ROLE OF

GOVERNMENT IN
ENTREPRENEURSHIP
 Role of Government in Entrepreneurship
The Government of India has undertaken several initiatives and
instituted policy measures to foster a culture of innovation and
entrepreneurship in the country. Job creation is a foremost challenge
facing India. With a significant and unique demographic advantage,
India, however, has immense potential to innovate, raise
entrepreneurs and create jobs for the benefit of the nation and the
world.
In the recent years, a wide spectrum of new Programmes and
Opportunities to nurture innovation have been created by the
Government of India across a number of sectors. From engaging with
academia, industry, investors, small and big entrepreneurs, non-
governmental organizations to the most underserved sections of
society.
Recognizing the importance of women entrepreneurship and economic
participation in enabling the country’s growth and prosperity,
Government of India has ensured that all policy initiatives are geared
towards enabling equal opportunity for women. The government
seeks to bring women to the forefront of India’s entrepreneurial
ecosystem by providing access to loans, networks, markets and
trainings.
 India’s recent efforts at promoting
entrepreneurship and innovation are:
Startup India: Launched in 2016, the Startup India initiative is
the flagship program of the Indian government to promote
startup culture and entrepreneurship. The scheme offers
numerous benefits, including tax exemptions, self-
certification compliance, and a dedicated mobile app for
registration. It also provides funding opportunities through
the Startup India Fund of Funds (FFS).
At the core of the initiative is the effort to build an ecosystem
in which startups can innovate and excel without any
barriers, through such mechanisms as online recognition of
startups, Startup India Learning Programme, Facilitated
Patent filing, Easy Compliance Norms, Relaxed Procurement
Norms, incubator support, innovation focused Programmes
for students, funding support, tax benefits and addressing of
regulatory issues.
Department for Promotion of Industry and Internal Trade
recognised startups that are within 10 years of
incorporation.
 India’s recent efforts at promoting
entrepreneurship and innovation are:

Standup India: This scheme primarily

promotes entrepreneurship among
women and marginalized communities.
Standup India aims to provide financial
assistance to at least one scheduled
caste or tribe and one woman
entrepreneur per bank branch. It offers
loans ranging from Rs. 10 lakhs to Rs. 1
crore for setting up greenfield
enterprises.
 India’s recent efforts at promoting
entrepreneurship and innovation are:
Atal Innovation Mission (AIM): Under the Atal Innovation
Mission, the government has set up Atal Incubation Centers
(AICs) and Atal Tinkering Labs (ATLs) to foster innovation and
entrepreneurship. AICs provide incubation support, mentoring,
and access to investors, while ATLs are established in schools
to nurture creativity and scientific thinking among students.
 The Atal Innovation Mission (AIM) is a flagship initiative set up
by the NITI Aayog in 2016 to promote innovation and
entrepreneurship across the length and breadth of the country.
 AlM's objectives are to create and promote an ecosystem of
innovation and entrepreneurship across the country at school,
university, research institutions, MSME and industry levels.
 Atal Tinkering Labs
 Atal Incubators
 Atal Community Innovation Centres
 Atal New India Challenges and Atal Grand Challenges
 Mentor of Change - Industry, Academia, Government, Global
Collaborations
 Aatmanirbhar Bharat ARISE-ANIC
 India’s recent efforts at promoting
entrepreneurship and innovation are:
Pradhan Mantri Mudra Yojana (PMMY): PMMY aims to provide
collateral-free loans to micro and small enterprises, including
startups. The scheme categorizes loans into three categories:
Shishu (up to Rs. 50,000), Kishore (from Rs. 50,001 to Rs. 5
lakhs), and Tarun (from Rs. 5,00,001 to Rs. 10 lakhs). Startups
can avail of these loans through various participating banks.
Eligible Entities who can apply for Mudra Loans
 Age 18-65 Years
 Individuals, Startups, Business Owners, Entrepreneurs, and
MSMEs
 Traders, artisans, shopkeepers, vendors, small manufacturers,
retailers, and other business entities engaged only in the
Trading, Services, and Manufacturing Sectors
 Women Entrepreneurs, as well as People belonging to SC/ST/OBC
category
 Applicants with No past loan default(s) with any financial
institution shall be preferred by Banks/NBFCs
 India’s recent efforts at promoting
entrepreneurship and innovation are:
Make in India: Launched to boost manufacturing in
India, the Make in India initiative supports startups in
the manufacturing sector. The scheme offers
incentives such as reduced compliance burden,
faster clearances, and easier access to capital. It
aims to transform India into a global manufacturing
hub and create employment opportunities.
Make in India is a Government of India scheme launched by
Prime Minister Narendra Modi in 2014 intended to boost
the domestic manufacturing sector and also augment
investment into the country. This article comprehensively
covers details on objectives, schemes & initiatives under
it, 25 focus sectors, advantages, challenges, & progress
related to the Make in India Scheme.
 India’s recent efforts at promoting
entrepreneurship and innovation are:
Electronic Development Fund (EDF): The Electronic Development Fund
provides early-stage funding to startups in the electronics and IT sector. It
promotes innovation, research, and development in electronics and IT
hardware manufacturing. The scheme offers financial support through
venture capital funds, incubators, and seed capital funds.
Biotechnology Industry Research Assistance Council (BIRAC): BIRAC is
an initiative under the Department of Biotechnology that supports startups
and entrepreneurs in the biotechnology sector. The council provides
funding, mentoring, and infrastructure support to startups working on
cutting-edge biotechnology, healthcare, and life sciences technologies.
Support for International Patent Protection in Electronics & Informatio
n Technology (SIP-EIT)
: This scheme encourages Indian startups and SMEs in the electronics and IT
sector to file international patents. It provides financial support to startups
for the expenses incurred in filing and prosecuting international patents.
The scheme aims to enhance the global competitiveness of Indian startups
in the electronics and IT domain.
Credit Linked Capital Subsidy and Technology Upgradation
Scheme (CLCS-TUS): The CLCS-TUS scheme aims to facilitate technology
upgradation in micro, small, and medium enterprises (MSMEs), including
startups. It provides capital subsidies to MSMEs for upgrading their
technology and machinery to improve productivity and competitiveness.
 India’s recent efforts at promoting
entrepreneurship and innovation are:
Export Promotion Capital Goods (EPCG) Scheme: The EPCG scheme
enables startups to import capital goods to produce goods and services for
export purposes. Under this scheme, startups can avail a license to import
capital goods at a concessional rate of customs duty, thereby reducing
their production costs and enhancing their export potential.
Technology Development Board (TDB): The Technology Development
Board offers financial support to startups and small and medium
enterprises (SMEs) for technology development and commercialization. It
provides grants and soft loans to assist in the development and
deployment of innovative technologies.
Research and Development Cess (R&D Cess) Refund: Startups engaged
in research and development activities can avail of a refund of the R&D
Cess paid on imported technology. This scheme encourages startups to
invest in R&D and innovation by providing financial relief.
ASPIRE (A Scheme for Promotion of Innovation, Rural Industries, and
Entrepreneurship)
: ASPIRE focuses on promoting entrepreneurship and job creation in rural
areas. It supports startups and small businesses in rural sectors such as
