UNIT-3

Entrepreneurial finance, Assistance &

Entrepreneurial Development
Agencies
 Various Financial institutions for funding enterprises

• With the quickened pace of economic development

under the impetus of the Five Year Plans, the most
striking change in the Indian economy has been the
initiation of an industrial revolutionist and the
reemergence of small-scale industries.
• During the past decade, there has been a deepening as
well as widening of the entrepreneurial structure as well
as the small-scale preindustrial structure.
• Not only have the established small industries increased
their installed capacity and output, but a wide range of
new small industries has also come into being.
• During the last two decades, there is a boom of entrepreneurial
activities in the country. Thus, in the field of capital-and product
goods industries, enterprises manufacturing such items as
machine tools, electrical and’ engineering equipment, chemicals
etc., which provide the foundation for a self (sustained growth of
the economy have been set-up. Amongst the consumer goods
industries, small units producing such items as -bicycles, sewing
machines, plastic products, etc. are forgoing ahead. These far-
reaching developments and the scale and scope of operation of
entrepreneurs, particularly in small-scale industries, have
brought to the fore the importance -of provision of
administrative and institutional assistance at various levels.
• Over the years, financial institutions are playing a
key role in providing finance and counseling to
the entrepreneurs to start new ventures as well
as mode diversify and even rehabilitate sick
enterprises. In this context, we shall discuss the
scale and scope of operation of various
development banks (institutions) that have been
rendering financial assistance, directly or
indirectly, to entrepreneurs and their various
ventures. .
 Institutional Finance
• Institutional Finance With the launching of the Five
Year Plans, in the absence of a sufficiently broad
domestic capital market, there .was need for
adopting and enlarging the institutional structure
to meet the medium and long-term credit
requirements of the industrial sector. It was in this
context that the RBI took the initiative in setting-up
statutory corporations at the all-India and’ regional
levels to function as specialised financial agencies
purveying term credit.
 Institutional Framework
• Institutional Framework for Industry Institutional
finance for -large, medium, small and tiny
industries by commercial banks - the State Bank of
India group, nationalized banks, private sector
banks and development corporations which have
been especially established to provide industrial
finance. In addition, the Reserve Bank of India
gives credit guarantees and the ECGC gives export
guarantees to the small-scale sector. By its
refinance operations, the
• Industrial Development Bank of India, too,
plays a significant role in the promotion of the
small scale-sector for it has enabled the SFCs
SSIDC/SSIACS and commercial banks to extend
a large quantum of financial assistance to this
sector. The National Small Industries
Corporation offers financial assistance is the
form of its hire-purchase schemes.
• In India, long-term loans are provided for a host of
financial institutions of the five all-India develop
merits IDBI and SIDBI are apex banks providing
refinance facilities to other institutions. Like-wise,
NABARD is an apex bank for agricultural finance
and Exim bank of export import trade. Then
industrial development banks, special institutions,
saving and investment institutions, financial service
institutions and regulatory institutions. RBI, SEBI,
and NSEIL are three regulatory bodies
 Entrepreneurs often need various sources of finance to start, grow, and
sustain their businesses. Here are common sources of finance for
entrepreneurs:

• Personal Savings:
– Using personal savings is one of the most straightforward ways to finance a
business. It shows commitment and confidence in the venture.
• Family and Friends:
– Borrowing from family or friends can be an option, though it's important to
handle such arrangements with care to avoid straining personal relationships.
• Angel Investors:
– Angel investors are individuals who provide capital in exchange for ownership
equity or convertible debt. They often invest in early-stage businesses and
provide mentorship and advice.
• Venture Capital:
– Venture capitalists (VCs) are professional groups that manage pooled funds
from many investors to invest in startups and small businesses in exchange
for equity. VC funding is common for high-growth potential businesses.
• Bank Loans:
– Traditional bank loans are a common source of financing.
Entrepreneurs can secure loans based on their creditworthiness
and the business's financial prospects.
• Microfinance Institutions:
– Particularly relevant in developing countries, microfinance
institutions provide small loans to entrepreneurs who may not
have access to traditional banking services.
• Crowdfunding:
– Platforms like Kickstarter, Indiegogo, and GoFundMe allow
entrepreneurs to raise funds from a large number of people who
contribute small amounts. There are different models, including
reward-based, equity-based, and donation-based crowdfunding.
• Grants and Competitions:
– Entrepreneurs can apply for grants from government agencies, non-profit
organizations, or participate in business competitions that offer cash
prizes or resources.
• Incubators and Accelerators:
– These programs often provide not only funding but also mentorship, office
space, and other resources to help startups grow.
• Initial Coin Offerings (ICOs) and Token Sales:
– In the realm of blockchain and cryptocurrencies, some entrepreneurs
fundraise by issuing their own tokens or coins through ICOs or token sales.
• Trade Credit:
– Suppliers may offer trade credit, allowing entrepreneurs to delay payment
for goods or services, providing a short-term financing option.
• Leasing and Equipment Financing:
– Entrepreneurs can lease equipment or obtain financing for specific assets, spreading the
cost over time.
• Government Grants and Subsidies:
– Various government programs offer grants, subsidies, or low-interest loans to support
small businesses, especially in specific industries or sectors.
• Invoice Financing:
– Entrepreneurs can use outstanding invoices as collateral to obtain financing, receiving a
percentage of the invoice value upfront.
• It's important for entrepreneurs to carefully consider the advantages and
disadvantages of each financing option and choose the one that aligns with their
business model, growth strategy, and financial needs. Additionally, seeking
professional advice from financial advisors or mentors can be beneficial in
navigating the complexities of business finance.
 1. Industrial Finance Corporation of India
(IFCI)
• Incorporation and Purpose The Industrial
Finance Corporation of India (IFCI) was
established in 1948 under an Act of
Parliament with the object of providing
medium and long-term credit to industrial
concerns in India. IFCI transformed into a
corporation from 21st May, 1993 to, provide
greater flexibility to’ respond to the needs of
the rapidly changing financial system.
 Scheme for Encouraging Entrepreneurship
Development
(a) Interest subsidy scheme for woman entrepreneurs;

(b) Consultancy fee subsidy schemes for providing marketing

assistance to small-scale industries;

(c) Encouraging the modernisation of tiny, small-scale,

ancillary units; and

(d) Control of pollution in the small and medium-scale

industries. The IFCI has shown its increasing concern in
the development of backward districts.
1)Granting loans on subscribing to debentures repayable
within a period not exceeding 25 years. (1948)

2) Underwriting the issue of stock, shares, bonds or

debentures by industrial concerns provided that it does not
retain any shares, etc., which it may have had to take up in
fulfillment of its underwriting liabilities beyond a period of 7
years except with the permission of the central Government
(now the IDBI).

3) Guaranteeing loans —— a. raised by industrial concerns,

which are repayable within a period not exceeding 25 years
and are floated in the market. (1948) b. raised by industrial
concerns from scheduled banks or state cooperative banks
(1960)
 Contd…
4) Guaranteeing deferred payments due from any industrial
concern a. In connection with the import of capital goods from
outside India b. In connection with the purchase of capital
goods within India

5) Guaranteeing loans (with the prior approval of the Central

Government) raised from, or credit managements made with,
any bank or financial institution in any country outside India by
Industrial concerns in foreign currency (1960)

6) Acting as agent for the Central Government or, with its

approval, for the International Bank for Reconstruction and
Development (lBRD) in respect of loans granted or debentures
subscribed by either of them (1952) 7) Subscribing to the stock
or shares of any industrial concern (1960)
 APEX BANKING INSTITUTION
• The Reserve Bank Of India is the apex banking
institution.
• It commenced operations on April 1, 1935, is
at the Centre of India's financial system.
Hence it is called the Central Bank.
• The Reserve Bank of India was inaugurated in
April 1935 with a share capital of Rs. 5crores,
divided into shares of Rs.100 each fully paid
up. The entire share capital was in the
beginning, owned by private shareholders. But
in view of the public nature of the Bank‟s
functions, the Reserve Bank of India, Act, 1934
provided for the appointment by the Central
Government of the Governor and two
• Deputy Governor (who were also directors of
the central Board). The Reserve Bank was
nationalized in 1949. Besides the central
Board, there are four local Boards with
headquarters at Bombay, Calcutta, Madras
and New Delhi
NABARD
 Industrial Development Bank of India
(IDBI)
• Industrial Development Bank of India (IDBI)
established under Industrial Development
Bank of India Act, 1964, is the principal
financial institution for providing credit and
other facilities for developing industries and
assisting development institutions.
• Till 1976, IDBI was a subsidiary bank of RBI. In
1976 it was separated from RBI and the
ownership was transferred to Government of
India. IDBI is the tenth largest bank in the
world in terms of development. The National
Stock Exchange (NSE), the National Securities
Depository Services Ltd. (NSDL), Stock Holding
Corporation of India (SHCIL) are some of the
Institutions which has been built by IDBI.
• The Head office of IDBI is located in Mumbai. The bank
has five regional offices, one each in Kolkata, Guwahati,
New Delhi, Chennai and Mumbai. Besides the bank have
21 branch offices.

