marketing Area

Marketing

Area

Local Statewide National Not Marketing

the Service

Total

Education No. % No. % No. % No. % No. %

Primary 36 72.00 7 14.00 6 12.00 2.00 50 100.00

Matriculation 49 57.65 23 27.05 13 15.30 85 100.00

Collegiate 59 55.66 36 33.96 9 8.49 2 1.89 106 100.00

Technical 20 51.28 11 28.20 7 17.95 1 2.57 39 100.00

Total 164 - 77 - 35 - 4 - 280 -

Source: Survey Data.

An examination of Table 5.19 reveals that the entrepreneurs with lesser education are

concentrated more in the local market. The share of entrepreneurs with primary education in

the local market is 72 per cent, that of matriculation level is 57.65 per cent, collegiate level is

55.66 per cent and 51.28 of the entrepreneurs with technical education background are

concentrated in the local market. The percentage share of the technically qualified

entrepreneurs in the state and inter-state market is 46.15, that of entrepreneurs with collegiate

education is 42.45, matriculation level educated's share is 42.35 and share of entrepreneurs

with primary education is only 26 per cent. It is important to note that the technically

qualified entrepreneurs are in a better position in the area of national market also (17.95 per

cent).

Thus it supports the belief that the education plays a very important role in the area of

marketing of goods or services by the entrepreneurs.

Education and Profit

Every entrepreneur aims at making the profit. The profit is the result of one's effort,

skill and technique of encashing the opportunities available in the market. The formal

education has always been considered an important asset of an individual in realising his

dreams. There are for and against opinions to the slogan "Good marketers are born but not

made". In this background an attempt is made to see how far the educational background of

the entrepreneurs influences the profitability.

This can be narrated with the help of the following Table 5.20.

Table 5.20

Education and Profit

Range of Profit (in

percentage)

Education Background Total

Primary Matriculation Collegiate Technical

6 - 10 16 35 46 12 109

11 - 15 6 16 19 7 48

16 - 20 6 8 13 7 34

21 - 25 9 10 17 4 40

Total 37 69 95 30 231

Source: Survey Data.

It can be seen from Table 5.20 that 231 entrepreneurs constituting 82.14 per cent of

the total are running their entrepreneurial activities with profit. The relationship between the

profit earned by the entrepreneurs and the educational background of the entrepreneurs is

studied with the help of co-efficient of correlation technique. The formula used to calculate

the coefficient of correlation is:

where,

r = Co-efficient of correlation

X = Deviation from the assumed mean of the first set of variables

Y = Deviation from the assumed mean of the second set of variables

∑ = Sign of summation

N = Number of items in each set of variables.

In calculating the coefficient of correlation, X is taken as mid-point in the percentage

of profit and Y is taken as number of entrepreneurs with primary, matriculation, collegiate

level and technical education holders in Tables 5.20.1, 5.20.2, 5.20.3, 5.20.4 respectively.

1. Primary Education and Coefficient of Correlation

Tables 5.20.1

Primary Education and Co-efficient of Correlation

Percentage of Profit

XMid-point

YPrimary

X-20 Y-8 x' y' xy

6-10 8 16 -12 +8 144 64 -96

11-15 13 6 -7 -2 49 4 14

16-20 18 6 -2 -2 4 4 4

21-25 23 9 +3 +1 9 1 3

∑y=37 -21 -4 206 73 -96

+3 +21

+18 -4 -75

2. Education up to Matriculation and Coefficient of Correlation

Table 5.20.2

Education up to Matriculation and Coefficient of Correlation

Percentage of Profit

XMid-point

YMatriculation

X-20 Y-8 x' y' xy

6-10 8 35 -12 + 15 144 225 -180

11-15 13 16 -7 -4 49 16 +28

16-20 18 8 -2 -12 4 144 +24

21-25 23 10 +3 -10 9 100 -30

∑y-69 -21 -26 206 485 -210

+3 +15 +52

-18 -11 -158

3. Collegiate Level Education and Coefficient of Correlation

Table 5.20.3

Collegiate Level Education and Coefficient of Correlation

Percentage of Profit

XMid-point

YCollegiate

X-20 Y-8 x' y' xy

6-10 8 46 -12 +21 144 441 -252

11-15 13 19 -7 -6 49 36 42

16-20 18 13 -2 -12 4 144 24

21-25 23 17 +3 -8 9 64 -24

∑y=95 -21 +21 206 685 +66

+3 26 -276

-18 -11 -210

4. Technical Education and Coefficient of Correlation

Table 5.20.4

Technical Education and Coefficient of Correlation

Percentage of Profit

XMid-point

YTechnical

X-20 Y-8 x' y' xy

6-10 8 12 -12 +2 144 4 -24

11-15 13 7 -7 -3 49 9 +21

16-20 18 7 -2 10 4 9 +6

21-25 23 4 +3 -13 9 36 -18

∑y=30 -21 +2 206 58 -42

+3 -12 -27

-18 -10 -15

The co-efficient of correlation calculated as above indicates that there is a high degree

of negative correlation or relationship between the profit rate of the entrepreneurs and

technical education (r is -0.9342), education up to matriculation or SSLC (r is -0.8703) and

collegiate level education (r is -0.7982). However, the correlation between the profit rate and

primary education is moderate (r is -0.5747). It can also be noticed from the above

calculations that, more number of entrepreneurs with technical education, education up to

matriculation and collegiate level education are concentrated in the lower ranges of profit and

vice versa. That means the rate of increase or decrease is not uniform. But it is moderate in

case of entrepreneurs with primary education.

To conclude, the performance of entrepreneurs in profit rate and the level of education

displayed negative relationship in all the cases but it is moderately negative in case of

primary education. Thus, it cannot be endorsed that higher education is influencing the

profitability of the entrepreneurs in the study area.

5. Performance vis-a-vis Family Background

The family connection and background is helpful in building the occupational career

of one's. It helps the entrepreneur in eliminating or at least minimizing the hurdles in the

promotion of the unit, expansion of the unit, making the investment or raising the finance and

marketing the products or services. Number of studies have indicated that the entrepreneurs

from trade or industrial background continue to dominate the entrepreneurial field, A.S. Rao

found that the business background of the entrepreneurs is found to have positive impact

though not significant on the establishment and running of an enterprise. Manohar U.

Deshpande found that people with little industrial or commercial background immersed into

entrepreneurship when suitable conditions were created, In an evaluation of 316 joint stock

companies, R.A. Sharma found that business experience in the same or related lines has

induced the new and small entrepreneurial class, Sadhak found that entrepreneurs who were

formerly traders had better access to financial resources and were less dependent on industrial

finance than technocrat/professional entrepreneurs.

But several researchers have found that entrepreneurs are increasingly emerged from

diverse social groups. Mishra and Bisht found that the entrepreneurs from service background

have made sizeable inroads into the entrepreneurial field.

Keeping in view the above, an attempt is made to study the relationship between the

family background and type of ownership, marketing area, capital investment, sales turnover,

return on investment and profit re-invested into the business. The influence of family

background on the schemes of development is presented under the heading Performance vis-

a-vis Schemes of Development.

Family Background and Type of Ownership

The decision regarding the particular form of ownership for the business plays a vital

role. This decision involves a careful investigation and analysis and demands a constant vigil

on the financial side of the attempt. It is influenced by the background of the entrepreneur

also. An analysis of the same is made with the help of the ensuing Table 5.21.

Table 5.21

Family background and type of ownership

Background of the

entrepreneur

Type of Ownership

TotalSole

Proprietorship

Partnership

Farm

Joint Stock

Company

No. % No. % No. % No. %

Trade or Industrial

background

101 72.14

(48.33)

36 25.71

(54.54)

3 2.15

(60.00)

140 100.00

Agricultural

background

52 8l.25

(24.88)

11 17.19

(16.67)

1.56

(20.00)

64 100.00

Service/Employment

background

56 73.53

(26.79)

19 25.00

(28.79)

1.47

(20.00)

76 100.00

Total 209 (100.00) 66 (100.00) 5 (100.00) 280 100.00

Source: Survey Data.

Note: Figures in parentheses denote, percentage to vertical total.

An interplay of the background and type of ownership as given in Table 5.21 exhibits

that 52 out of 64 entrepreneurs, constituting 81.25 per cent, from agricultural background

have preferred the sole proprietorship form of organization. This percentage is 72.14 (101 out

of 140) in case of entrepreneurs from trade or industrial background and 73.68 per cent in

case of entrepreneurs from service or employment background.

It is noticed that 36 out of 66 partnership firms (constituting 54.54 per cent) and 19

out of 66 partnership firms (constituting 28.78 per cent) are controlled/owned by

entrepreneurs with trade or industrial background and service or employment background

respectively. This number is only 11 (16.67 per cent) in case of entrepreneurs from

agricultural background. Of the 5 joint stock companies surveyed, 3 (60 per cent) units are

controlled by entrepreneurs from trade or industrial background and 1 each unit is (each 20

per cent) owned by entrepreneurs with agricultural background and service or employment

background.

The survey revealed that the entrepreneurial activities (which required) with huge

investment are formed under partnership and company form of organization. It has noted that

all the 5 joint stock companies are in the investment range of above Rs. 60 lakhs at the latest

year under study. During the same time 39 out of 63 partnership firms'(61.90 per cent) and 33

out of 170 sole proprietorship concerns (19.41 per cent) were concentrated in the investment

range of above Rs. 10 lakhs. Similarly, all the 5 joint stock companies (100 per cent), 31 out

of 61 partnership firms (50.82 per cent) and 32 out of 157 sole proprietorship concerns (20.38

per cent) who provided sales turnover figures were in the sales turnover ranges of Rs. 10-25

lakhs and above. These figures show the concentration of entrepreneurs with broad-based

ownership in higher ranges of investment and sales turnover and vice versa. Therefore, it can

be concluded that the units with higher investment are mostly owned by the entrepreneurs

from trade or industrial background followed by service or employment background and

agricultural background.

Family Background and Marketing Area

It is sometimes believed that the background of the entrepreneur also influences the

marketing area, because the family background proceeds trade connections. To test this belief

an attempt is made to study the relationship between the entrepreneurs' family background

and marketing area. The Table 5.22 enumerates this.

Table. 5.22

Family Background and Marketing Area

Background of Marketing A rea

Background of the

Entrepreneur

Marketing Area

TotalLocal Market

Statewide Market

National Market

Not Marketing the Service

No. % Ni % No. % No. % No. %Trade or

Industrial

background

69 49.29 48 34.29 20 14.28 3 2.14 140 100.00

Agricultural

background 37 57.81 20 31.25 7 10.94 - - 64 100.00

Service or

Employment

background

58 76.32 9 11.84 8 10.53 1 1.31 76 100.00

Total 164 (58.57) 77 (27.50) 35 (12.50) 4 (1.43) 280 (100.00)

Source: Survey Data.

Note: Figures in parentheses denote percentage to total, i.e., 280.

Table 5.22 reveals that 49.29 per cent of the entrepreneurs from trade or industrial

background are marketing their products or services locally, 34.29 per cent entrepreneurs

have entered state market and 14.28 entrepreneurs are marketing their products or services at

the national level. The local, statewide and national market share of the entrepreneurs from

agricultural background is 57.81 per cent, 31.25 per cent and 10.94 per cent respectively.

This share is 76.32 per cent, 11.84 per cent and 10.53 per cent respectively in case of

entrepreneurs from service or employment background. 4 entrepreneurs (of these 3 have trade

or industrial background and one entrepreneur is from service or employment background)

are not marketing the services.

The above figures' reveal that less number of entrepreneurs from trade or industrial

background are concentrated in local market (only 49.29 per cent) and they are ahead of the

entrepreneurs from other background in statewide market (34.29 per cent) and national

market (14.28 per cent). A large majority of entrepreneurs from service or employment

background are limiting their market to local area. The entrepreneurs from agricultural

background are enjoying a recognizable share in the statewide market. Thus, it can be

concluded that the entrepreneurs from trade or industrial background have a broad based

market than the other entrepreneurs and hence there is some impact of family background on

the marketing area of entrepreneurs.

Family Background and Capital Employed

The study of the family background and capital employed is presented and made with

the help of the ensuing Table 5.23.

The analysis of Table 5.23 is made by assigning ranks and the ranking is made on the

basis of percentage share of entrepreneurs in each range of investment. Such an analysis

reveals the following:

1. The entrepreneurs from agricultural background stood first and second and entrepreneurs

from service or employment background stood second and first in the initial and present

capital employed range of less than Rs. 50,000 respectively. The entrepreneurs from trade

or industrial background stood third both initially and at the latest year under study.

2. In the capital employed range of Rs. 50,000 to Rs. 1 lakh, the entrepreneurs from service

or employment background stood first both initially and at present and entrepreneurs from

agricultural background stood third initially and second at the latest year under study. The

entrepreneurs from trade or industrial background secured second place initially and third

place at the latest year under study.

3. In the capital employed range of Rs. 1 lakh to Rs. 3 lakhs the entrepreneurs from trade or

industrial background stood first initially and second at the latest year under study. This

position is interchanged in case of entrepreneurs from service or employment

background. The entrepreneurs from agricultural background stood last both initially and

at the latest year under study.

4. In the investment range of Rs. 3 lakhs to RS.I0 lakhs the entrepreneurs from trade or

industrial background stood first initially and second at the latest year under study. This

position is interchanged in case of entrepreneurs from agricultural background. The

entrepreneurs from service or employment background stood third both initially and at the

latest year under study.

5. The entrepreneurs from trade or industrial background stood first both initially and at

present in the investment range of Rs. 10 lakhs to Rs. 25 lakhs. The entrepreneurs from

service or employment background stood second initially and third at the latest year under

study and this position is interchanged in case of entrepreneurs from agricultural

background.

Table 5.23

Family Background and capital employed

5. In the initial investment range of Rs. 25 lakhs to Rs. 60 lakhs the entrepreneurs

from trade or industrial background, service or employment background and

agricultural background stood first, second and third respectively. At the latest

year under study the entrepreneurs from trade or industrial background and

agricultural background stood first and entrepreneurs from service or employment

background stood second. No entrepreneur has invested above Rs. 60 lakhs

initially due to the maximum investment limit prescribed by the government for

small scale industries. But with the expansion of the size of the business, the

industrial units with above Rs. 60 lakhs can be seen in the study area. As such the

entrepreneurs from trade or industrial background stood first, agricultural

background stood second and service or employment background stood third in

the investment range of above Rs. 60 lakhs.

The above analysis indicated that the entrepreneurs from trade or industrial

background stood first both initially and at the latest year under study in the ranges of higher

investment and stood third or second in the ranges of lower investment. The entrepreneurs

from other two backgrounds stood either first or second in the ranges of lower investment and

second or third in the ranges of higher investment. Thus, it can be concluded that the

entrepreneurs from trade or industrial background continued to dominate the industrial units

with heavy investment.

Family Background and Sales Turnover

The study of family background and sales turnover relationship is made by assigning

ranks on the basis of percentage share of entrepreneurs in each turnover range and presented

as below.

The analysis of Table 5.24 reveals that the entrepreneurs from trade or industrial

background stood either first or second in the higher sales turnover range and stood third in

the lower sales turnover range. There was no entrepreneur in the sales turnover range of less

than Rs. 25,000 at the latest year under study. It is noticed that in the sales turnover ranges

above Rs. 1 lakh the entrepreneurs from trade or industrial background stood first seven times

and second for five times. But in these ranges of turnover the entrepreneurs from agricultural

background stood first only thrice and entrepreneurs from service or employment background

twice. The entrepreneurs from these two backgrounds stood first or second in the lower sales

turnover ranges. There were no entrepreneurs initially in the sales turnover range of above

Rs. 1 crore from these two backgrounds.

Thus, it can be concluded that the entrepreneurs from trade or industrial background

are exhibiting better qualities of entrepreneurship by showing the sales performance.

Table 5.24

Family Background and sales turnover

Family Background and Return on Investment

Return on investment is one of the criteria to assess the development of

entrepreneurship. There may be a relationship between family background and profit earned

by the entrepreneurs. Several studies revealed that the entrepreneurs from trade or industrial

background are well settled or are ahead of others in the field of entrepreneurship.

To test the above, the relationship between profit and the family background study is

made with the ensuing Table 5.25.

Table 5.25

Family Background and Return on Investment

Family background No. of entrepreneurs

earning the profit

Total no of

entrepreneurs

% age

Trade or Industrial background 122 140 87.14

Agricultural background 52 64 81.25

Service or Employment

background

57 76 75.00

Total 231 280 (82.50)

Source: Survey Data.

Note: Figure in parentheses denotes percentage to total, i.e., 280,

It can be seen from Table 5.25 that 82.50 per cent of the total entrepreneurs (231 out

of 280) are running their units under profit. Among them, 87.14 per cent of the entrepreneurs

from trade or industrial background, 81.25 per cent of the entrepreneurs from agricultural

background and 75 per cent of the entrepreneurs from service or employment background are

running their units with profitability. These figures reveal that percentage share of the

entrepreneurs from trade or industrial background who are earning the profit is more than the

percentage calculated to total, i.e., 82.50 per cent. The profit earned by the entrepreneurs

from other two backgrounds is below the percentage calculated to total.

Family Background and Profit Re-invested

It is attempted here to examine the extent of profit re-investment on the basis of

family background of the entrepreneurs. Table 5.26 shows the background-wise distribution

of entrepreneurs who are re-investing the profit.

Table 5.26 reveals that in total 51.94 percentage of the entrepreneurs who are earning

the profit are re-investing the same into the business. The background-wise study indicates

that the entrepreneurs from service or employment background ranked first with 59.64 per

cent followed by the entrepreneurs from agricultural background with 51.92 per cent and

trade or industrial background with 48.36 per cent. These figures show the less dependency

of the entrepreneurs from trade or industrial background on the profit earned to meet their

working capital requirements and for the business expansion plans.

Table 5.26

Family background and profit reinvested

Family

Background

Percentage of profit reinvested and number of entrepreneurs

No. of entrepreneurs earning the

profit

Percentage 4 = 2/3 x

1000-20% 21-30% Above 30%

Total

Trade or

Industrial

background

34 4 21 59 122 48.36

Agricultural

background

14 2 11 27 52 51.92

Service

Employment

background

18 6 10 34 57 59.64

Total 66 12 42 120 231 (51.94)

Source: Survey Data.

Note: Figure in parentheses denotes percentage to total.

6. Performance vis-a-vis Category

The community/category background of the entrepreneurs is exercising its own

influence on the ownership pattern of the entrepreneurs, entry into the entrepreneurial field,

area of marketing, capital investment and sales turnover. This is because, in our country, the

community background is preceded by culture, education/literacy rate, financial base,

mobility nature, contacts at the political and official level and such other factors required for

the successful entrepreneurship. The studies conducted by Oamen, Shama and Singh and S.G.

Bhanushali revealed that the caste/community background had its own impact on the

entrepreneurs. But Sadhak found that the entrepreneurs have emerged from different socio-

economic backgrounds. Keeping in view the above, an attempt is made in the ensuing pages

to study the relationship between category of the entrepreneur and type of ownership, year of

establishment, marketing area, capital investment and sales turnover. The relationship

between category and schemes of development is presented under the heading Performance

vis-a-vis Schemes of Development,

Category and Type of Ownership

An attempt to analyse the type of ownership of the entrepreneur across the category of

entrepreneurs is being made as follows.

Table 5.27

Category and Type a/Ownership

Category Types of Ownership TotalSole Proprietorship

Partnership Firm Joint Stock Company

No. % No. % No. % No. %SC/ST 21 95.45 1 4.55 - - 22 100.00 Women 34 91.89 3 8.11 - - 37 100.00 Minority 32 76.19 8 19.04 2 4.77 42 100.00 BCM 39 82.98 8 17.02 - - 47 100.00 General 83 62.88 46 34.85 3 2.27 132 100.00 Total 209 66 5 280 Source: Survey Data.

It may be observed from Table 5.27 that 74.64 per cent of the total units (209 units)

were sale trading concerns, 23.57 per cent of the total units (66 units) were partnership firms

and 1.79 per cent of the total units (5 units) were limited companies.

It is generally understood that there is a relationship between the category and form of

organization, A study of category and form of organization relationship indicates that 21

(95.45 per cent) out of 22 SC/ST entrepreneurs, 34 (91.89 per cent) out of 37 women

entrepreneurs, 32 (76.19 per cent) out of 42 minority entrepreneurs, 39 (82,98 per cent ) out

of 47 -BCM category entrepreneurs and 83 (62.88 per cent) out of 132 general category

entrepreneurs have preferred sole proprietorship form of organization. It is important to note

that least percentage of general category entrepreneurs ( 62.88 per cent) have preferred sole

proprietorship form of organization. The distribution of other category entrepreneurs in the

partnership form type of ownership is much below the general category entrepreneurs. Only

the general and minority category entrepreneurs ( 3 and 2 entrepreneurs respectively) are

found in company type of ownership. Even in the partnership firm, the distribution of SC/ ST

entrepreneurs (only one out of 22) and women entrepreneurs ( 3 out of 37) is negligible. But

significant number of minority and BCM category entrepreneurs ( 8 entrepreneurs each) have

formed their units under partnership form of organization.

Thus it can be noticed that the entrepreneurs belonging to general category are

enjoying the benefit of pooled knowledge and more capital than the other category

entrepreneurs. To conclude, the category backing of the entrepreneurs ahs a little impact on

the choice of form of organization by the entrepreneur sin the study area.

Category and year of establishment of units

It would be interesting to examine the time at which the respondents made an entry

into entrepreneurship across the category. Table 5.28 shows the same.

It can be seen from Table 5 28 that 70 per cent of the total entrepreneurs started the

units only after 190 , 20 per cent entrepreneurs in between 1980-90 and finger countable

numbered units were started before 1980. An analysis cross the category of the entrepreneurs

reveals that 19 ( 86.37 per cent) out of 22 SC/ST entrepreneurs, 34 ( 91.90 per cent ) out of

37 women entrepreneurs, 32 ( 76.20 per cent ) out of 42 minority entrepreneurs and 34

( 72.34 per cent ) out of 47 BCM category entrepreneurs started their units after 1990. Bt 77

entrepreneurs ( constituting 58.33 per cent ) out of 132 general categoryentrepreneurs have

started their units after 1990. In 1980s, 20 per cent (56 units) of the total units were

established. The category-wise percentage share comparison in this decade reveals that less

than 20 per cent of the first four category entrepreneurs in the Table 5.28 have started their

units. But percentage share of general category entrepreneurs in this decade is 28.03 (37

units). Similar picture can be seen in the decade 1970 also. Another important feature is that

least percentage of less than the percentage calculated to total) general category entrepreneurs

have started their units after 1990.

Table No. 5.28

Category and year of establishment of units

No SC/ST entrepreneur and finger countable numbered women and minority category

entrepreneurs have started their units before 1970. Therefore, it can be noticed that general

category entrepreneurs are the early adopters/ chases of the industrial field and economically

and socially weaker sections of the society are the late entrants. To conclude, the category of

the entrepreneurs has its own influence on the time of entry of the entrepreneurs to the

industrial field in the study area.

Category and Marketing Area

An attempt is made here (Table 5.29) to study the category and marketing area

relationship.

Table 5.29 indicates that 164 entrepreneurs constituting 58.57 per cent are marketing

their products or services locally, 77 entrepreneurs constituting 27.50 per cent are marketing

at the state level and 35 entrepreneurs constituting 12.50 per cent are marketing at the

national level. 4 entrepreneurs (3 of them are belonging to BCM category and 1 minority

entrepreneur) are not marketing their services. The analysis of the category-wise performance

revealed that 63.64 per cent of the entrepreneurs (14) belonging to SC/ST community are

marketing their products or services locally, 18.18 per cent (each) of entrepreneurs (4 each)

are marketing their products ,or services at the state level and national level. The local,

statewide and national market share of women entrepreneurs is 81.08 per cent (30

entrepreneurs), 10.82 per cent (4 entrepreneurs) and 8.10 per cent (3 entrepreneurs)

respectively. This share is 47.63 per cent (20 entrepreneurs), 38.09 per cent (16

entrepreneurs) and 11.90 per cent (5 entrepreneurs) respectively in case of minority

entrepreneurs; 63.84 per cent (30 entrepreneurs), 23.40 per cent (11 entrepreneurs) and 6.38

per cent (3 entrepreneurs) respectively in case of entrepreneurs belonging to BCM category

and 53.03 per cent (70 entrepreneurs), 31.82 per cent (42 entrepreneurs) and 15.15 per cent

(20 entrepreneurs) respectively in case of general category entrepreneurs. It is important to

note that the percentage share of minority (47.63 per cent) and general category entrepreneurs

(53.03 per cent) in the local market is slightly below the percentage (total share in the local

market) calculated to total, i.e., 58.57 per cent. Similar position can be seen in statewide

market also. The shortfall in these two category of entrepreneurs is shared by SC/ST, women

and BCM category entrepreneurs.

Table No. 5.29

Cate and maketing area

The study also revealed that the area of operation of large majority of women

entrepreneurs is still limited to a particular town or locality. Though the entrepreneurs

belonging to SC/ST category stood first with 18.18 per cent in the national market, 20

entrepreneurs constituting 57.14 per cent, belonging to general category and 5 entrepreneurs

constituting 14.28 per cent, belonging to minority community are marketing their products or

services at the national level. Therefore, it can be noticed that the entrepreneurs belonging to

minority and general category are well versed with the techniques of marketing, familiar with

the channels of marketing and they enjoy lion's share in the state and national market (49.99

per cent in case of minority entrepreneurs and 46.97 per cent in case of general category

entrepreneurs), especially due to fluency in other languages, family background or trade

connections and educational background. It is important to note that, of the 132 general

category entrepreneurs, 84 are degree, post graduation and technical education holders. To

conclude, the category of the entrepreneurs has its own influence on the marketing area of the

entrepreneurs in the study area.

Category and Capital Employed

The study of the category and capital employed is made to see the capital contribution

ability of the entrepreneurs across the category. The ensuing Table 5.30 shows the

distribution of entrepreneurs in the study area.

The analysis of Table 5.30 reveals that the share of the SC/ST, women, minority,

BCM and general category entrepreneurs in the initial investment ranges of above Rs.3 lakhs

is 36.37 per cent, 24.33 per cent, 50 per cent, 44.68 per cent and 49.24 per cent respectively.

Their respective share at the latest year under study is 42.52 per cent, 50.01 per cent 64.70

per cent, 70.45 per cent and 79.64 per cent. These figures reveal that more number of general,

BCM and minority entrepreneurs are engaged in entrepreneurial activities with lesser

investment. It is noticed that no SC/ST entrepreneur has made investment above Rs. 25 lakhs

both initially and at the latest year under study and no women entrepreneur has made an

initial investment of above Rs. 25 lakhs. It is also noticed that no SC/ST, women and BCM

entrepreneurs were running the industrial units with investment above Rs. 60 lakhs both

initially and at the latest year under study. Out of the 10 units with above Rs. 60 lakhs

investment at the latest year under study, 8 units are owned by general category entrepreneurs

and 2 units by the entrepreneurs belonging to minority community.

To conclude, the category of entrepreneurs has its own impact on the capital

contribution ability of the entrepreneurs in the study area. The entrepreneurs from general

category have exhibited better qualities of entrepreneurship by owning industrial units with

heavy investment.

Category and Sales Turnover

The study of the category and sales turnover relationship is made with the help of the

ensuing Table 5.31.

The analysis of Table 5.31 indicates that the share of SCI ST, women: minority, BCM

and general category entrepreneurs in the initial sales turnover range of Rs. 2 to 5 lakhs and

above is 31.82 per cent, 19.45 per cent, 47.50 per cent, 46.34 per cent and 48.30 per cent

respectively. Their respective share at the latest year under study are 57.14 per cent, 48.00 per

cent, 68.75 per cent, 71.79 per cent and 74.29 per cent. These figures reveal that there is a

significant growth in the sales performance of the entrepreneurs. However, the entrepreneurs

from general, BCM and minority category have exhibited better qualities of entrepreneurship

by enjoying more share in the sales turnover range of Rs. 2 to 5 lakhs and above than the

SC/ST and women entrepreneurs.

Table 5.30

Category and capital employed

Capital

employed in Rs.

SC/ST Women Minority BCM General Total

Initial Present Initial Present Initial Present Initial Present Initial Present Initial Present

No % No % No % No % No % No % No % No % No % No % No % No %

Less than 50,000

50,000 to 1 lakh

1 lakh to 3 lakh

3 to 10 lakhs

10 to 25 lakhs

25 to 60 lakhs

Above 60 lakhs

Total 1

Closed the unit

Total II

Source: Survey Data

Percentage is calculated to total II

The horizontal analysis of the table reveals that the general category entrepreneurs

share in the sales turnover range of Rs. 1 lakh to Rs. 2lakhs is 53.70 per cent initially and

58.62 per cent at the latest year under study. Their initial and present share in the sales

turnover range of Rs. 2 lakhs to Rs. 5 lakhs is 50 per cent and 39.21 per cent respectively,

that of Rs. 5 lakhs to Rs. 10 lakhs is 46.15 per cent and 48.48 per cent respectively and Rs. 10

lakhs to 25 lakhs is 68.42 per cent and 51.72 per cent respectively. In the sales turnover range

of Rs. 25 lakhs to Rs. 1 crore, their share is 57.14 per cent initially and 63.63 per cent at the

latest year under study. It is also noticed that out of the 17 entrepreneurs with above Rs. 1

crore sales turnover at the latest year under study, 13 entrepreneurs constituting (6.47 per cent

are from general category. These figures indicate that the performance of the general category

entrepreneurs is much better than the entrepreneurs belonging to other category. The SC/ST,

women and BCM category entrepreneurs are not found in the higher sales turnover range.

It can be concluded that the general category entrepreneurs are performing well in the

study area, thus category backing of the entrepreneurs has its own impact on the sales

performance of the entrepreneurs followed by the entrepreneurial quality.

Table 5.31

Category and Sales turnover

Capital

employed in Rs.

