Entrepreneurship Development Role of financial Institutions Contents Preface Acknowledgements 1 2 3 4 5 6 7 8 Introduction The Concept of Entrepreneurship Development Karnataka State

Financial Corporation: A Profile Entrepreneurial Setting in Shimoga District Financial Role of KSFC in the Development of Entrepreneurship Role of KSFC in Promoting the Entrepreneurship Bibliography Author Index Subject Index 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 261 299 309 311 Summary of Findings, Suggestions and Conclusion 276 30 51 116 192

A Profile of Karnataka State and Case Study Area 89

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 postindependence 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 noninsurable 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. 2. 3. 4. the undertaking or managing of risk and handling of economic uncertainty, planning and innovation, co-ordination, administration and control, and 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. 2. 3. Those who carryout more or less routine aspects of management. Innovating, dynamic entrepreneurs-whose function is to "combine means of production in new ways". 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 Gujaratisetting 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 prerequisites 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. 2. 3. To study the various non-financial measures taken by the KSFC to develop and promote the entrepreneurship and their effect. To identify the problems being faced by the assisted entrepreneurs in getting the assistance from KSFC and in setting up their projects. 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. 2. 3. 4. Representative samples from all the three sectors (i.e., SSIs, transport operators and other sectors) and category of entrepreneurs. Representative samples from different forms of organizations. Representative samples from all the nine tauks m Shimoga district. Proportional representation was given to each taluk while selecting the sample. 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 1. Shimoga 2. Sagar 3. Bhadravati 4. Shikaripur 5. Honnali 6. Channagiri 7. Soraba 8. Thirthahalli 9. Hosanagara Source: Survey Data Sample Entrepreneurs 110 50 50 30 15 15 10 10 10

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 199798. 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. 3. 4. The type of units promoted by the entrepreneurs. Performance of entrepreneurs. 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 1. 2. 3. 4. 5. Gerald, M. Meier and Robert, E. Baldwin, Economic Development-Theory, History and Policy, Asia Publishing House, Bombay, 1960, p. 299. Spangler, Joseph., "Economic Factors in Economic Development", American Economic Review (Proceedings), Vol. 47, p.4. Encyclopedia of Social Sciences, Vol. 3-4, Macmillan and Company, New York, p. 218. Wernette, Philip, The Future of American Prosperity, Macmillan and Company, New York, 1955. 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. 7. 8. Berna, James J., Industrial Entrepreneurship in Madras State, Asia Publishing House, Bombay, 1960, p. 6. Kilby, Peter, Entrepreneurship and Economic Development, The Free Press, New York, 1971, p. 2. 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. 10. Drucker, Peter F., Innovation and Entrepreneurship-Practice and Principles. Affiliated East-West Press Pvt. Ltd., New Delhi, 1991, p. 19. 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. 12. 13. 14. 15. 16.

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. Schumpeter, ].A., "The Theory of Economic Development", Oxford University, New York, 1967, cited in Vasanth Desai, op. cit., p. 31. Bhanushali, S.G., op. cit., pp. 5-6. Lewis, Ben W., "The Corporate Entrepreneur", Quarterly Journal of Economics, Vol. 51, No.3, May 1937, p. 535. Ibid., p. 537. Harbison, Frederick, "Entrepreneurial Organization as a Factor in Economic Development", The Quarterly Journal of Economics, Vol. 70, No. 1, Feb. 1956, p. 365.

17. 18. 19.

Stauss, James H., "The Entrepreneur-The Firm", Journal of Political Economy, Vol. 52, No.2, June 1944, p.117. Ibid., p.120. 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. 22.

Acharya, Hemalatha, "Creative Responses in Indian Economy -A Comment", The Economic Weekly, Vol. 9, No. 17, April 27, 1957, pp. 547-49. 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. 24.

Pathak, H.N., Small Scale Industries in Ludhiana, IIMA reprint series, originally published in Economics and Political Weekly, Vol. VII, No. 48, November, 1972. 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. 3950.

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. 27. 28.

Saravanvel, P., Entrepreneurial Development-Principles, Policies and Programmes, Eee Pee Kay Publishing House, Madras, 1987. Rao, V. Lakshmana, Industrial Entrepreneurship In India. Chugh Publications, Ahmedabad, 1986, pp. 95-100. 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. 30.

Saradadevi, K., "Entrepreneurship of Women in India", Khadi Gramodyog, Vol. 35, No. 6, March 1989, pp. 269-71. 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. 32.

Bhatia, B.S., "New Industrial Entrepreneurs: Their Origins and Problems", Journal of General Management, Vol. 2, No. 1, Autumn 1974, pp. 69-79. Management Development Institute, New Delhi, "Small Scale Industries-An Assessment of Institutional Assistance-Case Studies of Some Select States in India", 198;3.

33. 34. 35. 36. 37. 38.

Deshapande, Manohar U., Entrepreneurship o/Small Scale Industry-Concept, Growth and Management, Deep and Deep Publications, Delhi, 1989. Sharma, R.A., Entrepreneurial Change iri Indian Industry, Sterling Publishers, New Delhi, 1980. Sadhak, H., op. cit. 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. 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. Sharma, Krishnalal and Singh, Harnek, Entrepreneurial Growth and Development Programmes in Northern India-A Sociological Analysis, Abhinav Publications, New Delhi, 1980.

39. 40.

Bhanushali, S.G., op. cit. 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.510, 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. 44. 45.

Mishra, Ramesh C. and Bisht, Narendra S., "Entrepreneurial Paradox-A Diagnostic Exercise", cited in N.S. Bisht and others, op. cit. Rao, Gangadhar, Entrepreneurship and Growth of Enterprise in Industrial Estates, Deep and Deep Publications, New Delhi, 1986, pp. 330-65. 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. 47. 48.

Berna, James J., op. cit. Desai, Vasanth, op. cit., p.301. 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. 2. 3. Theories emphasizing religious and socio-cultural factors. Theories emphasizing psychological factors. 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 preindependence 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 preindependent 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 nonmaterial 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. 2. 3. 4. 5. 6. 7. 8. To foster entrepreneurial growth in the country, particularly in the small sector and to secure wider dispersal of entrepreneurship. Optimum use of available resources. To let the trainee set or reset the objectives of his business and work individually and along with his group for their realization. To develop a broad vision to see the business as a whole and to integrate his function with it. To enable the trainee to cope with and coordinate the different types of paper work, most of which are statutorily obligator. To strengthen the trainee's passion for integrity, honesty and compliance with law which is the key to success in the long run. Generation of employment opportunities. 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 followup 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. 4. 5.

Cited in M.U. Deshpande., op. cit., p. 47. 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. 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. 9. 10. 11. 12.

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. 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. 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. Schumpeter, J.A., op. cit., cited in R.A. Sharma, op. cit., p. 6. 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. 15. 16. 17. 18. 19. 20.

Cole, Arthur H., "Entrepreneurship and Entrepreneurial History", The Institutional Setting, p. 99. Weber, Max, op. cit., p. 9. Sharma, R.A., op. cit., p. 43. Sharma, R.A., op. cit., p. 66. Sharma, R.A., op. cit., pp. 52-53, Sharma, R.A., op. cit., pp. 54-55. Desai, Aravindrai N., Environment and Entrepreneur, Ashish Publishing House, New Delhi, 1989, p. 39.

21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37.

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. Gadgil, D.R., The Industrial Revolution of India in Recent Times, Oxford University Press, Bombay, 1965, pp. 190-91. Shrama, R.A., 1980, op. cit. Oamen, M.A., op. cit. Berna, James J., op. cit. Mishra and Bisht, op. cit. Deshpande, M.D., op. cit. Sharma and Singh, op. cit. Bhanushali, S.G., op. cit. Acharya, op. cit. Berna, James J., op. cit. Chatterjee, Anjana, "Entrepreneurship Development Programme and SelfEmployment", Yojana 36(16), September 15,1982, p, 12. Cole, A.H., InternationaL Encyclopaedia of Social Sciences, Vol. 5. Macmillan and Company, New York, cited in Vasanth Desai, op. cit., p. 146. Higgins, E.E., "Entrepreneurship and Economic Development", The Free Press, New York, 1971, pp. 191-92, cited in Vasanth Desai, op. cit., p. 147. Chatterjee, Anjana, op. cit. Alexander, P. C.,'lndustrial Estates in India, Asia Publishing House, Bombay; 1963, p. 5. Palia, S.M., "Managing, Training and Extension Services for Small Scale IndustriesIndian Experience"', DeveLopment News, Vol. 4, 1984, Industrial Development Bank of India, Bombay, cited in Sadhak, H., op. cit., p. 53.

38. 39.

Sarwate, Dilip M., Entrepreneurial DeveLopment-Concepts and Practices, Everest Publishing House, Pune, 1996, pp. 15-16. 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. M8M14.

