Financial Challenges of the Unorganized Sector

A STUDY OF FINANCIAL FOR THE UNORGANISED SECTOR
ACKNOWLEDGEMENT
At the very outset of my heartfelt gratefulness and in depth gratitude

almighty God to his abundant and unfailing support that have sustained must,
throughout the period of project work to complete it in the right manner and in the
right time.
I would like to thankfully acknowledge bengaluru central university for

this opportunity, for facilitating the completion of this project. I also thank our CMA.
Prof. D. Gopinath, Director, Sindhi Institute of Management For this support and my
guide Prof. Tojo Thomas for his active guidance in successful completion of this
project. Without their encouragement, active guidance and cooperation this project.
I would like to express my gratitude towards all the people who have helped
me with the successful completion of this project. Without their encouragement,
active guidance and cooperation this project would not have been a success.
I would also express me deep gratitude to all who have contributed for the
timely completion of this project.
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CHAPTER I
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INTRODUCTION
Definition: Unorganized Sector
The term unorganized sector at what time used in the Indian contexts defined
by National Commission for enterprises in the unorganized sector, In their account
on situation of work and endorsement of livelihoods inside the unorganized sector as
consisting of every unincorporated confidential enterprises own by persons or
household unavailable in the sale or making of goods and services, operate on a
proprietary or joint venture base With less than ten total workers
Unorganized Sector: Small Business Units
Small business units are globally known as Small and Medium Enterprises
(SME). These include micro/tiny and unorganized enterprises. In India, Though the
small enterprises are well-known because Micro, Small and Medium Enterprises
(MSME) and each section have been evidently defined below two wide categories of
manufacturing and services In India, micro enterprises which include a big section of
the unorganized enterprises are included as identified section of the small
enterprises, since over 99 per cent of them exist as micro enterprises.
Considering the main position played by SMEs in employment generation,

export promotion and income redistribution, this sector receives policy support in all
countries of world, whether developing or developed. Special schemes and
institutions exist nearly in all places for the financing of SMEs.
3
Characteristics of Unorganized Sector
From the definition of NCEUS, following characteristics of a unit in

unorganised sector may be extracted.
1. It is small in terms of employment

2. It is associated with low capital intensity
3. Labour productivity is low
4. Produces low priced goods and services in different modes of self-employment,
unpaid family labor and wage work
5. An enterprise has no legal personality of its own
6. Working condition in unorganised sector units is very poor
7. Excessive seasonality of employment is seen
8. Social security measures are absent
9. Often negation of social standard is seen
10. Workers have very poor human capital base in terms of education, skill and training
and thus they are immobile
11. Any effective legal action taken against any illegal activity in this sector is seen as a
step of impairing
12. Workers are hugely scattered and not unionized
13. They are also socially stratified on the basis of caste and sub-caste
4
Need for Financing Unorganized Sectors
The role of unorganized sector is the economic and social development is

well known fact. This sector is the Endeavour towards innovation and creativity.
Unorganized sector in India is more often in the form of SME which is the chief
source of employment for vast section of population (Seshasayee, 2006). MSME
sector contributes 8% of the country’s GDP, 45% of the manufactured output and
40% of the export (Prime Minister Task Force Report, 2010).
Capital is the startup for any business hence is crucial for enterprise. Without
capital one cannot manage the factors of production such as raw material, labours,
plant and machinery etc
Challenges of Financing Unorganized Sectors
The challenges of financing for the unorganized business provide the

existence of a vast major informal and unorganized specified as in a simple
description as in the economy refers to the house-hold based manufacturing activity
and small scale and tiny sector of industry.
An unorganized sector is one which there is no stability in profits or gains

and its production is confined in the limited area. It requires less man power and
investments.
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Unorganized Sectors in India
The handicrafts, artisan professions, khadi and village industries such as the
handloom sector, agarbatti making, hand paper manufacturer and match box
industries etc., .these were the unorganized sector in the Indian economy.
The financial challenges in the unorganized sector likewise securing initial