SC/ST Women Minority BCM General Total

Initial Present Initial Present Initial Present Initial Present Initial Present Initial Present

No % No % No % No % No % No % No % No % No % No % No % No %

Less than 25,000

25,000 to 50,000

50,000 to 1 lakh

1 lakh to 2 lakh

2 to 5 lakhs

5 to 10 lakhs

10 to 25 lakhs

25 lakh to 1crore

Above 1 crore

Total 1

Not sent on hire

Refused to give

Closed the unit

Total II

Source: Survey Data

7. Performance vis-a-vis Schemes of Development

After floating the unit the entrepreneur tries to root it firm and make a good earning.

On getting a unit footing, he naturally begins to broad over the possibilities and direction of

further ascendancy. He toys with alternative plans and after having weighed pros and cons on

his scale of value picks up the one that tops his scale. Therefore, it is interesting to study in

juxtaposition of his past activity and plans for the future. It is one of the qualities of a good

entrepreneur that after establishing the unit he frees himself from day-to-day administration

and sets his eyes on new horizon, conceives new ideas or make addition to the existing

product or service, improves the quality of the existing product or service and again embarks

upon new path. How far this kind of entrepreneurial ability is being exhibited by the

entrepreneurs of Shimoga district?

With the ensuing tables an analysis of the changes introduced by the entrepreneurs

and the relation with family background, education and category is made. The relationship

between the above and schemes of development undertaken by the entrepreneurs is measured

by awarding merit point for each aspect of each criterion. The merit points are given on the

basis of percentage of entrepreneurs who have undertaken the change in each family

background, education background and category group. In each type of change, merit point is

given to the entrepreneurs' group which stood first in terms of percentage. Ten merit points of

each factor in a criterion and merit points is of all criteria are added and that group of

entrepreneurs securing maximum merit points is awarded first rank. No merit point is given

to the area in which no changes are made by the entrepreneurs. In such a case, the merit point

is reduced so as to suit the number of group of entrepreneurs who have effected the change.

To enhance the weightage of the above method or to support the conclusion drawn by

the above method, Ratio Analysis Technique (ratio of total changes to the total number of

entrepreneurs in each group) is used. The influence of family background, category and

education on the number of changes effected by the entrepreneurs is studied/analysed by

awarding one merit point to one change, two merit points for two changes and so on.

Table 5.32

Family background and scheme of development

Changes / Schemes of

Developments

Family Background

Trade or industrial background Agricultural background Service or employment

background

No. Percentage

to total i.e

140

Merit

points

No. Percentage

to total i.e

140

Merit

points

No. Percentage

to total i.e

140

Merit

points

Addition of a new products

Improvement of the

existing products

Expansion of the unit

Installation of modern

machinery

Establishment of a new

unit

Total

Ratio of total changes to

total Number of

entrepreneurs effected

change

Source survey data

Family Background and Schemes of Development

The family background and schemes of development influence the entrepreneurs'

choice of various avenues. In Table 5.32 an attempt is made to study the relationship between

the family background and various schemes of development undertaken by the entrepreneurs.

An analysis of Table 5.32 reveals that the entrepreneurs from service/employment

background tops the merit order with 13 points. The downward sequence, then is,

sons/wives/daughters of entrepreneurs from trade or industrial background (12 points) and

agricultural background (5 points). To enhance the weightage of the above findings, the ratio

of total changes to total number of entrepreneurs effected the change is calculated. It reveals

that entrepreneurs from service or employment background stand first with 2.155:1 followed

by entrepreneurs from trade or industrial background (2.07: 1) and agricultural background

(1.75: 1). It means that entrepreneurs with service or employment background exhibited the

best qualities of entrepreneurship in managing their entrepreneurial activities or by

undertaking various schemes of development followed by entrepreneurs from trade or

industrial background and agricultural background.

Family Background and Number of Changes, No Changes, etc.

The performance of the entrepreneurs and the development of entrepreneurship can be

measured with the number of changes effected by the entrepreneurs, the changes not made

and by considering the closure of units also. Table 5.33 and calculations there upon exhibit

the same in relation to their family background.

Table 5.33

Family background and number of changes

Number of changes Trade or industrial

background

Agricultural

background

Services or

employment

background

Total

No. Merit Points No. Merit Points No. Merit Points No. Merit Points

One

Two

Three

Four

Five

Total

Ratio of merit points to no. of

entrepreneurs effected the

change

Percentage of entrepreneurs

effected the change

Percentage of entrepreneurs

effected more that one type of

above change

Percentage of entrepreneurs not

made any changes

Percentage of entrepreneurs

closed the unit

Source: Survey Data

Table 5.33 reveals that entrepreneurs from trade or industrial background secured 195

points, that of agricultural background 68 points and service or employment background 128

points. The ratio of number of entrepreneurs effected the change to total merit points in each

case reveals that the entrepreneurs from service or employment background stand first with

1:2.20 followed by trade or industrial background with 1 :2.01 and agricultural background

with 1:1.70. A comparative study of ratio of total number of entrepreneurs (from all the three

backgrounds) effected the change to total merit points (i.e., 391/ 195 = 2.005 average ratio)

with the ratio of each background reveals that entrepreneurs from service or employment

background (1:2.20) and trade or industrial background (1:2.01) are showing better

performance than the average performance.

The entrepreneurs have effected one to all the five types of changes. The calculation

of percentage of entrepreneurs effected the change reveals that 69.64 per cent of the

entrepreneurs have made the changes. The background-wise performance study reveals that

entrepreneurs from service or employment background stand first (with 76.31 per cent

entrepreneurs have made the changes) followed by trade or industrial background (69.28 per

cent) and agricultural background (62.50 per cent). It is Important to note that the

performance of entrepreneurs from service or employment background is much above the

average performance. The performance of entrepreneurs from trade or industrial background

is very nearer to average performance.

The study of number of entrepreneurs effected more than one type of change (i.e., 2 to

5 types of changes) reveals that 67.92 per cent of the entrepreneurs from service or

employment background effected two to all the five types of changes followed by trade or

industrial background (54.63 per cent) and agricultural background (47.50 per cent).

Comparison between the average performance and background-wise performance reveals that

the performance of entrepreneurs from service or employment background is much above the

average performance (i.e., 56.92 per cent).

Some entrepreneurs have neither closed the unit nor made any changes. The study of

number of entrepreneurs not made any changes to total number of entrepreneurs (from each

background) reveals that least percentage of entrepreneurs from service or employment

background (11.84 per cent) have not made any changes followed by trade or industrial

background (14.28 per cent) and agricultural background (21.87 per cent).

Some entrepreneurs have closed their units or entrepreneurial activities at the end of

the period under study. The study reveals that least percentage of entrepreneurs from service

or employment background (11.84 per cent) have closed their units followed by agricultural

background (15.62 per cent) and trade or industrial background (16.42 per cent). In total, 15

per cent of the entrepreneurs have closed their units, but the performance of the entrepreneurs

from service or employment background is far better than the average.

To conclude, the entrepreneurs from service or employment background stood first in

all the fronts and exhibited better qualities of entrepreneurship. The performance of the

entrepreneurs from agricultural background is poor in all the criteria except the last criterion

used above (where they stand second).

Education and Schemes of Development

The formal education of the entrepreneur may influence his choice of activities or

schemes of development. In a study of the relationship between the level of education and

change in organisation and establishment of ,new firms by 125 engineering entrepreneurs in

Kolhapur city of Maharashtra state, S.G. Bhanushali found that technically trained

entrepreneurs scored the highest or stood first' followed by matriculates and collegiates. With

Table 5.34 and calculations, scanning of the same is made.

Scanning through Table 5.34, it could be noticed that entrepreneurs with technical

education ranked first with 19 points, chased by the group of entrepreneurs with collegiate

level education with 10 points. The entrepreneurs with primary level education ranked third

with 9 points followed closely by those having education up to matriculation with 8 points.

To support the conclusion drawn above, the ratio of total number of entrepreneurs effected

the change to total number of changes is calculated. It highlights that entrepreneurs with

technical education scored highest with 1:2.51 followed by collegiate level entrepreneurs

with 1:1.56, primary level education holders with 1:1.43 and matriculates with 1:1.31. The

change-wise study in relation to education background reveals that entrepreneurs with

collegiate level education excelled in addition of a new product (40.70 per cent),

improvement of the existing product (33.57 per cent), expansion of the unit (45.83 per cent)

and installation of modern machinery (35.78 per cent) and ranked second in establishment of

a new unit (29.17 per cent). The technically qualified entrepreneurs excelled in expansion of

the unit (45.83 per cent) and establishment of a new unit (41.66 per cent). They stood second

in addition of a new product (24.42 per cent) and third interest of the types of changes. The

matriculates stood second in improvement of the existing product or service (28.57 per cent),

expansion of the unit (8.34 per cent), installation of modern machinery (25.69 per cent) and

ranked third in rest of the developmental schemes. The entrepreneurs with primary level

eciucnion ranked fourth and did not pose as leaders amongst all categories of education of

entrepreneurs in any area of development. Thus, it can be concluded that entrepreneurs with

higher education (i.e., technically qualified and collegiates) have performed well by searching

for new endeavours and exhibited the best qualities of entrepreneurship.

Table 5.34

Education and schemes of development

Education and Number of Changes, No Changes, etc.

The influence of education on entrepreneurial ability can be gauged by looking into

number of changes made, stagnant nature, deletion of the produci or service by the

entrepreneurs. The ensuing Table 5.35 and calculations there upon reveal the same in relation

to their education level.

Table 5.35 reveals that entrepreneurs with primary education secured 59 merit points,

matriculates 93 points, coUegiates 142 points and technically qualified entrepreneurs secured

97 points. The ratio of number of entrepreneurs effected the change to total merit points in

each group reveals that, technically qualified entrepreneurs stand first with 1:2.85 followed

by collegiate level educated entrepreneurs with 1:2.00, primary level educated entrepreneurs

with 1: 1.78 and matriculates with 1: 1.63. The comparison between each group-wise ratio

and ratio calculated for the total (i.e., ratio of total number of entrepreneurs effected the

change to total merit points) reveals that performance of technically qualified entrepreneurs

is much above the ratio for the total. The ratio of collegiates is equal to the ratio calculated

performance of the entrepreneurs with primary level education and high school level

education/ matriculation is below than the ratio for the total.

The study of percentage of entrepreneurs effected the change each education group

reveals that 87.17 percentage of entrepreneurs who are technically qualified made the

different types of changes. The change made percentage of the matriculates, who stand

second is 67.05, collegiates is 66.98 and the primary level education holders is 66 per cent. A

comparison percentage-wise changes by each group (education level-wise) of the

entrepreneurs with percentage calculated for the total (i.e., 195 x 100/280 = 69.64 per cent)

entrepreneurs reveals that the performance of the technically qualified entrepreneurs is much

above the average performance. The performance of the other group of entrepreneurs is

slightly below the average percentage.

Some entrepreneurs have limited their changes to anyone, whereas some others have

made more than one type of change mentioned in Table 5.35. The study of number of

entrepreneurs effected more than one type of change (i.e., two to all the five types of

changes) reveals that 85.29 per cent of the entrepreneurs with technical education have made

2 to 5 types of changes followed by primary level educated entrepreneurs with 57.57 per cent,

collegiates with 54.92 per cent and matriculates with 42.10 per cent. A comparative study

between the group-wise performance and average performance (i.e., percentage calculated

to total) reveals that only the technically qualified entrepreneurs and entrepreneurs with

primary level education performed well, whereas the collegiates (they are near to average

percentage) and matriculates are lagging behind the average percentage.

Table 5.35

Education and Number of changes

Some entrepreneurs have neither closed the unit nor made any changes in their

venture. The study of the relationship between stagnant nature of the entrepreneurs and the

education background reveals that 15.35 per cent of the entrepreneurs in the study area has

exhibited the stagnant nature. The education level-wise scanning of the same shows that only

5.12 per cent of the entrepreneurs with technical education have exhibited the stagnant

nature. 16.03 per cent of collegiates, 17.64 per cent of matriculates and 18.00 per cent of

entrepreneurs with primary education have exhibited this nature, which is above the

percentage to the total (i.e., 15.35 per cent).

Some entrepreneurs have deleted their product or service or closed their units due to

various reasons. The study of education level-wise closure of units reveals that only 3 out of

39 entrepreneurs (constituting 7.69 per cent) who are technically qualified have closed their

units at the end of the period under study. This percentage is 15.29 for matriculates (13 out of

85 entrepreneurs), 16 per cent for primary level education holders (8 out of 50 entrepreneurs)

and 16.98 per cent for collegiates (18 out of 106 entrepreneurs). In total, 42 entrepreneurs out

of 280 entrepreneurs, constituting 15 per cent, have closed their units. The comparisbn

between the percentage to total and education level-wise percentage reveals that least

percentage of entrepreneurs with technical education have closed their units. The positive

deficiency of this group is being shared by the entrepreneurs with other education

background.

To conclude, the entrepreneurs with technical education ranked first in all the criteria

used to measure/assess the influence of education on schemes of development, stagnant

nature, etc. The collegiates, though stand last as far as the closure of the units is concerned,

they performed well. To summarise the results of the above criteria, highly educated group of

entrepreneurs (i.e., technically qualified and collegiates) have performed better than the less

educated group of entrepreneurs (i.e., matriculates and primary level education holders).

Thus, formal education is an influencing factor on the developmental changes of

entrepreneurs.

Category and Schemes of Development

The religion and caste background is having its own influence on the entrepreneur's

entry into entrepreneurial field, the expansion of business and undertaking various

developmental schemes. The study conducted by S.G. Bhanushali27 found that Brahmins

were ahead of all other castes in the plans for the establishment of new firms and led in

undertaking new un¬correlated activities also. The Christians played well in diversification

and J ains and Christians in expansion are the other findings. In another study, Sharma and

Singh28 found that caste background of the entrepreneurs had significant influence on the

entrepreneurs' entry into manufacturing, the expansion of the business and perception of

business stability. In a study of 45 light engineering industrial units in Kerala, Oamen found

that single largest group of entrepreneurs among them consisted of Muslims. Contrarily,

studies conducted by Bhatia and Sadhak revealed that there is no relationship hetween the

growth of firms and the socio-economic background of the entrepreneurs. In view of these

findings, an attempt to study the relationship between the category of entrepreneurs and

various schemes of development undertaken by them is made with the help of Table 5.36.

The study of on influence of category on the developmental changes made by the

entrepreneurs reveals that the entrepreneurs belonging to general category excelled with 21

points, closely followed by the BCM category entrepreneurs with 20 points. The

entrepreneurs belonging to minority category ranked third with 12 points followed by SC/ST

entrepreneurs with 10 points and women entrepreneurs with 7 points. The testing of the same

with Ratio A nalysis Technique (ratio of total number of entrepreneurs effected the charJ\e to

total number of changes), however, changed the position enjoyed by them except the women

entrepreneurs who stand last with 1:1.03. The ratio technique shows that the BCM category

entrepreneurs stand first with 1: 1. 97, followed by general category entrepreneurs with

1:1.81, SC/ST entrepreneurs with 1:1.50 and minority group entrepreneurs with 1:1.30.

The above figures reveal that general and BCM category entrepreneurs performed

well by undertaking various developmental changes than the other category entrepreneurs. It

is important to note that, of the 25 units newly established by entrepreneurs under study, 20

units (of which 13 belong to general category and 7 belong to BCM category), constituting 80

per cent of the total are established by these two group of entrepreneurs. Thus, the general

and BCM category entrepreneurs led in the starting of new correlated and un¬correlated

activities.

Table 5.36

Category and schmes of Development

Category and Number of Changes, No Changes, etc.

The scanning of the influence of category background of the entrepreneurs on the

number of changes, stagnant nature and closure of units is discussed below (Table 5.37).

A keen observation of Table 5.37 reveals that the entrepreneurs belonging to SC/ST

category secured 21 points, women entrepreneurs secured 32 points, minority group

entrepreneurs secured 43 points, BCM category entrepreneurs got 77 points and general

category entrepreneurs secured 218 points. Due to unequal size of the sampling from each

category, the ratio of number of entrepreneurs effected the change in each category to number

of merit points secured by them is calculated. The result indicates that the general category

entrepreneurs lead the race with 1:2.15, closely chased by BCM category entrepreneurs with

1:2.13, minority group with 1:1.72, SC/ST entrepreneurs with 1:1.61 and women

entrepreneurs with 1:1.60. Again, the general and BCM category entrepreneurs exhibited the

best qualities of entrepreneurship and enjoyed the negative shortfall in the remaining three

group of entrepreneurs by crossing 1 :2.00 ratio, which is calculated to the total (i.e., ratio of

total number of entrepreneuts effected the change to total merit points).

Looking at the percentage of entrepreneurs effected the change, it indicates that 69.64

per cent of the entrepreneurs have made one to all the five types of changes. The category-

wise analysis of the same reveals that BCM category entrepreneurs topped the list with 76.59

perc cent of the entrepreneurs effected the changes closely followed by the general category

entrepreneurs with 76.51 per cent. The percentage share of the other category entrepreneurs,

i.e., minority 59.52 per cent, SCI ST 59.09 per cent and women 54.05 per cent which is much

below the percentage calculated to total and percentage share enjoyed by BCM and general

category entrepreneurs.

The analysis of the diversified changes (i.e., two to five types of changes) made by the

entrepreneurs reveals that, 111 out of 195 entrepreneurs constituting 56.92 per cent have

made the diversified changes. The category-wise picture shows that 62.37 per cent of the

general category entrepreneurs and 61.11 per cent of the BCM category entrepreneurs have

made diversified changes. These two group of entrepreneurs have shared the shortfall (when

compared with percentage to total, i.e., 56.92 per cent) faced by the women (50 per cent),

SC/ST (46.15 per cent) and minority (40.00 per cent) entrepreneurs.

The study of the stagnant nature of the entrepreneurs shows that the 43 out of 280

entrepreneurs, representing 15.35 per cent to the total have not made any changes after the

commence¬ment of the entrepreneurial activity. The category-wise analysis of the same

reveals that general category ent.repreneurs excelled the race by limiting the number of

entrepreneurs to 12 out of 132 entrepreneurs, which is 9.09 per cent to total, i.e., 132. The

positive shortfall in the percentage 01 this category (15.35 - 9.09 = 6.26 per cent) is shared by

other category entrepreneurs.

Table 5.37

Category and number of changes

Scanning of the category and closure of units relation reversed the earlier findings

with SC/ST entrepreneurs excelled the race, since only one out of 22 entrepreneurs

constituting 4.54 per cent, has closed the unit. Similar achievement is exhibited by BCM

category entrepreneurs, since 6.38 per cent of the entrepreneurs have closed their units which

is much below the percentage calculated to the total (i.e., 15 per cent). The performance of

the general category entrepreneurs in this context is satisfactory since, 14.39 per cent (19 out

of 132) of entrepreneurs have closed their units, which is slightly below the percentage

calculated to total (i.e., 15 per cent). The percentage-wise positive shortage enjoyed by these

three category entrepreneurs has shared by women (29.72 per cent) and minority (19.04 per

cent) entrepreneurs.

To conclude, the category-wise performance analysis shows that general and BCM

category entrepreneurs dominated the entrepreneurial field by exhibiting better qualities of

entrepreneurship. Thus, it is evident that caste and religious background has certainly

influenced the entrepreneurship in the study area.

Problems of Entrepreneurs

In the course of managing an industrial or business unit, it is inevitable that a few

problems crop up. The entrepreneurs may face several setbacks and certain problems in going

ahead with the entrepreneurial function. An attempt to study the problems faced by the

entrepreneurs in the study area is made because entrepreneur cannot be treated in isolation.

He has to be viewed as one constantly interacting with the business sub-system promoted/

created by him and this sub-system is a part of a wider socia-economic system. During the

course of the field survey the entrepreneurs appraised us regarding the problems being

encountered by them. The problems faced by the entrepreneurs are detailed below:

1. Supply of Raw Materials

The timely supply of raw materials will ensure the growth of an entrepreneur. The

cost of product depends on the availability of raw materials at reasonable rate. The

government has made several arrangements to supply the raw materials to the small scale

industries. For example, priority has been fixed to supply the raw materials to these units. But

in reality it is not so. The entrepreneurs will not get either the raw materials in time or what

they get is not up to the mark. Besides this, the transportation problem, strikes, bundhs,

floods, famines and other natural havocks also affect the supply of raw materials.

2. Marketing Problems

It is another big problem faced by the entrepreneurs. There is no marketing

organisation which can ensure quick and prompt marketing of goods produced by the small

entrepreneurs. The role of Karnataka State Small Industries Marketing Corporation Ltd.

(KSIMC) in this direction is not praiseworthy. Marketing is the backbone of the small units.

The small entrepreneurs are not in a position to popularise their brand names and advertise,

since they are not capable of meeting the expenses and afford the luxury of expensive

advertisements.

3. Competition

Competition from the big units and the units already settled well is another problem of

small entrepreneurs.

4. Financial Problems

Generally, most of the small entrepreneurs face a few financial difficulties. The

finance is not easy to come by as the entrepreneurs have to depend on more than one source

and pay heavy investment charges and pass through many ordeals and subsequent delay.

Most of the units which are ancillary to other large industries do not receive timely payments

from mother units for their supply.

5. Rigid Government Rules

The entrepreneurs have to approach many offices to get the licence, finance, subsides,

concessions and to fulfil such other statutory requirements. Corrupt practices,

cumbersome/rigid and complicated official procedures, red-tap ism/undue delay in giving the

services, buck-passing, lack of guidance, etc., are the major obstacles faced by the

entrepreneurs while dealing with governmental procedures.

6. Technical Problem

Lack of technical know-how aspects of the small units is another problem faced by

the small entrepreneurs.

7. Poor Co-ordination

The co-ordination between lending institutions (such as KSFC and banks) and

government departments are not available in an integrated manner. This causes delay in

getting the services from other government departments and finance from KSFC and banks.

In a study of selected. Asian countries, the Management Development Institute, New Delhi

has found that the major problem faced by most of the Asian countries is lack of co-

ordination of institutional activities for development of small scale industries.

8. Labour Problem

The small entrepreneurs face the problem of supply of skilled labour and high labour

turnover rate.

9. Management

Most of the diagnostic studies reveal that the cause of sickness in small units is due to

lack of managerial skills and capabilities. The entrepreneur is not a professional and

he does not have any sort of training for acquiring managerial skills. The following

factors are responsible for the sickness in small scale industries:

1. Bad or incompetent management.

2. Lack of adequate finance and working capital.

3. Corrupt practices such as surreptitious removal of assets charged to the banks,

diversion/siphoning-off of funds, extravagant expenditure, under-invoicing of sales,

over-invoicing of purchases, etc.

3. It has been observed that in some cases while the unit has gone sick, promoters have

prospered. They consistently look to public sector banks and institutions for soft

loans, concessions and sacrifices. Even when a unit turns sick, the promoters continue

to live a life of ostentations and extravagance. They also do not furnish the desired

information to the banks.

10. Other Problems

Besides the above, the small entrepreneurs are facing the problem of lack of proper

guidance on the identification of investment opportunity, lack of training facilities in

management, production and marketing including advertising and packaging, non-availability

of land, sheds and other infrastructural support for setting up of enterprises, untimely

disbursal of loan and subsidy, lack of adequate power, etc.

The present study makes an attempt to highlight the problems faced by the

entrepreneurs. Table 5.38 highlights the problems faced by entrepreneurs.

Table 5.38

General Problems Faced by Entrepreneurs

Type/Nature of Problem Number of Entrepreneurs Percentage to Total (i.e., 280)

Scarcity of raw materials 28 10.00

Lack of power 62 20.25

Transportation problems 10 3.57

Rigid government rules 68 24.29

Financial problems 75 26.79

Marketing problems 119 42.50

Labour problems 70 25.00

Any other 43 15.36

No problem 55 19.00

Total 186.76

Source: Survey Data.

Note: Total exceeds 100 per cent due to multiple answers.

The entrepreneurs under study were asked to indicate the general problems faced by

their units (Table 5.38). Around 42.50 per cent of the entrepreneurs opined that they are

facing the problem of marketing, 26.79 per cent entrepreneurs had financial problems and

24.29 per cent of the entrepreneurs under study reported that they had problems of complying

with the various rules and regulations of the government. Some of the entrepreneurs (25 per

cent) experiencing labour problems complained of the difficulty of small units in hiring

skilled labour. Small units cannot afford to hire skilled labour and the unskilled workers

usually leave for better paid jobs, after obtaining some experience, forcing the small

entrepreneurs to hire unskilled workers again, only to have the process repeat itself. Thus 25

per cent of the entrepreneurs are facing the problem of high labour turnover rate.

Around 20.25 per cent of the entrepreneurs faced problems due to lack of adequate

power. Entrepreneurs complained that disruption in power supply often led to idleness of

manpower and machines. Only 10 per cent of the entrepreneurs reported that their units faced

scarcity of raw materials and 3.57 per cent entrepreneurs have encountered the problem of

transport.ation. According to some entrepreneurs, the transportation problem 'arise due to the

smallness in the scale of operation. Among the other problems experienced by 15.36 per cent

entrepreneurs include difficulty in obtaining technical know-how for their units, maintenance

of quality, etc. Fifty-five entrepreneurs are not .facing any problem at all, most of them are

transport operators and entrepreneurs who are running the STD/Xerox centres.

References

1. Kannan Gnana, "Training for Entrepreneurship Development" in Developing

Entrepreneurship-Issues and Problems, SIET Hyderabad, 1980, p. 118, cited in N.C.

Pillai and Anna V., "The Entrepreneurial Spirit Among Women", Indian

Management, Vol. 29, Nos. 11-12, NOV.-Dec 1990, pp. 93-98.

2. Sharma, Krishnalaland Singh, Harnek, op.cit.

3. Bhanushali, S.G., op.cit.

4. Sadhak, H., op.cit.

5. Deshpande, Manohar U., op.cit.

6. Rao, A.S., "Entrepreneurship and Performance of Enterprises-A Case Study of

Chemical Industry", p. 240, cited in R.S. J alaI (ed.), Industrial Entrepreneurship and

Small Scale Industries, Anmol Publications, New Delhi, 1991.

7. Oamen, M.A., op.cit.

8. Haggen, E.E., op.cit.

9. Deshpande, Manohar D., op.cit.

10. Kumar, Ashok, Entrepreneurship in Small Industry, pp. 72-73, A book available at

KSFC Head Office, Bangalore.

11. Ibid, pp. 74-75.

12. Murthy, BEVVN,Chandrashekar, M. and Gangadhar Rao, M., "Entrepreneurial

Process and Promises", pp. 56-59, cited in M. Gangadhar Rao (ed.), Entrepreneurship

and Entrepreneurship Development, Kanishka Publishing House, Delhi .

13. Kumar, Ashok, op. cit., p. 76.

14. Panandikar, Surekha, "Women Entrepreneurs-" Problems and Potentials, Economic

Times, December 26, 1985, p. 5.

15. Drucker., Peter F., op.cit.

16. Rao, A.S., op.cit, p. 341.

17. Ibid, p. 337.

18. Deshpande, Manohar D., op.cit.

19. Sharma, R.A., op.cit.

20. Sadhak, H., op.cit.

21. Mishra and Bisht, op.cit.

22. Oamen, M.A., op.cit.

23. Sharma, Krishnalal and Singh, Harnek, op.cit.

24. Bhanushali, S.G., op.cit.

25. Sadhak, H., op.cit.

26. Bhanushali, S.G., op. cit., p. 94.

27. Ibid.

28. Sharma, Krishnalal and Singh, Harnek, op.cit.

29. Oamen, M.A., op.cit.

30. Bhatia, B.S., op.cit.

31. Sadhak, H., op.cit.

32. Management Development Institute, New D~lhi, Small Scale Industries-;-An

Assessment ofInstitutional Assistance, Case Studies of Select States in India, 1983, p.

137.

6

Financial Role of KSFC in the Development of Entrepreneurship

Introduction

The economic and industrial development of a country largely depends upon how

efficiently funds are managed by its financial institutions and entrepreneurial promotion and

development activities are undertaken by them and other agencies. Efficient management of

financial institutions will not only improve their profitability but also enhance their

contribution to the industrial and economic development of the country.

Besides providing a means and mechanism of transferring command over resources of

the country, financial institutions help in the allocation of funds between different industries

and different sectors of the economy in consonance with the priorities laid down in the Five

Year Plans and Industrial Policy Resolutions. They channel the funds to those industrial

sectors which build a strong base for the rapid industrialization of the country. By providing

financial assistance on softer terms to entrepreneurs setting up their projects in backward

districts, they help in correcting regional imbalance in the country.

In the early fifties, banks played a vital role in the development of entrepreneurs in the

country. At the all-India level, IDBI, IFCI and ICICI which came into existence before 1970,

generally provide financial assistance to big industries in the large and medium sector, though

IDBI played a minor role in the development of small and tiny units in the country.

In order to achieve a balanced growth of entrepreneurship in the state of Karnataka

and also to promote local entrepreneurship in the small and medium sector, the KSFC was

established in the year 1959.

This chapter makes an evaluation of the role of KSFC in the development of

entrepreneurship by providing various types of financial assistance to the entrepreneurs. A

study lllto the financial role of KSFC is a matter of justifiable pride and pleasant privilege as

the institution carries a place of unique distinction in the performance among the SFCs in the

country. A performance evaluation could be made with a critical analysis of its lending

operations. This chapter (Part A and Part B) aims at analyzing the lending operations.

PART -A

KSFC at the Karnataka State Level

Karnataka is well suited for the development of entrepreneurship as the state is

endowed with rich natural resources which includes minerals, forests, agriculture, water

resources and human resources. The erstwhile state of Mysore was on the forefront of

industrialization. The major industries of the state, however, were concentrated in and around

Bangalore, Mandya, Mysore and Kolar. In order to prevent the concentration and to attract

entrepreneurs in the other areas of the state, the KSFC has made a tremendous promotional

and developmental efforts. Until 1980, the growth of KSFC was modest, but today it is a

different picture of zooming activity and excellence, while new and diverse industries are

encouraged to upgrade their technology by way of modernization. In the last 15 years, the

corporation has made a significant thrust in all aspects of its operations leaving behind the

traditionally strong SFCs. To address the diversified needs of ,f entrepreneurs, several new

schemes like factoring, equipment lease finance, hire purchase assistance, schemes to set up

private software technology park, software development, acquisition of black board vehicles,

acquisition of ready built offices/construction of office building, construction of godown and

warehouses, acquisition of tractors, acquisition of land/existing building/commercial spaces,

setting up of veterinary clinic, medical stores, mobile canteens and caterings, mobile

generators, office automation and training institutes and to get ISO 9000 certification are

introduced by the corporation after 1996. Special emphasis is being given towards the SC/ST,

women, minority and physically handicapped entrepreneurs.