agro-based industries, rural crafts, and food processing. The scheme
includes incubation centres, training programs, and financial assistance for
rural entrepreneurs.
 India’s recent efforts at promoting
entrepreneurship and innovation are:
National Manufacturing Competitiveness Program (NMCP): NMCP aims
to enhance the competitiveness of manufacturing industries, including
startups. It offers components such as Lean Manufacturing
Competitiveness Scheme, Design Clinic Scheme, and Enabling
Manufacturing Sector Innovation through Quality Tools.
Pradhan Mantri Kaushal Vikas Yojana (PMKVY): PMKVY is a skill
development program that provides training and certification to individuals,
including aspiring entrepreneurs. Startups can benefit from this scheme by
hiring skilled and certified individuals to meet workforce requirements.
National SC/ST Hub: This initiative is specifically designed to support
startups and businesses owned by entrepreneurs from Scheduled Castes
(SC) and Scheduled Tribes (ST). It offers assistance in capacity building,
access to credit, market linkages, and other essential resources.
NIDHI (National Initiative for Developing and Harnessing Innovations)
: NIDHI nurtures innovative ideas and startups through a network of
incubators and entrepreneurship development centres. It provides financial
support, mentoring, and training to entrepreneurs and startups.
 India’s recent efforts at promoting
entrepreneurship and innovation are:
National Innovation Foundation (NIF): NIF encourages grassroots
innovations and supports innovators and startups in various sectors. It
offers financial assistance, incubation support, and patent facilitation to
transform innovative ideas into viable businesses.
Women Entrepreneurship Platform (WEP): WEP is an initiative that
promotes and supports women entrepreneurs in India. It offers a
platform for networking, mentorship, and access to funding
opportunities. Startups led by women entrepreneurs can leverage this
scheme to gain visibility and support for their ventures.
Credit Guarantee Fund Scheme for Startups (CGFS): CGFS provides
collateral-free loans to startups through select banks and financial
institutions. The scheme aims to improve access to credit for startups,
facilitating their growth and expansion.
SIDBI Make in India Soft Loan Fund for Micro, Small and Medium E
nterprises (SMILE)
: SMILE aims to provide soft loans to startups and MSMEs in the
manufacturing and service sectors. It offers financial assistance to
support technology upgradation, capacity expansion, and market
development.
India’s recent efforts at promoting entrepreneurship and
innovation are:
Atal Incubation Centers (AICs): Under the Atal Innovation Mission, the
government has established AICs nationwide. These incubation
centres provide startups with physical infrastructure, mentoring,
networking opportunities, and access to funding to foster their growth.
Micro Units Development and Refinance Agency Ltd (MUDRA)
: MUDRA offers financial support to startups and small businesses
through various loan schemes. These loans, categorized as Shishu,
Kishore, and Tarun, cater to different stages of business growth and
help in meeting working capital requirements and purchasing assets.
National Small Industries Corporation (NSIC) Subsidy Scheme: The
NSIC Subsidy Scheme provides financial assistance to small
enterprises, including startups, through various support programs. It
includes assistance with the procurement of raw materials,
participation in trade fairs and exhibitions, and marketing support.
Venture Capital Assistance (VCA) Scheme: The VCA Scheme aims to
facilitate the flow of equity-based risk capital to startups and agri-
based ventures. It provides financial assistance through venture
capital funds to support their growth, technology upgradation, and
market development.
India’s recent efforts at promoting entrepreneurship and
innovation are:
BIRAC AcE Fund: The Biotechnology Industry Research Assistance
Council (BIRAC) AcE Fund provides early-stage funding to startups
working in the biotechnology sector. It supports startups in healthcare,
agriculture, and other biotech domains by offering financial assistance
and access to resources.
National Entrepreneurship Awards (NEA): NEA recognizes and
rewards exceptional startups and entrepreneurs who have significantly
contributed to the entrepreneurial ecosystem. The awards encourage
innovation, job creation, and social impact while providing recognition
and visibility to deserving startups.
Innovation in Science Pursuit for Inspired Research (INSPIRE)
: INSPIRE is an initiative by the Department of Science and Technology
(DST) to attract young talent towards scientific research and
innovation. It offers scholarships, research fellowships, and grants to
students and researchers, including support for startup ventures in
science and technology.
 MSME
 MSME
 In India, MSMEs contribute nearly 8% of the country’s GDP, around 45% of the
manufacturing output, and approximately 40% of the country’s exports. It won’t
be wrong to refer them as the ‘Backbone of the country.’
 The Government of India has introduced MSME or Micro, Small, and Medium
Enterprises in agreement with Micro, Small and Medium Enterprises
Development (MSMED) Act of 2006. These enterprises primarily engaged in the
production, manufacturing, processing, or preservation of goods and commodities.
 MSMEs are an important sector for the Indian economy and have contributed
immensely to the country’s socio-economic development. It not only generates
employment opportunities but also works hand-in-hand towards the development
of the nation’s backward and rural areas. According to the annual report by the
Government (2018-19), there are around 6,08,41,245 MSMEs in India.