funding, poor planning , unexpected expense , business start up delay , lender pull-
out, lack of staffing facility, over reliance credit , lack of ability to test new idea,
insufficient utilization facility, raw material shortages, lack of marketing support,
problem in working capital, problem in export, no technology up gradation, inability
to meet environmental standards, delay in payments, poor industry relation,
manufacturing problems, lack of concentration , inadequate dispersal, government
interference.
Government Initiatives for Unorganized Sector
The government realized the worth of this sector in economy and hence
established National Commission for Enterprises in the Unorganized Sector
(NCEUS) on 20th September, 2004. The present chairman of the commission is
Mr.Arjun Sengupta. The commission is set up as an advisory body and to
continuously keep an eye on the development and productivity of the informal
sector. The commission focuses on generation of the large scale employment in this
sector especially in rural areas. The unorganized sector includes the household sector
and micro enterprises (Charmes, 1997)
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The various spheres of intervention of the Ministry, and its allied organisations,
so far include:
1) Provision of credit from financial institutions/banks;
2) Support for technology up gradation
3) Integrated infrastructural facilities
4) Modern testing facilities and quality certification
5) Access to modern management practices 6) Entrepreneurship development and

skill up gradation through appropriate training facilities
6) Support for product development, design intervention and packaging
7) Welfare of artisans and workers
8) Assistance for better access to domestic and export markets
9) Cluster-wide measures to promote capacity building and empowerment of the

units and their collectives
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Following are institutions involved in financing to Unorganized Sector
1. Small Scale Industries Development Bank of India (SIDBI): SIDBI was

established under the Indian Companies Act 1956 on April 2, 1990. It is the wholly-
owned subsidiary of IDBI. The primary function of SIDBI is to grant loans and
advances to the small scale industries.
2. Commercial Banks: Reserve Bank of India introduced the concept of Priority

sector lending As per RBI, priority sector are those sectors which do not get timely
and adequate credit. They include agriculture and its allied activities, micro and
small enterprises, poor people, housing etc. Commercial banks are asked to lend 40%
of the net bank credit to priority sectors (NCEUS, 2007). They are basically small
value loans. Banks give first preference to these sectors since they are the major
contributors in Indian economy.
3. State Financial Corporation (SFCs): The main objective of SFCs is to provide

financial assistance to small scale sectors and also to provide employment
opportunities. The lending is done by the way of loans and debentures.
4. Regional Rural Banks (RRBs): RRBs are the commercial which are located in
the rural areas. The fundamental objective of RRBs is to promote and develop
agriculture, trade and commerce in rural areas. RRBs are regulated by Reserve Bank
of India.
5. Co-operative Banks: Co-operative banks mainly finances to those enterprises

which are formed on the co-operative basis whether upward integration or downward
integration. Units which work on co-operative basis are handlooms, handicrafts and
some village industries.
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6. National Bank for Agriculture and Rural Development (NABARD):

NABARD was established in 1982 with the objective to assist agriculture and
agriculture-related activities. A very small proportion of the credit goes to the
unorganized enterprises through indirect channel. There are intermediaries which
finances to the unorganized sector enterprises such as Self Help Group (SHG),
NGOs, Voluntary agencies and micro-finance institutions.
About Microfinance
Microfinance is a way in which loans, credit, insurance, access to savings accounts,

and money transfers are provided to small business owners and entrepreneurs in the
underdeveloped parts of India. The beneficiaries of microfinance are those who do
not have access to these traditional financial resources.
Small loans:
The definition of “small loans” varies between countries. In India, all loans
that are below Rs.1 lakh can be considered as microloans.
India's microfinance:
Sector is fragmented with more than 3000 microfinance companies (MGIs),

NGOs and NGO-MFIs. The top 10 microfinance companies in India are estimated to
account for almost 74 per cent of the total loans outstanding.
Muhammad Yunus a Nobel Prize winner introduced the concept

of Microfinance in Bangladesh in the form of the "Grameen Page 3 80
Bank".NABARD took this idea and started concept of Micro Finance in India.
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Subsidy under Government Schemes to Encourage Flow of Subsidy under