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. 2. To provide financial assistance in the form of term loans to tiny sectors, SSIs, ancillary industries and medium scale industries in Karnataka. 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. 4. To accord preference to local entrepreneurs. To extend special concessions to entrepreneurs belonging to Schedule Caste, Schedule Tribe, women, minority community, physically handicapped and Exservicemen. 5. 6. 7. To introduce office automation in every office of the corporation with a view of enhancing efficiency and speed of operations. 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. 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. 2. 3. 4. 5. 6. 7. Promoted by technician entrepreneurs, in the small scale sector, Located in growth centres and developing areas of the state, Promoted by entrepreneurs belonging to Scheduled Caste and Scheduled tribe, backward class entrepreneurs an other weaker sections of the society, having high employment potential, capable of utilization of local resources and 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 aresituated 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. 2. 3. 4. Loans and advances with a liberal repayment period (normally up to 8 years) including moratorium. Loans in collaboration with other financial institutions. Subscription to share capital of companies promoted by small entrepreneurs (special capital scheme) by way of soft loan. 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. 2. 3. 4. 5. 6. 7. 8. Permission! Approval/Licence from the authorities concerned. Information regarding the financial status. Project report. Bio-data of the applicant. A temporary registration certificate issued by the office of Industries and Commerce (in case of SSIs). Allotment letter (in case land is allotted by the government). No objection certificate from local authorities. 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 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. 1 2 3 4 5 6 Category Units situated in category A and B districts/regions Units situated in category C districts Units situated in non backward areas SRTOs including one to six vehicle owners Co-operatives and companies of Ex-servicemen Projects setup by women entrepreneurs (irrespective of the location) except the assistance under Mahila Udyama Nidhi Scheme, 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. 2. 3. 4. 5. 6. 7. 8. Misuse of funds. Misapplication of funds. Proved misrepresentation for obtaining loan assistance. Undue delay in implementation of the project. A deliberate default in repayment of dues. Act of loanee which is harmful to the interest of the corporation or the state. Failure to properly maintain and safeguard the secured property. Breach of the agreement entered into at the time of sanction of loan. Promoter's Minimum Contribution (in %) 17.50 20.00 21.50 15.00 10.00 15.00

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. 3. 4. 5. 6. 7. 8. 9. KSFC officers discuss with the banker of the entrepreneur if any pari-passu or second charge is involved (i.e., excess borrowing is made). The corporation will make frequent correspondence with defaulting unit so that urgent correction measures can be adopted. Review meetings with the persons or organisations concerned is held. The phase of implementation of project is verified regularly. Frequent study of financial statements. Repayment position is verified regularly. The corporation will get information about other projects so as to make comparative study. 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. 2. The corporation has the right to take over management or unit or both as per section 29 of the SFCs Act. 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. 4.

The KSFC can enforce its claims under section 3 of KPM(R) Act of 1979.5 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. 2. 3. 4. Acquisition of industrial land. Industrial sheds together with water, sanitary and electrical serVIces. Buildings required for the industry. 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. 2. 3. 4. Traditional industries such as rice and oil mills, cotton ginning and pressing mills, handlooms and power looms. Hotel industry. Industrial estates. 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. 2. 3. 4. 5. Industrial management training conducted by the small industries services institute. Special training course on a specific industry conducted by a specialised institute of the state government. Apprentice courses as per government schemes and regulations. Training by any specialized training institution recognized by KSFC. 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. 2. 3. 4. 5. There should be adequate demand and scope for expansion at a later stage. The construction cost should ensure that the rent charged is reasonable. Basic facilities like roads, power, water, drainage as required by the occupants of the sheds, must be ensured. A minimum of three sheds should be constructed. 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. 2. 3. The unit may be engaged in upgrading its process, technology or product. It may be an export-oriented unit or it may be producing items for import substitution. 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. 5. It may be looking for improvements in capacity utilization within the existing capacity by higher productivity. 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. 2. Single Vehicle Operator Scheme (SVO): Under this scheme, financial assistance is provided for a maximum of two vehicles only to an entrepreneur. 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. 2. 3. 4. The applicant must have experience in the transport industry. Applicants with regular transport contracts or inter-state permits will be given preference. The vehicle proposed to be purchased should be registered as a public carrier with the RTO concerned in Karnataka. 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. 2. 3. The borrower must be engaged in the said line for at least 3 years. They should have earned profits in the preceding 2 years and they should not have committed any default to bank or financial institution. 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.) Up to Rs. 25,000 Rs. 25,000 to Rs. 2,00,000 Above Rs. 2,00,000 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. Rate of Interest (in %) 12.5 14.5 17.5

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.) Up to Rs. 25,000 Rs. 25,000 to Rs. 2,00,000 Above Rs. 2,00,000 Source: Scheme Brochure. Rate of Interest (in %) Term Loan Working CapitaL Loan 12.5 14.5 17.5 12.5 15.5 18.0

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. 2. 3. 4. 5. 6. SSI/MSI units who have a minimum 3 years track record with consistent profitability and positive networth. The goods must be sold on credit basis. The unit should not be in default to institutions. Bills to be discounted must relate to domestic trade debts arising in the usual course of supplier's business. 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. 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. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Provides special emphasis to women entrepreneurs. Accord preference to local entrepreneurs. The corporation introduced office automation in every office with a view to enhance efficiency and speed of operation. It identifies new projects for investment and assists local people to set up industries in backward areas. It provides industrial information and project profiles of the products which are having good marketing potential to entrepreneurs. It tries to strengthen its own data bank on industrial information. Information on new products and technologies available with various research institutions are provided by the corporation. Special studies are carried out to assess problems and prospects of particular types of industries in the state. Research and development activities are encouraged and supported financially. Seminars and conferences are conducted to create industrial awareness and to solve the problems confronted by the industries. Industrial potential survey of district is conducted to assess the availability of local resources and industrial opportunities. References

1. 2. 3. 4. 5. 6. 7.

Operational Statistics, 1997-98, Karnataka State Financial Corporation. Banarjee, Gautham, Law Relating to State Financial Corporations, UDH Publishing House, Delhi, 1988, p. 5. Legal Manual, Karnataka State Financial Corporation, Bangalore, pp. 82-83. Ibid, p. 85. The Karnataka Acts and Rules, Vol. 17, Karnataka Public Moneys (Recovery of Dues) Act, 1979, Lawyers Law Book, pp. 326-27. Mitra, B.B., Transfer o/Property Act, 15th Edition, Kamal Law House, Kblkata, 1988, pp. 535-36. 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. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21.

Small Industries Service Institute (SISI). Field Testing Stations. National Small Industries Corporation (NSIC). Karnataka State Small Industries Development Corporation (KSSIDC). Karnataka Industrial Areas Development Board (KIADB). Karnataka Small Industries Marketing Corporation Limited (KSIMC). Technical Consultancy Services Organisation of Karnataka (TECSOK). Karnataka State Electronics Development Corporation Limited. Karnataka State Khadi and Village Industries Board. Karnataka State Social Welfare Advisory Board. Karnataka Leather Industrial Development Corporation. Karnataka State Handicrafts Development Corporation (KHDC). National Productivity Council (NPC). Bureau of Indian Standards. Vishveshwaraiah Industrial Trade Centre. Electronic Testing Development Corporation. Centre for Entrepreneurship Development of Karnataka (CEDOK). Science and Technology Entrepreneurs Park (STEP). Commercial, Co-operative and Grameena Banks. Financial Institutions such as IDBI, IFCI, ICICL 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 subdivisions, 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 23.2C to 37 C. The mean dally maximum temperature hovers around 15C 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. Share of Income Share In lakhs) total income (Rs. In of total ( in %) lakhs) 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. 2. Human Resources. Material 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:

Human Resources

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. Bhadravati Channagiri Honnali Hosanagar Sagar Shikaripur Shimoga Soraba Thirthahalli TOTAL Source: Census 1991, Karnataka. 1 2 3 4 5 6 7 8 9 Taluk Population as per 1991 Census 3,24,460 2,56,234 1,99,903 1,02,333 1,77,092 1,88,605 3,64,920 1,62,208 1,30,768 19,06,523 17.02 13.44 10.48 5.37 9.29 9.89 19.14 8.51 6.86 100.00 % to Total Population of the District

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 No. of SSI Fixed Units investment (Rs. in lakhs) 1992-93 512 452.35 1993-94 501 505.76 1994-95 503 706.15 1995-96 513 1,094.88 1996-97 508 1,292.24 1997-98 1,509 1,703.79 Source: DIC, Shimoga. Employment (Nos.) 1,660 1,679 1,645 1,905 2,051 4,297 Cumulative No.oj SSi Fixed Units investment (Rs. in lakhs) 6,916 5,926.71 7,417 6,432.47 7,920 7,138.62 8,433 8,233.50 8,941 9,525.74 10,450 11,229.53 Employment (Nos.) 31,614 33,293 34,938 36,843 38,894 43,191

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 199697, 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 talukwise 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. 1. 2. 3. 4. 5. 6. 7. 8. 9. Name o/the Taluk No. 0/ 551 Units (Rs. in iakhs) 1,588 845 828 572 1,548 991 2,607 645 826 10,450 Fixed Investment (Nos.) 2,070.00 718.00 720.00 560.00 1,436.00 1,072.00 3,348.00 580.53 725.00 11,229.53 Employment Generated 8,922 2,697 2,552 2,280 5,927 2,913 12,808 2,253 2,839 43,191

Bhadravati Channagiri HonnaJi Hosanagar Sagar Shikaripur ,Shimoga Soraba Thirthahalli Total 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 313-1998, 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. 2. Physical Infrastructure. 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 31-31997 (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. 2. 3. 4. 5. 6. Model Carpentry and Smithy Centre, Shimoga. Artisans Training Institute, Sagar. Agriculture Machinery, Sagar. Industrial Training Institute for Women, Shimoga. Industrial Training Institute, Bhadravati. 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. 2. 3. 4. Karnataka State Gazetteer, Government of Karnataka, Shimoga District, 1975. Karnataka State Profile, 1997-98, SISI Bangalore. Census Report, 1991, Karnataka. 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) Less than 30 31-40 41-50 Above 50 Sub Total Entrepreneurs with different age group Total Source: Survey Data. Marital Status Married Unmarried 28 14 87 6 78 36 229 20 Total 42 93 78 36 249 31 280 Percentage 15.00 33.22 27.86 12.85 88.93 11.07 100.00

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 Matriculation Collegiate Education Technical Education' Total Source: Survey Data. 1. 2.