Now, KSFC has been recognized by IDBI, Government of India and other financial

institutions as a model SFC for its pragmatic policies, programmes, functioning, appraisal

systems, recovery and up-keep of documents and records.

The recent hallmark was the extensive diversification of the operations of the

corporation. Along with new activities, traditional term lending also received a boost. The

corporation has been able to respond effectively to the growing and varied requirements of

the entrepreneurs. The overall performance of the corporation in the entrepreneurship

development for the period under study is given in the following pages.

1. Analysis of Targets and Achievements in Gross Sanctions

Among the multifarious activities that the KSFC is undertaking, the lending

operations take prominent place. The lending activity manifests in different forms with the

function of 'Sanction' as the core. Let us analyse the sanctions to entrepreneurs by KSFC

during the period under study with the ensuing Table 6.1.

Table 6.1

Year Wise Targets and Achievements in Gross Sanctions

(Amount: Rs. in lakhs)

Year Target Achievement Achievement Percentage to Target in Terms of;

No. Amount No. Amount No. Amount 1990-91 7,700 20,200.00 8,670 25,867.21 112.59 128.05 1991-92 9,000 26,625.00 10,922 34,050.23 121.35 127.88 1992-93 9,530 36,090.00 15,233 34,205.84 159.84 94.77 1993-94 10,000 34,450.00 13,224 35,476.93 132.24 102.98 1994-95 13,600 39,850.00 14,089 52,017.97 103.59 130.53 1995-96 14,000 67,630.00 14,819 81,881.03 105.85 121.07 1996-97 NA NA 13,053 85,984.32 1997-98 NA NA 6,970 57,736.47 Source: Operational statistics of KSFC for the respective years.

Note: The target and achievement includes bridge loan, leasing finance, hire purchase

assistance and merchant banking assistance.

NA: Not Available.

It is evident from Table 6.1 that the KSFC was able to reach the target in terms of

number from 1990-91 to 1995-96. The total number of sanctions made in 1990-91 was 8,670

which accounted for 112.59 per cent achievement as against the target. The achievement

percentage as against the target in terms of number of sanctions was 121.35 per cent in 1991-

92, 159.84 per cent (which is the highest) in 1992-93, 132.24 per cent in 1993-94, 103.59 per

cent in 1994-95 and 105.85 per cent in 1995-96. The total sanctions under all the schemes in

1990-91 touched to Rs. 25,867.21 lakhs registering an achievement percentage of 128.05 per

cent as against the target, followed by Rs. 34,050.23 lakhs showing an achievement

percentage of 127.88 per cent as against the target. The year 1992-93 witnessed a decrease in

actual sanctions when compared with the target. The achievement in sanctions in this year

was Rs. 34,205.84 lakhs which works out to 94.77 per cent of the target. The corporation was

able to reach the target in sanctions in the year 1993-94 (Rs. 35,476.93 lakhs as against the

target of Rs. 34,450 lakhs), 1994-95 (Rs 52,017.97 lakhs as against the target of Rs. 39,850

lakhs) and 1995-96 (R,s. 81,881.03 lakhs as against the target of Rs. 67,630 lakhs). The target

in gross sanctions for the year 1996-97 and 1997-98 are not available. The respective

sanctions for these years are Rs. 85,984.32 1akhs to 13,053 cases and Rs. 57,736.47 1akhs to

6,970 cases.

These figures reveal that the corporation experienced a surge in sanctions in 1992-93,

1993-94 and 1991-92 in terms of number and in 1994-95, 1990-91, 1991-92 and 1995-96 in

terms of amount. In total, over the years the annual sanctions (achievement) has increased by

more than 3 times up to 1996-97 and more than 2 times in the year 1997-98. However, the

year 1997-98 witnessed a decline in sanctions by 45.60 per cent in terms of number and by

32.85 per cent in terms of amount as against the relevant previous year.

2. Analysis of Achievement in Sanctions and Disbursements

Disbursement is the next step in the process of getting a loan. Unless disbursement

follows sanctions very closely, the loaning operations would not be at a desired level and

with expected efficiency. Hence the lender must feel that the disbursement areas important as

sanctions. In other words, in any lending function, the two operations, viz., sanctions and

disbursements must go hand in hand.

Table 6.2 shows the year-wise achievements in sanctions and disbursements during

the period under study.

It is evident from Table 6.2 that there is a steady increase in sanctions and

disbursements up to 1996-97. The total sanctions under various schemes touched to Rs.

25,867.21 lakhs in 1990-91 as against Rs. 19,059.89 lakhs in 1989-90, registering a growth

rate of 35.71 per cent. At the same time, the achievements in disbursement showed a growth

rate of 29.71 per cent as against the relevant previous year. The respective growth rate in

sanctions and disbursements being 31.63 per cent and 29.16 per cent in 1991-92,0.45 per cent

and 21.70 per cent in 1992-93, 3.71 per cent and 3.40 per cent in 1993-94, 46.62 per cent and

39.38 per cent in 1994-95, 57.40 per cent and 41.78 percent in 1995-96 and 5.01 per cent and

6.01 per cent in 1996-97 as against the relevant previous years. However, the year 1997-98

witnessed a negative growth rate of -32.86 per cent in sanctions and -27.71 per cent in

disbursements as against the relevant previous year.

Table 6.2

Year wise Achievements in Gross Sanctions and Disbursements

(Amount: Rs. in lakhs)

Year Sanctions Disbursements % of disbursements to sanctions

% growth rate achieved against the respective previous year in

Amount Amount Sanctions Disbursements1990-91 25,867.21 19,071.45 73.73 35.71 29.71

(19.059.89) (14,702.03) 1991-92 34,050.23 24,634.19 72.35 31.63 29.16. 1992-93 34,205.84 29,980.91 87.65 0.45 21.70 1993-94 35,476.93 31,000.73 87.38 3.71 3.40 1994-95 52,017.97 43,208.79 83.06 46.62 39.38 1995-96 81,881.03 61,263.10 74.82 57.40 41.78 1996-97 85,984.32 64,946.56 75.53 5.01 6.01 1997-98 57,736.42 46.955.66 81.33 -32.86 -27.71 Source: Operational statistics of KSFC for the respective years.

Note:

1. The above figures include sanctions and disbursements under all the schemes of KSFC.

2. Figures in parentheses denote gross sanctions in the year 1989-90 placed to calculate the

growth rate for the year 1990-91.

The comparison between the growth rate in sanctions and growth rate in

disbursements revealed that there is no wide gap between the two growth rates in 1990-91,

1991-92, 1993-94, 1994-95, 1996-97 and 1997-98. This shows the steady-cum close growth

rate in two lending operations.

There may be difference between the amount sanctioned and disbursed to the

entrepreneurs. The reason for this difference may be giving up of the entrepreneurial activity

by some entrepreneurs, lesser requirement of loan than the loan sanctioned, presence of

escalation clause, failure on the part of the sanctionee to fulfill the legal requirements in the

post-sanction period, etc. As such the analysis of the disbursements with, sanctions shows

that in 1992-93, 87.65 per cent of the loan sanctioned is disbursed to the entrepreneurs which

is highest among the 8 years study. The percentage of disbursements to sanctions in

descending order being 87.38 per cent in 1993-94, 83.06 per cent in 1994-95, 81.33 per cent

in 1997-98,75.53 per cent in 1996-97,74.82 per cent in 1995-96, 73.73 per cent in 1990-91

and 72.35 per cent in 1991-92. These figures show that more than 72 per cent of the amount

sanctioned is disbursed by the corporation in all the years under study to the entrepreneurs.

3. Analysis of Purpose-wise Sanctions

The corporation assists the entrepreneurs in setting up of new projects, expansion and

modernization of the existing projects, for the installation of modern machinery, for the

diversification of the entrepreneurial activity and for the rehabilitation of sick units. Table 6.3

shows the purpose-wise assistance provided by the corporation over the years.

Table 6.3 reveals that, ever the years 69.62 per cent (Rs. 2,43,860.46 lakhs) of the

total assistance covering 84.19 per cent (79,656 entrepreneurs/number of sanctions) of the

total cases is received by new projects, 29.04 per cent (Rs. 1,01,721.98 lakhs) of the total

assistance covering 15.08 per cent (14,264 entrepreneurs/number of sanctions) of the total

cases is received by the entrepreneurs for the purpose of expansion, modernization,

diversification, escalation, etc., and the balance (1.34 per cent 'Of the total assistance

covering 0.73 per cent of the total cases) for the purpose of rehabilitation of sick units.

The year-wise analysis reveals that from the year 1992-93 there is steady decrease in

the percentage share in the number of sanctions (from 91.67 per cent to 69.27 per cent) and

percentage share in the amount of assistance (from 82.86 per cent to 56.44 per cent) for the

setting up of new projects. At the same time, the percentage share in number of sanctions and

amount of assistance to the expansion, diversification and modernization plans of

entrepreneurs has increased considerably from 7.70 per cent and 15.48 per cent in 1992-93 to

29.72 per cent and 42.03 per cent respectively. After 1993¬94, there is a steady increase in

the amount of assistance given for the rehabilitation of sick units.

Table 6.3

Purpose-wise Gross Sanctions

Year

New Projects

(Amount: Rs. in lakhs)

Rehabilitation of Total

Sick Units

Expansion, Modernisation, Diversification, Escalation, etc.

No. Amount No. Amount No. No. Amount

Amount 1990-91 7,054 19,538.17

1,029 4,586.09 201 964.52 8,284

25,088.78 (85.15) (77.88)

(12.42) (18.28) (2.43)

(3.84) (100.00)

(100.00)

1991.92 9,321;25,759.12 1,188

6,885.06 10, 643.67 10,611 33,287.85

(87.85) (77.38) (11.19)

(20.68) (0.96)

(1.94) (100.00)

(100.00)

1992-93 13,707 27,861.13 1,151

5,206.00 34 :i57.73, 14,952 33,624.86

(91.67) (82.86) (7.70)

(15.48) (0.63)

(1.66) (100.00)

(100,00)

1993.94 11,713 27,999,85 1,144

6,081.91 57 240.77 12,914 34,322.53

(90.07) (81.58) (8,86)

(17.72) (0.44)

(0.70) (100,00)

(100,00)

1994.95 11,764 32,178,67 2,016 14,190.76

61 329,02 13,841 46,698.45

(85.00) (68,90) (14.56)

(30.39) (0.44)

(0.71) (100.00)

(100.00)

1995.96 11,494 40,818,63 2,877 21.024.14

50 519,97 14,421 62,362.74

79.70) (65.45)

(19,95)

(33.71)

(0,35)

(0.84)

(100,00)

(100.00)

1996--97 9,856

42,663.55

2,822

23,607.41

59 707.89

12,737

66,978,85

(77.38) (63.70)

(22,16)

(35,25)

(0.46)

(1.05)

(100,00)

(100.00)

1997.98 4,747

27,041.34

2,037

20,140,61

69 732.72 6,853

47,914,67

(69.27) (56.44)

(29.72)

(42,03)

(1.01)

(1.53)

(100.00)

(100,00)

Source: Operational statistics of KSFC for the respective years.

Notes:

1. Figures in parentheses denote percentage to horizontal total.

2. The above figures exclude bridge loan, leasing finance, hire purchase assistance and

merchant banking assistance,

These figures show the role of, the corporation in generating newer and newer

entrepreneurs, assisting them in undertaking diversification/ modernization/ expansion of

their entrepreneurial activities/units and in rehabilitation of the sick units in the state.

4. Analysis of Sector-wise Sanctions

The corporation provides financial assistance to SSIs, vehicle operators (i.e., transport

sector) and for other purposes like hospitals, nursing homes, hotels, lodges, STD/ISD booths,

marketing entrepreneurs, etc. The sector-wise sanctions made by the corporation during the

period under study is shown in Table 6.4.

Table 6.4

Sector wise Gross Sanctions

(Amount: Rs. in lakhs)

Year 55! units Transport Others Total

No. Amount No.

Amou

nt

No. Amount No. Amount

1990-

91

6,185 16,697.58 1,798 3,739.15 301 4,652.

05

8,284 25,088.

78

(74.66) (66.55) (21.70

)

(14.90) (3.64). (18.55

)

(100.0

0)

(100.00

)

1991•

92

7,597 23,284.50 2,737 5,920.74 277 4,082.

61

10,611 33,287.

85

(71.60) (69.95) (25.79

)

(17.79) (2.61) (12.26

)

(100.0

0)

(100.00

)

1992•

93

11,530 23,726.10 3,114 5,395.26 308 4,503.

50

14,952 33,624.

86

(77.11) (70.56) (20.83

)

(16.05) (2.06) (13.39

)

(100.0

0)

(100.00

)

1993•

94

7,422 20,815.75 4,826 6,541.15 666 6,965.

63

12,914 34,322.

53

(57.47) (60.65) (37.37

)

(19.06) (5.16) (2029)

(100.0

0)

(100.00

)

1994-

95

7,839 28,961.00 5,043 7,276.13 959

10,461.

32

13,841 46,698.

45

(56.64) (62.02) (36.43

)

(15.58) (6.93) (22.40

)

(100.0

0)

(100.00

)

1995•

96

7,991 34,981.11 5,380 8,730.57 1,050

18,651.

06

14,421 62,362.

74

(55.41) (56.09) (37.31

)

(14.00) (7.28) (29.91

)

(100.0

0)

(100.00

)

1996•

97

6,087 36,980.72 5,334 9,599.69 1,306

20,398.

44

12,737 66578.8

5

(47.79) (55.21) (41.96

)

(14.33)

(10.25)

(30.46)

(100.00

)

(100.0

0)

1997-

98

3,655 27,230.66 2,172 5,123.11 1,026

15,560.

90

6,853 47,914.

67

(53.34) (56.83) (31.69

)

(10.69)

(14.97)

(32.48)

(100.00

)

(100.0

0)

Total 58,3062,12,67

7.42

30,41452,325

.80

5,893

85,275

.5 1

94,613

3,50,278.

73

(61.63) (60.72) (32.14

)

(14.94) (6.23) (24.34

)

(100.0

0)

(100.00

)

Source: Operational statistics of KSFC for the respective years.

Note: 1. Figures in parentheses denote percentage to horizontal total.

2. The above figures exclude bridge loan, leasing finance, hire

purchase assistance and merchant being assistance.

Table 6.4 reveals that the SSIs continued to receive the major portion of the

corporation's assistance in all the years under study.' The year-wise analysis reveals that their

share in terms of number and amount, out of the total sanctions is 74.66 per cent and 66.55

per cent in 1990-91, 71.60 per cent and 69.95 per cent in 1991-92,.77.11 per cent and 70.56

per cent in 1992-93, 57.47 per cent and 60.65 per cent in 1993-94, 56.64 per cent and 62.02

per cent in 1994-95, 55.41 per cent and 56.09 per cent in 1995-96, 47.79 per cent and 55.21

per cent in 1996-97 and 53.34 per cent and 56.83 per cent in 1997-98 respectively. However,

the share of SSIs in sanctions has reduced continuously from 1992-93 to 1996-97 and shown

a little hike in 1997-98. In total, 61.63 per cent of the total number of entrepreneurs who are

in the SSI sector received 60.72 per cent of the total assistance.

In all the years under study, the percentage share of the transport sector is more in

terms of number than the amount. In total, 32.14 per cent of the total (30,414 entrepreneurs

out of 94,613 entrepreneurs) have received only 14.94 per cent of (Rs. 52,325.80 lakhs out of

Rs. 3,50,278.73 lakhs) the total assistance. This is due to the lending of large number of small

sized loans to vehicle operators.

The assistance to other activities though ranked third in terms of number with only

6.23 per cent share in total number of sanctions, it stood second in terms of amount of

assistance with 24.34 per cent share in total assistance. The percentage share in yearly

sanctions of this sector has continuously increased from 12.26 per cent in 1991-92 to 32.48

per cent in 1997-98. This shows the requirement of huge amount of capital by the

entrepreneurs who are engaging in other activities. Their share in number of sanctions has

also increased from 2.61 per cent in 1991-92 to 14.97 per cent in 1997-98.

Thus enjoying a lion's share in the total assistance by SSIs shows the importance

given by KSFC to this sector. But continuous decrease .in the yearly total assistance to SSIs

and transport sector after 1992-93 and simultaneous pickup of the other activities in the

number of sanctions and amount of assistance (percentage-wise) shows the figuring of other

activities like nursing homes, hotels, lodges, STD/ISD booths, Xerox centres, etc., in the

corporation portfolio. The lion's share in the number of sanctions to transport sector also

shows the role of the corporation in assisting service entrepreneurs who are the backbone of

industrial entrepreneurs.

5. Analysis of Area-wise/District-wise Sanctions

The corporation has classified the districts in the Karnataka state into two as

backward districts and other/non-backward districts. This classification is made on the basis

of the degree of backwardness of the different districts in the state. Table 6.5 shows the .area-

wise or district-wise sanctions made by the corporation during the years under study.

Out of the 19 districts shown in Table 6.5, 11 districts are identified as backward

districts and 8 districts are identified" as non-backward districts. Among the 11 backward

districts, north Karnataka part consists of 6 districts (Bidar, Gulbarga, Raichur, Belgaum,

Bijapur and Dharwad) and the remaining 5 districts are in south Karnataka which includes

malnad and coastal areas of the state. The 8 non-backward districts consists of only one

district in north Karnataka (i.e., Bellary) and rest in south Karnataka which includes malanad

region also.

An analysis of Table 6.5 brings out the following:

1. During the 8 years under study, out of the total gross sanctions of Rs. 3,50,278.73

lakhs to 94,613 cases, Rs. 1,49,775.72 lakhs constituting 42.76 per cent to 50,529

cases constituting 53.41 per cent to total went to backward districts. The backward

districts though got more share in terms of number, they received only 42.76 per cent

of the total sanctions made by the corporation. This shows comparatively small sized

loans to large number of entrepreneurs in the backward districts.

Table 6.5

Area-wise/District wise Analysis of Gross Sanctions

(Amount Rs. in lakhs)

Sl. No.

Name of the District Sanctions from the Year 1990-91 to 1997-98

Percentage Share to the State Total in Terns of;

No. Amount No. AmountI Backward Districts1 Bidar 2 Mysore

3 Dharwad 4 Raichur 5 Belgaum 6 Bijapur 7 Dakshina Kannada 8 Tumkur 9 Gulbarga 10 Hassan 11 Uttara Kannada

TOTAL II Other Districts 12 Bangalore 13 Shimoga 14 Kolar 15 Chitradurga 16 Mandya 17 Chickamagalur 18 Bellary 19 Kodagu

TOTAL II State Total (I & II)

Source: Operational statistics of KSFC for the respective years.

Note:

1. The above figures exclude bridge loan, leasing finance, hire purchase assistance and merchant banking assistance.

2. The re-organization of the state of Karnataka by creating 7 more new districts took place in November 1997, hence not shown separately.

3. Bangalore district includes both Bangalore urban and Bangalore rural.

2. Among the backward districts, Dakshina Kannada ranked first with the share of 7.65

per cent in the total assistance followed by Dharwad (6.19 per cent) Mysore (6.15 per

cent), Belgaum (4.34 per cent), Tumkur (4.30 per cent), Raichur (3.25 per cent),

Bijapur (2.98 per cent), Gulbarga (2.48 per cent), Bidar (2.31 per cent), Hassan (1.95

per cent) and Uttara Kannada (1.16 per cent). It is important to note that even among

the backward districts, 46.89 per cent of the total assistance (Rs. 70,231.65 lakhs out

of Rs. 1,49,775.72 lakhs) went to 4 districts in south Karnataka (such as Dakshina

Kannada, Mysore, Tumkur and Hassan), 34.30 per cent of the assistance (Rs.

51,378.13 lakhs out of Rs. 1,49,775.72 lakhs) went to 4 districts in old Bombay

government a real a part of north Karnataka (such as Belgaum, Bijapur, Dharwad and

Uttara Kannada) and 18.81 per cent of the total assistance (Rs. 28,165.94 lakhs out of

Rs. 1,49,775.72 lakhs) went to 3 districts of Hyderabad-Karnataka region (Bidar,

Gulbarga and Raichur). Considering the population of these districts (which is made

in detail at a latter part), it can be inferred that even among backward districts, the

districts in north Karnataka region appear to be 'the neglected in obtaining sanctions.

3. The share of the non-backward districts out of the total sanctions is 57.24 per cent in

terms of amount (Rs. 2,00,503.01 lakhs) and 46.59 per cent in terms of number

(44,084 entrepreneurs). Among these districts, Bangalore district alone has received

37.95 per cent of the total assistance and 66.30 per cent of the assistance given to non-

backward districts covering 24.57 per cent of the total number of sanctions in the state

and 52.73 per cent of the total number of sanctions to non-backward districts. The

share of the other districts in terms of amount out of the total assistance in descending

order being Kolar (5.02 per cent), Chitradurga (4.09 per cent), Bellary (3.75 per cent),

Shimoga (2.29 per cent), Mandya (2.10 per cent), Chickamagalur (1.06 per cent) and

Kodagu (0.98 per cent).

Table 6.5.1

Density of population, share in sanctions, deficiency, benefit and ranking

Sl. No.

Name of the District Density of population

Percentage share in sanction

Benefit(+) or Deficiency (-) in due share

Ranking

No % (-) (+)I Backward Districts1 Bidar 2 Mysore 3 Dharwad 4 Raichur 5 Belgaum 6 Bijapur 7 Dakshina Kannada 8 Tumkur 9 Gulbarga 10 Hassan 11 Uttara Kannada

TOTAL

II Other Districts 12 Bangalore 13 Shimoga 14 Kolar 15 Chitradurga 16 Mandya 17 Chickamagalur 18 Bellary 19 Kodagu

TOTAL II Grand Total

Source: For Density of Population, Karnataka at a Glance, 1992-93, Directorate of

Economics and Statistics, Bangalore.

The in-depth analysis of the above figures can be made by comparing the density of

population of each district with the share in the total sanctions during the period under study.

Table 6.5.1 shows the density of population of each district (in terms of number and

percentage), percentage share in the total sanctions of the corporation and the deficiency in

due share of the districts or benefit enjoyed in excess of the due share and rank secured.

It is evident from Table 6.5.1 that except Bangalore, Dakshina Kannada and Kolar

districts, all the other districts in the state failed to receive their due share in sanctions.

Among them backward districts are the major losers with -19.16 per cent deficiency in total

sanctions, while the deficiency rate is only -6.03 per cent in case of non-backward districts.

Even among backward districts, the 3 districts in north Karnataka-Belgaum, Bijapur and

Gulbarga (which ranked first, second and third among deficiency facet districts in the state)

faced a deficiency of 3.65 per cent, 3.52 per cent and 3.25 per cent respectively which

constitutes 54.38 per cent of the total deficiency of the backward districts. The two other big

districts in north Karnataka (before the reorganization of the state in November 1997)-

Raichur and Dharwad are facing the deficiency of -1.83 per cent and -1.66 per cent

respectively and ranked fifth and sixth respectively among the deficiency facer districts in the

state. These figures show the negligence of north Karnataka even after 34 years of

reorganization of state (from 1956 to 1990 i~ taken, since the initial year of study is 1990-

91).

Among the non-backward districts, Bangalore district is the major recipient of the

corporation's assistance which received 23.12 per cent more share than its legitimate share.

Kolar district is the another beneficiary district with 0.11 per cent positive share. All the other

districts have failed to get their due share in the KSFC's assistance. Shimoga district, the case

study area, is facing a deficiency of -1.96 per cent and placed fourth among the deficiency

facer districts in the state.

To conclude, this situation of injecting more and more quantities of assistance to a

few highly developed areas is bound to create regional imbalances. As a result backward

districts which require heavy attention are being neglected. Heavy concentration of sanctions

on a particular area or a part of it or a district will aggravate the position of regional

imbalances instead of reducing them. A major observation that can be made here is that the

corporation appears to have given little thought to the allocation of funds among the districts.

This is evident from the fact that the non-backward districts are facing minimum deficiency

in due share and getting larger share of assistance in general and position enjoyed by

Bangalore district in particular, leaving the backward districts as backward. This is a very

serious issue requiring deep thought not only for the industrialization of backward areas, but

also in eliminating regional imbalances.

6. Analysis of Gross Sanctions to Local Entrepreneurs

Development of local entrepreneurship or according preference to local entrepreneurs

has been one of the primary objectives of the corporation. Table 6.6 shows the gross

sanctions made by the corporation to the local entrepreneurs.

Table 6.6

Gross Sanctions to Local Entrepreneurs

(Amount Rs. in lakhs)

Sanctions in local

entrepreneurs

Total gross sanctions Percentage share of

local entrepreneurs to

total sanction in terms

of

Number Amount Number Amount Number Amount

1991-92 10,582 32,349.03 10.6[1 33.287.85 99.73 97.18

1992-93 14,921 33,137.29 14,952 33,624.86 99.79 98.55

1993-94 12,847 33,358.06 12,9[4 34,322.53 99.48 97.19

1994-95 13,760 44,975.27 13,841 46:698.45 99.41 96.31

1995-96 14,270 58,047.23 14,421 62,362.74 98.96 93.08

1996-97 12,644 63,730.37 12,737 66,978.85 99.27 95.15

1997-98 6,767 45,586.01 6,853 47,914.67 98.75 95.14

Source: Annual Reports of KSFC for the respective years.

Table 6.6 depicts that except in the year 1995-96 and 1997 -98, in all the years more

than 99 per cent of the total number of sanctions were made to the local entrepreneurs.

Similarly, except in the year 1995-96, in all the other years, more than 95 per cent of the total

amount of gross sanctions were made to the local entrepreneurs. Thus, it can be concluded

that the corporation continued to maintain its level in assisting the local entrepreneurs, thus,

succeeded in one of its primary objectives i.e., the development of local entrepreneurship.

7. Analysis of Gross and Effective Sanctions

Like the difference between sanctions and disbursements there may be gap between

gross sanctions and effective sanctions. The gross sanction will be made by the corporation

on the fulfillment of some preliminary requirements laid down by the statute. The reason for

this gap being the giving up of the idea of entrepreneurial activity chosen by the entrepreneur,

failure of the entrepreneur to fulfill the legal requirements in the post gross sanction period,

etc. The purpose of the study here is to see the lapse percentage in corporation's lending

operation and to give a clear-cut picture about the purpose-wise, sector-wise and area/district-

wise analysis of sanctions made earlier and to make the analysis of effective sanctions to

special category entrepreneurs. Table 6.7 presents the gross and effective sanctions made by

the corporation during the period under study.

It is evident from Table 6.7 that the effective sanctions made by the corporation varies

from 95.57 per cent to 98.63 per cent in terms of number and from 96.07 per cent to 98.40

per cent in terms of amount. The share of the effective sanctions to gross sanctions is 97.17

per cent in terms of number and 98.85 per cent in terms of amount in the year 1990-91 and

97.47 per cent and 97.83 per cent respectively in the year 1991-92. The respective share in

the year 1992-93 is 96.71 per cent and 97.60 per cent, 97.41 per cent and 98.38 per cent m the

year 1993-94, 97.61 per cent and 97.41 per cent in the year i 994-95, 98.63 per cent and 98.40

per cent in the year 1995-96,95.57 per cent and 96.42 per cent in the year 1996-97 and 95.69

per cent and 96.07 per cent in the year 1997-98.

Table 6.7

Analysis of Gross and Effective Sanctions

(Amount Rs. in lakhs)

Gross Sanctions Effective sanctions Percentage of

effective sanctions to

gross sanctions in

terms of

Number Amount Number Amount Number Amount

1990-91 97.17 98.25

1991-92 97.47 97.83

1992-93 96.71 97.60

1993-94 97.41 98.38

1994-95 97.61 97.41

1995-96 98.63 98.40

1996-97 95.57 96.42

1997-98 95.69 96.07

Source: Operational statistics of KSFC for the respective years.

Note: The above figures exclude bridge loan, lease finance, hire purchase assistance and

merchant banking assistance.

These figures show that the gap lying between the gross and effective sanctions varies

from 1.37 per cent to 4.43 per cent in terms of number and 1.60 per cent to 3.93 per cent in

terms of amount. Though it forms a small part of 100, it is not a negligible matter, thus

underlines a serious concern by the KSFC officials. The officials should find out the reasons

for dropping of the/giving up of the entrepreneurial activities by the entrepreneurs in the post-

gross sanction period and should take necessary steps or corrective measures to overcome

such a situation provided the situation is within their limits/control.

8. Analysis of Effective Sanctions to Special Category Entrepreneurs

The corporation continued to accord special priority to the projects set up by

entrepreneurs belonging to special segments of society, VIZ., SC/ST, women entrepreneurs,

minorities, physically handicapped and ex-servicemen entrepreneurs. Table 6.8 shows the

assistance of the corporation to the special category entrepreneurs.

A comparative study of the assistance to the special category entrepreneurs with the

total effective sanctions made by the corporation depicts the (act that there is an upward trend

in the percentage of effective assistance (both in terms of number and amount) to the special

category entrepreneurs during the first four years under study. But 'in 1994-95 and 1995-96 it

has declined slightly, increased in the year 1996-97 and again slightly reduced III the year

1997-98. The comparison between the amount sanctioned and number of sanctions in each

year reveals that the ratio between the two is one to more than two during the first seven

years under study. During 1997-98, this ratio is 1:1.72. The ratio between these two indicates

that more number of small sized loans are provided by the corporation to the special category

entrepreneurs followed by the holding/ownership of small sized units by them.

The individual category cum year-wise analysis of sanctions made to 3 major groups

depicts that the entrepreneurs belonging to minority community have ranked first in the first

four years under study and ranked second in the latter four years under study III terms of

amount sanctioned. This position is interchanged in case of women entrepreneurs in the first

and second half of -the years under study. In all the 8 years, the entrepreneurs belonging to

SC/ST ranked third in terms of amount sanctioned.