Government Schemes to Encourage Flow of Credit (General) – Major Schemes
Credit (General) – Major Schemes
The Central Government has been implementing a large number of schemes

to encourage the poor people particularly those who find it difficult to meet the
banks’ conditionalities directly to go for self-employment by raising loans from the
banks.
The Government helps the poor through a subsidy on the loan or through
margin/ equity money. This helps them to approach banks for a term loan and a
working capital loan.
Some of the major schemes being implemented by the government are listed
below:
• Prime Minister’s Rojgar Yojana (PMRY) (Ministry of MSME)
• Rural Employment Generation Programme (REGP) for Village Industries by KVIC

(Ministry of MSME)
• Interest Subsidy Eligibility Certification (ISEC) Scheme for Khadi by KVIC

(Ministry of MSME)
• Swarnjayanti Gram Swarozgar Yojana (SGSY) (Ministry of Rural Development)
• Swarnjayanti Shahari Swarozgar Yojana (SSSY), (Ministry of Urban Employment

& Poverty Alleviation.).
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Various Sources of Finance:
The various sources of finance are:
1. Internal sources: - These are the sources of funds that are available within the
firm. The various internal sources of funds available to the small business are:
a) Personal sources: This is the cheapest source and readily available. Personal
saving are the most convenient sources of funds in Africa on Financing to
small business in context of role of microfinance where they asked
respondents the reasons behind their large scale savings and conclude that
20% of the people respond that they save their income in order to start a
business which is the second most important reasons followed by
precautionary motive (which is almost 29%).
b) Borrowings from friends and family: Entrepreneur can borrow funds close
friends and family members. They can directly give money or can invest in
the business. This is the cheapest source and most frequently available.
However, it involves high interest, stress and risk.
c) Retained Profits: These are the profits retained by the owners from the past
earning profits. This is the cash generated by the firm when it trades
profitably. The firm retained every year profit and then collectively uses this
fund for starting up any new business or expanding the existing business have
given the concept of “Initial and Unorthodox sources of finance”where they
included entrepreneur savings, profit reinvestments, friends and family
savings, second mortgage, personal credit cards, customer advance, delay of
payments, premise sharing, employing relatives at below market salaries.
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2. External Sources: These are the sources of funds which are raised outside the
firms or business.
a) This includes Bank loans: The entrepreneur can borrow loans from banks
and other financial institutions. Nowadays RBI is focusing on financing to
SME sector or unorganized sector which in banking terminology is called
priority sector lending. As per the report of Reserve Bank of India,
“Operations and Performance of Commercial Banks” the credit to priority
sectors by public and private sector banks was 36.3% and 37.5% which was
lower than the overall target. The loans can be long term and short term.
b) Debt Financing: Debt financing involves borrowing funds from public or
other interest people with an obligation of repayment after a fixed period of
time. Debt instruments carry a fixed rate of interest which is mandatory to
pay every year irrespective of profit or loss. It includes loans from banks,
financial institutions, and others. Debt financing also includes a wide variety
of sources such as leasing and credit cards (OECD)
c) Venture Capital Funding: defined venture capital as a “financial
intermediary” which takes the investors capital and invest directly to the
portfolio of companies. It is the riskiest source since it involves financing to
start-ups or new business. Venture capitalist comprises the mixed
characteristics of bankers, stock market investors and entrepreneur in a single
Venture capital financing are done in three forms in India: equity, conditional
loans, and Income note.
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THE ADVANTAGES AND DISADVANTAGES OF UNORGANISED