50 85 106 39 280

17.86 30.36 37.86 13.92 100.00

Entrepreneurs with PUC, general degree and Postgraduation. 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 Schedule Caste and Tribe Women Entrepreneurs Minority Community Backward Community General Category Total Source: Survey Data. No. of Entrepreneurs 22 37 42 47 132 280 Percentage 7.86 13.21 15.00 16.79 47.14 100.00

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 Trade or Industrial Background Agricultural Background Service/Employment Background Total Source: Survey Data. No. of Entrepreneurs 140 64 76 280 Percentage 50.00 55.85 27.15 100.00

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 SSI Transport Others Total Source: Survey Data. No. of Entrepreneurs 200 55 25 280 Percentage 71.43 19.64 8.93 100.00

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 Sale proprietorship Partnership (a) with family members (b) without family members Joint stock company Total Source: Survey Data. 47 19 5 280 16.78 6.79 1.79 100.00 No. of Entrepreneurs 209 Percentage 74.64

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 At home Owned premised Rented / Leased premise Industrial estate Transport entrepreneurs Total Source: Survey Data.

No. of Entrepreneurs 23 94 63 45 55 280

Percentage 8.21 33.57 22.50 16.07 19.65 100.00

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 Local market 164 State-wide market 77 National market International 35 market Not marketing the service Total Source: Survey Data. 04 280 Percentage 58.57 27.50 12.50 1.43 100

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) Less than 50,000 50,000 to 1 lakh 1 lakh to 3 lakhs 3 lakhs to 10 lakhs 10 lakhs to 25 lakhs 25 lakhs to 60 lakhs Above 60 lakhs Units closed Total Source: Survey Data.

At the Time of Establishment No. of Entrepreneurs 49 43 64 89 28 7 280 % 17.50 15.35 22.86 31.79 10.00 2.50 100.00

At Present (i.e., as on 3103-1998) No. of % Entrepreneurs 11 3.93 21 7.50 41 14.64 88 31.43 42 15.00 25 8.93 10 3.57 42 15.00 280 100.00

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 Frequency Percentage (Units) 52 28 48.57 13.93 5.36 3.21 0.36 100.00 18.57 10.00 87 51 34 12 3 42 280 At Present (i.e., as on31-03-1998) Frequency Percentage (Units) 33 18 11.79 6.43 31.07 18.21 12.14 4.29 1.07 15.00 100.00

No employees One 2-5 136 6-10 39 11-20 15 21-50 9 More than 50 1 Closed the unit Total 280 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) Less than 25,000 At the Time of Establishment No. of % Entrepreneurs 36 12.86 At Present (i.e., as on 31-03-1998) No. of % Entrepreneurs 10 3.57

25,000 - 50,000 50,000 - 1 lakh 1 lakh - 2 lakhs 2 lakhs - 5 lakhs 5 lakhs - 10 lakhs 10 lakhs - 25 lakhs 2,00,000 - 1 crore Above 1 crore Not sent on hire Not available/Refused to give Closed the unit `Total Source: Survey Data.

25 33 54 56 25 19 7 1 4 20 280

8.93 11.79 19.28 20.00 8.93 6.79 2.50 0.35 1.42 7.15 100.00

12 19 29 51 33 29 22 17 4 12 42 280

4.29 6.79 10.36 18.21 11.79 10.36 7.86 6.07 1.42 4.28 15.00 100.00

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? Established by the entrepreneur Established by the family members Inherited from father Taken over a good/sick unit Total Source: Survey Data. No. of Entrepreneurs 232 25 14 09 280 Percentage 82.86 8.93 5.00 3.21 100.00

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 Addition of new product/service Improvement of existing product/service Expansion of unit No. of Entrepreneurs 88 144 27 Percentage in total entrepreneurs under study i.e. 280 31.42 51.42 9.64

Installation of modern machinery Establishment of new unit No changes Total Source : Survey data

112 25 43 439

40.00 8.92 15.35 156.75

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 6 - 10 per cent 11 - 15 per cent 16 - 20 per cent 21 - 25 per cent Sub Total No profit No loss Loss 109 48 34 40 231 35 5 38.93 17.15 12.14 14.29 82.51 12.50 1.78 No. of entrepreneurs Percentage

Not marketing the service Not available/Refused to give Total Source: Survey Data.

4 5 280

1.43 1.78 100.00

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 reinvested 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 No. of entrepreneurs Percentage

( average, annual) Less than 20 per cent 21-33 per cent Above 30 per cent Sub total Not necessary To repay the loan For personal use/ to lead the life Total

66 12 42 120 26 27 58 231

55.00 10.00 35.00 100.00 -

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 postindependent 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 Sole proprietorship No. % Primary 40 80.00 Matriculation 65 76.47 Collegiate 82 77.36 Technical 22 56.41 Total 209 Source : Survey Data Form of Organisation Partnership No. 9 19 22 16 66 % 18.00 22.35 20.75 41.02 Total Joint stack No. 50 85 106 39 280 % 100 100 100 100 -

company No. % 1 2.00 1 1.18 2 1.89 1 2.57 5 -

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 Education No. % Primary 37 74.00 Matriculation 57 67.05 Collegiate 72 67.93 Technical 34 87.17 Total 200 Source: Survey Data. Transport No. % 8 16.00 22 25.89 23 21.69 2 5.13 55 Others No. 5 6 11 3 25 % 10.00 7.06 10.38 7.70 Total No. 50 85 106 39 280 % 100.00 100.00 100.00 100.00 -

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 Education Primary Matriculation Collegiate Technical Total Local No. 36 49 59 20 164 % 72.00 57.65 55.66 51.28 Statewide No. 7 23 36 11 77 % 14.00 27.05 33.96 28.20 National No. 6 13 9 7 35 % 12.00 15.30 8.49 17.95 Not Marketing Total No. 50 85 106 39 280 % 100.00 100.00 100.00 100.00 the Service No. % 2.00 2 1 4 1.89 2.57 -

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 Primary percentage) 6 - 10 16 11 - 15 6 16 - 20 6 21 - 25 9 Total 37 Source: Survey Data. Education Background Matriculation Collegiate 35 16 8 10 69 46 19 13 17 95 Total Technical 12 7 7 4 30 109 48 34 40 231

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:
r= N XY X Y
2

{N X

( X )

}{N Y

( Y )

where, r X Y N = = = = = Co-efficient of correlation Deviation from the assumed mean of the first set of variables Deviation from the assumed mean of the second set of variables Sign of summation 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 6-10 11-15 16-20 21-25 X Mid-point 8 13 18 23 Y Primary 16 6 6 9 y=37 X-20 -12 -7 -2 +3 -21 +3 +18 Y-8 +8 -2 -2 +1 -4 -4 x' 144 49 4 9 206 y' 64 4 4 1 73 xy -96 14 4 3 -96 +21 -75

r=
r= 300 + 90 500 X 267

{4(206 ) (18 ) }{4(73) (+5) }

2 2

4(75 ) (18 )( +5)

r=

210 = 0.5747 35 .3765

2. Education up to Matriculation and Coefficient of Correlation Table 5.20.2 Education up to Matriculation and Coefficient of Correlation Percentage of Profit 6-10 11-15 16-20 21-25 X Mid-point 8 13 18 23 Y Matriculation 35 16 8 10 y-69 X-20 -12 -7 -2 +3 -21 +3 -18 Y-8 + 15 -4 -12 -10 -26 +15 -11 x' 144 49 4 9 206 y' 225 16 144 100 485 xy -180 +28 +24 -30 -210 +52 -158

r=

{4(206 ) (18 ) }{4(485 ) (11) }

2 2

4(-158) - (-18)(-11)

r=

632 198 500 X 1819

r=

830 = 0.8703 953 .67709

3. Collegiate Level Education and Coefficient of Correlation Table 5.20.3 Collegiate Level Education and Coefficient of Correlation Percentage of Profit 6-10 11-15 16-20 21-25 X Mid-point 8 13 18 23 Y Collegiate 46 19 13 17 y=95 X-20 -12 -7 -2 +3 -21 +3 -18 Y-8 +21 -6 -12 -8 +21 26 -11 x' 144 49 4 9 206 y' 441 36 144 64 685 xy -252 42 24 -24 +66 -276 -210

r=
r=

{4(206 ) (18 ) }{4(685 ) (5) }

2 2

4(-210) - (-18)(-5)