In total, the women entrepreneurs stand first both in terms of number bf sanctions

with the share of 36.81 per cent and amount with the share of 42.89 per cent in total sanctions

to special category entrepreneurs. The entrepreneurs belonging to SC/ST category, though

ranked second in terms of number with 32.44 per cent (15,320 out of 47,226 entrepreneurs),

they stand third in terms of amount with 16.56 per cent share (Rs. 13,418.96 lakhs out of Rs.

81,022.82 lakhs). This shows the sanctioning of large number of small sized loans to SC/ST

entrepreneurs. The entrepreneurs belonging to minority community are the recipients of less

number of big sized loans by the corporation which is evident from the fact that they stand

third in terms of number with 28.34 per cent share and second in terms of amount with 38.75

per cent share. The physically handicapped entrepreneurs ranked fifth in terms of amount

(Rs. 264.58 lakhs). This is because of concentration of these activities like of STD/ISD

entrepreneurs in running booths, Xerox centres, etc., to (due physical barrier they cannot

undertake other of entrepreneurial activities) cannot types which involves less cash outlay.

The ex-servicemen entrepreneurs ranked fourth in terms of getting the assistance (Rs.

1,188.88 lakhs) but fifth in terms of number of sanctions (309 cases).

To conclude, the upward tendency in the sanctions shows the attraction of the special

category entrepreneurs towards the corporation. But no or little education background,

absence of strong family and political background, absence of contacts at higher levels,

opting of sole proprietorship form of organization in large number (it is important to note that

out of 101 SC/ST, minority and women entrepreneurs surveyed, 87 entrepreneurs constituting

86.14 per cent are opting for sole proprietorship form of organization) limited the size of the

units owned by these entrepreneurs. Thus, there is a need to devise the schemes (both

financial and non-financial) for these entrepreneurs so as to motivate them to set up big sized

units with the assistance of the corporation.

9. Analysis of Special Lending of KSFC

The bridge loan, leasing finance, hire purchase assistance, fund and non-fund based

merchant banking services are the special types of assistance given by the KSFC to the

entrepreneurs.

Due to the non-availability of area-wise/district-wise, purpose-wise and sector-wise

figures, the special lending were excluded in the previous tables. Therefore, it is imperative

here to make an analysis of the same.

Bridge loan is a loan granted to the entrepreneurs to meet the gap in their equity

requirements. This scheme was in operation up to the year 1993-94. The leasing finance

scheme was introduced in the year 1993-94 and scheme for hire purchase assistance in the

year 1994-95. The fund based merchant banking was started in the second quarter of 1994-95

and non-fund based merchant banking services in the year 1995-96. Initially the facilities like

the preparation of project reports and pre-issue appraisal reports, syndication of loans and the

co-acceptance of bills of exchange was started. Later, underwriting of public issues was taken

up: Merger and amalgamation proposals were also undertaken. Bill discounting and deferred

payment guarantees were added to the list to satisfy the varied requirement of the

entrepreneurs.

Realising the need for providing allied services under one umbrella to entrepreneurs

who have been sanctioned term loan for imported machinery, the foreign letter of credit

scheme (FLC) was introduced in the year 1995-96. The corporation has been alive to a

pressing problem faced by small scale industrialists, that is, delay in the realization of bills

especially due to the tight liquidity position. The absence of institutions to meet this need

made KSFC to introduce factoring services for its clients. With the introduction of factoring

services, the corporation made an entry into a field with very few players. This has been

enthusiastically received and is meeting a long felt need of small industrialists.

The corporation has secured registration as debenture trustee from SEBI under the

Securities and Exchange Board of India Act, 1992. This was the first time (i.e., till 1992) an

SFC has been entrusted with this responsibility. A fee based service can thus be offered to

companies whose non-convertible debentures are subscribed to by the corporation.

Table 6.9

Shows the special lendings by KSFC during the years under study.

Table 6.9 shows the special lendings by KSFC during the years under study.

It can be seen from Table 6.9 that bridge loan to the extent of 2,871.99 lakhs is

provided to 1,266 entrepreneurs during the first four years under study. The hire purchase

assistance ranked second in terms of number with 697 cases and fourth in terms of amount

with the assistance of Rs. 8,254.27 lakhs. The leasing finance though ranked fifth with only

128 cases, stands third in terms of amount with Rs. 8,746.49 lakhs of assistance. The

sanctions under fund based merchant banking services during the last four years under study

was Rs. 24,335.17 lakhs to 145 entrepreneurs and under non-fund based merchant banking

services during the last three years under study was Rs. 12,733.35 lakhs to 131 entrepreneurs.

The involvement of huge cash outlay under leasing finance and merchant banking assistance

is due to small number of big sized loans to entrepreneurs.

The good performance of the merchant banking assistance scheme is proved by the

fact that the activity has generated an income of Rs. 7.03 crores in 1994-95, Rs. 14.91 crores

in 1995-96, Rs. 15.22 crores in 1996-97 and Rs. 13.09 crores in 1997-98 for the corporation.

10. Socio-economic Contribution of KSFC Assisted Entrepreneurs/Projects

The entrepreneurs who are assisted by the corporation cannot be treated in isolation,

because the business promoted by them is a part of a wider socio-economic system. The units

promoted by them is expected to provide quality products/ services to the society, generate

the employment opportunities so as to reduce the pressure on the government to give jobs and

avoiding so many social evils which the country is facing now (they include terrorism, anti-

nationalism, etc.). The corporation is discharging this responsibility by giving assistance to

existing as well as new entrepreneurs in the state. The same is presented in the ensuing Table

6.10.

Table 6.10

Socio-economic Contribution of KSFC Assisted Entrepreneurs/Units

Year Value a/Output(Rs. in lakhs)

InvestmentCatalysed

(Rs. m lakhs)

EmploymentGenerated(numbers)

NewEntrepreneurs Total No. of

Assisted(numbers)

Percentage toEntrepreneurs

Assisted

1990-91 1,25,443.90 41,814.63 2,09,073 6,814 (8670)

78.59

1991-92 1,66,439.25 55,479.75 2,77,398 10,343 (10,922)

94.69

1992-93 ,

1,68,124.30 56,041.43 2,80,207 13,219 (15,233)

86.77

1993-94 1,71,612.65 57,204.22 2,86,021 11,413 (13,224)

86.30

1994-95 2,33,492.25 77,830.75 NA 11,763 83.49 (14.089)

1995•96 3,11,813.70 1,03,937.90 NA 11. 955 (14819)

80.67

19%•97 3,34,894.25 1,11,631.42 NA 9,344 (13053)

71.58

1997-98 2,39,573.35 79,857.78 NA 4,485 (6970)

64.34

TOTAL 17,51,393.65

5,83,797.88 10,52,699 79,336(96,980)

Source: Operational statistics of KSFC for the respective years.

Note: Figures in parentheses denote total number of entrepreneurs assisted under all the

schemes of KSFC.

NA: Not Available.

It is evident from Table 6.10 that the investment catalyzed by the assisted projects is

expected to be Rs. 5,83,797.88 lakhs and the value of output estimated is at Rs. 17,51,393.65

lakhs during the period under study. It is important to note that the investment catalysed and

value of output of the projects assisted increased continuously from 1990-91 to 1996-97 but

reduced in 1997-98. The employment generated by these projects is also on the increase from

year to year during the first four years under study and particulars relating to the employment

generated during the last four years under study is not available. Assisting new and new

entrepreneurs besides encouraging the existing units is one of the important objectives of

KSFC.

Table 6.10 depicts that corporation has succeeded in achieving this objective also,

since 81.80 per cent of the total entrepreneurs (79,336 out of 96,980 entrepreneurs) assisted

are first time availers of KSFC finance.

PART - B

KSFC in Shimoga District

Finance is the crucial element for setting up of new projects, for their modernization,

expansion, diversification, etc. KSFC is one quasi-governmental agency catering to the needs

of the entrepreneurs. The corporation has a number of schemes under which financial

assistance is provided to the entrepreneurs. In Shimoga district, there is one grade 'A' branch

office at Shimoga and a field office at Sagar (which is closed in 1999-2000). The grade 'A'

branch office at Shimoga is well equipped with efficient and qualified personnel.

The study into the financial role of KSFC will not be complete unless the entire gamut

of its activities other than those discussed earlier is analyzed. Such an analysis is necessary to

know how far the corporation is successful in achieving the entrepreneurship development

role in the case study area. It is proposed, therefore, to discuss its lending operations in

Shimoga district in the following pages.

1. Analysis of Gross Sanctions

The sanctions to the entrepreneurs is made by Shimoga branch office and directly by

the head office. Table 6.11 shows the total sanctions made by the corporation during the

period under study.

Table 6.11 reveals that large number of sanctions are made by the branch office

during all the years under study. The head office sanctions are finger countable in terms of

number but involves huge amount of money. The performance of the' corporation in respect

of sanctions shows a mixed trend during the years under study.

Table 6.11

Year-wise Gross Sanctions in Shimoga District

(Amount: Rs. in lakhs)

Year Gross Sanctions Growth Rate Achieved against the Respective Previous Year in Terms of;

Branch Office Head Office Total

No. Amt No. Amt No. Amt No. Amt

1990-91 821 596.65

(641)

6

(396.93)

222.05

(7)

827

(113.95)

818.70

(648)

27.62

(510.88)

60.25

1991-92 557 655.14 6 199.65 563 854.79 -31.93 4.40

1992-93 539 593.67 2 33.40 541 627.07 -3.91 -26.64

1993-94 337 602.32 5 138.25 342 740.57 -36.79 18.10

1994-95 319 706.23 9 390.58 328 1,096.81 -4.10 48.10

1995-96 380 957.01 12 373.72 392 1,330.73 19.51 21.32

1996-97 337 1,103.86 15 407.73 352 1,511.59 -10.21 13.59

1997-98 187 631.44 12 425.80 199 1,057.24 -43.47 -30.06

Source: Operational statistics of KSFC for the respective years.

Notes:

1. Figures in parentheses denote gross sanctions for the year 1989-90 placed to calculate

the growth rate for the year 1990-91.

2. The branch office sanctions include sanctions under VISHWA scheme of Karnataka

state government.

The number of sanctions declined from 827 in 1990-91 to 328 in 1994-95. Again, it

picked up to 392 in 1995-96 and reduced considerably to 19'9 in 1997-9.8. Similarly, the

amount sanctioned is increased from Rs. 818.70 lakhs in 1990-91 to Rs. 854.79 lakhs in

1991-92. The year 1990-91 witnessed a percentage growth rate of 27.62 in terms of number

and 60.25 per cent in terms of amount as against the relevant previous year. But the year

1991-92 witnessed a negative growth rate of 31. 93 per cent (declined to that extent) in terms

of number and +4.40 per cent in terms of amount as against the relevant previous year. This

shows the granting of big sized loans to the entrepreneurs. In 1992-93, the sanctions touched

to Rs. 627.07 lakhs to 541 cases registering a negative growth rate of 26.64 per cent in terms

of amount and 3.91 per cent in terms of number as against the relevant previous year. In

1993-94, and 1994-95, though the number of sanctions reduced in terms of number (showing

a negative growth rate of 36.79 per cent and 4.10 per cent as against the respective previous

year), it showed a positive growth rate of 18.10 per cent in 1993-94 and a massive 48.10 per

cent in 1994-95 as against the relevant previous year. The corporation experienced a surge in

amount sanctioned in 1994-95. In 1995-96, the total sanctions touched to Rs. 1,330.73 lakhs

to 392 entrepreneurs registering a growth rate of 21.32 per cent in terms of amount and 19.51

per cent in terms of number as against the relevant previous year. In 1996-97 the total

sanctions touched to Rs. 1,511.59 lakhs to 352 entrepreneurs, registering a growth rate of

13.59 per cent in terms of amount and -10.21 per cent in terms of number as against the

relevant previous year. The year 1997-98 was a challenging year for KSFC, since the

corporation has experienced a setback in sanctions both in terms of amount and number.

During this year, the total sanctions under all the schemes of KSFC touched to Rs. 1,057.24

lakhs to 199 entrepreneurs, registering a negative growth rate of 30.06 per cent in terms of

amount and 43.47 per cent in terms of number as against the relevant previous year. The

reason for this decline being the corporation posed problems in mobilising the applications on

account of deceleration observed in industrial growth, steep power-cuts prevailing in the

state, high lending rates, rigid formalities to avail the loan, attraction of entrepreneurs by

banks and some other financial institutions, etc.

The district-wise analysis made earlier (Table 6.5.1) reveals that the district failed to

get its legitimate share when population is taken as the criterion. The district's due share is

4.25 per cent, but faced a deficiency of -1.96 per cent (share got is only 2.29 per cent) in

terms of amount and placed 4th among the deficiency facer districts in the state. It is also

important that the district is ranked 14th in terms of amount sanctioned and 11th in terms

number of sanctions in the state. This stresses the need on the part of corporation to give

special attention to the district.

2. Analysis of Targets and Achievements in Sanctions

Table 6.12 shows the year-wise targets and achievements of Shimoga branch office in

gross sanctions in the district.

Table 6.12

Year wise Targets and Achievements in Branch Sanctions

(Amount: Rs. in lakhs)

Year Grass Sanctions Percentage

Achievement to the

Target in Terms of

Target Achievement

No. Amount No. Amount No. Amount

1990-91 400 620.00 821 596.65 205.25 96.23

1991-92 410 700.00 557 655.14 135.85 93.59

1992-93 400 750.00 539 593.67 134.75 79.15

1993-94 500 610.00 337 602.32 67.40 98.74

1994-95 360 650.00 319 706.23 88.61 108.65

1995-96 325 920.00 380 957.01 116.92 104.02

1996•97 332 1,100.00 337 1,103.86 101.50 100.35

1997-98 345 700.00 187 631.44 54.20 90.20

Source: Operational statistics of KSFC for the respective years.

Note: Target and achievement is relating to all the schemes of KSFC and VISHW A scheme

of Karnataka state government.

Table 6.12 reveals that there is variation in achievement in sanctions over the years.

During the year 1990-91, the achievement in sanctions is more than 2 times (205.25 per cent)

in terms of number, but it is just 96.23 per cent in terms of amount. Similarly, during the year

1991-92 and, 1992-93, though the achievement in sanctions is satisfactory in terms of number

(the achievement percentage is 135.85 per cent in 1991-92 and 134.75 per cent in 1992-93), it

is only 93.59 per cent in 1991-92 and poor 79.15 per cent in 1992-93 in terms of amount. One

of the reasons for this wide gap in achievement in terms of number and amount during the

first 3 years under study is granting of large number of (1,163, out of 1,917 sanctions which

constitutes 60.67 per cent of the total sanctions in those 3 years) small sized loans (less than

Rs. 20.000 per entrepreneur) to entrepreneurs under the VISHWA scheme of the Karnataka

government. The corporation received bitter experience in 1993-94 as the achievement in

sanctions was only 67.40 per cent in terms of number and 98.74 per cent in terms of amount.

In 1994-95, though the achievement was not satisfactory in terms of number (the

achievement is 88.61 per cent of the target), it was satisfactory in terms of amount, since the

corporation was able to cross the target by sanctioning Rs. 706.23 lakhs which comes to

108.65 per cent of the target, i.e., Rs. 650 lakhs. The year 1995-96 was a year of boost to the

corporation, since it had reached the goal with an achievement of 116.92 per cent in terms of

number and 104.02 per cent in terms of amount. Similarly in 1996-97 also, the corporation

was able to reach the target both in terms of number and amount. But the year 1997-98

witnessed a sharp decline in the number of sanctions (187 as against 345 sanctions targeted)

and amount sanctioned. However, the decline rate in amount sanctioned (decline rate is 9.80

per cent) is less than the rate in number of sanctions (decline rate is 45.80 per cent). This

shows the sanction of big sized loans than the size of the loan targeted.

The analysis of the Table 6.12 can also be made by taking into account the targeted

growth rate and growth rate achieved in terms of amount during the years under study.

Accordingly, the targeted growth rate was 42.53 per cent in 1990-91, 12.90 per cent in 1991-

92,7.14 per cent in 1992-93, -18.67 per cent in 1993-94, 6.56 per cent in 1994-95, 41.54 per

cent in 1995-96, 19.56 per cent in 1996-97 and -36.36 per cent in 1997-98. The respective

growth rate achieved during these years was 16.79 per cent, 9.80 per cent, -9.31 per cent,

1.45 per cent, 17.25 per cent, 35.50 per cent, 15.34 per cent and -42.80 per cent. These

calculations reveal that the performance of the corporation was much satisfactory in 1993-94

and 1994-95 but not satisfactory in 1990-91, 1991-92, 1995-96 and 1996-97 and too weak in

1992-93 and 1997-98. This underlines the need for fixing the targets more wisely by taking

into account the economic position of the country/state in general and Shimoga district in

particular, status of the existing units, recovery performance, market for the products of

entrepreneurs, income distribution, lending rates, existence of money lending institutions in

the district, past experience of the corporation, etc.

3. Analysis of Taluk-wise Sanctions

A study in to the taluk-wise sanctions is made to know how far the corporation was

able to meet the legitimate share of each taluk and was instrumental to growth of the district.

Table 6.13 shows the taluk-wise sanctions made during the period under study.

Table 6.13

Taluk -wise Sanctions in Shimoga District

(Amount: Rs. in Iakhs)

Name of the taluk Gross sanctions from the year 1990-

91 to 1997-98

Percentage share to total in

terms of

No. Amount No. Amount

Shimoga 1.184 2,711.42 53.46 46.95

Bhadravati 348 1.038.38 15.71 17.98

Sagar 198 512.70 8.94 8.88

Shikaripur 122 495.51 5.51 8.58

Channagiri 102 230.34 4.60 3.99

Honnali 84 301.74 3.79 5.23

Soraba 77 263.66 3.48 4.57

Thirthahalli 65 145.75 2.93 2.52

Hosanagar 35 75.37 1.58 1.30

TOTAL 2,215 5.774.87 100.00 100.00

Source: Annual Sanctions Register, KSFC, Shimoga.

Note: Sanctions under VISHWA scheme and head office sanctions excluded.

Table 6.13 depicts that the Shimoga taluk alone has received 46.95 per cent of the

total assistance covering 53.46 per cent of the total number of sanctions. The share of the

Bhadravati taluk, which ranked second, is 17.98 per cent of the total sanctions covering 15.71

per cent of the total number of sanctions. The respective share (i.e., share of each taluk in

terms of amount and number) of other taluks being: Sagar 8.88 per cent and 8.94 percent,

Shikaripur 8.58 per cent and 5.51 per cent, Channagiri 3.99 per cent and 4.60 per cent,

Honnali 5.23 per cent and 3.79 per cent, Soraba 4.57 per cent and 3.48 per cent, Thirthahalli

2.52 per cent and 2.93 per cent and Hosanagar 1.30 per cent and 1.58 per cent.

The better analysis of these figures can be made by comparing the share of each taluk

in the total population of the district with the share in the corporation's assistance during the

period under study. Accordingly, the taluk-wise population distribution is 19.14 per cent of

the total population of district in Shimoga, 17.02 per cent in Bhadravati, 9.29 per cent in

Sagar, 9.89 per cent in Shikaripur, 13.44 per cent in Channagiri, 10.48 per cent in Honnali,

8.51 per cent in Soraba, 6.86 per cent in Thirthahalli and 5.37 per cent in Hosanagar. The

comparison of each taluk's share in the corporation's assistance with the above population

figures indicates that there is not much gap between the two in case of Bhadravati, Sagar and

Shikaripur taluks. But the taluks of Channagiri, Honnali, Soraba, Thirthahalli and Hosanagar

failed to secure their due share in the corporation's assistance. The deficit in these taluks is

enjoyed by the entrepreneurs of Shimoga taluk only with the share of 46.95 per cent in terms

of amount and 53.46 per cent in terms of number. Even in Shimoga and Bhadravati taluks,

about 90 per cent of the assistance is granted to the entrepreneurs in Shimoga and Bhadravati

city only.

It is also not out of interest to see how much of the assistance went to malnad

regionltaluks (such as Sagar, Sorab, Hosanagar and Thirthahalli) and non-malnad taluks.

Accordingly the share of malnad taluks in KSFC's assistance is only 17.27 per cent in terms

of amount and 16.93 per cent in terms of number but that of non-malnad taluks is 82.73 per

cent in terms of amount and 83.07 per cent in terms of number. This shows the backwardness

of malnad taluks in the entrepreneurship development with KSFC's assistance though backed

by talented people, rich natural resources and strong financial background (because of

arecanut cultivation).

These figures show the failure of the corporation in achieving balanced growth of the

district and concentration of its efforts in certain pockets of the district.

4. Analysis of Sector-wise Sanctions

The corporation provides financial assistance to SSIs, transport sector and for other

activities such as nursing homes, STD/ISD booths, lodges, hotels, marketing of products of

SSIs, etc. Table 6.14 shows the sanctions made by the corporation to the SSI sector, transport

sector and others sector.

Table 6.14

Sector -wise Sanctions in Shimoga District

(Amount: Rs. in lakhs)

55! Transport Others Total

Year No. Amount No. Amount No. Amount No. Amount

1990•91 166 337.51 96 227.62 5 4.26 267 569.39

1991•92 116 309.79 106 270.62 30 54.57 252 634.98

196.77 36 61.66 235 57<1.20

1992•93 116 315.77 83

1993•94 t03 358.57 121 210.66 14 28.53 238 597.76

1994•95 191 498.15 107 180.64 21 27.44 319 706.23

1995•96 175 653.95 180 247.76 25 55.30 380 957.01

1996•97 151 725.57 166 298.97 20 79.32 337 1,103.86

1997•98 89 399.86 73 150.64 25 80.94 187 631.44

Total 1,107 3,599.17 932 1,783.6 176 392.02 '

2,215

5,774.87

Source: Annual Sanctions' Register, KSFC, Shimoga.

Note: Sanctions under VISHWA scheme and head office sanctions excluded.

Table 6.14 reveals that the SSI sector continued to claim the major portion of the

corporation's assistance with 62.32 per cent share in total sanctions during the period under

study. During this period though the share of SSIs accounted for 49.98 per cent in terms of

number (1,107 out 2215 sanctions), in terms of amount it is 62.32 per cent (Rs. 3,599.17

lakhs out of Rs. 5,774.87 lakhs). At the same time, the transport sector received 30.89 per

cent of the total assistance (Rs.1,783.68lakhs out of Rs. 5,774.87lakhs) covering 42.07 per

cent of the total cases (932 out of 2,215 sanctions). This is because of less number of big

sized loans granted to SSI sector and large number of small sized loans granted to transport

operators. The other sector/activities ranked third both in terms of amount and numbers with

the assistance of Rs. 392.02 lakhs covering 176 cases.

To conclude, the above figures depicts the role played by the corporation in the

development of industrial entrepreneurship in the study area and figuring of service

entrepreneurship also (i.e., transport sector and other activities) in the portfolio of the

corporation.

5. Analysis of Category cum Sector-wise Sanctions•

The corporation is continued to accord top priority to the entrepreneurs belonging to

special segments of the society who require more attention. Table 6.15 shows the category

cum sector-wise allocation of sanctions during the period under study.

Table 6.15 indicates that out of the total sanctions, 28.02 per cent (Rs. 1,618.36 lakhs)

of the assistance covering 39.28 per cent of the total number of sanctions (870 cases) has

gone to special category entrepreneurs. The sector-wise sanctions being 22.20 per cent of the

total sanctions covering 30.71 per cent of the total number of sanctions to SSI sector, 39.75

per cent of the total sanctions covering 50.11 per cent of the total number of sanctions to

transport sector and 28.18 per cent of the total sanctions covering 35.79 per cent of the total

number of sanctions to others sector. These figures show the excessive concentration of the

special category entrepreneurs in the transport sector (50.11 per cent) and other sector (35.79

per cent) which requires less talent, risk bearing and uncertainty bearing capacity, expertise

and technical skill (except nursing home and hotels in others sector) when compared with the

SST sector.

Table 6.15

Category cum Sector-wise Sanctions in Shimoga District

(Amount: Rs. in lakhs)

Category Gross

Sanction

s from

1990•91

to

1997•98

SS! Transport Others Tota

l

No. Amount No. Amount No. Amount No. Amount

Special

Category

SC/ST 72 61.79 213 174.24 09 6.44 294 242.47

Women 124 402.97 44 14353 34 54.99 202 601.49

Minority 94 301.75 195 361.17 12 45.89 301 708.81

PH 03 050 05 1.26 06 1.53 14 3.29

WE/SC 39 4.22 04 10.17 43 14.39

WE/MC 05 2653 04 16.84 01 1.25 10 44.62

WE/PH 01 0.15 02 1.78 03 1.93

Me/PH 02 1.00 01 0.36 03 1.36

Sub-Total 340 798.91 467 708.99 63 110.46 870 1,618.36

General 767 2,800.26 465 1,074.69 113 281.56 134 4,15651

Category 5

Total 1.107 3.599.17 932 1.783.68 176 392.02 2,21

5

5,774.87

Percentage

share

of special

category

entrepreneurs

to

total 30.71 22.20 50.11 39.75 35.7

9

28.18 39.2

8

28.02

Source: Annual Sanctions Register, KSFC, Shimoga.

Note: Sanctions under VlSHWA scheme and head office sanctions excluded.

PH : Physically handicapped

WE: Women entrepreneur

MC : Minority community.

The concentration of 3 major group of special category entrepreneurs, viz., SC/ST,

women and minority community reveals that 72.24 per cent of SC/ST entrepreneurs (213 out

of 294 entrepreneurs), 64.78 per cent of the entrepreneurs belonging to minority community

(195 out of 301) are concentrated in the transport sector which required less technical

knowledge, skill, expertise, etc., when compared with the SSI sector. The women

entrepreneurs (including women entrepreneurs belonging to SC/ST, minority group and

physically handicapped) though enjoying 65.50 per cent share in the SSI sector (169 out of

258 women entrepreneurs), the field surveyor the primary data reveals that 67.57 per cent of

the total units owned by women (25 out of 37 units) are actually controlled and managed by

the male counterparts.

These figures underline the effort on the part of corporation to attract more and more

number of entrepreneurs from hitherto neglected sector of the society towards the small scale

industrial activity.

6. Analysis of Activity-wise Sanctions

The classification of entrepreneurs according to the type of activity in which they are

engaged and type of entrepreneurship developed by certain countries has attracted the

attention of many researchers. Vasanth Desai in a study of entrepreneurial functions

mentioned that Britain, due to geographical limitations has developed trading

entrepreneurship. Accordingly, depending upon the nature of activity in which the assisted

entrepreneurs/units are engaged, they are classified into two categories, viz., production and

processing activity/units and servicing activity/units. In the case study area, assistance is

provided by the corporation to the following types of activities.

6.1 Production and Processing Activity/Units

1. Products of cement/concrete bricks.

2. Production of agarbatis.

3. Ice-candy and ice-cream making.

4. Soda water and ice-blocks manufacturing.

5. Preparation of Idli Rava.

6. Masala powder and potato chips making.

7. Sugandha Adike powder making and Arecanut processmg.

8. Adike Hale Donne manufacturing.

9. Leather bags manufacturing.

10. Manufacturing of Hawai chappals.

11. Handloom and wool weaving units.

12. Steel furniture making.

13. Plastic goods manufacturing/PVC pipes making units.

14. Cattle feeds production/poultry feed.

15. Chilly powder making.

16. Readymade garments and leather garments making.

17. Notebooks and register book making.

18. Concrete mixtures and Gobar gas drum making.

19. Sandalwood carving.

20. Wooden furniture making.

21. Rice processing and paddy drying units.'

22. Flouring of food grains.

23. Oil extraction and refinery units.

24. Tin making units.

25. Bakery, biscuit manufacturing.

26. Polythene bags manufacturing.

27. Cashew nut processing.

28. Fibre glass making.

29. Stone quarrying/stone crushing.

30. Mosaic tiles making.

31. Candle manufacturing.

32. Cushion works.

33. Pot making.

34. Mill board and paper board manufacturing.

35. Manganese stone crushing unit.

36. Crushing of food grains.

37. Vehicle wheel alignment (computerised).

38. Synthetic paints making.

39. Fly ash bricks.

40. Manufacturing of thread rubber.

41. Errited water making

42. Stone cutting and polishing.

43. Poultry farms.

44. Agricultural equipments manufacturing units.

45. General fabrication works.

46. Fruit juice making.

47. Shavige manufacturing.

48. Auto-electrical works, Battery charging and reconditioning.

49. Machining of cylinder valves.

50. Refrigerator repairs.

51. Bamboo works.

52. Popcorn making.

6.2 Servicing Activity/Units

1. To purchase transport vehicle.

2. Tyre retreading works.

3. Hotel industry including lodges.

4. Vehicle repairing and servicing.

5. STD/ISD booths.

6. Cable T.V. network units.

7. Nursing homeslto instal electro-medical equipments.

8. General engineering works.

9. Stitching of clothes and laundrying.

10. Xerox centres.

11. Computer centres including software development.

12. Automobile service centres.

13. Income tax and Sales tax consultancy services.

14. Bar and Restaurant.

15. Eye testing centres.

16. Diesel pump overhauling and servicing.

17. Beauty parlours.

18. Architect consultancies.

19. Weighing of loaded vehicles.

20. Ornament cutting works.

21. Purchase of road rollers.

22. Acquisition of delivery vans by marketing entrepreneurs.

23. Ultra sound scanning.

24. Hi-tech video modelling and video graph.

25. Screen printing.

26. Godown construction.

Table 6.16 shows the activity-wise sanctions made by the corporation during the

period under study.

Table 6.16

Activity-wise Sanctions in Shimoga District

Type of the Activity /Units

(Amount: Rs. in lakhs) Gross Sanctions from the Year Percentage Share to Total

1990•91 to 1997-98 in Terms of;

No. Amount No. Amount

956 3,368.48 43.16 58.33

Production and processing activity/units

Servicing activity/units 1,259 2,406.39

Total 2,215 5,774.87

Source: Annual Sanctions Register, KSFC, Shimoga.

Note: Sanctions under VISHW A scheme and head office sanctions excluded.