• Functions of IDBI:
(i) To provide financial assistance to industrial enterprises.
(ii) To promote institutions engaged in industrial
development.
(iii) To provide technical and administrative assistance for
promotion management or expansion of industry.
(iv) To undertake market and investment research and
surveys in connection with development of industry.
 IDBI Assistance:
The IDBI provides financial assistance either directly or through some
specified financial institutions:
(i) Direct Assistance:
The IDBI grants loans and advances to industrial concerns. There is no
restriction on the upper or lower limits for assistance to any concern itself.
The bank guarantees loans raised by industrial concerns in the open market
from the State Co-operative Banks, the Scheduled Banks, the Industrial
Finance Corporation of India (IFCI) and other ‘notified’ financial institutions.
• (ii) Indirect Assistance:
The IDBI can refinance term loans to industrial concerns repayable within 3
to 25 years given by the IFCI, the State Financial Corporation and some
other financial institutions and to SIDCs (State Industrial Development
Corporations), Commercial banks and Co­operative banks which extend
term loans not exceeding 10 years to industrial concerns. IDBI subscribes to
the shares and bonds of the financial institutions and thereby provide
supplementary resources.
 Developmental Activities of IDBI:

• (1) Promotional Activities:

• In fulfillment of its developmental role, the bank continues to
perform a wide range of promotional activities relating to
developmental programmes for new entrepreneurs, consultancy
services for small and medium enterprises and programmes
designed for accredited voluntary agencies for the economic
upliftment of the underprivileged.
• These include entrepreneurship development, self-employment
and wage employment in the industrial sector for the weaker
sections of society through voluntary agencies, support to Science
and Technology Entrepreneurs’ Parks, Energy Conservation,
Common Quality Testing Centers for small industries.
(2) Technical Consultancy Organisations:
With a view to making available at a reasonable cost, consultancy
and advisory services to entrepreneurs, particularly to new and
small entrepreneurs, IDBI, in collaboration with other All-India
Financial Institutions, has set up a network of Technical Consultancy
Organisations (TCOs) covering the entire country. TCOs offer
diversified services to small and medium enterprises in the
selection, formulation and appraisal of projects, their
implementation and review.
(3) Entrepreneurship Development Institute:
Realising that entrepreneurship development is the key to industrial
development; IDBI played a prime role in setting up of the
Entrepreneurship Development Institute of India for fostering
entrepreneurship in the country. It has also established similar
institutes in Bihar, Orissa, Madhya Pradesh and Uttar Pradesh. IDBI
also extends financial support to various organisations in conducting
studies or surveys of relevance to industrial development.
 SIDBI – Small Industries Development Bank of India (vvv.IMP)

• The SIDBI (Small Industries Development Bank of India) is a

wholly-owned subsidiary of IDBI (Industrial Development Bank
of India), established under the special Act of the Parliament
1988 which became operative from April 2, 1990.

• SIDBI was made responsible for administering Small Industries

Development Fund and National Equity Fund that were
administered by IDBI before. SIDBI is the Primary Financial
Institution for promoting, developing and financing MSME
(Micro, Small and Medium Enterprise) sector. Besides focussing
on the development of the Micro, Small and Medium Enterprise
sector, SIDBI also promotes cleaner production and energy
efficiency.
 Contd…
• SIDBI helps MSMEs in acquiring the funds they
require to grow, market, develop and
commercialize their technologies and innovative
products. The bank provides several schemes
and also offers financial services and products
for meeting the individual’s requirement of
various businesses.
 Finance Facilities Offered by SIDBI
1: Direct Finance
SIDBI offers Working Capital Assistance, Term Loan Assistance,
Foreign Currency Loan, Support against Receivables, equity
support, Energy Saving scheme for the MSME sector, etc.
under its various direct finance loan schemes.
2: Indirect Finance
SIDBI offers indirect assistance by providing Refinance to PLIs
(Primary Lending Institutions), comprising of banks, State
Level Financial Institutions, etc. with an extensive branch
network across the country. The key objective of the
refinancing scheme is to raise the resource position of Primary
Lending Institutions that would ultimately enable the flow of
credit to the MSME sector.
3: Micro Finance
Small Industries Development Bank of India
offers microfinance to small businessmen and
entrepreneurs for establishing their business.
 Functions of SIDBI
• Small Industries Development Bank of India refinances
loans that are extended by the PLIs to the small-scale
industrial units and also offers resources assistance to
them.

