Women can start a unit with a group of two to three women promoters as a partnership venture or as a cluster of units. This will facilitate them to take care of their family duties and at the same time to look after the unit personally. Service industry and food industry are some of their tested areas of success. Suitable engineering industry with low labour intensity can also be started.
Government policy since last two years is giving more emphasis to SSI units and many easy and innovative schemes are launched through commercial banks/ financial institutions. Promoter`s equity/margin are reduced for women. Concession in rate of interest is also provided. Seed capital schemes like National Equity Fund Scheme, wherein interest free equity type of assistance upto 25 % of project cost is provided. Special schemes like Mahila Udyan Nidhi is operated by SIDBI through commercial banks exclusively for Women to set up SSI units and to start service activities. Entrepreneurs can bring in their capital as low as 10% and 25% is provided as equity at low rate of interest. Balance of 65% is funded by Banks with a repayment period of over 10 years. Under Credit Guarantee Fund Trust for Small Industries Scheme commercial banks lend liberally to SSI units upto Rs 25 lakhs without collateral security.
For women self help group special schemes are available with public sector banks to start SSI units extending concessional rate of interest and low margin and longer repayment period. There is another scheme called National Equity Fund under which 25 % of the project cost is funded as an interest free loan. 10% is to be brought in by the promoter and the banks fund balance 65 %. For prompt repayment of loan installments rebate in interest is also provided.
To start a SSI unit basic requirements are infrastructure, manpower, procurement of materials, Fixed Assets and Machinery for processing, Storage facilities, Marketing of products and collection of receivables. Other requirements like complying with Govt regulations, pollution control, labour welfare, adhering to license conditions etc are also to be taken care of. While women promoters can take care of most of the areas, the external assistance of commercial banks/financial institutions is necessary for financing working capital needs and to acquire fixed assets and machinery,
Schemes available with banks for working capital finance are
- Cash credit Scheme, which is a funding arrangement of a major percentage on the value of raw material, work in process, finished goods and receivables.
- Other working capital finance schemes are Venture Capital funding, Factoring, Discounting of Sales Bills, Letter of Credit facility etc.
Schemes available for financing fixed assets and machinery are
- Term Loan
- Lease finance
- Hire purchase finance
- Suppliers` bill discounting scheme
- Deferred payment credit scheme
Schemes for Women Entrepreneurs:
The integrated schemes of assistance to women entrepreneurs which provide for identification, selection, training and consultancy and escort services apart from term loan facilities on concessional terms continue to receive increasing response. As a result, assistance to women entrepreneurs is increasing day-by-day. Some of the schemes introduced to provide financial assistance to women entrepreneurs are briefly summarized.
Schemes for Women Entrepreneurs links:
Banks:
The Small Industry Development Bank of India(SIDBI) has special schemes for financial and managerial assistance for women entrepreneurs. These are aimed at providing,
- Training and extension servicing support to women entrepreneurs according to their skills and socio-economic status.
- Financial assistance on concessional terms to enable them to set up industrial units in the small scale sector.
The schemes are opened through State Financial Corporations(SFCs), State Industrial Development Corporations(SIDCs), Commercial Banks, State Cooperative Banks and Regional Rural Banks. SIDBI refinance these institutions to the extent of the assistance they provide. For instance, the Maharashtra State Financial Corporation(MSFC) provides assistance in the form of terms loans for which the entrepreneur is expected to contribute atleast 15% of the project cost. A minimum debt equity ratio of 3:1 has to be maintained. The entrepreneur has to repay the loan over eight years, including an initial moratorium period of two years.
BANK OF INDIA’s Priyadarshini Yojana:
Under this scheme the bank provides long term and working capital assistance under the following categories.
- Professional and self employed. E.g. chartered accountants, lawyers and doctors.
- Small Business e.g. beauty parlour, laundry and circulating library
- Retail traders e.g. fair price shops, general provision stores.
- Village or Cottage and Small Scale Industry Road Transport operators e.g. audio rickshaws, taxies
- Allied agricultural activity
The maximum loan amounts sanctioned depend on the entrepreneur needs with limits of upto Rs.2 lakh for term loans and up to Rs.1 lakh for working capital. Interest rates depend upon the quantum of loan and range from 12% (For loans upto Rs.2 lakh). Repayment schedules are fixed after taking into account the expected surplus income and normally span a period of three to five years. The assets acquired with bank finance will need to be hypothecated to the bank as security. The entrepreneurs’ contribution margin will be about 20%, depending upon the type of activity intended to be undertaken.