SECTOR
Advantage:
i) The contributions made by the unorganised sector to the national income, is very
substantial as compared to that of the organised sector.
ii) It adds more than 60% to the national income while the contribution of the
organised sector is almost half of that depending on the industry.
iii) On the contrary, the unorganized sector can be understood as the sector, which is
not incorporated with the government and thus, no rules are required to be followed.
iv) Government rules are not governed by any act.
V) Remuneration are provided on Daily wages.
Vi) With a view to providing social security to unorganized workers, Labour and
Employment Minister Mallikarjun Charge said the Unorganised Worker's Social
Security Act, 2008 has been enacted.
Vii) As per a government survey carried out in 2009-10, there were 43.7 crore
people employed in the unorganized sector.
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Viii) The Act provides for constitution of National Social Security Board at the
central level to recommend schemes related with life and disability cover, health and
maternity benefits, old age protection and any other benefit for unorganized sector
workers.
ix) The government has initiated steps in the context of all these social security
benefits there are social security schemes for BPL families, street vendors, workers
in the construction and building segment and MNREGA workers.
x) Some of the social security schemes for workers in the unorganized sector
include, Rashtriya Swasthya Bima Yojna, Aam Admi Bima Yojna and Indira Gandhi
National Old Age Pension Scheme, he added.
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Disadvantage:
The sectors that comprise of small scale enterprises or units and are not registered
with the government are known as Unorganized Sectors. Workers working in an
unorganized sector face the following disadvantages
(i) They get fewer wages.
(ii) Employment is subject to a high degree of insecurity and the people can be asked
to leave without having to any reason.
(iii) There is no provision for overtime, paid leave, holidays, leave due to sickness
etc.
(iv) There is no guarantee of getting work or earning daily for the large number of
people doing small jobs such as selling on the street or doing repair work, which
come under unorganized sector.
(v) No proper job security.
(vi) The working hours are too long, ignoring the aspect of health.In unorganised
sector, and jobs are low paid and are often not regular. There is no provision for over
time, paid leave, holidays, leave due to sickness etc. Employment is not secure.
Vii) There would not be any Job security for the employee
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Viii) Working hours are not fixed.
ix) No provision for overtime.
x) For unorganized sector less than the salary of workers prescribed by the
government.
Xi) There would not be Contribution to Provident fund by the employer. Increment
in salary is rarely.
Xii) Benefits and perquisites of Employees get add-on benefits like medical
facilities, pension, leave travel compensation, etc. are not provided.
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Unorganized Retail Sector
Retailing is one of the pillars of Indian economy and accounts for 14 to 15

percent of its GDP. The Indian retail market is estimated to be 450 billion and one of
the top five retail markets in the world by economic value. India is one of the fastest
growing retail markets in the world with 1.2 billion people
Unorganized retail sector it is defined as an outlet run locally by the

owner or caretaker of a shop that lacks technical and accounting standardization the
supply chain and sourcing are also done locally to meet the local needs unorganized
retailing refers to the traditional formats of low cost retailing for example, the local
kirana shops, owner manned general stores, pan/beedi shop, convenience stores hand
cart and pavement vendors, etc
The Indian retail sector is highly fragmented with 97 per cent of its business
being run by the unorganized retailers. The organized retail however is at a very
nascent stage. The sector is the largest source of employment after agriculture and
has deep penetration into rural India generating more than 10 per cent of India’s
GDP
India retailing industry is essentially owner named small shops. In 2010 larger
format convenience stores and supermarkets accounted for about 4 percent of the
industry and these were present only in large urban centers India is highly
fragmented and unorganized earlier on retailing in India was mostly done through
family owned small stores with limited merchandise, popularly known as kirana or
mom and pop stores. In those times, food and grocery were shopped from clusters of
open kiosks and stalls called mandis. There were also occasional fairs and festivals
where people went to shop. In the twentieth century, infusion of western concepts
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brought about changes in the structure of retailing there were some traditional retail
chains like nilgiri and akbarallys that were set up the public distribution system
outlets to sell subsidized food and started the khadi gram udyog to sell clothes made
of cotton fabric, during this time high streets like linking road and fashion street
emerged in Mumbai. Some Manufacturers like Bombay dyeing started forward
integrating to sell their own merchandise. Shopping centres or complex came into
existence which was a primitive form of today malls
IMPORTANCE OF UNORGANIZED RETAIL SECTOR
Retailing in India as also elsewhere e in the world is divided into organized

and unorganized retailing organized retailing refers to trade activities undertaken by
the licensed retailer. Those who are registered for sales tax, income tax etc, these
include the corporate Backed hypermarket, retail chains and also the privately owned
large retail business. Unorganized retailing, on the other hand, refers to traditional
format of low cost retailing, for example the corner storeowner manned general
stores, Cigarette shops, convenience store, hand cart, pavement vendor etc.
Unorganized retailing is the most prolific and visible form of retailing in India while
the organized retailing constitutes only a very small percentage (3-4%). The Reasons
as to why Indian retailing is so fragmented or unorganized in nature lies in her
entrenched poverty and the fact that a large number of educated unemployed and
superfluous labour takes refuge in retailing in the face of joblessness and glaring
poverty. India is one of the largest emerging markets, with a Population of over one
billion. It is one of the largest economies in the world in terms of purchasing power.
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Retailing in India is at a nascent stage of its evolution In India. The most of