 MSMEs Redefined
 A proposal was made to redefine MSMEs by the Micro, Small and Medium
Enterprises Development (Amendment) Bill, 2018, to classify them as
manufacturing or service-providing enterprises, based on their annual turnover.
MSME
 What is MSME?
 Micro Small and Medium Enterprises (MSMEs) were
introduced by the government through the MSME Act,
2006. Micro, Small and Medium Enterprises are
engaged in the production, manufacturing,
processing, or preservation of goods and
commodities subject to limits of investment. The
government revised the MSME definition in 2020 to
boost its growth.
 MSME Definition
 MSME new definition eliminates the distinction
between manufacturing and services enterprises and
also increases the investment and annual turnover
criteria for such enterprises. The new definition of
MSME was announced in the Atmnirbhar Bharat
package and expanded the investment and turnover
limit.
 MSME
 MSME Classification
 The MSME classification into Micro, Small, and Medium Enterprises based
on investment in plant and machinery equipment are as follows:
 Micro – the investment in plant and machinery equipment will not be more
than 1 crore, and annual turnovers will not be more than 5 crores.
 Small – the investment in plant and machinery equipment will not be more
than 10 crores, and annual turnovers will not be more than 50 crores.
1. Medium – As per the MSME classification criteria, the investment in plant and
machinery equipment of Medium enterprises is not more than 20 crore, and
the annual turnover is not more than 100 crore.
 Features of MSMEs
 Following are some of the essential elements of
MSMEs –
 1. MSMEs work for the welfare of the workers and artisans.
They help them by giving employment and by providing
loans and other services.
 2. MSMEs provide credit limit or funding support to banks.
 3. They promote the development of entrepreneurship as
well as up-gradation of skills by launching specialized
training centers for the same.
 4. They support the up-grading of developmental
technology, infrastructure development, and the
modernization of the sector as a whole
 5. MSMEs are known to provide reasonable assistance for
improved access to the domestic as well as export markets.
 6. They also offer modern testing facilities and quality
certification services.
 7. Following the recent trends, MSMEs now support product
development, design innovation, intervention, and
packaging.
 Government Schemes to Promote MSME
 The following are the government initiatives to promote MSME in India
for the country’s growth and development:
 1. Udyam Portal – It is the portal that simplifies the process of
registration of any enterprise under the MSME category. Recently, the
government’s new guidelines will make wholesale and retail enterprises
eligible for registration in Udyam Portal.
 2. MSME Samadhan – A portal that empowers micro and small
entrepreneurs to directly register issues related to delayed payments by
the Central Ministries/departments/ CPSEs/ State Government.
 3. Credit Linked Capital Subsidy and Technology Upgradation
Scheme (CLCS-TUS) – A scheme for the up-gradation of Technology for
micro, small and medium enterprises.
 4. Interest Subvention Scheme – For the incremental credit to
MSMEs.
 5. Micro and Small Enterprises Cluster Development Programme
(MSE-CDP) – An credit guarantee scheme.
 6. A Scheme for Promoting Innovation, Ruler Industry and
Entrepreneurship (ASPIRE) – Helping in reducing unemployment and
promoting a culture of excellence in entrepreneurship.
 7. Scheme of Fund for Regeneration of Traditional Industries
(SFURTI) – With the help of the latest modern technology, regenerates
the traditional industry in a systematic way to make them competitive
by enhancing their productivity and product quality.
 Importance of MSME in the Indian Economy
 Micro, Small, and Medium Enterprises (MSME) play a vital role in
the nation’s economic development.
 The significance of MSME for the growth and
development of the country is as follows:
1. 1. Micro, Small, and Medium Enterprises contribute to 29% of
the Indian GDP, 45% of manufacturing output, and about 40%
of overall export, and it employs over 11 crore people, out of
which 55% of employment happens in urban enterprises which
make MSMEs the second largest employer after agriculture.
 2. The Ministry of Micro, Small, and Medium Enterprises has the
aim to increase MSME’s contribution to Indian GDP from 29% to
50% by 2025 to become a 5 trillion dollar economy.
 3. MSMEs are also helping India by making it a manufacturing
hub.
 Micro, Small, and Medium Enterprises also help uplift backward
people and tackle poverty by generating employment in rural
areas through industrial development.
 4. Khadi and Village Industries, with low capital investment,
employ a large number of women in rural India and helps in the
upliftment of rural and other backward areas.
 Importance of MSME in the Indian Economy
 5. MSMEs employ around 120 million persons, becoming
the MSME ministry targets to increase its contribution
towards GDP by up to 50% by 2025 as India moves ahead
to become a $5 trillion economy
 6. Contributing around 45% of overall Indian exports
 7. MSMEs promote all-inclusive growth by providing
employment opportunities, especially to people belonging
to weaker sections of the society in rural areas.
 8. MSMEs in tier-2 and tier-3 cities help in creating
opportunities for people to use banking services and
products, which can amount to the final inclusion of the
contribution of MSMEs for the economy.
 9. promote innovation by providing an opportunity to
budding entrepreneurs to help them build creative
products hey and thereby boost competition in business
and fuel the growth.
 District Industries Centre
 The District Industries Centre Program began in 1978 as a
government initiative to bring all assistance and programs to the
village and small-sized entities under one roof, in order to
effectively grow all small size businesses in the nation’s rural areas
and villages. The DIC Program's major focus is on the
establishment of these kinds of production plants, which will
provide a large number of jobs in remote and semi-urban regions.