In addition, women entrepreneurs are also eligible for finance under the following government sponsored programmes where capital subsidy is available and the rate of interest is very low.
Prime Minister’s Rozgar Yojana(PMRY)
Self employment programme for Urban Poor(SEPUP)
Integrated Rural Development Programme(IRDP)
Scheme of Interest Subsidy for Women Entrepreneurs:
The main objective of the scheme of interest subsidy for Women Entrepreneurs is to provide incentives to the women with business acumen and entrepreneurial traits.
All industrial projects whether in rural, cottage, tiny, small and medium scale(i.e. with capital cost upto Rs.3 crore) sectors, if set up by women entrepreneur(s) will be covered under the scheme. The scheme shall be operated through the State Financial Corporations(SPCs)/State level Financial institutions granting assistance to women entrepreneurs for setting up their industrial ventures in the rural, cottage, tiny, small and medium scale sector.
To be eligible for availing herself of the subsidy under the scheme, a woman entrepreneur should fulfil the following criteria:
- The woman entrepreneur should have undergone a full course of EDP in the specified agency for the purpose of the scheme.
- The woman entrepreneur should be unemployed before taking up the industrial venture
- The venture should be her first venture
- The woman entrepreneur must have been sanctioned and disbursed financial assistance by SFC or a State level financial institution.
The assistance under the scheme takes the form of one time subsidy and is equivalent to the amount of interest payable by the industrial unit set up by the woman entrepreneur to the SFC or the State level financial institutions for the loan assistance sanctioned for the project for a period of one year, subject to a ceiling of Rs.25000 per annum.
In addition to the above there are several schemes offered by various state government and state level agencies.
IDBI’s Mahila Udyam Nidhi(MUN) Scheme:
IDBI has set up a special fund, Mahila Udyam Nidhi with a Corpus of Rs.5 crore to provide seed capital assistance to women entrepreneurs, intending to set up projects in SSI sector. The scheme is now being implemented by SIDBI.
Women Entrepreneurs owning and managing an enterprise with a minimum financial status of 51% of the equity are eligible for assistance provided the project cost excluding
Working capital does not exceed Rs.10 lakh. The debt equity ratio should be 3:1. Seed capital assistance will be provided in the form of soft loan up to a maximum of 15% of fixed cost to meet the gap in equity. Minimum promoter’s contribution insisted upon is 10% of the fixed cost.
A nominal service charge of 1% per annum is charged, which is payable annually. The seed capital should be repaid over a period not exceeding 10 years including an initial moratorium period of 5 years. In this scheme, seed capital assistance is provided without insisting on security.
Mahila Vikas Nidhi(MVN) Scheme:
Recognizing the role of voluntary agencies in improving the socio economic status of women, IDBI has decided to set up a special development fund, Mahila Vikas Nidhi, with an initial allocation of Rs.3 crore from its technical assistance fund. Assistance by way of grant and soft loan would be made available from the Nidhi to such voluntary organizations working exclusively for women and having a registered organization with a properly constituted governing body. Agencies with a proven record of performance in managing income-generating programmes would be eligible to receive aid under the Nidhi. Activities such as setting up of training cum development centers, skill upgradation such as setting up of training cum development centers, skill upgradation programmes, programmes of marketing assistance as well as management upgradation and such other industrial activities which improve the economic status of women would be eligible for support under the MVN. The assistance under the scheme would be towards one time capital expenditure, the recurring expenses being met by the voluntary agencies out of its funds or grants/donations from government or other agencies.
State Bank of India’s Stree Shakti Package:
The SBI introduced a new package in November 1989 aimed at reinforcing its efforts in the area of developing entrepreneurship among women. Concessions and facilities under the package are given here.
- An important highlight of the package is conducting of Entrepreneurial Development Programme(EDP) exclusively designed for women all over the country with the help of SBI Staff Training College and local branches.
- The branch managers along with field staff would provide the necessary inputs and assistance to those women who do not plan to set up full fledged industrial ventures but would like to do something at home. In this scheme for loans of upto Rs.25000/- neither the guarantee nor the margin money is taken from borrowers. Further a discount of half a percent is allowed on the interest charged. The loan proposals received from women entrepreneurs would be sanctioned within a period of 30 days except in cases of proposals for high value and also where other financial institutions are involved.
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