the retail sector is unorganized In India; the retail business contributes around 11
percent of GDP. Of this, the organized retail sector accounts only for about 3 percent
share, and the remaining share is contributed by the unorganized sector which is
mostly a family owned business in India.
The main challenge facing the organized sector is the competition from
unorganized sector. Unorganized retailing has been there in India for centuries,
theses are named as mom-pop stores. The main advantage in unorganized retailing is
consumer familiarity that runs from generation to generation. It is a low cost
structure they are mostly operated by owners, has very low real estate and Labour
costs and has low taxes to pay.
The figure shows comparative to other nations of the world Indian retail
sector is highly dominating by the unorganized retail sector because of the
unorganized retail sector is one of the easiest ways to generate self-employment as it
requires minimum investment in terms of land labour and capital and also Indian
population size is also one of the main reason to this. These stores are not affected by
the modern retailing as it is still considered very convenient to shop. In order to keep
pace with the modern formats kirana have now started providing more value added
services like stocking ready to cook vegetables and other fresh produce. They also
provide services like credit, phone service, home delivery etc.
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Why unorganized Retail sector is dominating in India:
Small-store (kirana) retailing has been one of the easiest ways to generate self-
employment, as it requires limited investment in land, capital and labour. It is
generally family run business, lack of standardization and the retailers who are
running this store they are lacking of education, experience and exposure. This is one
of the reasons why productivity of this sector is approximately 4% that of the U.S.
retail industry. Unorganized retail sector is still predominating over organized sector
in India, unorganized retail sector constituting 97% (twelve million) of total trade,
while organized trade accounts only for 3%.
The reasons for unorganized retail sector domination in India:
1. In smaller towns and urban areas, there are many families who are traditionally
using these kirana shops 'mom and pop' stores offering a wide range of merchandise
mix. Generally these kirana shops are the family business of these small retailers
which they are running for more than one generation.
2. These kiran shops are having their own efficient management system and with this
they are efficiently fulfilling the needs of the customer. This is one of the good
reasons why the customer doesn't want to change their old loyal kirana shop.
3. A large number of working class in India is working as daily wage basis, at the
end of the day when they get their wage, they come to this small retail shop to
purchase wheat flour, rice etc for their supper. For them this the only place to have
those food items because purchase quantity is so small that no big retail store would
entertain this.
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4. Similarly there is another consumer class who are the seasonal worker. During
their unemployment period they use to purchase from this kirana store in credit and
when they get their salary they clear their dues. Now this type of credit facility is not
available in corporate retail store, so this kirana stores are the only place for them to
fulfil their needs.
5. Another reason might be the proximity of the store. It is the convenience store for
the customer. In every corner the street an unorganized retail shop can be found that
is hardly a walking distance from the customer's house. Many times customers prefer
to shop from the nearby kirana shop rather than to drive a long distance organized
retail stores.
6. This unorganized stores are having n number of options to cut their costs. They
incur little to no real-estate costs because they generally operate from their
residences. Their labour cost is also low because the family members work in the
store. Also they use cheap child labour at very low rates.
Challenges which are faced by the Indian unorganized retail sector:
 Lack of best practice in inventory management and supply chain

management.
 Lack of standardization.
 Stiff competition from organized retail sector.
 Lack of knowledge, skills and training.
 Consumers shifting towards organized retail markets.
 Lack of government policies discouraging the unorganized
retailers.
 Lack of capital
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STATEMENT OF THE PROBLEM
Unorganized sector plays an important role in India’s growth this is