840 90 500 X 2715

r=

930 = 0.7982 1165 .118

4. Technical Education and Coefficient of Correlation Table 5.20.4 Technical Education and Coefficient of Correlation Percentage of Profit 6-10 11-15 16-20 21-25 X Mid-point 8 13 18 23 Y Technical 12 7 7 4 y=30 X-20 -12 -7 -2 +3 -21 +3 -18 Y-8 +2 -3 10 -13 +2 -12 -10 x' 144 49 4 9 206 y' 4 9 9 36 58 xy -24 +21 +6 -18 -42 -27 -15

r=

{4(206 ) (18 ) }{4(58 ) (10 ) }

2 2

4(-15) - (-18)(-10)

r=

60 180 500 X 132

r=

240 = 0.9342 256 .90465

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 visa-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 Trade or Industrial background Agricultural background Service/Employment background Total Source: Survey Data. Note: Figures in parentheses denote, percentage to vertical total. 209 56 52 Sole Proprietorship No. % 101 72.14 (48.33) 8l.25 (24.88) 73.53 (26.79) (100.00 ) 66 19 11 Type of Ownership Partnership Joint Stock Farm No. % 36 25.71 (54.54) 17.19 (16.67) 25.00 (28.79) (100.00 ) 5 Company No. % 3 2.15 (60.00) 1.56 (20.00) 1.47 (20.00) (100.00 ) 280 100.00 76 100.00 64 100.00 No. 140 Total % 100.00

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

Background of the Entrepreneur Trade or Industrial background Agricultural background Service background Total or 58 76.32 9 11.84 8 10.53 1 1.31 76 100.00 Employment 37 57.81 20 31.25 7 10.94 64 100.00 69 49.29 48 34.29 20 14.28 3 2.14 140 100.00 Statewide Market Ni %

Marketing A rea
Marketing Area Local Market No. % National Market No. % Not Marketing the Service No. % Total No. %

164

(58.57 )

77

(27.50)

35

(12.50 )

(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 Trade or Industrial background Agricultural background No. of entrepreneurs earning the profit 122 52 Total no of entrepreneurs 140 64 % age 87.14 81.25

Service or Employment background Total Source: Survey Data.

57 231

76 280

75.00 (82.50)

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 0-20% 21-30% Above 30% Total No. of entrepreneur s earning the profit Percentage 4 = 2/3 x 100

Trade or Industrial background Agricultural background Service Employment background

34

21

59

122

48.36

14 18

2 6

11 10

27 34

52 57

51.92 59.64

Total 66 Source: Survey Data.

12

42

120

231

(51.94)

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 socioeconomic 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 Sole Types of Ownership Partnership Firm Joint Total Stock

Proprietorship No. % SC/ST 21 95.45 Women 34 91.89 Minority 32 76.19 BCM 39 82.98 General 83 62.88 Total 209 Source: Survey Data.

No. 1 3 8 8 46 66

% 4.55 8.11 19.04 17.02 34.85

Company No. % 2 4.77 3 2.27 5

No. 22 37 42 47 132 280

% 100.00 100.00 100.00 100.00 100.00

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 Initial Present No % No % Women Initial Present No % No % Minority Initial Present No % No % BCM Initial Present No % No % General Initial Present No % No % Total Initial Present 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 Initial Present No % No % Women Initial Present No % No % Minority Initial Present No % No % BCM Initial Present No % No % General Initial Present No % No % Total Initial Present 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 Trade or industrial background No. Percentage to total i.e 140 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 Merit points Family Background Agricultural background No. Percentage to total i.e 140 Merit points Service or employment background No. Percentage to total i.e 140 Merit points

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 No. 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 Merit Points No. Agricultural background Merit Points No. Services or employment background Merit Points No. Merit Points Total

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 uncorrelated 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 uncorrelated 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 categorywise 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 commencement 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 coordination 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. 2. 3. Bad or incompetent management. Lack of adequate finance and working capital. 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 Scarcity of raw materials Lack of power Transportation problems Rigid government rules Number of Entrepreneurs 28 62 10 68 Percentage to Total (i.e., 280) 10.00 20.25 3.57 24.29

Financial problems Marketing problems Labour problems Any other No problem Total Source: Survey Data.

75 119 70 43 55

26.79 42.50 25.00 15.36 19.00 186.76

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. 3. 4. 5. 6.

Sharma, Krishnalaland Singh, Harnek, op.cit. Bhanushali, S.G., op.cit. Sadhak, H., op.cit. Deshpande, Manohar U., op.cit. 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. 8. 9. 10. 11. 12.

Oamen, M.A., op.cit. Haggen, E.E., op.cit. Deshpande, Manohar D., op.cit. Kumar, Ashok, Entrepreneurship in Small Industry, pp. 72-73, A book available at KSFC Head Office, Bangalore. Ibid, pp. 74-75. 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. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29.

Kumar, Ashok, op. cit., p. 76. Panandikar, Surekha, "Women Entrepreneurs-" Problems and Potentials, Economic Times, December 26, 1985, p. 5. Drucker., Peter F., op.cit. Rao, A.S., op.cit, p. 341. Ibid, p. 337. Deshpande, Manohar D., op.cit. Sharma, R.A., op.cit. Sadhak, H., op.cit. Mishra and Bisht, op.cit. Oamen, M.A., op.cit. Sharma, Krishnalal and Singh, Harnek, op.cit. Bhanushali, S.G., op.cit. Sadhak, H., op.cit. Bhanushali, S.G., op. cit., p. 94. Ibid. Sharma, Krishnalal and Singh, Harnek, op.cit. Oamen, M.A., op.cit.

30. 31. 32.

Bhatia, B.S., op.cit. Sadhak, H., op.cit. 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 112.59 128.05 121.35 127.88 159.84 94.77 132.24 102.98 103.59 130.53 105.85 121.07

No. Amount No. Amount 1990-91 7,700 20,200.00 8,670 25,867.21 1991-92 9,000 26,625.00 10,922 34,050.23 1992-93 9,530 36,090.00 15,233 34,205.84 1993-94 10,000 34,450.00 13,224 35,476.93 1994-95 13,600 39,850.00 14,089 52,017.97 1995-96 14,000 67,630.00 14,819 81,881.03 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. assistance and merchant banking assistance. NA: Not Available.

Note: The target and achievement includes bridge loan, leasing finance, hire purchase

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 199192, 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 Disbursements % of % growth rate achieved disbursements against the respective to sanctions previous year in Amount Amount Sanctions Disbursements 1990-91 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. Sanctions

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 199394, 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 Sick Units
Expansion, Modernisation, Diversification, Escalation, etc. No. Amount No. Amount No. No. Amount

Total

1990-91

7,054 19,538.17 1,029 (85.15) 9,321;25,759.12 1,188 (87.85)

4,586.09 (77.88) (12.42) 6,885.06 (77.38) (11.19) 34

201 (18.28) (2.43) 10, 643.67 10,611 33,287.85 (20.68) (0.96) :i57.73, 14,952 33,624.86 (15.48) (0.63) 240.77 12,914 34,322.53 (17.72) (0.44)

964.52 (3.84) (100.00)

Amount 8,284 25,088.78 (100.00)

1991.92

(1.94) (100.00)

(100.00)

1992-93 13,707 27,861.13 1,151 1993.94 11,713 27,999,85 1,144 1994.95 11,764 32,178,67 2,016 14,190.76 1995.96 11,494 40,818,63 2,877 21.024.14

5,206.00

(91.67) 6,081.91

(82.86) (7.70) 57

(1.66) (100.00)

(100,00)

(90.07) 61

(81.58) (8,86) 329,02 13,841 46,698.45 (68,90) (14.56) 519,97 14,421 62,362.74 (65.45) (19,95) 1996--97

(0.70) (100,00)

(100,00)

(85.00) 50

(30.39) (0.44)

(0.71) (100.00)

(100.00)

79.70)

(33.71) (0,35) 9,856 42,663.55 2,822 23,607.41 (77.38)

(0.84) (100,00) 59

(100.00) 707.89 12,737 66,978,85

(63.70) (22,16) 2,037 20,140,61 (56.44) (29.72)

(35,25) (0.46) 69 (42,03) (1.01)

(1.05) (100,00) 732.72 (1.53) (100.00)

(100.00) 6,853 47,914,67 (100,00)

1997.98

4,747 27,041.34 (69.27)