• It discounts and rediscounts bills.

• It also helps in expanding marketing channels for the

products of SSI (Small Scale Industries) sector both in the
domestic as well as international markets.

• It offers services like factoring, leasing etc. to the

industrial concerns in the small-scale sector.
 Contd…
• It promotes employment-oriented industries particularly in
semi-urban areas for creating employment opportunities and
thus checking the relocation of people to the urban areas.

• It also initiates steps for modernisation and technological

up-gradation of current units.

• It also enables the timely flow of credit for working capital

as well as term loans to Small Scale Industries in
cooperation with commercial banks.

• It also co-promotes state-level venture funds.

 Benefits of SIDBI
1. Custom-made
SIDBI policies loans as per the requirements of your businesses. If
your requirement doesn’t fall into the ordinary and usual
category, Small Industries Development Bank of India would
assist in funding you in the right way.
2. Dedicated Size
Credit and loans are modified as per the size of the business. So,
MSMEs could avail different types of loans custom-made for
suiting their business requirement.
3. Attractive Interest Rates
It has a tie-up with several banks and financial institutions over
the world and could offer concessional interest rates. The SIDBI
has tie-ups with World Bank and the Japan International
Cooperation Agency.
 Contd…
4: Assistance
It does not just provide a loan, it also offers assistance and much-required advice. Its
relationship managers assist entrepreneurs in making the right decisions and
offering assistance till the loan process ends.
5: Security Free
Businesspersons could get up to Rs.100 lakhs without providing security.
6: Capital Growth
Without tempering the ownership of a company, the entrepreneurs could acquire
adequate capital for meeting their growth requirements.
7: Equity and Venture Funding
It has a subsidiary known as SIDBI Venture Capital Limited which is wholly owned
that offers growth capital as equity through venture capital funds that focusses on
MSMEs.
8: Subsidies
SIDBI offers various schemes which have concessional interest rates and comfortable
terms. SIDBI has in-depth knowledge and a wider understanding of schemes and
loans available and could help enterprises in making the best decision for their
businesses.
9: Transparency
• Financial institutions:
IFCI,IDBI.SIDBI,NABARD,ICICI,EXIM,LIC
• Banks:
IFCI,IDBI.SIDBI,NABARD,ICICI,EXIM,HDFC,UTI
• Co-operative banks are financial entities
established on a co-operative basis and
belonging to their members. This means that
the customers of a co-operative bank are also
its owners. These banks provide a wide range
of regular banking and financial services.
 ICICI

• The creation of Industrial Credit and Investment

Corporation of India (ICICI) is another milestone in
the growth of the Indian Capital Market. It was
incorporated in the year 1955, as a company registered
under the Companies Act. The ICICI was incorporated to
finance small scale and medium industries in the private
sector.
• Ifci -1948
• Idbi -1964 profit maximisation
• Share holder wealth maximisation
• Icici-1955
 Contd…