Table 6.16 depicts that the share of the entrepreneurs in the production and.

processing line of activity though accounted for 58.33 per cent of the total amount

sanctioned, only 43.16 per cent of the total number of entrepreneurs (956 out of 2,215

entrepreneurs) are receiving the assistance from the corporation. The share of the

entrepreneurs who are in the line of servicing activity is 41.67 per cent in terms of amount but

56.84 per cent in terms of- number (1,259 out of 2,215 entrepreneurs). These figures show

the diversion of more funds towards the development of industrial entrepreneurship but

attraction of large number of entrepreneurs in the servicing line followed by the development

of servicing entrepreneurship. This proves the hypothesis that the corporation played a major

role in attracting more number of service entrepreneurs than the industrial entrepreneurs in

the study area.

In addition to that, besides the traditional industries such as food and beverages, wood

based industries, textiles, etc., the corporation is assisting/attracting different types of

industries. The above list of industries reveals the fact that in recent years, non-traditional

industries such as chemicals, cement products, glass and ceramics, rubber and plastic goods,

leather garments, electrical and electronics related industries, etc., and in the newly allowed

sectors such as nursing homes, electro-medical equipments installation, X-ray units,

computer services, beauty parlours and special types of industries like transport, hotels, bar

and restaurants and lodges have been figuring more and more in the corporation's portfolio

than the earlier years. This is to a significant extent the result of a deliberate policy followed

by the corporation to encourage non-traditional industries. This shows the diversion of funds

of the corporation towards the non-traditional industries.

Form or Organisation

Table 6.17

Constitution•wise Sanctions in Shimoga District

(Amount: Rs. in lakhs)

Percl?1ltage Share to Tor:!.1 in Terms o[

No. Amount

83.07 62.31

15.53 32.89

1.35 4.62

0.05 0.18

100.00 100.00

It is evident from Table 6.17 that out of 2,215 e,trepreneurs assisted by the

corporation, 1,840 entrepreneurs constituting 83.07 per cent to the total have preferred the

sole proprietorship form of organisation followed by 344 entrepreneurs constituting 15.53 per

cent to the total preferred the partnership firm, 30 entrepreneurs constituting 1.35 per cent to

the total preferred company form of orgaItlsation and. only one unit is formed under co-

operative form of organisation. The respective share of these entrepreneurs in the amount

assisted is 62.31 per cent, 32.89 per cent, 4.62 per cent and 0.18 per cent. The receipt of

lesser share in amount sanctioned (62.31 per cent) by large number of sole proprietors (83.07

per cent) and receipt of huge amount of assistance (37.51 per cent) by small number of

partnership firms and joint stock companies (16.88 per cent) supports the belief that the size

of the sole proprietorship concern is usually small when compared with the other two forms

of organisations. Keeping in view this belief, it can be concluded that the corporation has

attracted large number of small entrepreneurs and they opted for small sized units. It is also

evident that, despite the demerits like limited capital, limited managerial ability, unlimited

liability and absence of continuity, the entrepreneurs preferred sole proprietary form of

organisation in large number, since it assures smooth running.

7. Analysis of Constitution-wise Sanctions

The entrepreneurs set up their projects under sole proprietorship or partnership or

company or under co-operative form of organisation. Table 6.17 shows the constitution-wise

sanctions made by the corporation durig the period under study.

Sole proprietorship concern Pannership firm

Joint stock company Co-operative society TOTAL

Gross Sanctions [rom the Year 1990-91 to 1997-98

No. Amount

1,840 3,598.41

344 1,899.25

30 266.91

01 10.30

2,215 5,774.87

8. Analysis of Size-wise Sanctions

The analysis of the size wise sanctions is made to know the size of the units owned by

the entrepreneurs in the study area on the assumption that there is a positive relationship

between the size of the loan and size of the projects/units owned by the entrepreneurs. Table

6.18 shows the size-wise assistance provided by the corporation.

Table 6.18 reveals that the share of units getting the assistance below Rs. 50,000 has

accounted for 30.12 per cent (667 units), between Rs. 50,001 - Rs 1 lakh is 8.22 per cent

Source: Annual Sanctions Register, KSFC, Shimoga.

Note: Sanctions under VISHW A scheme and head office sanctions excluded.

(182 units), between Rs. 1,00,001 - Rs. 2 lakhs is 19.86 per cent (440 units), between Rs.

2,00,001 - Rs. 5 lakhs is 28.53 per cent (632 units), between Rs. 5,00,001 - Rs. 10 lakhs is

8.49 per cent (188 units), between Rs. 10,00,001 - Rs. 25 lakhs is 4.42 per cent (98 units) and

above Rs. 25 lakhs is 0.36 per cent (only 8 units) during the period under study. If the number

of sanctions made under VISHW A scheme is also included, then the share of the units

getting below Rs. 50,000 assistance will be accounted for 55.48 percentage of the total

number of sanctions [667+1,262 = 1,929 out of 3,477 (2,215 + 1,262) sanctions]. Excluding

the VISHW A sanctions, a large majority of sanctions are for the projects below Rs. 5 lakhs

(86.73 per cent). These figures prove the hypothesis that the corporation has attracted large

number of small sized units! entrepreneurs in the study area.

?f rura~ Karn~taka. Under this scheme, the entrepreneurship lllstitUtlOnS lIke KHDC and

KVlC will undertake the responsibility of supplying the required raw materials to the tiny,

cottage and small units. They also undertake the task of selling the products manufactured by

the entrepreneurs through exhibition or government owned stores.

Under• this scheme, the KSFC provides the financial assistance to the eligible units. The size

of the assistance is depending upon the nature of the activity, need of the entrepreneurs, etc.

Table 6.19 shows the sanctions under this scheme.

head office sanctlons

Table 6.19

Sanctions under Vishwa Scheme

Taluk (Amount Rs. in lakhs)

Gross Sanctions Total

I 1990•91 1991•92 1992-93 1993•94

I ~ ... ~ ~ ~

~

:t :t :t :t :t

c c c c c

~ I: ~ I: ~ I: ~ I: ~ I:

"0:: "0:: "0:: "0:: "0::

Shimoga 67 4.02 16 1.60 83

5.62

Bhadravati 17 1.02 50 1.00 39 1.17 106

3.19

Sagar 98 3.01 67 3.68 6 0.33 171 7.02

Shikaripur 73 3.59 90 6.11 155 8.99 318

18.69

Channagiri 16 0.80 16

0.80

Honnali 57 2.60 97 5.50 50 4.40 54 3.06 258

15.56

Soraba 144 7.14 55 6.25 199

13.39

Thirthahalli 31 1.86 31

1.86

Hosanagar 67 4.02 13 1.30 80

5.32

Total 554 27.26 305 20.16 304 19.47 99 4.56 1,262 71.45

Source: Annual Sanctions Register, KSFC, Shimoga.

In t~e case study area 1,262 entrepreneurs (Table 6.19)

were aSSisted by the corporation. Out ,of which 860 were

women (68.14 per cent) and 402 were men (31.86 per cent). Of

the 860 women entrepreneurs, 483 belong to BCM category,

228 to general category, 79 to SC!STs and 70 are minority

women entrepreneurs. Of the 402 male entrepre~urs, 267

Table 6.18

Size.wise Sanctions in Shimoga District

Size of the Loan Number of Sanctions from the

/lmount in Ru ees Year 1990•91 to 1997•98

Below 50,000 667

50,001 to 1,00,000 182

1,00,001 to 2,00,000 440

2,00,001 to 5,00,000 632

5,00,001 to 10,00,000 188

10,00,001 to 25,00,000 98

Above 25,00,000 8

Total 2,215

Source: Annual Sanctions Register, KSFC, Shimoga. Note: Sanctions under VISHW A

scheme and

excluded.

Percentage Share to Total Number 0 Sanctions

30.12 8.22 19.86 28.53

8.49 4.42 0.36

100.00

9. Analysis of Sanctions under Vishwa Scheme

VISHWA scheme is not a KSFC sponsored scheme. This scheme was introduced by

the Karnataka state government in the month of October 1991. This scheme aims at building

up of rural entrepreneurship and strengthening the economic base

belong to BCM category, 47 belong to general category, 48 to Schedule Caste and 40

Scheduled Tribes. These figures show the importance. given by the corporation to the special

category entrepreneurs, V1Z., women, BCM, SC/ST and minority.

The entrepreneurs under this scheme are provided with term loan and working capital

for the purpose of sandalwood carvings, bamboo works, leather products making, handloom

weaving, silk reeling, coir products making and wool carpets making in the case study area.

The entrepreneurs of Shikaripur, Honnali, Soraba, Sagar and Bhadravati are the major

availers of the loan under this scheme. Entrepreneurs of Channagiri and Thirthahalli taluks

received negligible share in the KSFC's sanctions.

The existence of this scheme in operation for the .first four years under study and

sponsorship by the government of Karnataka are the reasons for excluding the assistance

under this scheme in the previous tables and analysis (i.e., from Table 6.13 to 6.18)

In order to see how far the scheme was able to generate the entrepreneurs, a group

survey at Talguppa, Marathur, Gowthampura and Heggodu was carried out. The survey

reveals that VISHW A scheme has failed to generate the entrepreneurs. Of the 30 units

surveyed (all women), 26 are not running their enterprises/businesses (on the date of field

survey). Among them, 11 have viewed that even today no loan a~ount/knitti~g machines is

received by them. KHDC, they opmed that, dId not supplied the required raw materials in

time ~d faile~ to make marketing arrangements properly, as proI:l1sed earher. A few of them

also opined that, the medIators had promised them that there is no need to repay the loan, but

now they are receiving the repayment notice (based on the report of the respondents).

It is thus noticed that the illiteracy, backwardness, Ignorance and a few other negative

traits of these women entrepreneurs were exploited or misused by some unknown persons.

There is an absence of transparency in the implementation of this scheme. Finger countable

officials of KSFC opined (orally) that they are not bothered about the recovery of loan, since

the money granted by them is g~a:anteed by the government of Karnataka. Therefore, it is a

v1~able to design these types of programmes (politically motIvated) in such a way that there

shall be no room for m~diator's role. If not, the designed fruits may not be achieved an the

mediators may enjoy at the cost of others.

Assessment of the Performance in Financing the Entrepreneurs

The d perat10nal performance of the KSFC during the years

und er s~udy at the Karnataka state level is really commendable an sattsfactory. The analysis

of sanctions number-wise and

amount-wi d l' f . .

'. se an ana YS1S 0 sector-w1se, purpose-wIse,

act1vlty-wis' d" 1 fl f '. d

e ass1stance, lrectlOna ow 0 ass1stance an

according preference to local entrepreneurs indicates that the

corporati" h f . h

h On 1S growlllg at a muc aster pace III testate. But

t e corporation is unable to maintain regional balance in the

state This' 'd f h f h h Sh' d'"

• 1S eV1 ent rom t e act t at t e 1moga Istnct IS

una Ie to . d h . h .,.

S"l . get 1tS ue s are m t e corporatlOn s asSIstance .

. Im1 arly 1n Shimoga district, the assistance of the corporation 1S 1 c~ncentrated in certain

pockets of the district and mal~ad ta u ~ have failed to get their due share. The achievement

in s~ct~ons shows a mixed trend during the period under study an ~s declined sharply ~n the

year 1997-98 in terms of numh er. In the year 1998-99 the corporation was not able to

reac the t . . ( h . db' R

439 arget III sanctlOns t e amount sanctlOne emg s.

144.87 lakhs to 95 cases as against the target of Rs. 700 lakhs to

. h cases). The situation in 1999-2000 has further worsened ~lt the assistance of 278.25 lakhs

covering 65 cases as against t he. target of Rs. 600 lakhs to 130 cases. During this year the

ac levement . . f

d percentage IS 46.34 per cent m terms 0 amount

~ ~O per cent in terms of number. At this juncture, it was S~ ~ t at to know how the

entrepreneurs assisted by KSFC in 1moga district feel about the corporation, its services,

b

238

Financial Role of KSFC in the Development of Entrepreneurship

problems faced in getting the assistance and also their views on further scope for

improvement in the present services. To see this, an assessment of the performance of KSFC

is carried out (besides the secondary data) by taking into account the

following:

1. The extent to which entrepreneurs have relied on KSFC to meet their initial capital

requirements (i.e., Source of

Initial Capital).

2. Adequacy of the term loan sanctioned and the source

relied to meet the shortfall (i.e., Term Loan and KSFC).

3. Source of working capital, adequacy of it and the source relied to meet the shortfall

(i.e., Working Capital and

KSFC).

4. Commitment of KSFC in Lending.

5. KSFC and Entrepreneur/Way of Approaching the KSFC.

6. Follow-up Activities of KSFC.

7. Evaluation of Terms of Lending.

1. Source of Initial Capital

It is quite interesting to examine the sources from which the entrepreneurs raised the initial

capital. Tne entrepreneur might have come up on his own or on being financially encouraged

and motivated by the members of his family, relatives, friends, financial institutions, banks

and moneylenders. The interest of the re.§earcher is to ascertain the man/source responsible

for infusing the spirit of enterprise in the entrepreneur. The following Table 6.20 shows the

combination of various sources

of initial capital.

We can understand from Table 6.20 that the source of

initial capital consisted of own capital and borrowed capital. It reveals that the respondents

were dependent on a number of sources for raising the initial capital. However, 41

entrepreneurs r.epresenting 14.64 per cent• of the samplet size (Sl. Nos. 1, 2, 3, 7 and 33)

were dependent on only on.e source for raising the initial capital. The remaining 239

entrepreneurs

Financial Role of KSFC in the Development of Entrepreneurship

Table 6.20 Entrepreneur's Source of Initial Capital

I

\

Si.

No. Sources

1. Own money invested

2. Borrowed from family members

3. Karnataka Sute Financial Corporation (KSFC)

4. Own money Invested and borrowed from family members

5. Borrowed from family members and KSFC

6. Own money invested and KSFC

7. Moneylenders

8. KSFC and moneylenders

9. Borrowed from family members and relatives

10. Own money invested and commercial bank

11. Borrowed from family members and commercial bank

12. Own money. borrowed from family members and KSFC

13. Own money invested, borrowed from family members, KSFC and bank

14. Own money, borrowed from family 'members and

lenders money-

15. Own money, borrowed from friends, KSFC and bank

16. Own money, KSFC and commercial bank

17. Borrowed from family members and friends

18. Own money and borrowed from friends

19. Own money, borrowed from friends and KSFC

20. Own money and moneylenders

21. Own money, KSFC and moneylenders

22. Own money, borrowed from family members, friends, KSFC

and moneylenders

23. Own'money, borrowed from friends, KSFC and moneylenders

24. Borrowed from family members, KSFC and moneylenders . 25 Borrowed from family

members, friends KSFC and

lenders. ,money-

26. Own money, borrowed from family members friends and

KSFC '

27. Borrowed from family members, friends and KSFC

28. Borrowed from family members, KSFC, moneylenders and commercial bank

29. Own money, borrowed from family members KSFC and

moneylenders '

30. Own money, borrowed from family members, KSFC and commercial bank

31. Own money, borrowed from friends and family members and moneylenders.

32. Own money, borrowed from friends and commercial bank

33. Hand tool Total

Source: Survey Data.

No. of

E ntrepreneu rs 26

02

11

03

51

99

01

07

09

04

02

20

01

239

01

01 06 01 01 07 01 03 . 01

02 02 01

07

01 01

03

02

01

01 01 280

were dependent on more than one source of capital. It is important to note that 227

entrepreneurs representing 81.07 per cent of the sample size borrowed initial capital from

KSFC besides borrowing from other sources. The rest of the entrepreneurs (i.e., 53

entrepreneurs) borrowed loan from KSFC for expansion, diversification or modernisation of

the existing units or for the revival of a sick unit.

A noteworthy feature of the pattern of financing of entrepreneurs' units is that 190

entrepreneurs have invested their own money, 109 entrepreneurs have borrowed from

members of their family, 24 from friends, 23 entrepreneurs from moneylenders and 18

entrepreneurs from commercial banks. This shows the inadequacy of KSFC's assistance in

setting up of the project in some cases. It is very interesting to note that 1 entrepreneur has

started his unit in the year 1970 with a hand tool worth Rs. 90 given by his friend (that was a

kind of initial capital). Now he is an entrepreneur receiving serious recognition in the study

area.

Above mentioned analysis signifies the existence of a desirable situation to KSFC,

since good number of entrepreneurs borrowed/raised initial capital from the corporation and

invested their own money also.

It is a strong belief that the community background and family background of

entrepreneur mainly influence the source of financial assistance. An analysis of the

community background of entrepreneur and source of initial capital reveals that majority of

the women entrepreneurs borrowed initial capital from family members and SC/ST

entrepreneurs from KSFC, friends, relatives and moneylenders.

Those from the trade or industrial background opined that they can draw the initial

capital easily since they have got relatives in the same trade and they have imbibed

entrepreneurial skill.

2. Term Loan and KSFC

Most of the studies on Indian small scale industries emphasis that the small

entrepreneurs lack adequate funds of their own to establish, to develop and to expand their

enterprise.

The assessment of the adequacy of long term loans granted by the KSFC is made on

the basis of the difference between the amount of loans requisitioned by the

borrowers/entrepreneurs and the amount sanctioned by the KSFC and by studying the

dependence of entrepreneurs to meet the shortfall. Tables 6.21 and 6.22 show the adequacy of

the term loan sanctioned and source relied to meet the shortfall respectively.

Table 6.21

Term Loan Sanctioned to Entrepreneurs by KSFC

Percentage of Loan Sanctioned 100 per cent / Full amount 70 per cent to 90 per cent

50 per cent to 70 per cent Less than 50 per cent

Total

Source: Survey Data,

A study of the amount of long term loan sanctioned by KSFC as against the amount

requested by the entrepreneurs (Table 6.21) reveals that as much as 18.57 per cent of the

entrepreneurs who had borrowed for long term had been, sanctioned the full amount of loan

requested by them. Further, as much as 48.93 per cent of the entrepreneurs had been

sanctioned loans ranging from 70 per cent to 90 per cent of the loan applied for, while 26.07

per cent of the entrepreneurs had been sanctioned loans ranging from 50 per cent to 70 per

cent of the loans applied for. Only 6.43 per cent of the entrepreneurs had sanctioned less than

50 per cent of the loans applied for.

Thus a small group of entrepreneurs (18.57 per cent) has been sanctioned full amount

of loan applied for by them while a vast majority of the entrepreneurs, 81.43 per cent, had

secured less than the amount of loan applied for by them.

No. of Entrepreneurs 52

137

73

18

280

Percentage 18.57 48.93 26.07

6.43 100.00

The entrepreneurs to whom full amount of assistance is not available have to invest

either their own money or have to rely on some other source to meet the shortfall. Table 6.22

shows the .remedies resorted to by the entrepreneurs to meet the gap between finance

required and sanctioned.

Table{6.22

Source Relied to Meet the Shortfall

entrepreneurs have relied on two or more sources to meet their initial capital

requirements in the study area.

373

163.58

3. Working Capital and KSFC

Term loan and working capital are the two pillars of any entrepreneurial activity, thus

one without another is unil1laginable. Thus a study into the working capital sanctions made

by the KSFC to the entrepreneurs, adequacy of it, source relied to bridge the gap between

working capital required and working capital sanctioned and the remedies resorted to by the

non-borrowers of working capital from KSFC is made and preSented in the Table 6.23.

The analysis of Table 6.23 reveals that out of 280 only 70 entrepreneurs constituting 25 per

cent to total had obtained Working capital from KSFC and a large majority had not borrowed

working capital from KSFC (Part A). It is observed that (Part B) as much as 77.15 per cent of

the entrepreneurs who had obtained working capital, had been sanctioned less than their

requirement or the amount requested, while only 16 entrepreneurs constituting 22.85 per cent

to total had been sanctioned the full amount of working capital requested by them.

Source

Own money invested Banks

Family members Friends and relatives Moneylenders/Private financial institutions Total

No. of EntTepreneurs 190

18

109

32

24

Percentage to Total i.e., 228 83.33

7.89 47.80 14.03 10.53

Source: Survey Data.

Note: Total exceeds 228 and 100 per cent due to dependency on more than one source by the

entrepreneurs to whom full amount of loan is not sanctioned (i.e., 280-52 - 228).

The analysis of Table 6.22 reveals that out of the 228 entrepreneurs to whom the full

amount of loan is not sanctioned, a large majority of entrepreneurs had invested their own

m~)ley (83.33 per cent) and borrowed the money from family members (47.80 per cent).

Friends and relatives (32 entrepreneurs), moneylenders/private financial institutions (24

entrepreneurs) and banks (18 entrepreneurs) are the other sources relied by the entrepreneurs

to meet the gap in their initial capital requirements.

An important observation that can be made from these figures is that 183

entrepreneurs have relied on banks, family members, friends and relatives and

moneylenders/private financial institutions to meet their initial capital requirements. Among

them, 38 entrepreneurs (228-190) have completely relied on external source to meet the

shortfall or not capable of making the investment on their own. Thus a large majority of

Table 6.23

Working Capital, KSFC and A lternate Source

-

PART-A

- WORKING CAPITAL BORROWINGS FROM KSFC

Did Working Capital Borrowed? No. of Percentage

- EntTepreneurs

Yes/ working capital borrowed 70 25.00

_ No/ working capital not borrowed 210 75.00

- TOTAL 280 100.00

PART - B

- ADEQUACY OF WORKING CAPITAL GIVEN BY KSFC

l('Yes', was it Adeqllate? No. of Percentage

- Entrepreneurs

Yes/Full amount was sanctioned 16 22.85

___ No/Inadequate or part sanctioned 54 77.15

- TOTAL 70 100.00

PART-C

SOU/?CE RELIED TO MEET THE GAP TO WHOM IT WAS INADEQUA TE

.rE Percentage lO Total, i.e.,

Source Relied No. OJ ntrepreneurs 54

Total

136 20 10 242

64.76 9.52 4.76 115.21

advance from customers, purchased the raw materials on credit basis and out of turnover. The

sorry state of affairs that is prevailing in the study area is 16 entrepreneurs constituting 29.63

per cent to total had limited their activity due to inadequacy of working capital and non-

availability of it from any of the source. This situation is against the basic spirit behind the

financing the small units, i.e., no unit should be perishable due to lack of capital.

Thus, out of 38 entrepreneurs (54-16) who had relied on some other source, a large majority

had relied on the sou!,ce 'Any other' in Part - C of the Table 6.22 and rest on overdraft, cash

credit, etc. 1'he dependence of 38 entreprene\.1rS on 52 sources shows the dependency on

multiple agencies, besides KSFC, to meet the gap in working capital requested and

sanctioned.

The large majority of entrepreneurs (210 out of 280), who have not availed worki~ capital

were asked to indicate the sourCe relied to meet their working capital :'equiremeots (part -

D). The study reveals that a large majority (64.76 rer cent) of entrepreneurs had relied on the

source ,. Any other' which includes ploughing back of profits, agriculture incotOe,¬other

business income, salary income of husband, advance by customers, purchase of raw materials

on credit basis, hand loan and managing it out of turnover. Overdraft (18.09• per cent), cash

credit (5.71 per cent), discounting of bills of exchange (6.66 per cent), facility from

commercial banks and borrowiog from moneylenders/private financial institutions (5.71 per

cent) are the other sources resorted to by the entrepreneurs to meet their working capital

requirements. Ten entreprenevrs are of the opinion that no working capital is required to rvn

their unit and 20 entrepreneurs have limited their activity due to the non-availability of

working capital.

The dependence of 180 entrepreneurs (210-30) on 212 SOurces of working capital shows the

dependency. of so01e entrepreneurs on multiple agencies to meet their working capital

requirements.

Overdraft

Cash credit Short terl11 loan

Discounting of bills of exchange Moneylenders/ Private financial institutions

Any other

Limited the activity TOTAL

14 2 2 2 6

25.93 3.70 3.70 3.70

11.11

26 16 68

48.15 29.63 125.92

Note: Total exceeds 54 and 100 per cent due to dependency on two or more sources to meet

the working capital requirements by some eOtrepreneurs.

PART-D

SOURCE RELIED BY NON-BORROWERS OF WORKING CAPITAL

Percentage lO No. of Entrepreneurs

Total, i.e., 210

18.09 5.71 6.66 5.71

Source Relied

Overdraft Cash credit

Discounting of bills of exchange Moneylenders/Private financial institutions

Any other

Limited the activity Not necessary

38 12 14 12

Note: Total exceeds 210 and 100 per cent due to dependency on two or more sources by

some entrepreneurs to meet the gap in working capital requirements.

Source: Survey Data.

The 54 entrepreneurs to whom the working capital sanctioned was inadequate were relied on

(Part - C) overdraft (25.93 per cent), cash credit, short term loan and discounting of bills of

exchange (3.70 per cent each), moneylenders (11.11 per cent) and a large num~er of

entrepren:urs on other sour~es (48.15 per cent) which lncludes ploughmg back of profIts,

246

Financial R ole of KSFC in the Development of Entrepreneurship

To conclude, the corporation is not able to . m:et the working capital requirements of a large

maJonty ~i

entrepreneurs (75 per cent) and not able to meet the .

working capital requirement of the entrepreneurs to v:hom It

. d (I' e 54 out of 70 entrepreneurs). ThiS urged

was sanctlOne .. , .

the entrepreneurs to search for som: other .lendmg. agency or

multiple agencies to meet their workmg capital reqUirements.

. 4. Commitment of KSFC in Lending

The lack of access to finance is a major barrier to the emergence of entrepreneurs. Therefore,

the study sought to

. whether the entrepreneurs were forced to delay or

examme . . T bl 6 24 abandon the project due to the reason given mae . .

Table 6.24

KSFC and Entrepreneurs Project

KSFC', Attitude

No. of Entrepreneurs

Percentage to Total, i.e., 280

42.86 3.57 5.71 7.14 5.00 2.14

66.42

120 10 16 20 14

6 186

Delay in sanctions Denial of loan

Inadequacy of working capital . Non.availability of working capital Delay in getting the

working capital Any other

Total

Source: Survey Data.

The study into the commitment of KSFC in ~ending by taking its attitude towards the

entreprenc::u~'s project (Table 6.24) reveals that 120 entrepreneurs constitutmg 42.86 per

ce~t to total reported that delay in sanctions ~as ca~s~d the de~ay .I~ the commencement of

the entre.prene~nal. ~Ctl~1ty. The e~la of loan has affected the expanslOn/ dlverstftcatlo?/

modermsa¬tion of the units of 10 entrepreneurs :u:-d t?ey did ab~do.ned

. Ian of expansionidiverslftcatlOn/modermsatlon.

t elr p , . al' b KSFC and non-

Inadequacy of working caplt given y

availability of working capital from KSFC has urged 16

Financial Role of KSFC in the Development of Entrepreneurship

247

I I

I I

I

"

entrepreneurs and 20 entrepreneurs respectively to limit their entrepreneurial activity. Delay

in getting the working capital has affected 14 entrepreneurs and six entrepreneurs had

sincerely reported that they were forced to delay/abandon their projects due to their inability

in fulfilling the legal formalities of the corporation to avail the loan.

The entrepreneurs under study were asked about the reason/their feeling about the delay in

sanctioning the term loan and working capital and denial of loan either in full or in part.

The most common reason assigned for delay in sanctioning the loan, both term loan and

working capital, include the rigid and complicated procedure followed by KSFC (98

entrepreneurs), buck-passing or showing the finger towards another Deputy Manager/Clerk

(8. entrepreneurs), lack of co-ordination among different agencies on which the entrepreneurs

should rely to get different services '(6 entrepreneurs) and corruption prevailing in KSFC to

some extent (28 entrepreneurs-it is their oral opinion only and not officially proved). Five

entrepreneurs opined that the lending policy of KSFC does not permit full sanction of loans

hence not able to get adequate loan. One entrepreneur maintained that reluctance. of KSFC to

extend working capital requirements of her unit stemmed from the fact that she was

manufacturing to meet orders of Shimoga Zilla Panchayat which is presumably late in

making payments.

It is noteworthy that 2 entrepreneurs complained that KSFC has not sanctioned full amount of

loan because he has no political backing, one entrepreneur opined that he belongs to

Scheduled Caste and one entrepreneur opined that she was a woman entrepreneur belonging

to upper s;aste.

To conclude, the rigid and complicated procedures of KSFC and buck-passing nature backed

by a little corruption had caused either the delay in the commencement of the entrepreneurial

activity or caused the giving up of the ideal plan of expansion/ diversification/modernisation

of the

h

248

financial Role of KSFC in the Development of Entrepreneurship

units and limiting the activity to the extent of availability of working capital.

5. Way of Approach'ing the KSFC by Entrepreneurs

A study into the way of approaching the KSFC or route followed by the entrepreneurs to

meet the officials of KSFC to get the loan is made to see how far the officials of KSFC are

dealing freely with the loan applicants, and the role played by middlemen (as in RTO offices)

in establishing link between the loan applicants and KSFC officials. Such a study revealed

that 196 entrepreneurs, constituting 70 per cent to the total, had approached the KSFC on

their own, 48 entrepreneurs constituting 17.14 per cent to the total through the friends/ relati

ves/ poli ticians and 32 entrepreneurs consti tu ting 11. 4 3 per cent to total, approached the

KSFC through her husband/ father (women entrepreneurs) and the officials of KSFC.

It is noteworthy that the KSFC officials approached 3 entrepreneurs and expressed their

readiness to grant the loan to set up the units and for the expansion of existing units.

The category-wise study reveals that only 21.63 per cent of the women entrepreneurs (8

entrepreneurs), 50 per cent of the SC/ST entrepreneurs (11 entrepreneurs), 72.45 per cent of

the BCM category entrepreneurs (34 entrepreneurs) and 76.20 per cent of the minority

entrepreneurs (32 entrepreneurs) had approached the KSFC on their own. But a large

majority of general category entrepreneurs, 84.85 per cent, approached the KSFC on their

own. To conclude, though a large majority of entrepreneurs are approaching the KSFC on

their own, their seems to be interference of middlemen to some extent. The figures also show

the more dependency of special category entrepreneurs on the middlemen to avail the

services of KSFC.

6., Follow-up Activities of KSFC

The follow-up activities is as important as the lending a,ctivity. If adequate follow-up is not

made by the officials of KSFC,

Financial Role of KSFC in the Development oj Entrepreneurship

249

I

l

there is every possibility of diversion of funds/siphoning-off of a3sets charged to KSFC and'

adopting any other corrupt practices so as to declare the unit sick. In a study of sickness in

small scale industries in Dewas district of. Madya Pradesh, Gyan Prakash) found that in some

cases while the unit has gone sick, promoters have prospered. They consistently look to

public sector banks and institutions for .>oft loans, concessions and sacrifices.