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 No. Transport Amount Others No. Amou 199091 (74.66) (66.55) (21.70 ) (14.90) (3.64). 6,185 16,697.58 nt 1,798 3,739.15 301 4,652. 05 (18.55 ) (100.0 1991 92 (71.60) (69.95) (25.79 ) (17.79) (2.61) 7,597 23,284.50 2,737 5,920.74 277 0) 4,082. 61 (12.26 ) (100.0 1992 93 (77.11) (70.56) (20.83 ) (16.05) (2.06) 11,530 23,726.10 3,114 5,395.26 308 0) 4,503. 50 (13.39 ) (100.0 1993 94 (57.47) (60.65) (37.37 ) 19947,839 28,961.00 5,043 7,276.13 959 (19.06) (5.16) 7,422 20,815.75 4,826 6,541.15 666 0) 6,965. 63 (2029) (100.0 0) 13,841 12,914 (100.00 ) 46,698. 34,322. 53 14,952 (100.00 ) 33,624. 86 10,611 (100.00 ) 33,287. 85 8,284 (100.00 ) 25,088. 78 Total No. Amount No. Amount

95 (56.64) (62.02) (36.43 ) (15.58)

10,461. 32 (6.93) (22.40 ) (100.0 0) 14,421

45 (100.00 )

1995 96

7,991

34,981.11

5,380

8,730.57

1,050 18,651. 06 (7.28)

62,362. 74

(55.41)

(56.09)

(37.31 )

(14.00)

(29.91 ) (100.0 0) 12,737

(100.00 )

1996 97

6,087

36,980.72

5,334

9,599.69

1,306 20,398. 44 (30.46) (100.00 ) 1,026 15,560. 90 (32.48) (100.00 )

66578.8 5

(47.79)

(55.21)

(41.96 )

(14.33) (10.25) 5,123.11

(100.0 0) 6,853 47,914. 67 (100.0 0)

199798

3,655

27,230.66

2,172

(53.34)

(56.83)

(31.69 )

(10.69) (14.97) 94,613 3,50,278. 73 (14.94)

Total

58,3062,12,67 7.42 (61.63)

30,41452,325 .80 (60.72)

5,893 85,275 .5 1 (32.14 )

(6.23)

(24.34 ) (100.0 0)

(100.00 )

Source: Operational statistics of KSFC for the respective years. Note: 1. 2. Figures in parentheses denote percentage to horizontal total. 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 .areawise 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. I 1 2 3 4 5 6 7 8 9 10 11 Name of the District Backward Districts Bidar Mysore Dharwad Raichur Belgaum Bijapur Dakshina Kannada Tumkur Gulbarga Hassan Uttara Kannada TOTAL Sanctions from the Year Percentage Share to the 1990-91 to 1997-98 State Total in Terns of; No. Amount No. Amount

II 12 13 14 15 16 17 18 19

Other Districts Bangalore Shimoga Kolar Chitradurga Mandya Chickamagalur Bellary 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 nonbackward 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. I 1 2 3 4 5 6 7 8 9 10 11 II 12 13 14 15 16 17 18 19 Name of the District Backward Districts Bidar Mysore Dharwad Raichur Belgaum Bijapur Dakshina Kannada Tumkur Gulbarga Hassan Uttara Kannada TOTAL Other Districts Bangalore Shimoga Kolar Chitradurga Mandya Chickamagalur Bellary Kodagu TOTAL II Grand Total Density of population No % Percentage share in sanction Benefit(+) or Deficiency (-) in due share Ranking (-) (+)

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 199091). 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 Number Amount Number Amount 1991-92 10,582 32,349.03 10.6[1 33.287.85 1992-93 14,921 33,137.29 14,952 33,624.86 1993-94 12,847 33,358.06 12,9[4 34,322.53 1994-95 13,760 44,975.27 13,841 46:698.45 1995-96 14,270 58,047.23 14,421 62,362.74 1996-97 12,644 63,730.37 12,737 66,978.85 1997-98 6,767 45,586.01 6,853 47,914.67 Source: Annual Reports of KSFC for the respective years. of Number 99.73 99.79 99.48 99.41 98.96 99.27 98.75 Amount 97.18 98.55 97.19 96.31 93.08 95.15 95.14

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/districtwise 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 gross Number Amount Number Amount terms of Number sanctions of in effective sanctions to

Amount

1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 Source: Operational statistics of KSFC for the respective years. merchant banking assistance.

97.17 97.47 96.71 97.41 97.61 98.63 95.57 95.69

98.25 97.83 97.60 98.38 97.41 98.40 96.42 96.07

Note: The above figures exclude bridge loan, lease finance, hire purchase assistance and

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 postgross 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, antinationalism, 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) Investment Catalysed (Rs. m lakhs) Employment Generated (numbers) New Entrepreneurs Total No. of Assisted Percentage to Entrepreneurs Assisted

(numbers)

1990-91 1991-92 1992-93 , 1993-94 1994-95 199596 19%97 1997-98 TOTAL 17,51,393.65

1,25,443.90 1,66,439.25 1,68,124.30 1,71,612.65 2,33,492.25 3,11,813.70 3,34,894.25 2,39,573.35 5,83,797.88

41,814.63 55,479.75 56,041.43 57,204.22 77,830.75 1,03,937.90 1,11,631.42 79,857.78 10,52,699

2,09,073 2,77,398 2,80,207 2,86,021 NA NA NA NA

6,814 (8670) 10,343 (10,922) 13,219 (15,233) 11,413 (13,224) 11,763 (14.089) 11. 955 (14819) 9,344 (13053) 4,485 (6970) 79,336 (96,980)

78.59 94.69 86.77 86.30 83.49 80.67 71.58 64.34

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 Branch Office Head Office

No. 821 Amt 596.65 (641) No. 6 Amt 222.05

Total
No. 827 Amt 818.70

Growth Rate Achieved against the Respective Previous Year in Terms of;
No. 27.62 (510.88) Amt 60.25

1990-91

(396.93) (7)

(113.95) (648)

1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98

557 539 337 319 380 337 187

655.14 593.67 602.32 706.23 957.01 1,103.8 6 631.44

6 2 5 9 12 15 12

199.65 33.40 138.25 390.58 373.72 407.73 425.80

563 541 342 328 392 352 199

854.79 627.07 740.57 1,096.8 1 1,330.7 3 1,511.5 9 1,057.2 4

-31.93 -3.91 -36.79 -4.10 19.51 -10.21 -43.47

4.40 -26.64 18.10 48.10 21.32 13.59 -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 Target No. 400 410 400 500 Grass Sanctions Achievement Amount 620.00 700.00 750.00 610.00 No. 821 557 539 337 Amount 596.65 655.14 593.67 602.32 Percentage Achievement to the Target in Terms of No. Amount 205.25 96.23 135.85 93.59 134.75 79.15 67.40 98.74

1990-91 1991-92 1992-93 1993-94

1994-95 360 650.00 319 706.23 1995-96 325 920.00 380 957.01 199697 332 1,100.00 337 1,103.86 1997-98 345 700.00 187 631.44 Source: Operational statistics of KSFC for the respective years. of Karnataka state government.

88.61 116.92 101.50 54.20

108.65 104.02 100.35 90.20

Note: Target and achievement is relating to all the schemes of KSFC and VISHW A scheme

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 1990Percentage share to total in No. 53.46 15.71 8.94 5.51 4.60 3.79 3.48 2.93 1.58 100.00 terms of Amount 46.95 17.98 8.88 8.58 3.99 5.23 4.57 2.52 1.30 100.00 91 to 1997-98 No. Amount Shimoga 1.184 2,711.42 Bhadravati 348 1.038.38 Sagar 198 512.70 Shikaripur 122 495.51 Channagiri 102 230.34 Honnali 84 301.74 Soraba 77 263.66 Thirthahalli 65 145.75 Hosanagar 35 75.37 TOTAL 2,215 5.774.87 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! Year No. 199091 166 199192 116 Transport Others Total Amount No. Amount No. Amount No. 337.51 96 227.62 5 4.26 309.79 10 270.62 30 54.57 252 6 196.77 199293 116 199394 t03 199495 191 199596 175 199697 151 199798 89 Total 1,10 315.77 358.57 498.15 653.95 725.57 399.86 3,599.17 83 12 1 10 7 18 0 16 6 73 93 210.66 180.64 247.76 298.97 150.64 1,783.6 36 14 21 25 20 25 17 61.66 28.53 27.44 55.30 79.32 235 238 319 380 337 57<1.20 597.76 706.23 957.01 1,103.8 6 631.44 Amount 267 634.98

569.39

80.94 187 392.02 ' 5,774.8 7

7 2 6 2,215 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 to 199798 SS! No. Amount Transport No. Others Amount Tota l No. Amount No. Amount from 199091

Special Category SC/ST Women Minority PH WE/SC WE/MC WE/PH Me/PH Sub-Total General Category Total Percentage share of special category entrepreneurs to total 30.71 22.20 50.11 39.75 35.7 9 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 28.18 39.2 8 28.02 72 124 94 03 39 05 01 02 340 767 61.79 402.97 301.75 050 4.22 2653 0.15 1.00 798.91 2,800.26 213 44 195 05 04 04 02 467 465 174.24 14353 361.17 1.26 10.17 16.84 1.78 708.99 1,074.69 1.783.68 09 34 12 06 01 01 63 113 176 6.44 54.99 45.89 1.53 1.25 0.36 110.46 281.56 392.02 294 202 301 14 43 10 03 03 870 134 5 2,21 5 242.47 601.49 708.81 3.29 14.39 44.62 1.93 1.36 1,618.36 4,15651 5,774.87

1.107 3.599.17 932

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. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Products of cement/concrete bricks. Production of agarbatis. Ice-candy and ice-cream making. Soda water and ice-blocks manufacturing. Preparation of Idli Rava. Masala powder and potato chips making. Sugandha Adike powder making and Arecanut processmg. Adike Hale Donne manufacturing. Leather bags manufacturing. Manufacturing of Hawai chappals. Handloom and wool weaving units. Steel furniture making. Plastic goods manufacturing/PVC pipes making units. Cattle feeds production/poultry feed. Chilly powder making. Readymade garments and leather garments making.