• The IFCI and SFCs confined themselves to lending activity

and kept away from underwriting and investing in
business though they were authorized to subscribe for
the shares and debentures of the companies and to
undertake underwriting business. Therefore, a large
number of up and coming enterprises faced continuous
problems in raising funds in the capital market.
• Besides, they were not in a position to secure the desired
amount of loan assistance from the financial institutions
due to their thin equity base. To encourage industrial
development in the private sector, a considerable
provision of underwriting facility was considered
necessary to accelerate the phase of the industrialization.
To fill these gaps, the ICICI was established.
 Objectives of the ICICI
1. To assist in creation, growth and modernization
of business enterprises in the non-public sector.
2. To encourage and promote the involvement of
internal and external capital sources, in such
enterprises.
3. To motivate pvt ownership of industrial
investment and to promote and assist in the
expansion of markets.
4. To provide equipment finance.
5. To provide finance for rehabilitation of industrial
units.
 Functions of the ICICI
1. Providing finance in the form of long-term or medium term
loans or equity participation.
2. Sponsoring and underwriting new issues of shares and other
securities,
3. Guaranteeing loans from other private investment sources.
4. Making funds available for reinvestment by revolving
investment as rapidly as possible.
5. Providing project advisory services i.e. offering advice –
 to private sector companies in the pre-investment stages on
Government policies and procedures, feasibility studies and
joint venture search, and
 to Central and State Governments on specific policy related
issues.
 Role of Government in promoting
Entrepreneurship (Agencies)
Government plays a very important role in developing
entrepreneurship. Government develop industries in rural
and backward areas by giving various facilities with the
objective of balances regional development.The
government set programmes to help entrepreneurs in the
field of technique,finance,market
and entrepreneurial development so that they help to
accelerate and adopt the changes in industrial
development. Various institutions were set up by the
central and state governments in order to full this
objective.
 1. Small industries development organization (SIDO)

• SIDO was established in October 1973 now under Ministry of Trade,

Industry and Marketing.

• SIDO is an apex body at Central level for formulating policy for

the development of Small Scale Industries in the country,headed by
the Additional Secretary & Development Commissioner(Small Scale
Industries)under Ministry of Small Scale Industries Govt. of India.
SIDO is playing

• A very constructive role for strengthening this vital sector, which has
proved to be one of the strong pillars of the economy of the country.
SIDO also provides extended support through Comprehensive plan
for promotion of rural entrepreneurship.
2. Management development Institute(MDI)

• MDI is located at Gurgaon(Haryana).It was

established in 1973 and is sponsored by Industrial
Finance Corporation Of India,with objectives of
improving managerial effectiveness in the industry.It
conducts management development programs in
various elds.In also includes the programmes for the
officers of IAS,IES,BHEL,ONGC and many other
leading PSU’s.
 3. Entrepreneurship development institute of India (EDI)

• Entrepreneurship Development Institute of India (EDI),

an autonomous and not for- profit institute, set up in
1983, is sponsored by apex financial institutions –

• the IDBI Bank Ltd., IFCI Ltd., ICICI Bank Ltd. and the
State Bank of India (SBI). EDI has helped set up twelve
state-level exclusive entrepreneurship development
centres and institutes. One of the satisfying
achievements, however, was taking entrepreneurship to
a large number of schools, colleges, science and
technology institutions and management schools in
several states by including entrepreneurship inputs in
their curricula
 In the international arena, efforts to develop
entrepreneurship by way of sharing resources and
organizing training programmes, have helped EDI earn
accolades and support from the World Bank,
Commonwealth Secretariat, UNIDO, ILO, British
Council, Ford Foundation,
• European Union, ASEAN Secretariat and several other
renowned agencies. EDI has also set up
Entrepreneurship Development Centre at Cambodia, Lao
PDR, Myanmar and Vietnam and is in the process of
setting up such centres at Uzbekistan and five African
countries.
 4. All India Small Scale Industries Board(AISSIB)

The Small Scale Industries Board (SSI Board) is the apex

advisory body constituted to render advise to the
Government on all issues pertaining to the small scale
sector.It determines the policies and programmes for
the development of small industries with a Central
Government Minister as its president and the
representatives of various organization i.e. Central
Government,State Government,National Small
Industries Corporations,State Financial
Corporation,Reserve Bank of India,State Bank of
India,Indian Small Industries Board,Non government
members such as Public Service Commission,Trade and
Industries Members.
5. National Institution of Entrepreneurship and Small Business
Development(NIESBUD),New Delhi

• It was established in 1983 by the Government of

India.It is an apex body to supervise the activities of
various agencies in the entrepreneurial development
programmes.It is a society under Government of
India Society Act of 1860.The major activities of
institute are:
i) To make efiective strategies and methods
ii) To standardize model syllabus for training
iii) To develop training aids,tools and manuals
iv) To conduct workshops,seminars and conferences.
v) To evaluate the benefits of EDPs and promote the
process of Entrepreneurial Development.
vi) To help support government and other agencies
in executing entrepreneur development
programmes.
vii) To undertake research and development in the
field of EDPs.
6. National Institute of Small Industries Extension Training

• It was established in 1960 with its headquarters at

Hyderabad.The main objectives of national Institute of
Small Industries Extension Training are:
i) Directing and Coordinating syllabi for training of small
entrepreneurs.
ii) Advising managerial and technical aspects.
iii) Organizing seminars for small entrepreneurs and
managers.
iv) Providing services regarding research and
documentation.
 7. National Small Industries Corporation Ltd. (NSIC)