In view of the above, the entrepreneurs under study were asked to indicate how many times

the officials of KSFC visited their units and the purpose of visit. Out of the 280 entrepreneurs

surveyed, 125 entrepreneurs constituting 44.64 per cent to total reported that the officials of

KSFC have not visited their units after sanctioning and disbursing the loan. Sixty

entrepreneurs constituting 21.43 per cent to total reported that the officials of KSFC have

visited their units to recover the loan only, while 90 entrepreneurs constituting 33.93 per cent

to total reported that the officials of KSFC have visited their units to evaluate the progress

from time to time.

These figures reveal that not visiting the units after giving the loan and visiting for recovery

only is outweighing the visiting of units to evaluate the progress of units from time to time.

This underlines an urgent need to visit/meet all the assisted entrepreneurs compulsorily that

too with the major purpose of evaluating the progress and for recovery if need be. The former

purpose will' bring the positive/healthy relationship between the corporation and entrepreneur

and reduce the bad lending, make easier the recovery of loan and reduce the possibilities of

units goning sick.

7. Evaluation of Terms of Lending

An evaluation of the terms of lending the loan by KSFC is carried out on the basis of the

following:

1. Time lag in sanctioning loans.

2. Repayment period allowed.

250 Financial Role of KSFC in the Development of Entrepreneurship

3. Promoter's minimum contribution.

4. Insistence on security.

5. Rate of interest charged.

6. Legal formalities to avail loans.

7. Recovery procedure.

8. Service rating.

Time Lag in Sanctioning and Disbursing Loans

The entrepreneurs under study were asked whether they found the time taken by the KSFC in

sanctioning and disbursing of term lpan to be 'normal', 'moderately lengthy' or I too lengthy'.

The responses of the entrepreneurs as indicated in Table 6.25 reveal that as much as 59.71 per

cent of the entrepreneurs have found the time lag in sanctioning and disbursing the term loan

to be normal, while 26.43 per cent found it to be moderately lengthy. Only 22.86 per cent of

the entrepreneurs reported that the time lag was 'toO lengthy'.

Table 6.25

Time Lagfor Sanctioning Loans

Opinion Regarding Time Taken to Sanction & Disburse' the Loans

Normal

Moderately lengthy

Too lengthy

Total

No. of Entrepreneurs

Percentage

[42 74 64 280

50.71 26.43 22.86 100.00

Source: Survey Data.

Thus, a simple majority (50.71 per cent) of the entrepreneurs had no complaints against the

time take? ?y the KSFC to sanction and disburs~' the loan. But the oplruon of almost half of

the total entrepreneurs (138 out of 280 entrepreneurs) surveyed who had experienced either

moderately lengthy or too lengthy time lag is a point to be seriously considered by the

corporation.

Financial Role of KSFC in the Development of Entrepreneurship 251

\

t

1 \

i

\

Repayment Period of Loans

The entrepreneurs under study were asked whether the time allowed by the KSFC was

sufficient for repayment of long term loans. Table 6.26 depicts that a large majority of the

entrepreneurs who had availed long term loans, 74.64 per cent, felt that repayment period was

sufficient. Remaining 25.36 per cent of the entrepreneurs opined that repayment period

allowed by the KSFC is insufficient, hence expected the extension . o~ the repayment period

by considering the nature of t~e actlVlty of the entrepreneur, time required to generate the

mcome, market condition, the amount of investment involved in the activity, etc.

Table 6.26

Repayment Period for Long Term Loan

No. of Entrepreneurs

Percentage

Opinion Regarding Repayment Period Allowed

Sufficient

Insufficient

Total

209 71 280

74.64 25.36 100.00

Source: Survey Data.

To. concl~de, majority of the entrepreneurs had no comp1amts agamst the time granted by

KSFC for the repay¬ment ~f long. term loans. But those who opined insufficient, ~re mamly

hailed from either too neglected class of the society, l.e., 45.45 per cent of SCs/STs, 43.24 per

cent of women entrepre-neurs and 28.57 per cerlt of minority entrepreneurs. Therefore, the

opinion expressed by these group of entre¬preneurs (25.~6 per c~nt to t~e total entrepreneurs

surveyed) is a matter which reqUlres senous attention from KSFC, since development of

entrepren~urship among neglected class of the society is one objective of KSFC among

many.

Promoter's Minimum Contribution

KSFC will not p~ovide entire financial requirement of any entrepreneur. He IS expected to

contribute certain portion of

252

Fi'(lancial Role of KSFC in the Development of Entrepreneurship

the cost of the proposed project. The rationale be~ind this provision is to bring seriousness in

the entrepreneur. Otherwise the entrepreneur may not run the unit with expected/ required

seritlUsness.

The entrepreneurs under study were asked to indicate their opinion regarding the minimum

contribution to be made by them. Such a study rc!Vealed that (Table 6.27), 189

entre¬preneurs constituting 67.50 per cent to the total reported that there is no difficulty in

making their personal contribution for the unit. Of these, 52 entrepreneurs had obtained full

amount of loan required (Table 6.21) and the remaining 137 entre¬preneurs have actually

made the Contribution to their unit.

Table 6.27

Promoter's Minimum Contribution

No. of Entrepreneurs

Percentage

Opinion Regarding the Promoter's Minimum Contribution Normal/No difficulty Moderately

high

Too high

Total

Source: Survey Data.

Among them, 26 entrepreneurs opined that there will be no seriousness in running the unit

unless certain portion of the money is contributed by them. Around 16.43 per cent of the

entrepreneurs reported that it is 'moderately high' (find a little difficulty) and 45 entrepreneurs

constituting 16.07 per cent to total are faced much difficulty in making the contribution.

Among a little difficulty and much difficulty facers (46 and 45 entrepreneurs respectively) 12

were SCs/STs (54.54 per cent), 9 were women entrepreneurs (24.32 per cent), 20 minority

entrepreneurs (47.62 per cent), 16 BCM category entrepreneurs (34.04 per cent) and 34

entrepreneurs (25.75 per cent) were belonging to general category.

To conclude, the getting of 100 per cent loan by 52 entrepreneurs shows the practice of over-

estimating (he project

189 46 45 280

67.50 16.43 16.07 JOO.OO

Financial Role of KSFC in the Development of Entrepreneurship

253

cost and throwing away of the policy of KSFC to grant only a part C?f the loan required by

the entrepreneurs. The difficulty in making the promoter's minimum contribution across the

category line reveals that a large majority of SC/ST entrepreneurs (54.54 per cent) followed

by minority (47.62 per cent), BCM (34.04 per cent), general (25.75 per cent) and women

(24.32 per cent) entrepreneurs faced difficulty in making the promoter's minimum

contribution.

The family background-wise study reveals that a large majority of entrepreneurs from

agricultural background (35.93 per cent) followed by service or employment background

(35.52 per cent) felt that it was difficult to make the promoter's contribution. But this

percentage is 27.14 in case of entrepreneurs from trade or industrial background.

Insistence on Security

The insistence of the lending agencies that collateral security should be provided before loans

could be granted is often perceived to be a major problem for agriculturists who have no

collateral security at the KSFC expected areas and for entrepreneurs belonging to weaker

sections of the society to raise finance. However, the need to adhere to sound lending

practices compels the KSFC to insist that loans will be granted

only against some collateral security. .

Table 6.28 Insistence on Security by KSFC

Opinion Regarding Insistence on Collateral Security

Fair

Unfair

Total

No. of Entrepreneurs

Percentage

183 97 280

65.36 34.64 100.00

Source: Survey Data.

Keeping in view the abovt, the entrepreneurs under study were asked whether in their

opinion, the KSFC was fair in insisting that they should provide collateral security before

•

254

Financial Role of KSFC in the Development of Entrepreneurship

term loans could be sanctioned to them. The response of the entrepreneurs, as indicated in

Table 6.28 reveals that a large majority of the entrepreneurs who had borrow~d.lo~g .te~m

loans, 65.35 per cent, felt that the KS.FC w~s f~.r m mSlstmg that collateral security should

be prOVided. Slgn.lftc~t number of entrepreneurs among them opine~ that no f1!~anclal

agency can survive by lending money without g~ttmg .collateral security and insistence

of .col1ate~al sec.unty will create seriousness in running the umt and m makmg the

repayment of loan. Around 34.64 per cent of the entrepreneurs felt that the corporation was

unfair in doing so .. ~mong them a few entrepreneurs opined that the KSFC offl~lals has

adopted the practice of estimating the value of secunty much below the market value of the

security, thus forced them to offer some other security or to minimise the size of the

operat~o~. The non-availability of working capital or the prOViding of insufficient working

capital by KSFC has created the problem of relying on two lending agencies

simultaneously.by some entrepreneurs. Non-availability of any other sec,:nt~. other than the

security offered to KSFC and non-ava1lablhty of working capital with KSFC has also

affected many entrepreneurs in the study area.

Rate of Interest Charged

The entrepreneurs under study, were asked to indicate their opinion regarding the rate of

interest charged by KSFC for long term loan (Table 6.29).

Table 6.29

Rate of Interest Charged by KSFC

Opinion Regarding the Rate of Interest Charged

Normal

Moderately high

Too high

Total

Source: Survey Data. '

No. of Entl'l:preneurs

Percentage

141 61 78 280

50.36 21.78 . 27.86 100.00

Financial Role of KSFC in the Development of Entrepreneurship

255

It can be observed from Table 6.29 that as much as 50.36 per cent of the total entrepreneurs

felt that the interest rate was 'normal', while 21.78 per cent of the total entrepreneurs felt that

the interest rate was 'moderately high' and 27.86 per cent of the entrepreneurs opined that

interest rate was 'too high'. The entrepreneurs forming the latter two groups were of the

opinion that the lending rates of KSFC should be in accordance with the market rate. The

application processing fee, commitment charges and delay in sanctions really make the

lending rate exhorbitant thus financial management of the unit becomes burdensome.

Legal Formalities to A vail Loans

The rigid and complicated formalities to be completed while availing loans are said to be

deterrent to entrepreneurs to aRproach some lending agencies for finance. Saravanvel4 writes

th'at the lengthy procedures involved in acquiring bank loans, the ~elay and the running

around involved often deter women from venturing into entrepreneurship.

Table 6.30

Formalities to be Completed for A vailing Loans'

Opinion Regarding Formalities to be Completed

Rigid and complicated Fairy simple

Total

No. of Entrepreneurs

Percentage

213 67 280

76.07 23.93 100.00

Source: Survey Data.

How:, far the entrepreneurs in Shimoga district experienced while dealing with KSFC? This

question was putforth before the respondents. The study reveals that (Table 6.30), 213

entrepreneurs constituting 76.07 per cent to total, reported that formalities to be completed

for availing long term loans were rigid and complicated while only 67 entrepreneurs

constituting 23.93 per cent to total repo{ted that the legal formalities were fairly simple. The

instances or

A

256

Financial Role of KSFC in the Development of Entrepreneurship

examples of giving up of the plan of expansion/modernisation of the unit with KSFC's

assistance due to rigid and complicated procedures, closure of the dealing with KSFC,

shifting towards commercial banks, where the legal formalities are said to be simple, are also

found during field survey. The observation/ mood among the entrepreneurs indicated that it is

better to deal with commercial banks where both term loan and working capital is available

and it also avoids the simultaneous dependence on two lending agencies. The sharp decline in

number of sanctions and amount sanctioned from 337 cases amounting to Rs. 1,103.86 1akhs

in 1996-97 to 187 cases amounting to Rs. 631.44 lakhs in 1997-98 and to 95 cases amounting

to Rs. 439.87 1akhs in 1998-99 and to only 65 cases amounting to Rs. 278.02 1akhs in 1999-

2000 proves the above observation backed by opinion of the entrepreneurs during

field survey.

Recovery Procedure

The procedure for recovering the loan in paper and in practice need not be same. It depends

upon the frequency of dealings of the entrepreneurs with the lending agency, follow-up

activities undertaken by the lending agency after sanctioning the loan, purpose of visiting the

entrepreneur's unit, attitude of the lender while dealing with the borrower and real intention

of the borrower while obtaining the loan.

The entrepreneurs under study were asked to indicate their opinion/feelings regarding the

recovery procedure followed by KSFC (Table 6.31). Of the 280 entrepreneurs surveyed, 224

entrepreneurs constituting 80 per cent to total opined that the recovery procedure is 'strict' and

the remaining 20 per cent (56 entrepreneurs) opined 'not strict'. Those who opined strict have

favoured (finger countable) and many a entrepreneurs strongly criticised/ attacked/blamed

KSFC a,nd even exp'ressed their anger with researcher. The instances of reacting negatively

by treating the researcher as a representative of KSFC, grumbling and murmuring with the

Financial Role of KSFC in the Development of Entrepreneurship

257

researcher is also experi~ced during field survey. The entrepreneurs opined that the KSFC

officials harshly deal with the defaulters by invoking section 29 of the SFCs Act. The practice

of publishing the name of the defaulters and auction notice in leading newspapers were also

critiCIsed by many. The respondents recognised the difference between the procedure

followed in commercial banks and KSFC and applauded the former. Even with liberalised

recovery procedure the bad lending rate is low in commercial banks when compared with

KSFC. This is because of regular contacts with the borrowers by commercial banks which is

either nil or at a minimum by KSFC. Some entrepreneurs opined that the officials of KSFC

are in no way better than the moneylenders of pre-independence period or some private

financial institutions. Lack of humane approach, failure to understand the real problems of

the entrepreneurs, discriminating between the big borrowers and small borrowers while

invoking section 29 of the SFCs Act, pressing the entrepreneurs to start the work after giving

term loan but without providing working capital, buck-passing, red-tapism untimely sanctions

and disbursements, inadequate lending, immediate seizure of the units, weak promotional

measures taken to motivate the entrepreneurs, not considering seriously the grievances made

or the opinion expressed during EDPs, PRC or PMC holders' meeting are the other lacunae

identified by the entrepreneurs during the field survey.

Table 6.31 Recovery Procedure of KSFC

No. of Entrepreneurs 224

56

280

Percentage 80.00 20.00 100.00

Opinion Regarding Recovery Procedure Strict

Not strict

Total

Source: Survey Data.

The observation made while asking this question to the respondents clearly indicated that

there is a continuous fall in the\:orporation's sanctions from 1996-97 to 1999-2000. .

258

'{inancial R ole of KSFC in the Developmen-t of Entrepreneurship

Financial R,ole of KSFC in the Development of Entrepreneurship

259

Service Rating Very good Good Average

Bad

Total

Source: Survey Data.

It is important to note that entrepreneurs with education background, service or employment

background and strong financial background (by taking investment made, turnover achieved

and profit earned) have rated the services as either 'good' or 'very good' in large number. .

The entrepreneurs responded were asked to express their suggestions to improve the present

services of KSFC. Of the 280 respondents, 254 respondents responded that though the

present services are very good/ good/ average, still there is a scope for improvement in the

present services in order to develop and promote the entrepreneurship in true sense.

Strengthening of entrepreneurial guidance, simplification of legal formalities, humane

approach in recovery, delegation and decentralisation of authority, quick disbursal of the loan

application and loan sanctioned, timely services, giving the list of documents required to get

the assistance at once, provision of more working capital, special concessions to small

projects in rural areas, accepting the agricultural land and buildings in

No.o[Entrepreneurs 21

118

126

\ 15

280

Percentage 7.50 42.14 45.00 5.36 100.00

villages as security for loan, relaxing the promoter's minimum contribution margin to the

financial weak entrepreneurs, proper valuation of the security offered by the loanee so as to

facilitat~ him in borrowing loans by mortgaging the remaining properttes from other banks

and financial institutions enhancement of repayment period during initial stage; particularly

to those units which have seasonal work, liberal financial assistance to encourage the

expansion and moderni¬sati,on of KSFC assisted entrepreneurs provided their repayment

were satisfactory, studying the intention of the defaulters before seizing or locking the unit

(studying the real cause for sickness) and fixing the interest rate just equal to bank lending

rates are the major areas recognised by the entrepreneurs, which offers scope for

improvement in the present services of KSFC.

Some entrepreneurs had given their own suggestions to create favourable environment for the

entrepreneurship development in the study area. They include strengthening of infrastructural

facilities like roads, proper maimenance of roads, conversion of state highway from

Honnavar to Tumkur in~o nat~onal, highway, linking the Bangalore-Talaguppa r~lway lme

wtth Konkan railway so as to facilitate trading w1th coastal Karnataka, Goa and Mumbai,

completion of the Auto work complex at Shimoga, uninterrupted power supply, development

of industrial estates, provisions of water, road, post office, banking, ware house, canteen,

recreation club, separate power line, security (by way of fencing) in industrial estates, quick

allotment of the sheds or plots in the estates to the needy and taking quick decisions regarding

the sheds or plots which are not used by the allotees for a long time.

. Tw.o entrepreneurs opined that they were not able to get :ntern.atlOnal trade links due to the

absence of aircraft facility 10 Sh1moga town. The entrepreneurs who experienced the high

labour turnover problem stressed o~ the need for human reso.urc~ development, giving the

education capable of cultlvatmg the time consciousness, sincerity and hard working nature.

Conducting of more and more. EAPs to college students or youths, EDPs to the assisted

entrepreneurs, PRC/

Service Rating

After asking the opinion regarding the above, the respondents under study were requested to

rate the services of KSFC as 'very good' or 'good' or 'average' or 'bad' based on their

experience (fable 6.32). Entrepreneurs' views on the services offered by the KSFC with

reference to their project indicate that 126 entrepreneurs (45 per cent) have stated 'average',

118 as 'good' (42.14 per cent) and 21 as 'very good' (7.50 per cent). Only 15 have rated the

service as 'bad' (5.36 per cent).

Table 6.32 Seruice Rating of KSFC

260 FinanciaL Role of KSFC in the Development of Entrepreneurship

PMC holder meeting, considering the views or opinions expressed by the participants

seriously (that means not to conduct EAPs/EDPs, etc., to reach the target fixed or to obey the

instructions given by the head office or government) are also figured during survey. A large

number of SSIs which are eligible for subsidy opined that untimley disbursal of subsidy has

deterred/interrupted their activity. Encouragement to R&D activities to identify the scope for

the development of industries in Shimoga district, provision of marketing assistance and

technical assistance and proper co-ordination among different agencies which are engaged in

entrepreneur¬ship development or on which the entrepreneurs is supposed to depend are the

other areas identified by the entrepreneurs.

Based on these views, findings and on the basis of general problems faced by the

entrepreneurs in Shimoga district along with major findings of the study, a few suggestions

are given in the last chapter.

References

1. Desai, V asanth, op. cit., p. 81.

2. Dhat, P.N and Lydoll, H.F., The Role of SmaLL Enterprises in Indian Economic

Development, Asia Publishing House, Bombay, 1961, p. 70.

3. Prakash, Gyan, "Problems and Prospects of Small Scale Industries in India-An

Evaluation", cited in R.S. Jalal (Ed.), Industrial Entrepreneurship and SmaLL Scale

Industries, Anmol Publications, New Delhi, 1991, p. 178-79.

4. Saravanvel, P., op.cit., p. 67.

Other References:

Annual Reports of KSFC from 1989-90 to 1999-2000.

Annual Sanctions Registers of KSFC from 1990-91 to 1997-98. Karnataka at a Glance, 1992-

93, Published by Directorate of

Economics and Statistics, Bangalore, Government of Karnataka.

Operational Statistics of KSFC from 1990-91 to 1997-98.,

7

Role of KSFC in Promoting the Entrepreneurship

Introduction

The developments banks1 in India have emerged as important instruments through

which programmes of entrepreneurship development are implemented.

A development bank has been defined as "an institution to promote and finance

enterprises in the private sector". A large number of development banks were established in

the developing countries in the post Second World War era in order to accelerate the pace of

their economic development through industrialization. The functions of these banks are

designed to suit the requirements of each country. According to Basu, "the size of the

economy, the stage of its development, the socio-economic framework of a country, its

banking and financial infrastructure, the political outlook of the government and the credit

policies pursued by it determine the variety and nature of the functions of development

banks." As such, the functions performed by different development banks are not similar.

They perform financial as well as promotional functions, such as provision of long term

loans, participation in equity capital, guaranteeing loans and underwriting the new issue of

shares and debentures, promotion of new industry to fill up the gaps in the industrial structure

provision of technical" managerial and administrative advice, conduct of techno-economic

survey and market research, laying out of industrial estates etc.

Development Banks in India

In India at the time of independence, the capital market was not well developed and

entrepreneurs, particular by new ones operating on a small scale found It extremely difficult

to raise long term capital. Gupta sums up the state of industrial finance in India before

independence in the following words. The principal features of the industrial financing

organization in India were the closed circle character of industrial entrepreneurship, a semi

organized and narrow industrial securities market of issuing institutions and virtual absence

of participation by intermediary financial institutions in the long term financing of industry. It

is due to the prevalence of such a situation that the government established the industrial

finance corporation of India (IFCI) within tow years of independence.

1 The terms 'development bank' and 'financial institution’ are used synonymously in this study.

The important network of development banks in India comprise IFCI, ICICI, IDBI,

SIDBI, SFCs, State Industrial Development Corporations, Unit Trust of India (UTI), Life

Insurance Corporation of India (LIC) and the general insurance Corporation of India (GIC).

Of these, the first six development banks perform both financial and developmental

functions. The promotion of new entrepreneurs, in order to widen the entrepreneurial base in

the country is an important aspect of the developmental functions of the developments banks

in India. They perform a wide range of activities either directly or through institutions

sponsored by themselves in order to promote and develop entrepreneurship. These activities

include provision of finance (financial measure) and helping the entrepreneurs to

performance all promotional activities required to establish a unit, right from the stat of

identifying a suitable project up to the stage of establishing an industrial unit. The two

important activities undertaken by development banks (in Karnataka) in promoting the

entrepreneurship, among many, include:

1. Conducting Entrepreneurship Development Programmes.

2. Provisions of Consultancy Services.

1. Entrepreneurship Development Programmes

Conducting of Entrepreneurship Development Programmes (EDPs) in Karnataka state

is co-ordinated by the State Level Committee for Co-ordination of EDPs. The committee

consists of representatives of KSFC, KSSIDC, KSIIDC, State Bank of India, Canara Bank,

Corporation Bank, State Bank of Mysore, Syndicate Bank and Vijaya Bank. The TECSOK,

promoted by the Government of Karnataka was the nodal agency for conducting and

monitoring of EDPs in the state. In 1992, the CEDOK was established to take over the task of

conducting EDPs in Karnataka state.

2. Consultancy Services

In Karnataka, consultancy services to entrepreneurs intending to set up units in the

tiny, small and medium scale industrial sectors are provided at reasonable costs by the

TECSOK established in 1976.

Assessment of Promotional Role of KSFC

The promotional activities of the corporation are mainly aimed at providing the

required thrust to the growth of industries in the state through new entrepreneurship. It has

organised a number of programmes on its own and in association with other developmental

agencies and voluntary organizations. Such programmes include EDPs, EAPs, PRC/PMC

holders' meeting and successful entrepreneurs' meet.

1. Entrepreneurship Development Programmes

The Entrepreneurship Development Programme is the most crucial component of the

promotional efforts of KSFC. An EDP is conducted to help the trainee in acquiring skills and

capacities necessary for playing his entrepreneurial role effectively.

Through such programmes, the corporation identifies the latent entrepreneurial traits

among the participants, motivate them to take up an industrial venture, training in managing

the project and guide in locating the project, testing its economic viability and technical

feasibility, guiding about the market conditions, complying with government/corporation's

rules and regulations and obtaining finance.

The corporation conducts Industrial Motivation Camps and Industrial Seminars. Such

programmes are of a short duration spanning a day or two and are conducted in association

with other agencies such as DIC, TECSOK and commercial banks. The corporation also

conducts studies and market surveys at regular intervals to assess the industrial potentialities

of different regions in the state. The data collected from such surveys together with

information regarding the facilities provided by different agencies to entrepreneurs is

important to the prospective entrepreneurs in the Industrial Motivation Camps arid Seminars.

The corporation also conducts Management Orientation Course for first generation

entrepreneurs assisted by it. In addition, it arranges inter-institutional meetings with bankers.

The problems faced by the entrepreneurs are discussed and remedies are suggested by a team

of experts in such meetings.

Selection Criteria

The KSFC will give a general call about EDPs. The assisted entrepreneurs, PRC/PMC

holders are also invited for such programmes. If the EDP is held in association with other

agencies, they will also mobilise the people in that area.

A brief account of the important programmes conducted by the corporation in the

study area is as below:

1. In 1992-93 an EAP for physically handicapped was organised by KSFC in

collaboration with Karnataka State Physically "Handicapped Persons Association at

Shimoga, benefited 43 participants. The purpose of the programme was to brief the

schemes of KSFC meant for physically handicapped persons.

2. In 1993-94, an EAP for the final year students of Government Polytechnic for

Women, Shimoga was organized that benefited 80 students.

3. During the year 1994-95, a long term EDP of 2 weeks was held at Shimoga benefited

35 participants. However, only one among them availed loan amounting to Rs. 3

lakhs to set up a project. In Channagiri and Honnali taluks also, one each such EDPs

were held that benefited 85 and 80 participants respectively Among the 85

participants in Channagiri, 2 participants availed loan amounting to Rs. 1,20,000 in

total.

4. In 1995-96, one each follow-up meeting of EDP was organized at Channagiri and

Honnali taluks that benefited 25 and 38 participants respectively. Among the 25

participants at Channagiri, only one participant availed the loan to set up a project.

On 6-2-1996, EDP for women was held at Heggodu in. Sagar taluk by KSFC,

Shimoga in association with Kavikavya Trust, Heggodu that benefited 70

participants. The technical session held at EDP briefed the schemes of KSFC for

women entrepreneurs and the procedure to be followed by the applicant to avail the

loans. However, not even a single participant came forward to set up a project by

availing the assistance of KSFC. The above experience of the corporation in

Shimoga, Channagiri, Honnali and Sagar shows the low output/ineffectiveness of

such programmes. On 7-2-1996, to discuss the problems to women entrepreneurs

assisted by the corporation a meet was held at Shimoga.

2. PRC/PMC Holders' Meeting

This is the meeting of the entrepreneurs who have obtained the Provisional

Registration Certificate or Permanent Registration Certificate to start a small scale industry

from the DIC. The objective of such programmes is to induce the PRC/PMC holders to

expand or modernize their projects or to diversify from the existing line of activity. During

such meetings, guidance with regard to the preliminary work to be completed before setting

up an enterprise, information on government policies and programmes, sources of finance,

schemes of assistance, limit of assistance, rules and regulations to be complied with, etc., are

provided to the participants.

During the year 1994-95, one each meeting was held at Sagar and Shimoga benefited

8 and 2 participants respectively. Among the participants, 2 in Sagar and 1 in Shimoga have

availed a loan amounting to Rs. 20,000 and Rs. 11 lakhs respectively. During 1995-96, 2 such

programmes held at Sagar benefited 32 participants in total. Out of them, 16 participants

constituting 50 per cent of the total came forward to set up either new projects or

expand/modernize/improve the existing projects.

In Shimoga taluk also, one such meeting in 1995-96, benefited 8 participants. Out of

them, 2 availed a loan to set up a project/expand or modernize the existing projects These

figures show the effectiveness of such meetings when compared with EDP-output ratio (i,e.,

ratio of EDP participants and number of participants who have started the industry).

3. Successful Entrepreneurs Meet

The assisted entrepreneurs, who are regular in repayment to the corporation are the

major target groups of such meets. It aims at encouraging the successful entrepreneurs to

expand or modernize their projects and to diversify from the existing line of activities. During

the meet, guidelines about newly introduced schemes of the corporation, rules and regulations

to be complied with, scope for the development of industries in that area, marketing,

opportunities available to the product/service, the product profile, etc., are given. The

grievances of the entrepreneurs are also dealt with and suggestions and options of the

entrepreneurs are invited to improve the services.

During the year 1995-96, one such programme held at Sagar benefited 27

entrepreneurs. Among them, 2 availed a loan amounting to Rs. 20 lakhs to expand their

projects. Similar, programme for women was organized at Shimoga benefited 13 participants.

IS Similar meet was held on 12-9-1996 at Shimoga. The meet briefed the entrepreneurs the

new schemes of KSFC and invited the opinions of participants regarding the KSFC, their

grievances, etc.

The corporation is also organizing the seminars exclusively for the rejuvenation of

sick units. One such programme was held in 1996-97 at Shimoga. The reasons for the

sickness, how to prevent the sickness, the efforts of KSFC to control the sickness, etc., were

figured in the seminar

4. Effectiveness of EDPs

The various activities of the KSFC have already been discussed in the earlier pages.

In the ensuing pages an attempt is made to evaluate the impact of the Entrepreneurship

Development Programmes on the entrepreneurs/participants in the study area. The ultimate

objective of such programmes is, of course, the establishment and continued functioning of

industrial units of entrepreneurs. However, adequate data regarding the number of units

which have been set up as a result of EDPs and the names and addresses of all the

participants (like the loan borrowers) is not maintained properly by KSFC. Therefore, the

impact of EDPs on the development of entrepreneurs has been made on the basis of data

obtained from entrepreneurs under study. The evaluation of other promotional activities is not

made due to the aforesaid reasons. Moreover, EDP is the most important promotional activity

of KSFC than any other.

The effectiveness of Entrepreneurship Development Programmes is assessed by

taking into account the following parameters:

1. The coverage of EDPs, i.e., the number of entrepreneurs under study who have

obtained training under the programme and the agency conducted it.

2. The extent to which the EDP has motivated the entrepreneurs to set up units.

3. The extent of usefulness of EDP.

4. Follow-up of EDP by KSFC and extent of usefulness of follow-up activities.

5. The impact of the EDPs on the functioning of entrepreneurs.

Coverage of EDPs

Out of the 280 entrepreneurs surveyed, 100 entrepreneurs constituting 35.71 per cent

of the total had attended EDPs, while 64.29 per cent had not undergone training under such

programmes (Table 7.1)

Table 7.1

Number of Entrepreneurs who Attended EDPs

EDP Training No. of Entrepreneurs Percentage

Entrepreneurs who had attended EDP 100 35.71

Entrepreneurs who had not attended EDP 180 64.29

Total 280 100.00

Source: Survey Data.