17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50.

Notebooks and register book making. Concrete mixtures and Gobar gas drum making. Sandalwood carving. Wooden furniture making. Rice processing and paddy drying units.' Flouring of food grains. Oil extraction and refinery units. Tin making units. Bakery, biscuit manufacturing. Polythene bags manufacturing. Cashew nut processing. Fibre glass making. Stone quarrying/stone crushing. Mosaic tiles making. Candle manufacturing. Cushion works. Pot making. Mill board and paper board manufacturing. Manganese stone crushing unit. Crushing of food grains. Vehicle wheel alignment (computerised). Synthetic paints making. Fly ash bricks. Manufacturing of thread rubber. Errited water making Stone cutting and polishing. Poultry farms. Agricultural equipments manufacturing units. General fabrication works. Fruit juice making. Shavige manufacturing. Auto-electrical works, Battery charging and reconditioning. Machining of cylinder valves. Refrigerator repairs.

51. 52.

Bamboo works. Popcorn making.

6.2 Servicing Activity/Units 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. To purchase transport vehicle. Tyre retreading works. Hotel industry including lodges. Vehicle repairing and servicing. STD/ISD booths. Cable T.V. network units. Nursing homeslto instal electro-medical equipments. General engineering works. Stitching of clothes and laundrying. Xerox centres. Computer centres including software development. Automobile service centres. Income tax and Sales tax consultancy services. Bar and Restaurant. Eye testing centres. Diesel pump overhauling and servicing. Beauty parlours. Architect consultancies. Weighing of loaded vehicles. Ornament cutting works. Purchase of road rollers. Acquisition of delivery vans by marketing entrepreneurs. Ultra sound scanning. Hi-tech video modelling and video graph. Screen printing. 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 199091 to 1997-98 No. Amount in Terms of; No. Amount

956 3,368.48 43.16 58.33 Production and processing activity/units Servicing activity/units 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 1,259 2,406.39

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 Constitutionwise 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 0.05 100.00 4.62 0.18 100.00

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 cooperative 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. 344 30 01 Amount 1,899.25 266.91 10.30 1,840 3,598.41

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 Gross Sanctions I I 199091 ~ :t c ~ Shimoga 5.62 Bhadravati 3.19 Sagar 98 Shikaripur 18.69 Channagiri 0.80 Honnali 15.56 57 2.60 97 5.50 50 4.40 54 3.06 258 16 0.80 16 3.01 73 3.59 90 67 6.11 3.68 155 6 8.99 0.33 171 7.02 318 17 1.02 50 1.00 39 1.17 106 I: "0:: 67 4.02 ~ 199192 ... ~ :t c I: "0:: ~ :t c I: "0:: 16 1.60 ~ :t c I: "0:: ~ :t c I: "0:: 83 1992-93 ~ 199394 ~ ~ (Amount Rs. in lakhs) Total

Soraba 13.39 Thirthahalli 1.86 Hosanagar 5.32 Total 554

144 31 67

7.14 1.86 4.02

55

6.25

199 31

13

1.30 19.47 99 4.56

80 1,262 71.45

27.26 305

20.16 304

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 /lmount in Ru ees 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 10,00,001 to 25,00,000 Above 25,00,000 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 8 188 98 Number of Sanctions from the Year 199091 to 199798

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 '. act1vlty-wis' se an d" d l' 1 fl f f . '. . d ana YS1S 0 sector-w1se, purpose-wIse, ow 0 ass1stance an

e ass1stance, lrectlOna corporati" h state This' una Ie to hf .h

according preference to local entrepreneurs indicates that the On 1S growlllg at a muc aster pace III testate. But 'd .d f h hf . h h h Sh' .,. d'"

t e corporation is unable to maintain regional balance in the 1S eV1 ent rom t e act t at t e 1moga Istnct IS

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 d . . f 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. 3. Adequacy of the term loan sanctioned and the source Source of working capital, adequacy of it and the source relied to meet the shortfall relied to meet the shortfall (i.e., Term Loan and KSFC). (i.e., Working Capital and KSFC). 4. 5. 6. 7. Commitment of KSFC in Lending. KSFC and Entrepreneur/Way of Approaching the KSFC. Follow-up Activities of KSFC. 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. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. Sources Own money invested Borrowed from family members Karnataka Sute Financial Corporation (KSFC) Own money Invested and borrowed from family members Borrowed from family members and KSFC Own money invested and KSFC Moneylenders KSFC and moneylenders Borrowed from family members and relatives Own money invested and commercial bank Borrowed from family members and commercial bank Own money. borrowed from family members and KSFC Own money invested, borrowed from family members, KSFC and bank Own money, borrowed from family 'members and lenders moneyOwn money, borrowed from friends, KSFC and bank Own money, KSFC and commercial bank Borrowed from family members and friends Own money and borrowed from friends Own money, borrowed from friends and KSFC Own money and moneylenders Own money, KSFC and moneylenders

22. 23. 24.

Own money, borrowed from family members, friends, KSFC Own'money, borrowed from friends, KSFC and moneylenders Borrowed from family members, KSFC and moneylenders . 25 Borrowed from family lenders. ,money-

and moneylenders

members, friends KSFC and 26. 27. 28. 29. 30. 31. 32. 33. No. of E ntrepreneu rs 26 02 11 03 51 99 01 07 09 04 02 20 01 239 01 Own money, borrowed from family members friends and KSFC ' Borrowed from family members, friends and KSFC Borrowed from family members, KSFC, moneylenders and commercial bank Own money, borrowed from family members KSFC and moneylenders ' Own money, borrowed from family members, KSFC and commercial bank Own money, borrowed from friends and family members and moneylenders. Own money, borrowed from friends and commercial bank Hand tool Total

Source: Survey Data.

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 75.00 25.00

_ No/ working capital not borrowed 210 TOTAL PART - B 280 100.00

ADEQUACY OF WORKING CAPITAL GIVEN BY KSFC l('Yes', was it Adeqllate? Entrepreneurs Yes/Full amount was sanctioned 16 54 22.85 77.15 No. of Percentage

___ No/Inadequate or part sanctioned TOTAL 70 100.00

PART-C SOU/?CE RELIED TO MEET THE GAP TO WHOM IT WAS INADEQUA TE .rE 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 nonavailability 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. Percentage lO Total, i.e., Source Relied No. OJ ntrepreneurs 54

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 . was sanctlOne d (I' e 54 out of 70 entrepreneurs). ThiS urged .. , .

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 . Table 6.24 KSFC and Entrepreneurs Project KSFC', Attitude No. of Entrepreneurs Percentage to Total, i.e., 280 whether the entrepreneurs were forced to delay or examme . . T bl 6 24 abandon the project due to the reason given mae . .

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?/ modermsation of the units of 10 entrepreneurs :u:-d t?ey did ab~do.ned . t elr p , Ian of expansionidiverslftcatlOn/modermsatlon. . 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 II II 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. 2. Time lag in sanctioning loans. Repayment period allowed.

250 3. 4. 5. 6. 7. 8.

Financial Role of KSFC in the Development of Entrepreneurship Promoter's minimum contribution. Insistence on security. Rate of interest charged. Legal formalities to avail loans. Recovery procedure. 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 repayment ~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 entrepreneurs (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 entrepreneurs 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 entrepreneurs 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 overestimating (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 nonavailability 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 19992000 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 modernisati,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 entrepreneurship 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. 2. 3. Desai, V asanth, op. cit., p. 81. Dhat, P.N and Lydoll, H.F., The Role of SmaLL Enterprises in Indian Economic Prakash, Gyan, "Problems and Prospects of Small Scale Industries in India-An

Development, Asia Publishing House, Bombay, 1961, p. 70. 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, 199293, 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. 3.

In 1993-94, an EAP for the final year students of Government Polytechnic for Women, Shimoga was organized that benefited 80 students. 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. 2. 3. 4. 5. The coverage of EDPs, i.e., the number of entrepreneurs under study who have obtained training under the programme and the agency conducted it. The extent to which the EDP has motivated the entrepreneurs to set up units. The extent of usefulness of EDP. Follow-up of EDP by KSFC and extent of usefulness of follow-up activities. 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 Entrepreneurs who had attended EDP Entrepreneurs who had not attended EDP Total Source: Survey Data.