 What is a District Industries Centre?

 A District industries Centre is a district-level entity that assists in
the establishment of small businesses in the rural areas of India.
Before establishing a DIC, a potential entrepreneur must visit
various organisations in order to obtain the necessary support and
facilities, and in many instances, most of them will be located
outside of their neighbourhood.
 So, there were a lot of delays, as well as the entrepreneur having
to incur many expenses which they can’t afford. Due to these
inconveniences, several agencies of the state authority have now
been assigned appropriately in charge to the DIC. Thus, an
entrepreneur may obtain all of the help they require in setting up
their business from a single institution, namely DIC.
 Role of District Industries Centres (DICs)
District Industry Centres exist only to promote and support the
businesses of their respective states. The Department of
Commerce and Industry in each state forms DICs. Alongside
DICs, Sub-District Industries Centres provide assistance. DIC's
responsibilities include:
1. DIC assists an entrepreneur in the DIC programs and
guarantees continuous support during the establishment of their
business.
2. DIC offers young business owners a single-window clearing
system that allows them to settle their business-related
problems quickly.
3. DIC encourages the expansion and development of many
manufacturing industries in rural and urban communities.
4. Under the Standup India Scheme, DIC provides financing for
MSMEs, start-ups and growing companies.
5. DIC provides self-employed individuals with machinery and
tools to help them with their businesses.
6. DIC also carries out a periodic assessment of their programs
and schemes to ensure proper implementation and operation.
Schemes Under the District Industries Centres (DICs)
 Below is the list of DIC schemes:
1. Prime Minister’s Employment Guarantee Program: This program started
its operations in 2008. This scheme's purpose is to assist educated but jobless
persons in rural and urban regions. It offers adequate job related skills.
2. DIC Loan Scheme: This scheme is accessible in cities and rural regions
under one lakh people and a capital investment less than ₹2 lakhs. It assists the
self-employed and smaller businesses in rural regions. Small size Industries
Board and Village Industries locate similar businesses and aid them in obtaining
an MSME loan.
3. Seed Money Scheme: This program aids self-employed individuals who are
part of self-employment initiatives or specialised wage jobs. The financing under
the scheme is ₹25 lakhs. For ventures up to ₹10 lakhs, the seed money
support will be 15 percent. A loan from a bank will cover 75 percent of the
project costs, with a maximum aid limitation of ₹3.75 lakhs for all SC/ST/OBC
and the total support will be 20 percent.
4. District Awards Scheme: This scheme, as the name implies, boosts the
morale of new and successful businesses by recognizing them with district-level
prizes. Every year, the District Advisory Committee picks such businesses and
honours them on Vishwakarma Jayanti.
5. Entrepreneurship Development Training Program: This program
prepares educated but jobless individuals to get self-employment or professional
jobs. The Entrepreneurship Introductory Program (Udyojakta Paricha Karyakram),
Entrepreneurship Development Training Program and the Technical Training
Program are the 3 training programs offered under this scheme.
Functions of District Industries Centres (DICs)
Survey and Investigation: The District Industries Centre surveys existing conventional
and emerging businesses, raw materials, and people’s capabilities who are employed in
the business. It anticipates the market price for numerous items used in a manufacturing
unit. It also develops techno-economic viability analysis in order to provide enterprises
with investment recommendations.
Training Courses: The DIC also offers training classes for smaller and modest business
owners. It functions as a go to contact point for start-ups and small industry service
institutions.
Machinery and Equipment: The District Industries Centre advises where one can
purchase machinery and tools and can also organise for the delivery of machinery on a
rental basis.
Raw Materials: The District Industries Centre gathers information about the resources
needed by various units and arranges bulk purchases of those products. As a result, small
business operations may obtain raw materials at inexpensive costs.
Arrangement for Loans: It establishes the required agreements with Leading Banking
and other Financial Firms to give small businesses financial support. It also evaluates
applications and keeps track of the movement of industrial loans in its province.
Marketing: Market studies and market development opportunities are carried out by
the District Industries Centre. It also arranges marketing channels related to small
businesses, maintains communications with government contracted organisations, and
keeps enterprises up to date on market data.
Khadi and Village Industries: District Industries Centres concentrate on the
improvement of Khadi and village businesses, as well as other small producers. It also
maintains a strong working relationship with the State Khadi Authority and organises
training courses for rural craftsmen.