Among them, 48 entrepreneurs had participated in the EDP conducted jointly by

KSFC and DIC, 4 entrepreneurs had participated in the EDP conducted jointly by KSFC and

Commercial banks, 2 entrepreneurs in a programme conducted by KSFC and KSSIDC and

one entrepreneur had participated in the EDP conducted by KSFC and an engineering college

where he was a student. The remaining 45 entrepreneurs had participated in an EDP

conducted by KSFC independently.

Therefore, it should be noted that a majority of the entrepreneurs under study had

established their units without the benefit of such programmes.

Entrepreneurs under study were asked to rank the various factors which influenced

them-to-become an entrepreneur or to establish their units in the order of importance which

they attached to each factor. The findings of the study in this regard have been incorporated

in Chapter 5 (Table 5.5) and the ranking relevant to EDPs are reproduced in Table 7.2.

Table 7.2

Ranking of EDP as a Motivating Factor

Ranking of EDP No. of

Entrepreneurs

Percentage of EDP

Trained Entrepreneurs,

i.e., to 100

Rank 1 5 5.00

Rank 2 4 4.00

Rank 3 2 2.00

Rank 4 -

Rank 5 1 1.00

Source: Survey Data.

It can be observed from Table 7.2 that out of the 100 entrepreneurs who had attended

EDPs, only 12 per cent have mentioned it as a factor motivating them to set up their units/ in

becoming an entrepreneur. Among them, 5 entrepreneurs have ranked it as the first important

factor, 4 entrepreneurs have ranked it as the second important factor, 2 entrepreneurs have

accorded it the third rank and only one entrepreneur has accorded it the last or fifth rank.

The inference which can be drawn from these findings is that the potential

entrepreneurs who undergo training under EDPs already have an intention to establish units

and they attend such programmes to acquire knowledge and skill to establish and manage an

industrial unit. A few entrepreneurs opined that they did participate in such programmes just

to honour the invitation given by KSFC/DIC officials. The instances of using this opportunity

(i.e., EDP) to get solution to their grievances, to get additional finance for

expansion/modernization, to get the postponement of exercising strict recovery measures by

KSFC was also observed during field survey.

The Selection Process

The selecting of candidates for undergoing training is a crucial aspect of the EDP. The

EDP participants were asked about the' way of their selection for the EDP. It is very

important that all the 100 EDP participants attended the programme on receiving a letter from

the agency that conducted it. No entrepreneur was selected either by writing a written test or

on facing an interview.

The inference that can be drawn up from the above is that the corporation is not

adopting the healthy practice of securing and identifying those with entrepreneurial traits.

Even the oral view of officials that "we will conduct EDP just to reach the target fixed"

shows the less seriousness of KSFC to the direct approach to entrepreneurship development.

It is important to note that from 1998-99, the KSFC has stopped the EDPs as an economy

measure.

The Extent of Usefulness of ED?

The entrepreneurs under study were asked to indicate the extent to which the

programme was beneficial to them in selecting the project, project evaluation and preparation

of techno-economic feasibility report, in getting knowledge about market condition, in-plant

training and in any other way. Table 7.3 shows the findings of the survey in this regard.

Table 7.3

Extent of Usefulness of EDP

Component of EDP Extent of Usefulness

Useful Not Useful Total

No. % No. % No. %

1. In selecting the project 25 25.00 75 75.00 100 100.00

2. Project evaluation and

preparation of techno-

economic feasibility report

5 5.00 95 95.00 100 100.00

3. About market condition 8 8.00 92 92.00 100 100.00

4. In-plant training - 100 99 99.00 100 100.00

5. Any other 35 35.00 65 65.00 100 100.00

The areas of usefulness include knowledge about new product. new type of lathe in

Punjab, procedure to avail the loan, terms, conditions and schemes of KSFC,

benefited in expansion/ modernization / technological upgradation of the unit,

production planning and waste minimization.

No.: Number of Entrepreneurs

Source: Survey Data.

It can be observed from Table 7.3 that a majority of the entrepreneurs rate the various

components of the EDP as 'not useful'. Only in the case of two components, viz., 'Any other'

and ‘In selecting the project' (35 per cent and 25 per cent respectively) significant number of

EDP participants have rated It is useful of the 3 other components, field trips to industrial

UDlts to get in-plant training benefited only one participant, 5 entrepreneurs in project

evaluation and in preparation of techno-economic feasibility report and 8 participants in

getting knowledge about market conditions for the products manufactured by them or service

rendered by them.

Many of the entrepreneurs complained that the KSFC officials do not deal in

accordance with the promises made during the programme. Few entrepreneurs opined that the

project ideas Identified during the EDP were highly impracticable, not suitable of the nature

of the entrepreneur and involved very large investment. One entrepreneur expressed the view

that an EDP Instead of emphasizing on how easy it is to set up an unit should focus on the

various problems an entrepreneur is likely to encounter In the course of establishing and

managing an Industrial enterprise and how to overcome them.

Follow-up of EDP and Extent of Usefulness

The follow-up programme constitutes an important component of the

Entrepreneurship Development Programme. Under the follow-up programme, the trainees are

provided guidance in the actual setting up of the unit. The type of assistance provided

Includes guidance in applying for and obtaining sanction of financial assistance, selecting and

procuring a suitable location, completing governmental formalities to establish a unit

registration under various statutes and assistance in obtaining a licence.

The entrepreneurs under study were asked whether they received follow-up assistance

from KSFC and the extent to which it was useful. Of the 100 entrepreneurs who attended

EDP, only 35 entrepreneurs received follow-up assistance from the corporation, while 65

entrepreneurs mentioned that such assistance was not received.

Table 7.4 shows the findings of the survey with regard to the extent of usefulness of

the follow-up programmes.

Table 7.4

Extent of Usefulness of Follow-up of EDP

Assistance

Provided after

EDP

Extent of usefulness

Useful Not Useful Total

No. % No. % No. %

1. In securing

sanction of loan

8 22.86 27 77.14 35 100.00

2. selecting and

securing suitable

location

2 5.71 33 94.29 35 100.00

3. completing

governmental

4 11.43 31 88.57 35 100.00

formalities say

registration of

units, obtaining

licence etc.

4. Any other 2 5.71 33 94.29 35 100.00

The areas of usefulness include optimum use of resources, extension of loan

repayment period and a sense of responsibility and sincerity created.

No.: Number of Entrepreneurs

Source: Survey Data.

Table 7.4 indicates that large number of entrepreneurs have rated the assistance

provided by KSFC after the completion of EDP as 'not useful'. The assistance provided in

securing sanction of loans was rated as 'useful' by 22.86 per cent of the entrepreneurs, 11.43

per cent rated the services of KSFC in completing governmental formalities as 'useful' and

only 2 each entrepreneurs have rated the services as 'useful' in the area of selecting and

securing suitable locations and any other.

The inference that can be drawn from the above is that follow-up of EDP by KSFC is

not encouraging one.

Impact of EDP on the Functioning of Entrepreneurs

The impact of the EDP on the functioning of entrepreneurs is studied by conducting a

comparative analysis of the functioning of the entrepreneurs who have been trained under an

EDP and those who have not received such training. The concentration of EDP and non-EDP

entrepreneurs in different areas of marketing is chosen as a factor to assess the same. Table

7.5 shows the distribution of EDP and non-EDP entrepreneurs in the different areas of the

market.

Giving knowledge to the participants about the market conditions is one of the

important components of an EDP as indicated in Table 7.3. The analysis of Table 7.3

revealed th.at this component of EDP has not benefited 92 per cent of entrepreneurs. Despite

this, the analysis with the help of Table 7.5 is carried out to see whether the performance of

EDP entrepreneurs as far as marketing is concerned is influenced by any other factor. Table

7.5 indicates that the percentage share of EDP entrepreneurs in local market is less than the

percentage share of non-EDP entrepreneurs, while they have enjoyed better share in the

statewide market (28 per cent) and national market (18 per cent) than the non-EDP

entrepreneurs.

Table 7.5

EDP and Marketing Area

Type of market EDP entrepreneurs Non- EDP entrepreneurs

No. of

Entrepreneur

% No. of

Entrepreneur

%

Local 54 54.00 110 61.11

State wide 28 28.00 49 27.22

National 18 18.00 17 9.45

Not marketing

the service

- - 4 2.22

Total 100 100.00 180 100.00

Source: Survey Data.

Though the above findings is favourable to EDP, the entrepreneurs' opinion regarding

the extent of usefulness of EDP in getting knowledge about market condition (Table 7.3)

contradicts the above findings. Therefore, it can be inferred that it is the natural

entrepreneurial skill inherited in the entrepreneurs that helped them in climbing the ladder of

marketing. The concentration of entrepreneurs from trade or industrial background in

statewide and national market (Table 5.22) in large number supports the inference drawn

above.

Based on the above, the summary of findings and a few suggestions are given in the

next chapter.

References

1. Diamond, William, Development Banks, John Hopkins, Baltimore, 1957, pp. 4-5.

2. Basu, S.K., Theory and Practice a/Development Banking-A Study in the Asian

Context, Asia Publishing House, Bombay, 1965, p.39.

3. Gupta, L.c., The Changing Structure a/Industrial Finance in India, Clarendon Press,

Oxford, 1969, p. 9.

4. Karnataka State Financial Corporation, "Report on Entrepreneurship Awareness

Programme for Physically Handicapped", KSFC News, Vol. 15, Issue No. 12, June

1994, pp. 12-13.

5. Karnataka State Financial Corporation, "Report of Entrepreneurship Development

Programmes", KSFC News, Vol. 16, Issue No. 7, January 1995, p. 8.

6. EDP Report, 1994-95, Karnataka State Financial Corporation, Shimoga and Annual

Sanctions Register, KSFC, Shimoga.

7. EDP Report,' 1995-96, KSFC, Shimoga and Annual Sanctions Register, KSFC,

Shimoga.

8. Karnataka State Financial Corporation, "Report on Entrepreneurship Development

Programmes", KSFC News, Vol. 17, Issue No. 12, March 1996, p. 6.

9. EDP Report, KSFC, Shimoga.

10. Karnataka State Financial Corporation, "Report on Entrepreneurship Development

Programmes", KSFC News, Vol. 17, Issue No. 12, March 1996, p. 7.

11. EDP, PRC/PMC Holders Meeting Report, KSFC, Shimoga, 1994-95 and Annual

Sanctions Register, KSFC, Shimoga.

12. Op. cit, 1995-96.

13. Ibid.

14. Report on Successful Entrepreneurs Meet, 1995-96, KSFC, Shimoga and Annual

Sanctions Register, KSFC, Shimoga.

15. Report on Successful Entrepreneurs Meet, 1995-96, KSFC, Shimoga.

16. Karnataka State Financial Corporation, "Shimoga-Successful Entrepreneurs Meet",

KSFC News, Vol. 18, Issue No. 7, October 1996, p.12.

17. Karnataka State Financial Corporation, Report on "Seminar Relating to Rejuvenation

of Sick Units", KSFC News, Vol. 18, Issue No. 11, February 1997, p.12.

Summary of Findings, Suggestions and Conclusion

The KSFC was set up with the objective of promoting and developing the

entrepreneurship. How far the KSFC is successful in attaining the above objective, how the

entrepreneurs in the study area have discharged their entrepreneurial role, i.e., performance,

what are the factors motivating the entrepreneurs in the study area, the impact of caste,

education and family background on entrepreneurial role, how the resources are allocated by

KSFC among the different districts, sectors and purposes for which the allocation is made,

what are the problems the entrepreneurs are confronted with, what are the lacunae in its

functioning-are some of the questions to which this study tries to find some answers. An

attempt is made in the following pages to provide suitable answers to these vital questions

selecting Shimoga district as a case study area.

Summary of Findings

The major findings of the study are as below:

1. In the pre-independence era, India has witnessed the slow growth and absence of broad-

based entrepreneurship. The factors such as caste system, colonial rule, joint family system,

cultural traditions, educational system and the like were responsible for this situation.

2. In the post-independence era, India has been a witness to the emergence of large industrial

houses, expansion and diversification of those industrial houses existing before

independence, the emergence of state as an entrepreneur through the creation of the public

sector on the industrial map of the country and also the entrance of multinational corporations

on r:he industrial scene.

3. The process of entrepreneurship development came into vogue due to the shortage of

the entrepreneurs in developing countries. In India, up to sixties the government policy

relating to entrepreneurship development was directed towards provision of financial

assistance, financial incentives like tax concessions, subsidies, concessional finance,

preference in government purchase and creation of infrastructural facilities. It was only in the

seventies, the Indian Government realised that merely providing the fiscal and financial

incentives was not adequate for promoting new entrepreneurs. Therefore, the government

adopted the policy of developing entrepreneurs through Entrepreneurship Development

Programmes.

4. The fruits of the industrialisation are not available to all the regions of the country. The

status of people in some areas of India is an illustration of a paradox. At the policy level' they

are equal. The five year plans and industrial policy resolutions passed since independence

have given added thrust to the entrepreneurship development. But such parts of India even

now lack adequate number of entrepreneurs.

5. The Karnataka state has experienced an imbalanced distribution and growth of industries in

the post-independent era. A large number of big and medium sized industries were

concentrated in and around Bangalore, Tumkur, Mysore, Kolar and Mandya. At the same

time, north Karnataka experienced continued negligence and for many a year 'Bidar' district

in the north Karnataka part of the state was declared as 'No Industry District'.

6. Entrepreneurship is an important avenue through which the / country can achieve a de

centralised industrial structure. It will also help to alleviate many economic and social

problems like widespread unemployment, growing terrorism, growth of anti-national

elements, non-utilisation of existing natural resources, lopsided regional development and

poverty. Therefore, development of entrepreneurship has received special attention of the

policy makers.

7. Today, a network of institutions exist in the country .to develop the entrepreneurship. The

Karnataka State Financial Corporation is an integral part of this network functioning in the

state of Karnataka. The entrepreneurship development is the main motto of the corporation.

8. The promotion and development of entrepreneurship by KSFC take the form of

conducting EDPs, EAPs, PRC an PMC holders' meeting, successful entrepreneur meet,

providing financial assistance to entrepreneurs through a versatile range of schemes, in some

cases on a concessional basis. It also gives special thrust to special category entrepreneurs,

gives importance to the development of local entrepreneurship and guidance is provided to

women entrepreneurs through separate cells and grievances of the entrepreneurs are met

through public grievances cell. However, it played its commercial role effectively (indirect

approach) than the promotional role (direct approach).

9. The Karnataka state is having abundant supply of resources for entrepreneurship

development.

10. A study of the income distrubution of the case study area, i.e., Shimoga distnct vis-a-vIs

that o.f t~e K~rnataka state indicates that the district is predommantly mfluenced by

agriculture, i.e., agrariap in nature.

, 1 LrThe Shimoga district is endowed with rich ?~~ral resources, ./ favourable climate and

infrastructural factlltles. The study into the distribution of industries indicate that the

industrial development is somewhat lopsided with the co~centration of industries mainly in

Shimoga, Bhadravatl and Sagar

taluks.

12. A large majority of the entrepreneurs surveyed, 81.79 ?er /cent were married while

only 7.14 per cent were unmarned. / The 'largest group of the entrepreneurs comprising 33.22

per

Summary of Findings, Suggestions and Conclusion

279

I

l

cent of the total were in the age group of 31-40 years, followed by 27.86 per cent in the age

group of 41-50 years. 15 per cent were less than 30 years of age and 12.85 per cent of the

entrepreneurs were over 50 years of age.

~e educational background study revealed that 37.86 per cent of the total entrepreneurs

surveyed had obtained collegiate education, 30.36 per cent were matriculates, 17.86 per cent

had primary education and 13.92 per cent were technically qualified.

14. Significant number of entrepreneurs hailed from general ----:-category (47.14 per

cent) and majority of the entrepreneurs surveyed (52.86 per cent) belong to special category,

viz., SC/ST, women, minority and BCM.

)5 ... The family background of the entrepreneurs revealed that 50 per cent were from trade or

industrial background, 27.15 per cent from serv'ice or employment background and only

22.85 per cent were from agricultural background.

~6~ Majority of the entrepreneurs under survey were motivated to turn to entrepreneurship

due to need for independence, desire to get gainfully occupied and desire to achieve

something, i.e., own internal drives and ambitions. They were neither motivated by the efforts

of KSFC nor by the success of other entrepreneurs or social prestige factor.

17. A majority of the entrepreneurs surveyed are engaged in

/' the SS! sector (71.43 per cent), owning sole proprietary form of organisation (74.64 per

cent). The rest are in the transport and other sectors (28.57 per cent) and opting partnership

and company form of organisation (25.36 per cent) .

18. A majority of the entrepreneurs (58.57 per cent) are in the ./ local market followed by

statewide market (27.50 per cent) and national market (12.50 per cent).

19. The size of the entrepreneurs' units is said to be small since

/ 55.71 per cent of the units were of less than Rs. 3 lakhs initial investment and a majority of

the units had either less than 5 employees (58.57 per cent) or no employees (18.57 per cent)

initially. However, the investment range and

280

Summary of Findings, Suggestions and Conclusion

Summary of Findings, Suggestions and Conclusion

281

employees' number have increased in the latest year under study.

~O. A majority of the units were in the sales turnover range of ( less than Rs. 5 la.khs initially

(204 units). But significant number of units (83 units) have crossed this range at the latest

year under study. These figures show the size-wise and operation-wise growth of the

entrepreneurs.

21. A larger majority of the entrepreneurs had established the / units on their own with the

financial assistance of KSFC.

Thus, though KSFC's finance was not a motivating factor, it was felt definitely a facilitating

factor.

22. The different types of changes made by the entrepreneurs after floating the unit shows

the innovating character of the entrepreneurs in the study area.

23. A larger number of entrepreneurs are in the profit percentage range of 6-10 per cent

(109 out of 280 entrepreneurs) and re-investing less than 20 per cent to their business (66 out

of 120 entrepreneurs).

24. A study into the impact of category, education and family' background on the

performance of the entrepreneurs revealed the following:

yThe performance of the entrepreneurs across the category line revealed that the

entrepreneurs belonging to general category have a broad-based ownership, early

chasers/adopters or early entrants to the entrepreneurial field in the case study area, exhibited

better qualities of entrepreneurship by owning units with heavy investment, by showing

better performance in sales turn¬over, by undertaking various schemes of development and

number of changes in their units. In the latter two areas, the BCM category entrepreneurs also

performed well. The entrepreneurs belonging to minority and general category have a lion's

share in statewide and national market due to fluency in language and imbibed

entrepreneurial skill. The concentration of 54.54 per cent of SC/ST entrepreneurs and 33.33

per cent of minority

entrepreneurs in the transport sector which required less technical skill, talent and expertise

when compared with the SSI sector and practical control of a large majority of uni ts in the

name of the women by the male counterparts show the impact of category or social

background on the emergence of entrepreneurs and on the entrepreneurial performance in the

stuJy area.

(b) The educational background of the entrepreneurs had significantly influenced the type of

ownership, sector, marketing area, schemes of development and number of changes. The

tendency to widen the scope of ownership is exhibited by technically qualified entrepreneurs.

The entrepreneurs from primary, matriculation level and collegiate level education

background restricted their ownership in one's own family in large number, since it assures

smooth running. Similarly, a large majority of technically qualified entrepreneurs, 87.17 per

cent, chosen the SSI sector as it is suitable to their educational background. The technical,

collegiate level and matriculation level education holders are having a lion's share in the

statewide and national market, while a large majority of entrepreneurs with primary

education, 72 per cent, are concentrated in local market. However, profit and. education

relationship study indicated that technical education, matriculation level and collegiate level

education background and profit shows a high degree of negative correlation. But the profit

and primary education background shows a moderate degree of negative correlation. Thus, it

can be inferred that educational background is nothing to do with the profit earning capacity

of one. The study also revealed that higher education is not influencing the profitability of the

entrepreneurs. The other factors such as imbibed entrepreneurial skill, area chosen for

entrepreneurial activity, market conditions, etc., are influencing the profitability of

entrepreneurs.

282

Summary of Findings, Suggestions and Conclusion

(c) The performance of the entrepreneurs across the family background revealed that the

entrepreneurs from trade or industrial background excelled the race in many respects or areas

followed by the entreprene~rs from service or employment background and agncultural

background. To brief, the former had a broad-based ownership, enjoying lion's share in the

statewide and national market, owning units with higher investment both initially and at the

latest year under study, showed a good performance in sales turnover, return on investment

and depended less on profit to meet the financial requirements of the business. However, the

entrepreneurs from service or employment background replaced the entrepreneurs from trade

or industrial background in undertaking various schemes of development and by making

number of changes. This shows the innovative character of the entrepreneurs from service or

employment background. The re-investment of profit into business by 59.64 per cent of

entrepreneurs from service or employment background proves the above inference drawn.

25. The entrepreneurs 'under study faced marketing problems, ..Hnancial (particularly

working caI;Jital) J?roblems~ ~abour ./ problems, rigid government rules IncludIng the ngid

and complicated procedures of KSFC, lack of adequate power, scarcity of raw materials,

transportation problem and such other problems. The development of entrepreneurship, more

particularly, in industrial estates is retarde~ due to the l~ck of infrastructural facilities such as

roads, draInage, post office, separate banking facility, water supply, security, canteen,

recreation facility and the like.

26. The KSFC has made a significant finan~ial.contribution to /~~e development of

entrepreneurship 1n the state of Karnataka. It is evident frpm the following:

(a) The corporation was able to reach the t~rget i~ terms of number of sanctions and amount

sanctioned In mpst of the years under study.

...•

I

\

Summary of Findings, Suggestions and Conclusion

283

(b) The major portion of the assistance of the corporation has gone to new entrepreneurs. But

the expansion/ modernisation/ diversification of the units owned by entrepreneurs and

rehabilitation of sick units are also figured more and more in the latter years under study.

(c) The 55I sector had enjoyed a lion's share in the KSFC's total sanctions during the period

under study. But sanctions made to other sectors in large quantity and transport sector in large

number in the latter years under study shows the diversification of corporation's funds

towards these sectors and the role played in assisting the service entrepreneurs.

(d) The corporation has succeeded in its goal of developing local entrepreneurship by

sanctioning 95.76 per cent of the total amount sanctioned during the 8 years under study to

99.40 per cent of the total number of entrepreneurs assisted.

(e) There is an upward tendency in the corporation's sanctions (with little variations) to the

special category entrepreneurs, viz., SC/ST, minority and women.

(f) The special lending of KSFC shows'the introduction of new and innovative schemes to

cater to the needs of the entrepreneurs .

(g) The socio-economic contribution made by the corporation by assisting new and new

entrepreneurs along with existing entrepreneurs, generating more and more employment

opportunities, the value of the output generated and investment catalysed by such projects is

really appreciable.

However, the performance of the corporation at the state level is not free from lacunae. Few

such identified areas are as below:

(a) The total sanctions made by the corporation is declined from 14,819 cases in 1995-96 to

13,053 in 1996-97. Again, it has reduced by 46.60 per cent in terms ff number (from 13 ,053

in 1996-97 to 6,970 in 1997 -'J8) and by

284

Summary of Findings, Suggestions and ConcLusion

285

Summary of Findings, Suggestions and Conclusion

32.85 per cent in terms of amount (from Rs. 85,984.32 lakhs in 1996-97 to Rs. 57,736.47

lakhs in 1997-98) in 1997-98 as against the relevant previous year. This is a serious issue

'Yhich requires attention of KSFC.

(b) Though growth rate achieved in sanctions and disbursements in the first seven years under

study is satisfactory, a wide gap in corporation's sanctions and disbursements (ranging from

12.35 per cent in 1992-93 to 27.65 per cent in 1991-92) shows the lapse percentage in the

financial assistance.' Similarly, the difference in gross and effective sanctions shows the lapse

percentage in corporation's assistance.

(c) The' district-wise analysis of sanctions revealed that a few highly developed areas

continued to bag the resources of KSFC and backward districts, more particularly a large part

of north Karnataka, which require more attention are being neglected. This situation will

aggravate the position of regional imbalance instead of reducing it. It is also noted that the

corporation appears to have given little thought to the allocation of funds among different

districts/areas of the state.

27. A study into the commercial role of KSFC in Shimoga district reveals the following:

(a) The sanctions made by the branch office of KSFC at Shimoga and head office shows a

mixed trend during the period under study. In total, the district failed to get its legitimate

share in the total sanctions made at the state level. The difference between the share of the

district in total amount of sanctions and share in the total population of the state followed by

placing of the district next after to the 3 districts of north Karnataka (among deficiency facer

districts) supports the above inference dr:awn.

(b) Huge' gap in the achievement percentage in terms of number of sanctions and amount

sanctioned during the first three years under study shows the sanctioning of

small sized loans to large number of borrowers by the corporatlOn.

(c) The corporation was not able to reach the target in terms of amount of sanctions in 5 out

of 8 years under study.

(d) The analysis of tal uk-wise assistance reveals that the corporation has failed to achieve the

balanced growth of the district and concentrated its financial efforts in certain pockets of the

district. Further, the region-wise analysis reveals that maIn ad region taluks failed to get their

legitimate share in the corporation's assistance.

(e) Sanctioning of a large sum of money to the SSI sector and to a significant number of

entrepreneurs in the transport sector shows the role played by the corporation in the

development of industrial entrepreneurship and figuring of service entrepreneurship also in

its portfolio.

(D Category cum sector-wise analysis reveals that the special category entrepreneurs have

dominated the transport sector and more than 1I3rd of the .. other sectors. Their share in the

SSI sector, which requires more technical knowledge and skill when compared with transport

~eCtor, is less than the share enjoyed by the entrepreneurs belonging to general category.

(g) The activity-wise analysis reveals that t~e corporation has played a major role in

attracting more number of service entrepreneurs than the industrial entrepreneurs.

(h) The concentration of a large majority of KSFC assisted entrepreneurs, 83.07 per cent, in

the proprietary form of organisation shows the narrow ownership base followed by small size

of the units.

(i) The analysis of size-wise sanctions reveals that a large number of sanctions (86.73 per

cent) are of less than Rs. 5 lakhs, thus the size of the majority of the units is used to be small.

28. A study into the commercial functions of lending finance to entrepreneurs in the case

study area revealed the following: (a) A large majority of entrepreneurs, 85.36 per cent, were

286

Summary of Findings, Suggestions and Conclusion

dependent on more than one source to meet the initial capital requirements. Also, 81.07 per

cent of the sample size have borrowed term loan from KSFC to meet the initial capital

requirements besides borrowing from other sources. This shows the inadequacy of the capital

provided by the corporation to the entrepreneurs. But it is a sound lending policy of any

organisation. Getting of 100 per cent term loan by 52 entrepreneurs in the study area shows

the practice of over-estimating the project cost and virtual scrapping of the corporation's

lending provisions.

. (b) The working capital policy of the corporation is faulty one, since it has either failed to

meet the working capital requirements of the entrepreneurs or failed to provide adequate

working capital. This urged the entrepreneurs to depend on multiple agencies to meet their

working capital requirements. This has also affected the activity of the entrepreneurs as 36

entrepreneurs have limited their activities due to non-availability of working capital or

insufficient working capital.

(c) As regards the attitude of the corporation in granting loan, a big number of entrepreneurs

had complaints again.st the delay in sanctions, non-availability' of working capital or

availability of insufficient working capital. Rigid and complicated procedures followed by the

corporation is the most common reason assigned by the respondents for delay in sanctioning

the loan. Significantly, the entrepreneurs did not face discrimination from KSFC in obtaining

finance due to caste reasons, absence of political banking, illiteracy or due to their rural

background.

(d) Though a large majority of entrepreneurs have approached the KSFC on their own, their

seems to be interference of middlemen to some extent.

(e) The follow-up measures of KSFC on lending the money is weak. Also, visiting the units

with the purpose of

Summary of Findings, Suggestions and Conclusion

287

recovery only had cultivated negative attitude among the borrowers. .

(D An evaluation of the terms of lending revealed that a majority of entrepreneurs had no

complaints against the time taken to sanction loans, the period allowed for repaymenfof

loans, minimum contribution to be made by the promoter(s) and insistence of collateral

security. However, almost half of the respondents felt that interest rates were high and a large

majority have felt that the formalities of obtaining loans were rigid and complicated and

recovery procedure is very strict. The services of the corporation in the latter two areas are

strongly commented/ criticised/blamed/ attacked by the respondents in the study area. Despite

this, 42.14 per cent of the entrepreneurs rated the service of KSFC as 'good'. But this number

is outweighed by those rated the service of KSFC 'average'.

(g) A large number of entrepreneurs had identified various lacunae in the services and

identified the areas which offer scope for the improvement in the present services of KSFC.

29. The closure of large number of VISHW A units, fraud in sanctioning and disbursing

the loan, receipt of repayment notice by those who had not obtained the loan really, the

mediators role, false promise of the mediators (based on field survey information), improper

marketing arrangement, selecting of large number of illiterate rural women as beneficiaries of

the scheme and absence of transparency in the implementation of the scheme shows the

virtual flop of the VISHW A Scheme.

30. It was found that the coverage of the Entrepreneurship Development Programmes is

not adequate as a majority of the entrepreneurs under study have established units without the

benefit of such programmes. Again, the influence of the Entrepreneurship Development

Programmes on the entrepreneurs who had attended such programmes was not

288

Summary of Findings, Suggestions and Conclusion

encouraging as evidenced by the following findings:

(a) The study into the EDP as a motivating factor on the entrepreneurs indicated that the

entrepreneurs who attended Enq:epreneurship Development Programmes already have an

intention to establish units due to the internal ambition of their own. The ranking assigned by

the participants of such programmes indicates that EDP was ranked last with only 48 points.

. (b) A study into the usefulness of different components of EDP indicated that a large

majority of the entrepreneurs rate the various components of EDP as 'not useful'.

(c) ~he follow-up of EDP activities by KSFC is very poor, smce only 35 out of 100 EDP

participants did receive suc~ f?llow-up a~ter attending the EDP. Even a large maJonty of

avallers of follow-up, rate the various components of EDP follow-up as 'not useful'.

(d) The EDP participants and loan borrowers ratio shows .the poor output of such

programmes.