because majority of population are involved in this sector. It gives employment to
more than half of the population. So there is major concern of the government
towards this sector. More than 90% of the workforce and nearly about 50% of the
national product is accounted for by the unorganized sector.
Capital is the startup for any business hence is crucial for enterprise.
Without capital one cannot manage the factors of production such as raw material,
labours, plant and machinery etc. Access to finance has been major problem for this
sector all around the world. The present study focuses on challenges in financing
unorganized sectors.
NEED AND RELEVANCE OF THE STUDY
The need of the study is to understand about unorganized sector. To

reveal the significance of unorganized sectors and its features. To understand about
various financial institutions that assist unorganized sectors. The highlighted areas in
this study are role of various financial institutions in economy, effectiveness of these
institutions in value delivery system, regulatory mechanism for such type of
institutions, and finally to determine various challenges in financing unorganized
sectors.
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CHAPTER II
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METHODOLOGY
Objectives
1. To understand about challenges in financing unorganized sectors

2. To study about unorganized sectors.
3. To study about financial assistance provided for unorganized sectors.
Research Plan:
Content analysis is the research method used in the present study this method
allows qualitative data to be analysed systematically. This method is used for
subjective interpretation of the content of text data through the systematic
classification. make valid inferences by interpreting and coding textual materials
through systematic evaluating text. Eg documentation qualitative data can be
converted to qualitative data
Data Collection:
The sources for present study are secondary. Secondary data are those
which have been collected by some other person for his/her purpose and published.
Secondary data is collected from the government websites, investment

magazines, business magazines, banks brochures, literature review.
Limitation
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1. The study is limited to sources of finance only

2. Period for the internship is four weeks only.
3. Data sources for the study are secondary.
4. Information or data may be biased.
5. The study is related to Indian financial institution and non-financial
institution
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CHAPTER-III
SWOC
STRENGTH:
26
 Less investment
To run unorganized sector the less investment is essential in
the way of minimize the risk in production, personnel management and
marketing is not a much important factor, the financial aspects are not
highly influence with the audit facilities. So these unorganized sectors are
in small manufacturing unit like a cottage industry, handlooms, tailoring,
handicrafts maker, which has been occupied in a small business unit firms
it has lowered the expenses.
 Various financing institution grant loans and advances
Various financing like SIDBI, NABARD, MSME, ICICI,
IRBI, EXSIM, BANK, UTI, SFCS, LIC, SIDCS, DIC, Institution grant
loans and advances for the unorganized sector to make a growth in the
Indian economy provide a various opportunity for the public
 Program for development of unorganized sector by Indian government by
a establishing national commission for enterprises in the unorganized
business(NCEUS)
 Commercial bank is giving first preference in lending to unorganized
sector
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Government they provide subsidies to the small business unit to
motivate. The lending level of bank increased due to the major
contribution of loans borrowed persons and supports them to do business
 The readily available financial sources like credit facility providing
institution and government make a large number of arrangements for the
unorganized sector people the nations. It transformed to a developed
nation by increase in the more entrepreneur and more business units make
a well grow in the economy of India
Weakness
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 Absence of detailed financial statement
The sources of funds, profit & loss account statement
balance sheet, tax payment statement, subsides get from government,
trade activities.
 Unorganized business are smaller size
Due to the insufficient or shortage of amount to invest
or run a business. So far expanding their unorganized
Sector to a medium or large scale industry some of the formally steps
and permission are needed to get and the license to be availed to make
a business in big unit. It is necessary to build a al functional unit and
make supply of human resources.
 Access to finance is short due to high risk of default
The loss in gaining the invested fund, low return, high
wage pay, maximization in production cost wastage of raw materials,
the finished goods are has damage it may disfunctions the sector to
make defaults and increase risk.
 Inadequate creditworthiness
Some financial institution or bank if a business owner arise for
getting loans they would see credit score on previous repayment of
29
loan interests so inadequate credit worthiness are applied district of
financial supporters are increase credit risk for the unorganized sector
they affect majority
 Lack of managerial competencies.
It take placed by the unorganized sector they wouldn’t
appointed any skilled manager and qualified graduates are not
appointed to run a strategic unit sector managerial skill is necessary to
run a own unorganized sector, so they may have a risk in payment to a
graduated persons and bank may also think how a unskilled person
would run sector effectively without managerial skills.
 Lack of financial literacy
The well worsted knowledge in financial aspects and Maintenance
of accounting procedures for a business owner should
have tactical way to handle the monetary terms it make lack of financial
literacy
Opportunities
 India is developing economy
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It has increase opportunity for public in employment facility
money flow increase and new technology up gradation through the
opportunity provided for the unorganized sector.
 Young minds with new business ideas
The population growth in India is filled with young talents and
with a new business idea by well growth in educational sectors. And
the EDP institutions are supported the young entrepreneurs to make a
new ventures by motivational hands of energy.
 Government policies favoring financing unorganized
Unorganized sector by lending loans or credit from financial
institution or bank and some other institution like SIDBI, IDBI, ICICI,
NABARD. At same the women entrepreneurs are also given a financial
supports by MSME
Challenges
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 Unorganized sectors do not maintain proper accounting records which
creates hindrances in lending procedure
 The projects of unorganized sectors are new ideas of the entrepreneurs.
And they involve risk and bank do not finances the risky project.
 New entrepreneur face problems in getting finance since they do not
have any credit history.
 Banks generally require security for any credit or advances which acts
as a barrier in financing to the enterprises
 Lending procedure in banks is generally long and takes lot of time to
complete it.
 Various scheme need to be prepared to address the challenges of
finance.
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CHAPTER IV
Outcomes
33
1. Most SME are unorganized sectors