[Link]
Functions of District Industries Centres (DICs)
Survey and Investigation: The District Industries Centre surveys existing conventional
and emerging businesses, raw materials, and people’s capabilities who are employed in
the business. It anticipates the market price for numerous items used in a manufacturing
unit. It also develops techno-economic viability analysis in order to provide enterprises
with investment recommendations.
Training Courses: The DIC also offers training classes for smaller and modest business
owners. It functions as a go to contact point for start-ups and small industry service
institutions.
Machinery and Equipment: The District Industries Centre advises where one can
purchase machinery and tools and can also organise for the delivery of machinery on a
rental basis.
Raw Materials: The District Industries Centre gathers information about the resources
needed by various units and arranges bulk purchases of those products. As a result, small
business operations may obtain raw materials at inexpensive costs.
Arrangement for Loans: It establishes the required agreements with Leading Banking
and other Financial Firms to give small businesses financial support. It also evaluates
applications and keeps track of the movement of industrial loans in its province.
Marketing: Market studies and market development opportunities are carried out by
the District Industries Centre. It also arranges marketing channels related to small
businesses, maintains communications with government contracted organisations, and
keeps enterprises up to date on market data.
Khadi and Village Industries: District Industries Centres concentrate on the
improvement of Khadi and village businesses, as well as other small producers. It also
maintains a strong working relationship with the State Khadi Authority and organises
training courses for rural craftsmen.