(e) Though the EDP entrepreneurs are enjoying a lion's share in the statewide and national

market than the non¬EDP entrepreneurs, it is the imbibed entrepreneurial skill that motivated

them to lead the race not the EDP the study reveals. '

The above findings indicated the ineffectiveness of EDPs in promoting the entrepreneurship

in the participants.

Suggestions

The emergence of entrepreneurs has far-reaching implications for the social and economic

advancement of any nation. The process ?f entrepreneurship development should not merely

stop by lendmg the money by the development agencies including KSFC. There should be a

total commitment by KSFC and other agencies involved in the task of entrepreneurship

development. The role played by KSFC offers a scope for giving a few suggestions, as it is

going to playa major role in the development of entrepreneurship in the coming years.

Considering the above,

!

I

r

J

J

Summary of Findings, Suggestions and Conclusion

289

a few suggestions based on secondary data, field survey findings and observation are given

below:

1. Mere establishment of or increase in the number of institutions for assistance or

launching of newer and newer schemes do not by itself assure the development of

entrepreneurship. An integral functional approach on the part of institutions serving in the

state for the cause of entrepreneurship development is even more important. Providing

stimulatory, supportive and sustaining services should be the part of this integral functional

approach. The stimulatory activities refer broadly to identification of potential entrepreneurs,

development of entrepreneurial qualities and provision of infrastructure. Supportive activities

refer to the kind of assistance which would help entrepreneurs to start viable enterprises.

These include

_ arrangements for finance and consultancy services for management of enterprises.

Sustaining activities relate to those which would make a unit effic:ient and viable on

continuing basis, such as assistance for modernisation, expansion and diver~ification. In fact,

these three constitute an entrepreneurial development cycle, in which any imbalance in the

approach is likely to make the entire programme infructuous. The KSFC, the study revealed,

has placed emphasis on providing finance (commercial role) but not assigning needed priority

to promotional role or direct approach to eptrepreneurship development. Thus, it is suggested

to adopt an integral functional approach mentioned above. The same is presented in particular

in the ensuing pages also.

21 The KSFC mainly assists those prospective entrepreneurs who approach them by

themselves. Such a wait and see approach may prove to be wrong approach that too during

the days of liberalisation. Now some banks have started to volunteer to provide loans by

searching needy entrepreneurs. The corporation too has to identify the prospective

entrepreneurs in the society and then try to help in financing

and promoting them. After identifying the prospective entrepreneurs an intensive training

shall be given on organizational techniques, accounting, relevant laws, marketing

management etc. In other words, skill formation should be an important part of such training.

Before financing the project it may be insisted that the prospective entrepreneurs complete

satisfactorily a training programme which will at least expose them to the required

knowledge and skills.

As a part of this skill formation, the corporation is conducting Entrepreneurship

Development Programmes. Based on the study it is suggested that there is a need to

strengthen the various components of EDPs. The EDPs can be organized more

effectively with the help of academicians' and successful entrepreneurs. The strengths

and weaknesses of the prospective entrepreneurs can be assessed by conducting a

written test before selecting a candidate. The target group for EDPs should not only

be technical students as the corporation is doing now, but also the students of

Commerce, Management and Arts faculty. Because there may be no relationship

between education and area of interest. By conducting the EDPs to these group, the

corporation can encash the imbibed talents of the students. As a part of identification

and helping exercise, the corporation can introduce the schemes like village adoption

scheme as in commercial banks.

3. The entrepreneurs have to conform to, more particularly the SSIs, a number of

regulatory obligations. It is noted that rigid and complicated procedures of KSFC

deterred entrepreneurs in many ways. The entrepreneurial approach' and the

bureaucratic approach are two contracting approaches in the sense that the first one is

characterized by 'doing things' in a different way and the other is characterized by

'doing things' in a routine way. It generally results in a built-in-conflict which

generates certain difficulty to produce the desired results, i.e., entrepreneurship

development.

Therefore, the corporation should be helped by a team of experts consisting of

psychologists, economists and management experts. This team is expected to evaluate

not only economic feasibility of the proposed project but also the entrepreneur

himself. This is necessary as competent entrepreneurial skill alone makes a project

successful. This type of arrangement would eliminate the bureaucratic element in the

decision making process, would extend facilities only to worthy and eliminate/reduce

the chances of sickness.

In addition to annoying bureaucratic attitude and red-tape of the officials, some units

also fail to comply with the various formalities required to be completed, for this they

blame the government and quasi-governmental authorities. The gaps left by the

entrepreneurs in preparing the case for establishing their units is mainly due to their

ignorance about the procedures involved. A prior knowledge on the part of the

entrepreneurs in this matter would definitely hasten the promotion stage. Therefore,

the KSFC/DIC should open a cell to advise the prospective entrepreneurs on the

procedure and formalities to be completed and the proper agency to be approached.

Of course, the technical, planning and legal departments of KSFC are doing this job.

But the entrepreneurs felt that they do not give the list of documents to be given at

once. Thus, the practice of giving the required documents list at once should be

started with much sincerity.

Alternatively, there must be a co-ordination among all the agencies/departments

which are required to provide various services to entrepreneurs. The entrepreneurs

before getting the loan have to face more difficulties in getting the necessary

documents from taluk office, DIC, KSSIDC, KIADB, KPTCL/KEB, etc., as the, case

may be, due to bureaucratic style of functioning, corruption and other causes

prevailing in these offices. Hence a system under which the KSFC should send the list

of documents needed to the departments concerned on behalf of the loan applicants in

turn, they should send it directly to the KSFC. The responsibility to complete this

work may be fixed on each employee through legislation. Also, the time limit for

sanctioning and disbursing the loan on the employees of KSFC should be fixed.

4. In view of the problems being faced by the villagers (particular! y agriculturists) in

giving security at the corporation's expected places, the corporation should accept the

agricultural land as security for loan. This may help in the development of rural

entrepreneurship.

5. Besides fixing the promoter's minimum contribution on the basis of location of units,

type of project and category of the entrepreneurs, the financial background of the loan

applicant should also be considered. Because the poverty is not the experience of

people belonging to a particular area or community. Poor persons of upper caste and

poor people in non-backward areas (poverty in the midst of plenty) can be seen in this

country. This will certainly help in reducing the possibilities of getting the benefit of

schemes and programmes of government by what we call creamy-layer category of

the society emerged in the post-independent period.

6. KSFC is not running for earning profit like commercial banks. As its main motto is

development of entrepreneurship, the rate of interest on 'loans should be less than or

at least equal to that of commercial banks.

7. Recovery procedure shall be modified. While invoking section 29 of the SFCs Act

/taking stringent action against the defaulter, the real cause for default and his

intention should be studied.

8. Public grievance cell may be set up at the branch level?

9. It is not sufficient to merely lend term loan to those entrepreneurs who approach them

for finance. Working capital is as important as term loan, hence the corporation

should provide more and more working capital so as to avoid the simultaneous

dependence of entrepreneurs on KSFC and bank or to relieve them from the clutches

of private financial institutions / moneylenders, where / to whom they have to pay

more interest. The attitude of KSFC should be to see that no project worth financing

suffers for want of finance. The KSFC should ensure that working capital needs have

been adequately estimated at the time of preparation of project report. A small

entrepreneur, because of lack of business experience, generally under estimates

working capital requirements of the unit. Thus, the need-based financing of working

capital should be the approach Instead of reliance on security oriented financing.

Various ratios like net sales to inventory, net sales to working capital, debtors

turnover (average collection period) and current ratio should be made use of in

determining working capital need of the units.

10. Regionally well balanced growth has all along been one of the principal objectives of

the planned economic development of this country. Many institutions like KSFC is

put in charge of such development. But it has been established by this study that the

corporation has not succeeded in achieving the assigned target on this issue. It is

observed that Bangalore district continue to bag the resources of KSFC, while the

majority of the districts of north Karnataka being neglected. In this background, it is

suggested that the Karnataka state government should come forward to create 'an apex

body' subordinate to KSFC to look into the development of entrepreneurship in north

Karnataka. The units coming up in these areas may be exempted or discounted from

application processing fee, commitment charges and the entrepreneurs must be given

longer repayment periods. The corporation should also establish Technical Advise

and Guidance Cell' at important places (say, Hubli, Belgaum and Gulbarga) in the

north Karnataka region. Special developmental campaigns should also be conducted

to educate the prospective entrepreneurs.

11. Financial incentives may be an attractive instrument for inducing entrepreneurs, but

lack of infrastructural facilities is retarding the development of entrepreneurship,

Development agencies, therefore, sincerely try and actually develop industrial sheds,

road, drainage, post office, bank, telephone, telex facilities, etc., in industrial estates.

Social attention for the development of infrastructural facilities outside the industrial

estates should also be given.

12. The support structure for marketing is necessary if the entrepreneurship programme is

to succeed. KSFC can think of acting as catalyst between the small scale industrial

units and the consumers and help in marketing the products of assisted units.

However, KSFC alone is a helpless spectator. State level agencies like KHDC, KVIC,

KSIMC or district level co-operative societies will have to assume the responsibility

and help specialized small institutions to market the goods. Various government

departments should purchase their requirements (certain percentage) from SSI units.

This can be achieved through legislation.

13. Finally, the entrepreneurship development cannot be achieved unless the education

system and policies of government are directed towards it. A change in the

educational curriculum is necessary to create entrepreneurial awareness. The branches

of education, particularly commerce and management, should invariably include a

component of entrepreneurship in their syllabi. More and more job-oriented courses

should be introduced both at the + 2 stage and graduation and post graduation level.

This would go a long way in motivating the youths of the country to turn to

entrepreneurship.

Conclusion

The present study was undertaken with an objective of studying the role of Karnataka

State Financial Corporation in promoting and developing entrepreneurship in Karnataka state

with special reference to Shimoga district. It has been achieved with the study of various

facets of entrepreneurship in the case study area, financial assistance provided in the state and

case study area and promotional activities undertaken, more particularly Entrepreneurship

Development Programmes in Shimoga district.

The study was started with 9 hypotheses.

The first hypothesis that it is the ambition factor rather than compulsion and

encouragement factor that motivated the entrepreneurs in the study area has been proved, as

the study reveals that, need for independence, desire to get gainfully occupied and desire to

achieve something in life has driven most of the entrepreneurs to threshold of

entrepreneurship. Any other factor which has ranked third in motivating the entrepreneurs is

the combination of both ambition, compulsion and encouragement factor. But the first three

motivating factors mentioned above are outweighing the last factor, i.e., any other in Table

5.5. Moreover, the encouragement factors such as KSFC finance, EDP/EAP and success of

others have very poorly motivated the entrepreneurs in the study area. Therefore, it can be

inferred that ambition factor has motivated the entrepreneurs in large number in the study

area.

The hypothesis that the coverage of EDP is not adequate and ineffective has also been

proved by the study. It is noted that a large majority of entrepreneurs had set up their projects

without EDP training and even the EDP participants rated the different components of EDP

as 'not useful' in great number, follow-up of EDP as weak, components of follow-up of EDP

also as 'not useful'. EDP, as a motivating factor in becoming an entrepreneur, has motivated

only 12 entrepreneurs, among them 5 have ranked it as first, 4 have ranked it as second, 2

have ranked it as third and only one entrepreneur assigned fifth or last rank to the EDP/EAP

factor.

The third hypothesis concentrated on the type of entrepreneurs attracted by the

corporation in terms of number is also proved. The study into the sector-wise sanctions made

by the corporation and more particularly activity-wise sanctions made by the corporation in

the study area reveals that the corporation has played a major role in attracting more number

of service entrepreneurs than industrial entrepreneurs.

The fourth hypothesis that entrepreneurs have opted for or preferred small sized units

has been proved by the number of entrepreneurs concentrated in the units with lesser

investment range and lesser turnover range initially, running the units with either no

employees or finger countable employees and by borrowing lesser amount of financial

assistance (i.e., small sized loans) by a large number of entrepreneurs in the study area.

The fact that over 95.76 per cent of the total assistance provided by the corporation

during the period under study went to 99.40 per cent of the total number of assisted

entrepreneurs in the state who are the local entrepreneurs proves the hypothesis that the

corporation has played a major role in the development of local entrepreneurship.

The findings of the study endorse the hypothesis that women entrepreneurs play only

a surrogate role in their units. It is noted that out of the 37 units owned by women

entrepreneurs, only 12 units are managed and practically controlled by women and the

remaining 25 units are only in the name of the women, but actually managed and controlled

by the male counterparts, i.e., husband, father and other male members of the family. This

shows the women entrepreneurs' higher dependence on male members of the family in

discharging their entrepreneurial responsibilities.

The study into the financial role of KSFC revealed that the corporation has provided

financial assistance for a variety of activities. It would be too harsh to dismiss the efforts of

KSFC in this direction. But there seems to be lack of commitment in achieving the balanced

growth of the state as well as in the case study area. The study finds that Bangalore district at

the state level and non-malnad region in general and Shimoga taluk in particular in the case

study area received more and more assistance of KSFC. At the same time, a large majority of

districts of north Karnataka and even case study area have failed to get their legitimate share

in the corporation's sanctions. These figures fully endorse the hypothesis that the corporation

failed to achieve balanced growth of the state as well as of the case study area.

As regards the hypothesis regarding the impact of the category, education and family

background on the entrepreneurial performance, the study finds that the entrepreneurs from

general category excelled the race by showing better performance in investment, sales

turnover, broad-based market, by early chasing the entrepreneurial field and by having broad-

based ownership. Though they ranked second In undertaking various schemes of

development and in the state-wide market share, their performance in the other fronts

certainly outweigh the performance of the entrepreneurs belonging to other category.

Similarly, the entrepreneurs from trade or industrial background led the race in many respects

than the entrepreneurs from other two backgrounds. The impact of higher education, i.e.,

technical and collegiate level education in undertaking different types of changes, schemes of

development, in having broad-based ownership, enjoying state-wide market also favours the

high degree of positive correlation between the entrepreneurial performance and educational

background.

Though the entrepreneurs from non-general category, other than trade or industrial

background and entrepreneurs with lower education show their entrepreneurial performance

in a few areas, the landmark in this front has been made by the entrepreneurs belonging to

general category, entrepreneurs with higher level of education and entrepreneurs from trade

or industrial background. Thus, the above hypothesis can be endorsed by this study.

Closure of majority of units assisted under VISHWA scheme, absence of transparency

in the implementation of the scheme, stopping the assistance under this scheme by KSFC and

opinions of entrepreneurs surveyed and official views prove the last hypothesis that the

VISHWA scheme fails to generate the entrepreneurs.

In recent years combined efforts of government and developmental banks, more

particularly the KSFC are trying to develop the entrepreneurship so as to eliminate the

poverty, backwardness, unemployment problem, etc., being faced by the country and also to

use the locally available resources.

The study has successfully evaluated the financial and non-financial role of Karnataka

State Financial Corporation in the development of entrepreneurship. It has done yeoman's

service for the development of entrepreneurship in the state as well as in the case study area

and steered in to occupy a place of pride in the entrepreneurial or industrial map of the

country. What is really needed is the commitment of the corporation to identify itself with the

socialistic philosophy of the state, reflecting the needs and urges of the people, particularly in

small sector. Of course, the working of the corporation suffers from a few handicaps and

loopholes. The suggestions made on the basis of the findings, if implemented in good faith,

would go a long way in strengthening the entrepreneurial base in the state of Karnataka

which includes Shimoga district, the case study area.

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Reports, Gazetteers, Booklets and others

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1991-92, 1992-93, 1993-94, 1994-95, 1995-96, 1996-97, 1997-98, 1998-99 and 1999-

2000.

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Thesis and Dissertation

Laxmisha A.S., The Role of KSFC in the Development of Entrepreneurship in Rural Areas-A

Case Study of Sagar Taluk, Dissertation submitted to Madurai Kamaraj University,

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to the Mysore University, April 1993 (Unpublished).

Author Index

Acharya, 8, 9, 40

Alexander, P.c., 50

Bagchi,8 Baldwin, 8

Banerjee, Gautham, 88

Basl,l, 261

Berna, 2, 16, 40

Bhanushali, S.G., 8, 14, 40,

159,175 Bhatia, 8, 14

Bhat, K.S.N., 38

Bolton, 1

Brimmer, 8

Cantilion, Richard, 4

Chaterjee, Anjana, 50

Chopra, K.C., 13

Cochran, 32

Cole, 35, 42

Derossi, Flavia, 35

Desai, Arvindrai N., 49

Desai, Vasanth, 8, 16,38

Diamond, William, 274

Drucker, Peter F., 5.

Evans, 7

Ford, Henry, 2

Gadgil, D.R., 18,39

Gaikwad and Tripathi, 8, 9

Galbraith, 6

Gangadhar and Reddy, 14

Gnana, Kannan, 190

Gudi,10

Gupta, 262

Gyan, Prakash, 260

Haggen, E.E., 5, 120

Harbison, 7 Heggade,9

Higgins, Benjamin, 42

Hoselitz, 31, 32

Kilby, 26

Knight, Frank,S Kumar, S. Ashok, 123

Kunkel, 31, 32

Lakhanpal, 8, 14

Lewis, 6

Marx, Karl,S

McClelland, 34, 35, 45

Medhora,8

Meier and Baldwin, 1

Mishra and Bisht, 15, 40, 149

Mitra, B.B., 88

Murthy, BEVVN, 124

Nafzinger, E.W., 15

Oamen, 11, 40, 119, 159

Palia, S.M., 50

Panandikar, 128

Pandit, 8 Papanek, G.F., 35

Pathak, 8, 9 Pavlov, 8

Pil1ai, 10

Rao, A.S., 119, 141, 149

Rao, N. Gangadhar, 15

Rao, V. Lakshman, 10

Rao, V. Sarveshwar, 15

Ratheneau, Emil, 1

Romijin, H.A., 50

Sadhak, 12, 149, 159

Saravanavel, 10

Sarwate, Dilip M., 50

Say, J.B., 4

Schumpeter, Joseph A., 5, 34

Sharadadevi, 11

Sharma and Singh, 14, 40, 159

Sharma, R.A., 8, 12, 40, 140

Singh, Birendra Narain, 14

Spengler, 1

Spoadek, 8

Stauss, 7

Stokes, 31,32

Qualified professionals, 75.76

Tissue culture activities, 78

Subject Index

Achievement in Sanctions and Disbursements, 196-98

Achievement Motivation Syndrome, 45

Achievement Motivation Training, 46, 47

Analysis of Data, 22

Andhra Pradesh State Financial Corporation, 14

Assam Financial Corporation, 3

Assessment of KSFC in Financing Entrepreneurs, 237-60

Commitment in lending, 246-48

Follow.up activities, 248-49

Source of initial capital, 238-48

Term loan, 240-43

Terms of lending, 249-60

Way of approach, 248

Working capital, 243-46

Assistance for

Acquiring machinery, 77-78

Maintenance, development and construction of road, 75

Marketing, 81

Tripathi, Dwijendra, 8

~eber,Max, 31, 36

Wernette, Philip, 2

Young, 31, 33

Background of study, 1-29

Analysis, 22

Concept of entrepreneur, 4.8

Definitions, 22-23

Dimensions of study, 24-25

Hypotheses, 19-20

Justification of study, 17-19

Limitations, 23-24

Methodology and sample,

20-22 Objectives, 19

Prelude, 1-2

Review of literature, 8-17

Statement of problem, 2-4

BDA, 60

BDD (Business Development Department), 85

Bureau of Indian Standards, 99

Business Opportunity Guidance, 47

Category and Capital employed, 166

Marketing area, 163-65

No. of changes, no changes EAP (Entrepreneurship Equipment Lease

Finance, 82 Hire Purchase Assistance, 82

etc., 183•86 Awareness Programme), 53, Hinduism, 31, 36

Performance, 159 56, 8~ 123,259,260,278,295 ,-;actoring, 83 , homo

hierarchius, 36

Sales turnover, 166•69 Education and Family Background and Capital

Hypotheses of Study, 19•20

Schemes of developm~nt, Marketing area, 144•45 employed, 153•56

181•83 No. of changes, no changes Marketing area, 151•53

ICICI (Industrial Credit and

Type of ownership, 160-61 etc., 177-81 No. of changes, no change

Investment Corporation of

Year of establishment, 161-63 Performance, 141 etc., 172•75

India), 18,43,99, 192,262

CEDOK, 99, 263 Profit, 145•49 Profit reinvested, 158•59 IDBI

(Industrial Development

Coefficient of correlation, Schemes of development, 175 Return on

investment, 156•58 Bank of India), 18, 43, 54, 56,

146-48 Sector, 143•44 .. Sales turnover, 156 79,99, 117, 192,

193,262

Commitment charges, 60 Type of ownership, 142-43 Type 'of ownership,

150•51 IFCI (Industrial Finance

Composit Loan Scheme, 66•67 EDP, 16, 17, 20-24,44-48,53, 56, Field

Testing Stations, 98 Corporation of India), 18, 43,

Computer Loan Scheme, 73•74 57, 123,257,259,260,263•73, Fifth Five Year

Plan, 44 99,192,262

Concept of Entrepreneur, 4-8 278,288,290,295 Finance for Industrial

Motivation Camps

Contents of EDP, 46-48 Electronic Testing Development Electro-medical

equipment, and Seminars, 264

Corporation, 99 70 Industrial Policy Resolutions,

Development of Entrepreneurs entrepl'ende, 4 Ex-servicemen, 71-72

18, 51, 92

in India, 262•63 Entrepreneur Guidance Cell, 86 Generators, 73

Industrial Structure of

DIC (District Industries Centre), Entrepreneurship Hatecheries and poultry

Karnataka, 93•94

11,20,99,115,264,291 Concept, 41•42 farms, 81-83

Infrastructure for

Dimensions of Study, 24-25 Development, 42•44 Hospital and nursing home,

Entrepreneurship

District Shimoga: A Profile, Development programme, 70-71

Development, 94-96

99•115 44•48 Hotel and tourism industry,

General characteristics, 99-103 Entrepreneurship Development 68•69

Jainism,31

Infrastructure for ED, Concept, 30-50 Quality control equipment,

Justification for Study, 17•19

111-115 Entrepreneurial supply 73

Present industrial scenario, theories, 30•35 Tourism related facilities, 77

Karnataka State: A Profile, 89-99

108-11 Process of development, 41•48 First Investment Clause, 62

General characteristics, 89-93

Resources for Supply and neeJ of First World War, 13 Industrial

structure, 93-94

entrepreneurship entrepreneurs, 36-41 FLC (Foreign Letter of Credit),

Infrastructure for

development, 103•08 - pre-independence scenario, 214 entrepreneurship

District Shimoga: 36-39 development, 94-96

Entrepreneurs, 116-91 - post•independence scenario, GIC (General

Insurance Institutions for

Performance, 137-86 39-41 Y Corporation of India), 262 entrepreneurship

Problems, 186-90 Entrepreneurship Development GIIC (Gujarat Industrial

development, 98-99

Social profile, 116.25 Programme, 44-48, 278 Investment Corporation), 45

Resources for

U nits promoted, 126-36 Equpment Finance Scheme,

entrepreneurship

69-70 development, 96•98

314

Karnataka State Social Welfare Board, 10

Kerala State Handloom Development Board, 11 KHDC (Karnataka HandJoom Development

Board), 83, 98 KJADB (Karnataka Industrial Areas Development Board),

6(7, 9.5; 11~291

KMF (Karnataka Milk Federation), 107 KPM(R) Act (1979), 64

KSFC (Karnataka State Financial Corporation), 17-25,48,51¬60, 62-71, 74, 75, 82-87, 99,

114, 122, 124, 136,188,193-227,234-59,263-72,276-80, 282-98

KSFC: A Profile, 51-88

Business development department, 85 Entrepreneurial guidance cell, 86

Finance: terms and conditions, 56-64 Merchant banking'service,

84-85

Objectives, 52-53 Organisation, 54-56 Origin, 51-52

Other activities, 87-88 Project identification cell, 86 Public grievances cell, 87

. Schemes for entrepreneurs, 64-84

Special incentives, 53-54 Women entrepreneurs' cell, 86

KSIMC (Karnataka SmaJJ Industries Marketing Corporation), 98, 187, 294 KSSIDC

(Karnataka State Small Industries Development Corporation), 56, 60, 94, 98,

11~ 26]. 268, 291 KVIC (Knadiand Village Industries Co;porati0nh 6'1. 84,235,294

'"

Subject Index

Subject Index

KSFC at State Level: Analysis of, 193-218

Achievement of sanctions and

disbursements, 196-98 Area-wise sanctjon~ 202-07 Gross effective sanction~

208-09

Gross sanctions to local entrepreneur~ 207-08 Purpose-wise sanctions, 198-99

Sanctions to special category, 209-13

Sector-wise sanctions, 200-02 Socio-economic. constitution, 216-18

Special lending, 213-16 Targets and achievements in gross sanctions, 194-96 KSFC in

Shimoga Dist.:

Analysis of, 218-37 Activity-wise sanctions, 228-32

Category cum sector-wise sanctions, 226-28 Constitution-wise sanctions, 232-33

Gross sanctions, 218-20 Sanctions under VISHW A,

234-37

Sector-wise sanctions, 225-26 Size-wise sanctions, 233-34 Taluk-wise sanctions, 223-25

Targets and achieVements in

sanctions, 221-23

KSSIDC (Karnataka State Small Industries Corporation),

263

I

"

Life Insurance Corporation of India, 39, 262

Limitation of Study, 23-24 Literature: Review, 8-17

Mahila Udyam Nidhi Scheme, 74

Management Development Institute, 12, 168 Management Education Component, 47

Market Advisory Centre, 10 Merchant Banking Service, 84-85

Methodology of Study, 20-21 Modernisa,tion Scheme, 69

I"~

NABARD,114 N-ach,34

National Equity Fund Scheme,

58,71 NGOs,56

No Industry District, 3, 277 NPC (National Productivity

Council),98

NSIC (National Small Industries Corporation),98

315

Objectives of EDP, 45-46 KSFC, 52-53 Study, 19

Origin of KSFG, 51-52

jJ4njJdff~ 6J

PerfOrm.wce of Entrepreneurs; lJ7-6'6

Changes by entrepreneurs,

137-38 Category, 159-69

Family background, 149-59 Performance and education,

141-49

Profit re-invested, 140-41 Return on investment, 128-40 Schemes of development,

169-86

Planning Commission, 18

PMC, 18,257,259,264,265,278 PMRY, 157

PRC, 18,257,259,264,265,278 Process of Entrepreneurship

Development, 41-48 Entrepreneurship Concept, 41-42

Entrepreneurship development, 42-44 Entrepreneurship development programme, 44-48

Project Identification Cell, 86 PrOmoter's Minimum Contribution, 60-61, 251-52

Promotional and Developmental Efforts of KSFC, 84-88 Promotional Role of KSFC, 263-74

316

EDP, 263-65

Effectiveness ofEDPs, 267-74 PMC/PRC holder's meet,

265-66

Successful entrepren~urial meet, 266-67

Public Grievance Cell, 87

Ratio Analysis Technique, 170,

181 RBI,54

Recall of Loan Amount, 61 Role of KSFC in

Entrepreneurship Promotion, 261-75

Assessment of promotional role, 264-68

Development banks in India, 263-64'

EDP as motivating factor, 268-74

Sample Design, 21•22 Scheme for

Development of industrial establishment, 68

Disabled entrepreneurs, 67 Educated unemployed youths,

66

R&D activities, 78-79 Rehabilitation of sick units, 78 Transport industry; 72-73

Schemes for Entrepreneurs, 64-84

SC/ST, 58, 59, 67, 121, 160, 161, 163,165,166,169,181,183, 184,194,212,213,222,228,

279,280,283

Subject Index

SEBI (Securities ancl--Exchange

Board of India), 53, 85, 214 Second World War, 261

Seed Capital Scheme, 79•80 SF-Cs.. 18, 43,117,193,194,262 SIDBI (Small Industries

Development Bank of India), 56,79,262

SISIs (Small Industries Service Institutes), 18, 60, 98

Single Window Sche~e, 76•77 ~LAC (Small Loan Advisory Committee), 55

Social Profile of Entrepreneurs, 116-25

Age and marital status, 117-18 Community-wise

distribution; '120-21 Education level, 118-20 Family backgro~nd, 121-22 Motivating factors,

122-25

Soft Loan Scheme, 80 Special Capital Scheme, 80 Special Incentives of KSFC,

53-54

Spirit of Capitalism, 31

SR TO (Small Road Transport Operator), 72

SSIs (Small Scale Industries), 21, 22,200,201,225,279,281 State Financial Corporations Act

(1951),3,51,52,57,64,257, 292

STEP (Science and Technology Entrepreneurs Park), 99

Summary of Conclusion, 294-98 Findings, 276-88 Suggestions, 288-94

Subject Index

SVO (Single Vehicle Operator), 72

SWISS (Single Window Industrial Support System), 14

!

'.

Targets and Achievements in Gross Sanctions, 194-96 Technical Consultancy

Organisation, 44 Technician's Scheme, 64-65 Technocrats, 6

TECSOK (Technical .

Consultancy Services Organisation of Karnataka), 98,263,284

1'erm Loan, 23

Terms of Lending: Evaluation, 249-60

Insistence on security, 253-54 Legal formalities, 255-57 Promoter's minimum

contribution, 251-53 Rate of interest, 254-55 Recovery procedure, 256-57 Repayment period,

251 Service rating, 258-60

Time lag; 250

Theories of Entrepreneurial Supply Emphasising Economic factors, 35 Psychological factors,

33-31-Religious and socio-economic

, factors, 31-33

Tiny Unit, 23

317

Transfer of Property Act (1882), 44

TRYSEM,115

UNIDO, 26

United Nations Economic Commission for Latin America, 2, 3

Units Promoted by

Entrepreneurs, 126-36 Classification on investment

basis, 130-35 Commencement, 135-36 Form of organisation, 127 Location, 127•29 Sector-

wise distribution,

126-27

Type of market, 129-30 UTI (Unit Trust of India), 262

Vishveshwaraiah Industrial Trade Centre, 99 VISHWA, 20, 21, 22

VISHW A Scheme, 83-84, 115, 126, 23j,236, 287, 297

Women Entrepreneurs' Grievance Cell, 86 Working Capital, 23 Working Capital Loan, 23

Zilla Panchayath, 101 Zilla Parishad, 101