2. 99% of unorganized businesses are micro enterprises.
3. Various initiatives are taken to strengthen micro financing.
4. Financial education to SME to maintain proper business records.
5. Central Government to issue integrated smart cards to the beneficiaries of
various government schemes
6. If the micro, medium, small, unregistered, unorganized, informal sectors do
not have access to finance, they can neither produce nor they can take the risk
of producing or selling things in the market nor can they purchase inputs.
7. Focus on cluster development
8. Lack of Skill development and technology up gradation in unorganized
sectors.
9. 50 % of the national products are accounted for by the informal economy.
10. Established National Commission for Enterprises in the Unorganized Sector
(NCEUS) as an advisory body and to address the issues faced by enterprises
in relation to unorganized sectors.
11. Income –earning opportunities for a large number of people.
12. Sources for loan are banks, money lenders, friends, relatives.
13. Unorganized entrepreneurs prefer raising loan from money lenders.
14. Stiff competition from organized and big industries
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CHAPTER-V
EXPERIENCE
35
 Content analysis: the process conducted by the me has given a practical
approach on how the content analysis is used in the research process to
analyze the data and draw conclusions content analysis was used in this
research to know about the unorganized sector.
 I understood the process of research problem: The opportunity identification,
data collection process through secondary sources, the classification, analysis
and interpretation of data using both qualitative and quantitative data analysis
and techniques.
 Understood how the content analysis methods are used. This method allows
qualitative data to be analyzed systematically. This method is used for
subjective interpretation of the content of text data through the systematic
classification. This research technique make valid inferences by interpreting
textual material through systematic evaluating text documentation qualitative
data can be converted to quantitative data.
 Data collection was a difficult task for me: as major data used for the research
as secondary data was a tough task. The non-availability of timely data was a
task to which was supposed to be addressed in the research process
 Non-availability of accurate data on time was a major problem: research
cannot have any erroneous elements and must convey the correct messages
36
without being misleading. This accuracy and precision have a component that
relates to the intended use.
LEARNING
This study helps me to understand the interest of workers working in
unorganized sector in India also helps to understand about unorganized sector
and how they work. I also got an idea about how the finances are arranged for the
unorganized sector.
Time Optimization
Through this project helps me to understood how to manage time. It helped
the researcher to complete the given project within the given time.
Managing the situation
I am learned how to deal with the different situation through this project.
Communication
37
It improves for me the communication skills. It helps to maintain a
better communication with different people related to this project.
Helps to understand about the mining industry
This project helps me to understood about the different methods of mining.
It also helped to increase the knowledge about the various process included in
mining.
Conclusion
38
Unorganized sector plays a crucial role in the economy. Government and Reserve
Bank of India are working hard to provide timely and easy access to finance to
unorganized sectors by way of various policies and programmes such as priority
sector lending, Financial Inclusion, collateral free loans. Today there is huge demand
by this sector but government hardly meet out this demand. On the other side, banks
also face various problems in providing finance since enterprises in unorganized
sector do not properly maintain books of accounts. Banks do not have trust and
confident on new set up. Banks are highly rigid about the credit worthiness of the
customer. Finally, it can be concluded that unorganized sector faces various
problems with regard to accessibility of finance. To overcome this, government and
other participating agencies must go ahead to support and must give momentum to
the working of this sector.
Bibliography
39
References:
1) R. Vaidyanathan "Understanding the unorganised sector" 2004.
2) Anjula Gurtoo and Colin C. Williams "Entrepreneurship and the informal
sector".
3) S SAKTHIVEL, PINAKI JODDAR "Unorganised Sector Workforce in
India".
40