[Link]
 Small Industries Service Institutes (SISI)
The Small Industries Service Institutes (SISIs) are set-up in capital of all the
28 states. These Institutes through their wide network provide consultancy
and training service to small and prospective entrepreneurs. SISIs function
under the Ministry of SSI, Government of India and provide services such as
preparation of project reports, conducting training programs in different
areas, extending technical assistance, and offering guidance on industrial
policy of the government. These are pioneer organization to develop small
scale industries through counselling, consultancy, and training. SISIs assist
the industries in marketing the products and acquiring quality standards.
They also provide various types of extension and assistance services in
setting up of units, promoting and developing product and services by the
small scale industries
Functions of SISI:
1. To assist new entrepreneurs in preparing project proposals,
obtaining financial assistance, and exploring possibilities of
expansion and diversification.
2. To assist existing/ prospective entrepreneurs through technical
and managerial counseling in selecting appropriate machinery and
equipment, adoption of recognized standards of testing, quality
performance etc.
3. To conduct economic and technical surveys; and prepare techno-
economic feasible reports for selected areas and industries.
 Small Industries Service Institutes (SISI)
4. To give exposure to Small Scale Industries (SSIs) on market survey,
product identification and selection, technologies involved, management
of small enterprises on matters relating to financial, marketing,
packaging, and exports.
5. To conduct EDPs for several target groups, e.g., educated unemployed
youth, ex-service personnel, new entrepreneurs etc. on issues related
with establishment of new enterprise, material handling, new
technologies, management technique, facilities/ assistance available
from State/ Central govt. agencies, banks, financial institutions and NSIC,
energy conservation, pollution control, quality improvement, etc.
6. To advise the Central and State governments on policy matters
relating to small industry development,
7. To assist in testing of raw materials and products of Small-Scale
Industries (SSIs), their inspection and quality control,
8. To provide market information to the SISIs,
9. To recommend SSIs for financial assistance from banks/ financial
institutions,
10. To enlist entrepreneurs for participation in Govt. stores purchase
program,
11. To identify the potential for ancillary development through sub-
contract exchanges
Entrepreneurship Development Institute of India (EDII)

Entrepreneurship Development Institute of India (EDII), an

autonomous and not-for-prot institute, set up in 1983, is an
acknowledged National Resource Institute for Entrepreneurship
Education, Research, Training & Institution Building. It is promoted
by IDBI Bank Ltd., IFCI Ltd., ICICI Bank Ltd. and the State Bank of
India (SBI). The Government of Gujarat pledged twenty-three acres
of land on which stands the sprawling EDII campus. EDII has been
recognised as Centre of Excellence by Ministry of Skill Development
and Entrepreneurship, Govt. of India.
It takes up training, research and consultancy activities in the field
of small industry and entrepreneurship. It was specially developed
to address the needs of north eastern hills states with a view to
market and develop traditional and handicraft industry.
Entrepreneurship Development Institute of India (EDII)

Entrepreneurship Development Institute of India (EDII), an autonomous

and not-for-prot institute, set up in 1983, is an acknowledged National
Resource Institute for Entrepreneurship Education, Research, Training &
Institution Building. It is promoted by IDBI Bank Ltd., IFCI Ltd., ICICI Bank
Ltd. and the State Bank of India (SBI). The Government of Gujarat pledged
twenty-three acres of land on which stands the sprawling EDII campus.
EDII has been recognised as Centre of Excellence by Ministry of Skill
Development and Entrepreneurship, Govt. of India.
It takes up training, research and consultancy activities in the field of
small industry and entrepreneurship. It was specially developed to
address the needs of north eastern hills states with a view to market and
develop traditional and handicraft industry.
Besides the above there are several other important institutions which
conduct entrepreneurship development programmes and provide
assistance for entrepreneurial development at the national and state level
and these are:
 At the national level:
 i. Small Industries Development Corporation
 ii. Industrial Development Bank of India (IDBI)
 iii. Industrial Finance Corporation of India (IFCI)
 iv. Industrial Credit and Investment Corporation of India (ICICI)
 v. Small Industries Development Bank of India (SIDBI)
Entrepreneurship Development Institute of India (EDII)

 vi. Khadi and Village Industries Commission (KVIC)

 vii. National Bank of Agriculture and Rural Development
(NABARD).
 At the state level:
 i. Small Industries Service Institute (SISIs)
 ii. District Industries Centres (DICs)
 iii. State Finance Corporations (SFC)
 iv. State Industries Promotion Corporation (SIPC)
 v. State Small Industries Corporation (SSIC)
Small Industries Development Bank of India (SIDBI)