• The NSIC was established in 1995 by the Central

Government with the objective of assisting the
small industries in the Government purchase
programmes.
• The corporation provides a vast-market for the
products of small industries throughits marketing
network.It also assists the small units in
exporting their products in foreign countries.
 DICS
• The DIC’s programme is funded jointly by the concerned state and central
government. It took part in various promotional measures In order to bring out
the development of small unit sectors in the district level. The DIC’s performs the
following functions mainly:

1. To spot the entrepreneurs: DICs conducting various motivational programmes so

that they can find new entrepreneurs throughout the districts. It is done
particularly under some schemes and with the association of SIS’s and TCO’s for
conducting Entrepreneurial programmes.
2. Purchase of fixed assets: To purchase fixed assets, the DICs suggest loan
applications of the prospective entrepreneur to some of the concerned financial
and development institutions like NSIC, SISI etc., DCI’s also recommend
commercial banks so that to meet the working capital requirement of SSI to run
operations daily.
3. Offers subsidies and other incentives: DCIs help the rural people to subsidies
offered by the government on various schemes. It leads to the betterment in
boosting financial capacity of the units and may undergo for further
development activities.
 Contd…
4. Guidance of import and export: Government provides various types of
incentives for import and export on particular goods and services. The
license to the importer and exporter is issued on the basis of
recommendation of DIC.

5. Entrepreneurial training programmes: DCIs allow a lot of training

programmes for the rural entrepreneurs who are new to the business
world and also recommend other institutions to take part in such training
programs. These are intended to give better assistance to the new
entrepreneurs.

6. Provides employment for unemployed educated ones: The DICs have

introduced a scheme to guide the unemployed educated youth by
providing them facilities for selfemployment. The age limits between 18 to
35 years with minimum qualification of metric or technical trade. The
notable thing here is that the technocrats and women are given
importance.
 Financing Small-Scale Industries (SSIs) in developing countries requires a nuanced
approach, as these businesses often face unique challenges such as limited access to
formal financial institutions, inadequate infrastructure, and regulatory hurdles. Here
are some common financing options and strategies for Small-Scale Industries in
developing countries:

• Microfinance Institutions (MFIs):

– MFIs specialize in providing financial services, including
small loans, to micro-entrepreneurs who often lack
access to traditional banking. These institutions play a
crucial role in supporting SSIs in developing countries.
• Government Support and Subsidies:
– Many governments in developing countries offer
financial support, subsidies, and incentives to promote
the growth of small businesses. Entrepreneurs should
explore government programs aimed at providing
affordable loans, grants, and training.
• Development Banks:
– Development banks are financial institutions that provide long-term
capital for economic development projects. Entrepreneurs in
developing countries can explore loans and financial support from
such banks that focus on fostering economic growth.
• Peer-to-Peer Lending:
– Peer-to-peer lending platforms connect borrowers directly with
individual lenders. This can be an alternative financing option,
especially when traditional banking services are limited.
• Community-Based Financing:
– Informal community-based financing mechanisms, such as rotating
savings and credit associations (ROSCAs) or community savings
groups, can provide small-scale financing solutions for entrepreneurs.
• Venture Capital and Impact Investors:
– While venture capital is often associated with high-growth startups,
impact investors may be interested in supporting SSIs that have a social
or environmental impact. These investors may provide not only capital
but also expertise and networks.
• Local Cooperative Banks:
– Cooperative banks are owned and operated by their members, often
with a focus on serving a specific community or sector. Entrepreneurs
can explore cooperative banks for loans and financial services tailored
to local needs.
• Supplier Credit and Trade Financing:
– SSIs can negotiate favorable payment terms with suppliers or explore
trade financing options that allow them to defer payments while
maintaining a healthy supply chain.
• Technology-Enabled Financing Solutions:
– Mobile banking and digital finance services can provide accessible
and affordable financial solutions for SSIs, overcoming geographical
barriers and reducing transaction costs.
• Capacity Building and Training Programs:
– Besides providing financial support, development organizations and
NGOs may offer capacity building and training programs to enhance
the skills of entrepreneurs, making them more attractive to lenders
and investors.
• Grassroots Initiatives and Non-Profit Organizations:
– Non-profit organizations and grassroots initiatives may offer grants or
low-interest loans to support SSIs, especially those focused on
community development and poverty alleviation.
• It's essential for entrepreneurs in developing
countries to assess their specific needs,
understand the local financial landscape, and
explore a combination of financing options.
Building strong relationships with local
communities, understanding the regulatory
environment, and leveraging technology can
also contribute to the success of financing
initiatives for SSIs in these regions.
 Both central and state governments play pivotal roles in promoting entrepreneurship
by offering various incentives and subsidies. Their combined efforts create a conducive
environment for business growth, job creation, and economic development. Here's an
overview of the roles they typically play:

• Central Government:
• National Policies and Frameworks:
– The central government formulates national policies and frameworks that
set the tone for entrepreneurship development across the country. These
policies often focus on areas such as ease of doing business, access to
finance, and support for innovation.
• Financial Support Schemes:
– The central government may provide financial support through schemes
like credit guarantee programs, interest subsidies, and grants for specific
sectors or groups of entrepreneurs.
• Research and Development (R&D) Support:
– To foster innovation, the central government may invest in R&D initiatives
and provide funding for research projects. This encourages entrepreneurs
to develop new technologies and products.
• Infrastructure Development:
– The central government plays a crucial role in developing national infrastructure,
including transportation, communication, and technology, which indirectly benefits
entrepreneurs by improving connectivity and reducing operational costs.
• Skill Development Programs:
– National skill development programs aim to enhance the capabilities of the
workforce. By investing in education and training, the central government
contributes to creating a skilled labor pool for entrepreneurs.
• Regulatory Environment:
– Establishing a conducive regulatory environment is essential for entrepreneurship.
The central government works on simplifying regulations, reducing bureaucratic
hurdles, and ensuring a business-friendly ecosystem.
• Export Promotion:
– Central government initiatives often include schemes to promote exports, providing
entrepreneurs with opportunities to tap into international markets and grow their
businesses globally.
• State Government:
• State-specific Incentives:
– State governments have the flexibility to tailor incentives based on
local needs. These may include tax breaks, subsidies, and grants for
businesses operating within their jurisdictions.
• Land and Infrastructure Support:
– State governments can facilitate the acquisition of land and provide
infrastructure support, including industrial parks and special
economic zones, to attract businesses and promote entrepreneurship.
• Sector-specific Policies:
– Recognizing the unique strengths and opportunities within their
states, governments may formulate policies that target specific
sectors, such as agribusiness, tourism, or technology.
• Local Skill Development Initiatives:
– State governments can design and implement skill development programs that address the
specific needs of the local workforce and align with the industries prevalent in the region.
• Entrepreneurship Development Centers:
– Establishing entrepreneurship development centers and incubators at the state level
provides support in the form of mentorship, networking, and infrastructure to budding
entrepreneurs.
• Cluster Development:
– Supporting the development of industry clusters can enhance collaboration and create
economies of scale, benefiting businesses within the same sector.
• Ease of Compliance:
– State governments play a role in ensuring that entrepreneurs face minimal bureaucratic
challenges. This includes streamlining processes for business registration, obtaining
licenses, and compliance with regulations.
• Promotion of State as an Investment Destination:
– States actively promote themselves as attractive investment destinations, participating in
trade fairs, roadshows, and other events to showcase their business-friendly environment.
• The collaboration between central and state
governments is crucial for the overall success
of entrepreneurship promotion.
Entrepreneurs should stay informed about the
various incentives and subsidies available at
both levels of government to take full
advantage of the support provided for their
business endeavors.
 FISCAL TAX CONCESSION
1.Tax holiday for three years:
In order to give entrepreneurial ventures a much-needed boost, the
government in the union budget 2016-17 has announced to provide a deduction
of 100% tax exemptions during the first three years of operation. Only the
companies that are registered as startups under the Department of Industrial
Policy and Promotion (DIPP) that involve in innovation, deployment,
development or commercialization of new products and services driven by
technology would be eligible for the three year tax benefits. Moreover, in the
first three years the eligible startups would not have to pay any tax for profits
except MAT (Minimum Alternate Tax). MAT is calculated on `book profit'.
2. 20% exemption on Capital Gains:
Capital gains are the taxes charged on profits gained from sale of capital assets
such as stocks and bonds. The government has recently made provision for an
exemption of 20% capital gains tax. This provision was a long-pending demand
by the startups. Before this provision, most investments in Indian startups were
compelled to route their investment through Maurititius as the capital gain tax
on investment from there waived following provisions in the Double Tax
Avoidance Treaty.
3. Taxes on Turnover:
The government levy 25% tax plus cess and
surcharge on new manufacturing firms. However,
companies with a turnover of less than 50 crore
per annum have to pay 29 percent tax. Medium
and small companies with a turnover of less than
Rs. 50 crore are taxed at a rate of 25 percent.
Moreover, the period of claiming profit linked tax
exemption is now increased from 5 years to 7
years. This step by the government would benefit
approximately 6.67 lakh companies in the
country.
 4. Payment of EPF by the Government:

• The government will now provide EPF

(Employees' Provident Fund) contribution of
8.33% for the period of three years. Earlier, the
percentage of the contribution was 12% of
employees basic salary. This move will relieve
many employers by cutting costs of startups by
12% for straight three years and will provide
opportunities to hire competent candidates for
their company as candidates will have job
security. Many companies have started registering
themselves with EFPO to avail the benefits.
 5. Presumptive tax:
• It is mandatory for the entrepreneurs to maintain the
books of account. However, under Presumptive
taxation scheme, it is not required to maintain the
books of account and hence will reduce the burden of
the entrepreneur. Anyone whose income earned
stands at 8% is eligible for this scheme. However, a
person whose income earned is more than 8 %, higher
rate can be declared. Moreover, all the small business
man with a turnover of up to Rs 2 crore and
professional with gross income of up to Rs 50 lakh
can avail benefit of this scheme.
 Contd…
• All these policies comes under "Startup India”
campaign of the government and were proposed
in the Union budget 2016-17. These policies
were made with an objective to give a much-
needed boost to the budding entrepreneurial
ventures. It is a subsidiary of the `Make in India'
scheme and aims to create more jobs within the
country. This startup tax policy will definitely
give the much-needed boost to the startups.
 As of my last knowledge update in January 2022, the Indian government has implemented
various measures and initiatives to promote entrepreneurship in the country. Please note that
there might have been further developments since then. Here are some of the steps taken by the
Indian government to foster entrepreneurship:

• Startup India Campaign:

– Launched in 2016, the Startup India campaign aims to promote and
support startups in the country. It provides various benefits such as tax
exemptions, funding support, and easier compliance procedures.
• Stand-Up India:
– The Stand-Up India scheme focuses on promoting entrepreneurship
among women and individuals from the Scheduled Castes (SC) and
Scheduled Tribes (ST). It offers financial support and facilitates bank loans
for enterprises run by these groups.
• MUDRA (Micro Units Development and Refinance Agency)
Yojana:
– MUDRA Yojana provides financial assistance to small and micro-
enterprises through various financial institutions. It aims to encourage
entrepreneurship at the grassroots level.
• GST (Goods and Services Tax) Reform:
– The implementation of GST aimed to simplify the tax structure and
reduce the tax burden on businesses. This has a positive impact on
entrepreneurship by streamlining tax compliance.
• Ease of Doing Business Initiatives:
– The government has taken steps to improve the ease of doing
business in India by simplifying regulations and procedures,
reducing paperwork, and facilitating faster approvals for
businesses.
• Research and Development Initiatives:
– Initiatives to promote research and development in various sectors
have been launched to encourage innovation and technological
advancements, which are essential for the growth of startups.
• Incubation Centers:
– The government has supported the establishment of incubation centers and
innovation hubs across the country. These centers provide startups with
infrastructure, mentorship, and networking opportunities.
• Skill Development Programs:
– Skill development programs aim to enhance the capabilities of the workforce,
making them better equipped to start and manage their own businesses.
• Access to Finance:
– Various schemes and programs have been introduced to make it easier for
entrepreneurs to access funding. This includes initiatives by the Small Industries
Development Bank of India (SIDBI) and other financial institutions.
• International Collaboration and Partnerships:
– The government has actively sought international collaboration to promote
entrepreneurship. This includes partnerships with other countries, organizations,
and investors to facilitate knowledge exchange and funding.
• Digital India Campaign:
– The Digital India initiative promotes the use of
technology and digital platforms to simplify
processes, increase efficiency, and provide a
conducive environment for startups to thrive.
It's important to check for updates and new
developments, as the government may
introduce additional measures or modify
existing ones to further support
entrepreneurship in India.