No. of Entrepreneurs 100 180 280

Percentage 35.71 64.29 100.00

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 Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Source: Survey Data. 5 4 2 1 Percentage of EDP Trained Entrepreneurs, i.e., to 100 5.00 4.00 2.00 1.00

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

1. In selecting the project 2. Project evaluation and preparation of technoeconomic feasibility report 3. About market condition 4. In-plant training 5. Any other

25 5

25.00 5.00

75 95

75.00 95.00

100 100

100.00 100.00

8 35

8.00 100 35.00

92 99 65

92.00 99.00 65.00

100 100 100

100.00 100.00 100.00

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 1. EDP In securing Useful No. 8 2 % 22.86 5.71 Extent of usefulness Not Useful No. % 27 33 77.14 94.29 Total No. 35 35 % 100.00 100.00

sanction of loan 2. selecting and securing suitable location 3. completing governmental formalities registration units, licence etc. 4. Any other say of

11.43

31

88.57

35

100.00

obtaining 2 5.71 33 94.29 35 100.00 loan

The areas of usefulness include optimum use of resources, extension of 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 No. of % Entrepreneur 54 54.00 Non- EDP entrepreneurs No. of % Entrepreneur 110 61.11

Local

State wide National Not marketing the service Total Source: Survey Data.

28 18 100

28.00 18.00 100.00

49 17 4 180

27.22 9.45 2.22 100.00

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. 2. 3. 4. Diamond, William, Development Banks, John Hopkins, Baltimore, 1957, pp. 4-5. Basu, S.K., Theory and Practice a/Development Banking-A Study in the Asian Context, Asia Publishing House, Bombay, 1965, p.39. Gupta, L.c., The Changing Structure a/Industrial Finance in India, Clarendon Press, Oxford, 1969, p. 9. 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. 6. 7. 8. Karnataka State Financial Corporation, "Report of Entrepreneurship Development Programmes", KSFC News, Vol. 16, Issue No. 7, January 1995, p. 8. EDP Report, 1994-95, Karnataka State Financial Corporation, Shimoga and Annual Sanctions Register, KSFC, Shimoga. EDP Report,' 1995-96, KSFC, Shimoga and Annual Sanctions Register, KSFC, Shimoga. Karnataka State Financial Corporation, "Report on Entrepreneurship Development Programmes", KSFC News, Vol. 17, Issue No. 12, March 1996, p. 6.

9. 10. 11. 12. 13. 14. 15. 16. 17.

EDP Report, KSFC, Shimoga. Karnataka State Financial Corporation, "Report on Entrepreneurship Development Programmes", KSFC News, Vol. 17, Issue No. 12, March 1996, p. 7. EDP, PRC/PMC Holders Meeting Report, KSFC, Shimoga, 1994-95 and Annual Sanctions Register, KSFC, Shimoga. Op. cit, 1995-96. Ibid. Report on Successful Entrepreneurs Meet, 1995-96, KSFC, Shimoga and Annual Sanctions Register, KSFC, Shimoga. Report on Successful Entrepreneurs Meet, 1995-96, KSFC, Shimoga. Karnataka State Financial Corporation, "Shimoga-Successful Entrepreneurs Meet", KSFC News, Vol. 18, Issue No. 7, October 1996, p.12. 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 broadbased 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. 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. 19. A majority of the entrepreneurs (58.57 per cent) are in the ./ local market followed by The size of the entrepreneurs' units is said to be small since statewide market (27.50 per cent) and national market (12.50 per cent). 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

/ 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. 23. The different types of changes made by the entrepreneurs after floating the unit shows A larger number of entrepreneurs are in the profit percentage range of 6-10 per cent the innovating character of the entrepreneurs in the study area. (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 turnover, 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 nonEDP 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 broadbased 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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Rosen, George, Some Aspects of Industrial Finance in India, Asia Publishing House, Bombay, 1962. Sadhak, H., Role of Entrepreneur in Backward Area, Daya Publishing House, New Delhi, 1989. Saravanvel, P., Entrepreneurial Development ~ Principles, Policies and Programmes, Eee Pee Kay Publishing House, Chennai, 1987. Sarvate, M. Dilip, Entrepreneurial Development - Concepts and Practices, Everest Publishing House, Pune, 1996. Lakhanapal, Ajay, Entrepreneurial Development An Institutional Approach, Commonwealth Publishers, New Delhi, 1990. Legal Manual, Karnataka State Financial Corporation, Bangalore. Management Development Institute, New Delhi, Small Scale Industry - An Assessment of Institutional Assistance - Case Studies of Some Select States in India, 1983. McClelland, C. David, The Achieving Society, D. Van Norstrand Co., Inc. New York, 1961 cited in M.U. Deshpande, Entrepreneurship of Small Scale Industry - Concept, Growth and Management, Deep and Deep Publications, New Delhi, 1989. McClelland, C. David, The Achieving Society, The Free Press, New York, 1961, cited in R.A. Sharma, Entrepreneurial Change in Indian Industry, Sterling Publishers, New Delhi, 1980. Meier, M. Gerald and Robert E. Baldwin, Economic Development -Theory, History and Policy, Asia Publishing House, Bombay, 1960. Mishra, C. Ramesh and Narendra S. Bisht, "Entrepreneurial Paradox - A Diagnostic Exercise", cited in N.S. Bisht and others (ed.), Entrepreneurship-Reflections and Investigations, Chugh Publications, Allahabad, 1989. Mitra, B.B., Transfer of Property Act, 15th Edition, Kamal Law House, Kolkata, 1988. Murthy, BEVVN, M. Chandrashekar and M. Gangadhar Rao, Entrepreneurial Process and Promises, cited in M. Gangadhar Rao., (ed.), Entrepreneurship and Entrepreneurship Development, Kanishka Publishing House, Delhi. Oamen, M.A., Small Industry in Indian Economic Growth: A Case Study of Kerala, S.B. Press; Trivandrum, cited in Ajay Lakhanpal, Entrepreneurial Development - An Institutional Approach, Commonwealth Publisher, New Delhi, 1990. PaJia, S.M., "Meaning, Training and Extension Services for Small Scale Industries-Indian Experience", Development News, Vol A, 1984, Industrial Development Bank of India,

Bombay, cited in Sadhak H., R ole of Entrepreneur in Backward Area, Daya Publishing House, New Delhi, 1989. Say, Jean Baptiste, Catechism of Political Economy, New York, 1827, cited in Bhanushali, S.G., Entrepreneurship Development, Himalaya Publishing House, Mumbai, 1987. Schumpeter, J.A., The Theory of Economic Development, Oxford University, New York, 1967, cited in Vasanth Desai, Entrepreneurial Development, Vol. 1, Himalaya Publishing House, Mumbai, 1991. Sharma, R.A., Entrepreneurial Change in Indian Industry, Sterling Publishers, New Delhi, 1980. Sharma, Krishnalal and Harnek Singh, Entrepreneurial Growth and Development Programmes in Northern India - A Sociological Analysis, Abhinav Publications, New Delhi, 1980. Stokes, G. Randall, "The Afrikaner Industrial Entrepreneur and Afrikaner Nationalism", Economic Development and Cultural Change, Vol. 22, No. 4, July 1974, cited in R.A. Sharma, Entrepreneurial Change in Indian Industry, Sterling Publishers, New Delhi, 1980. The Karnataka Aces and Rules, Vol. 17, Karnataka Public Moneys (Recovery of Dues) Act, 1979, Lawyers Law Book. UNIDO, "Industrialization of Developing Countries: Problems and Prospects", (Monograph17), United Nations, New York, 1969, cited in Sadhak H., Role of Entrepreneur in Backward Area, Daya Publishing House, New Delhi, 1989. Verma, H.S., Industrial Families in India, Concept Publishing Company, New Delhi, 1985. 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. Weber, Max, Religion of India, translated by H. Gerth and D. Martindale, Glencoe, 1960, cited in H.S. Verma, Industrial Families in India, Concept Publishing Company, New Delhi, 1985. Wenette, Philip, The Future of American Prosperity, Macmillian arid Company, New York, 1955. Young, F.W., "A Micro Sociological Interpretation of Entrepreneurship", cited in M.U. Deshpande, Entrepreneurship of Small Scale Industry - Concept, Growth, Management, Deep and Deep Publications, Delhi, 1989.