Financial Challenges of the Unorganized Sector

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Financial Challenges of the Unorganized Sector

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A STUDY OF FINANCIAL FOR THE UNORGANISED SECTOR

At the very outset of my heartfelt gratefulness and in depth gratitude

I would like to thankfully acknowledge bengaluru central university for

Definition: Unorganized Sector

Unorganized Sector: Small Business Units

Considering the main position played by SMEs in employment generation,

Characteristics of Unorganized Sector

From the definition of NCEUS, following characteristics of a unit in

1. It is small in terms of employment

Need for Financing Unorganized Sectors

The role of unorganized sector is the economic and social development is

Challenges of Financing Unorganized Sectors

The challenges of financing for the unorganized business provide the

An unorganized sector is one which there is no stability in profits or gains

Unorganized Sectors in India

The financial challenges in the unorganized sector likewise securing initial

Government Initiatives for Unorganized Sector

1) Provision of credit from financial institutions/banks;

2) Support for technology up gradation

3) Integrated infrastructural facilities

4) Modern testing facilities and quality certification

5) Access to modern management practices 6) Entrepreneurship development and

6) Support for product development, design intervention and packaging

7) Welfare of artisans and workers

8) Assistance for better access to domestic and export markets

9) Cluster-wide measures to promote capacity building and empowerment of the

Following are institutions involved in financing to Unorganized Sector

1. Small Scale Industries Development Bank of India (SIDBI): SIDBI was

2. Commercial Banks: Reserve Bank of India introduced the concept of Priority

3. State Financial Corporation (SFCs): The main objective of SFCs is to provide

5. Co-operative Banks: Co-operative banks mainly finances to those enterprises

6. National Bank for Agriculture and Rural Development (NABARD):

Microfinance is a way in which loans, credit, insurance, access to savings accounts,

Sector is fragmented with more than 3000 microfinance companies (MGIs),

Muhammad Yunus a Nobel Prize winner introduced the concept

Subsidy under Government Schemes to Encourage Flow of Subsidy under

The Central Government has been implementing a large number of schemes

• Prime Minister’s Rojgar Yojana (PMRY) (Ministry of MSME)

• Rural Employment Generation Programme (REGP) for Village Industries by KVIC

• Interest Subsidy Eligibility Certification (ISEC) Scheme for Khadi by KVIC

• Swarnjayanti Gram Swarozgar Yojana (SGSY) (Ministry of Rural Development)

• Swarnjayanti Shahari Swarozgar Yojana (SSSY), (Ministry of Urban Employment

Various Sources of Finance:

The various sources of finance are:

THE ADVANTAGES AND DISADVANTAGES OF UNORGANISED

substantial as compared to that of the organised sector.

organised sector is almost half of that depending on the industry.

iv) Government rules are not governed by any act.

V) Remuneration are provided on Daily wages.

Employment Minister Mallikarjun Charge said the Unorganised Worker's Social

Security Act, 2008 has been enacted.

people employed in the unorganized sector.

in the construction and building segment and MNREGA workers.

National Old Age Pension Scheme, he added.

with the government are known as Unorganized Sectors. Workers working in an

unorganized sector face the following disadvantages

(i) They get fewer wages.

to leave without having to any reason.

come under unorganized sector.

(v) No proper job security.

Viii) Working hours are not fixed.

ix) No provision for overtime.