Articles Acharya, Hemalatha, "Creative Responses in Indian Economy - A Comment", The Economic Weekly, Vol. 19, No. 17, April 27, 1957. Balu, V. (Prof.), "Financing of Small Scale Industries - A Sample Study including Notified Backward Areas", Indian Journal of Economics, 72 (2), October 1999. Bhat, K.S.N., "Concept of Entrepreneurship - Old Wine in the New Bottle", KSFC News, Bangalore, Vol. 18, Issue No. 1, April 1996. Bhatia, B.S., "New Industrial Entrepreneurs: Their Origins and Problems", Journal of General Management, Vol. 12, No. 1, Autumn, 1974. Chatterjee, Anjana, "Entrepreneurship Development Programme and Self-employment", Yojana, 36(16), September 15, 1982. Chebbi, V.K., "Entrepreneurship Development Programmes for Self Employment in Rural and Semi-urban Areas, Small Industry Extension Training Institute, Hyderabad. Evans a r), George Herbertson, "The Entrepreneur and Economic Theory-A Historical and Analytical Approach", American Economic Review (Papers and Proceedings), Vol. 39, No.3, May 1949. Gangadhara, V. and K. Rajeshwar Reddy, "Women Entrepreneur Development Programme of APSFC - An Introspection", Indian Journal of Marketing, Vol. 21, Nos. 5-10, JanJune 1991. Gnana, Kannan, "Training for Entrepreneurship Development" in Developing Entrepreneurship - Issues and Problems, SIET, Hyderabad, 1980, cited in N.C. Pillai and Anna, V., "The Entrepreneurial Spirit among Women", Indian Management, Vol. 29, Nos. 11-12, Nov-Dec. 1990. Harbison, Frederick, "Entrepreneurial Organization as a Factor in Economic Development", The Quarterly Journal of Economics, Vol. 70, No. 1, Feb. 1956. Harikumar, V. and K. Sasikumar, "Industrial Sickness in the SSI Sector in Kerala", SEDME 24(3), September 1997. Heggade, D. Odeyar, "Development of Women Entrepreneurship in India-Problems and Prospects", Economic Affairs, Vol. 26, Qr. 1 Nos. 1-2, Jan-Mat. 1981. Lewis, W. Ben., "The Corporate Entrepreneur", Quarterly Journal 0/ Economics, Vol. 51, No. 3, May 1937. Economics, Feb. 15,1998. . Narasaiah, P.V. and others, "Industrial Financing - An Evaluation of APSFC", Southern

Panandikar, Surekha, "Women Entrepreneurs - Problems and Potentials", Economic Times, December 6, 1985. Pandit, D.P., Creative Responses in Indian Economy - "A Regional Analysis", The Economic Weekly, Vol l9, No. 8, Feb. 23, 1957. Parik, S.M., "Role of Small Scale Industry", SSI Magazine, May 1998. Pathak, H.N., Small Scale Industries in Ludhiana, IIMA Reprint Series, Originally Published in Economic and Political Weekly, Vol. VII, No. 48, November 1972. Ramakrishnaiah, K. and others, "Institutional Finance to SSI : Role of APSFC", SEDME, 25(3), December 1998. Romijin, H., "Entrepreneurship Training for Small Business in Developing Countries - Some Issues", Economic and Political Weekly, Vol. 24, No. 8, Feb. 25, 1989. Sarada Devi, K., "Entrepreneurship of Women in India", Khadi Gramodyog, Vol. 35, No. 6, March 1989. Sarma, Anilkumar, "Growth of Industrial Entrepreneurship in India," The Indian Journal of Commerce, Vol 18, Part IV, No. 65, Dec. 1965. Singh, Birendra Narain, Pattern of Entrepreneurship in Agra- With Special Reference to Light Engineering Industry", Indian Journal of Commerce, Vol. 17, Part III, No. 60, Sept. I964. Spengler, J. Joseph, "Economic Factors in Economic Development", American Economic Review, (proceedings), Vol. 47. Stauss, H. James., "The Entrepreneur - The Firm", Journal of Political Economy, Vol. 52, No.2, June 1994. Reports, Gazetteers, Booklets and others Annual Reports of Karnataka State Financial Corporation for the years 1989-90, 1990-1991, 1991-92, 1992-93, 1993-94, 1994-95, 1995-96, 1996-97, 1997-98, 1998-99 and 19992000. Annual Sanctions Registers for the years 1990-91, 1991-92, 1992-93, 1993-94, 1994-95, 1995-96, 1996-97 and 1997-98 of Shimoga Branch Office, KSFC. Assistance to Industry - A Booklet, 1995. Census Report, 1991, Karnataka. District Industrial Potential Survey Report, District Industries Centre, Shimoga. EDP Report, 1994-95, 1995-96 and EDP, PRC/PMC Holders Meeting Report 1994-95, KSFC, Shimoga.

Gudi, M. Savitri, "Karnataka State Social Welfare Board - Assisting Women to Organize Industries", Report of the Third International Conference of Women Entrepreneurs, 1984. Karnataka at a Glance, 1992-93, Published by Directorate of Economics and Statistics, Bangalore, Government of Karnataka. Karnataka State Financial Corporation - A J, Booklet, 1997. Karnataka State Financial Corporation, "Report on Entrepreneurship Awareness Programme for Physically Handicapped", KSFC News, Vol. 15, Issue No. 12, June 1994. Karnataka State Financial Corporation, "Report on Entrepreneurship Development Programmes", KSFC News, Vol. 16, Issue No. 7, January 1995. Karnataka State Financial Corporation, "Report on Entrepreneurship Development Programmes", KSFC News, Vol. 17, Issue No. 12, March 1996. Karnataka State Financial Corporation, "Shimoga - Successful Entrepreneurs Meet", KSFC News, Vol. 18, Issue No. 7, October 1996. Karnataka State Financial Corporation, "Report on Seminar Relating to Rejuvenation of Sick Units", KSFC News, Vol. 18, Issue No. 11, February 1997. Karnataka State Gazetteer, Government of Karnataka, Shimoga District, 1975. Operational Statistics of KSFC from 1990-91 to 1997-98. Report on Successful Entrepreneurs Meet", 1995-96, KSFC, Shimoga. Scheme-wise Brochures of KSFC, Bangalore. State Profile, Karnataka, 1997-98, SISI, Bangalore. Varshika Pragathi Varadi from 1-4-1997 to 31-3-1998, Zilla Kaigarika Kendra, Shimoga and Zilla Panchayat, Kaigarika Vibhagha, Shimoga.

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, Madurai, 1997 (Unpublished). Surekha B., Role of Commercial Banks and Financial Institutions in Financing and Promoting Women Entrepreneurs - A Case Study of Karnataka State, Thesis submitted 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 Finance, 82 etc., 18386 hierarchius, 36 Sales turnover, 16669 Schemes of developm~nt, 18183 Education and Marketing area, 14445 Family Background and Capital employed, 15356 Hypotheses of Study, 1920 No. of changes, no changes ICICI (Industrial Credit and Type of ownership, 160-61 etc., 177-81 No. of changes, no change etc., 17275 IDBI Return on Investment Corporation of Year of establishment, 161-63 India), 18,43,99, 192,262 CEDOK, 99, 263 Profit, 14549 Profit reinvested, 15859 (Industrial Development Coefficient of correlation, investment, 15658 146-48 193,262 Commitment charges, 60 15051 Testing Stations, 98 Type of ownership, 142-43 Type 'of ownership, Field IFCI (Industrial Finance EDP, 16, 17, 20-24,44-48,53, 56, Corporation of India), 18, 43, Sector, 14344 Schemes of development, 175 .. Sales turnover, 156 Bank of India), 18, 43, 54, 56, 79,99, 117, 192, Performance, 141 Marketing area, 15153 Performance, 159 EAP (Entrepreneurship Equipment Hinduism, 31, 36 ,-;actoring, 83 , homo Lease

Hire Purchase Assistance, 82 Awareness Programme), 53, 56, 8~ 123,259,260,278,295

Composit Loan Scheme, 6667

Computer Loan Scheme, 7374 Plan, 44 Motivation Camps Contents of EDP, 46-48 equipment, Corporation, 99 Development of Entrepreneurs 18, 51, 92 in India, 26263 99,192,262

57, 123,257,259,260,26373, Finance for

Fifth Five Year Industrial Electro-medical

Concept of Entrepreneur, 4-8 278,288,290,295

Electronic Testing Development 70 entrepl'ende, 4

and Seminars, 264 Industrial Policy Resolutions, Ex-servicemen, Generators, 73 Hatecheries and poultry farms, 81-83 Hospital and nursing home, 70-71 71-72

Entrepreneur Guidance Cell, 86 Entrepreneurship

Industrial Structure of DIC (District Industries Centre), Karnataka, 9394 11,20,99,115,264,291 Infrastructure for Dimensions of Study, 24-25 Development, 4244 Entrepreneurship District Shimoga: A Profile, Development programme, Development, 94-96 99115 4448 Jainism,31 Infrastructure for ED, Concept, 30-50 Justification for Study, 1719 111-115 Entrepreneurial supply theories, 3035 73 Tourism related facilities, 77 First Investment Clause, 62 Industrial Letter of Credit), Present industrial scenario, 108-11 Quality control equipment, Hotel and tourism industry, Entrepreneurship Development 6869 General characteristics, 99-103 Concept, 4142

Karnataka State: A Profile, 89-99 Process of development, 4148 General characteristics, 89-93 Resources for Supply and neeJ of structure, 93-94 entrepreneurship entrepreneurs, 36-41 FLC (Foreign 214 Infrastructure for development, 10308 - pre-independence scenario, entrepreneurship First World War, 13

District Shimoga: Entrepreneurs, 116-91 Insurance Problems, 186-90

36-39 Institutions for

development, 94-96 - postindependence scenario, Corporation of India), 262 GIC (General

Performance, 137-86 39-41 Y development, 98-99

entrepreneurship GIIC (Gujarat Industrial

Entrepreneurship Development

Social profile, 116.25 Programme, 44-48, 278 Resources for U nits promoted, 126-36 entrepreneurship 69-70 development, 9698 Equpment Finance Scheme,

Investment Corporation), 45

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), 17-25,48,5160, 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, 2122 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, 7980 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, 7677 ~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 , 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, 12729 Sectorwise 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 factors, 31-33