The Small Industries Development Bank of India (SIDBI),

established on April 2, 1990, by an Act of the Indian
Parliament, serves as the primary financial institution for the
promotion, financing, and development of the Micro, Small, and
Medium Enterprise (MSME) sector, as well as for the
coordination of functions of institutions engaged in similar activities.
Sivasubramanian Ramann is the current (January
2022) Chairman & Managing Director of SIDBI
SIDBI is the country's primary institution for promoting, financing,
and developing industries in the micro and small-scale sectors.
It coordinates the activities of other institutions involved in similar
activities.
SIDBI assists MSMEs in obtaining the funds they need to expand,
market, develop, and commercialise their innovative technologies
and products.
The bank offers several schemes as well as financial services and
products to meet the needs of individuals in various businesses.
Small Industries Development Bank of India (SIDBI)
Historical Background
The Industrial Development Bank of India has served as the apex bank in the field of
financing all industries, including small-scale industries, since its inception.
However, as the financing activities of small-scale industries expanded significantly, the
need for a separate apex bank for small-scale industries became apparent.
As a result, the Small Industries Development Bank of India (SIDBI) was established, taking
over IDBI's financing activities for small-scale industries.
The SIDBI (Small Industries Development Bank of India) was established by a special Act of
Parliament in 1988 and went into effect on April 2, 1990.
The Shares of SIDBI are held by the Government of India and twenty-two other institutions /
public sector banks / insurance companies owned or controlled by the Central Government.
Role of SIDBI

Role of SIDBI
Indirect lending – It is done through Banks, SFBs, NBFCs, MFIs, and New Age Fintechs and
is based on a multiplier effect/a wider reach in financing the MSME sector.
Direct lending – It aims to close existing credit gaps in the MSME sector through
demonstrative and innovative lending products that can be scaled up by the credit delivery
ecosystem.
Fund of Funds – It promotes entrepreneurship by providing funding to emerging startups
through the Fund of Funds channel.
Promotion and Development - encouraging entrepreneurship and assisting aspiring
entrepreneurs in the holistic development of the MSME sector through credit-plus initiatives.
Acts as a facilitator through roles such as Nodal Agency for the Government's MSME-
oriented Schemes.
Small Industries Development Bank of India (SIDBI)

SIDBI – Functions
Small Industries Development Bank of India refinances loans made by PLIs
to small-scale industrial units and also provides them with resources.
1. It offers bill discounts and rediscounts.
2. It also aids in the expansion of marketing channels for SSI (Small
Scale Industries) sector products in both domestic and international
markets.
3. It provides factoring, leasing, and other services to small-scale industrial
concerns.
4. It encourages employment-oriented industries, particularly in semi-
urban areas, in order to create job opportunities and prevent people from
relocating to cities.
5. It also initiates steps for modernization and technological
advancement of existing units.
6. In collaboration with commercial banks, it also enables the timely flow of
credit for working capital as well as term loans to Small Scale Industries.
It also works with state-level venture funds to promote them.
Small Industries Development Bank of India (SIDBI)
SIDBI – Benefits
Custom made - SIDBI policies loans based on the needs of your business. If your
requirement does not fall into the ordinary and usual category, the Small Industries
Development Bank of India can help you get the funding you need.
Dedicated Size - Credit and loans are tailored to the size of the company. As a result,
MSMEs may be able to obtain various types of loans that are tailored to their specific
business needs.
Attractive Interest Rates - It has agreements with several banks and financial
institutions around the world and may be able to offer low interest rates. The SIDBI has
collaborations with the World Bank and the Japan International Cooperation Agency.
Assistance - It provides more than just a loan; it also provides assistance and much-
needed advice. Its relationship managers assist entrepreneurs in making sound
decisions and provide assistance throughout the loan process.
Security Fee – Without providing security, businesspeople could receive up to Rs.100
lakhs.
Capital Growth - Entrepreneurs could acquire adequate capital for meeting their
growth requirements without tempering their ownership of a company.
Equity and Venture Funding - It has a wholly owned subsidiary, SIDBI Venture
Capital Limited, that provides growth capital as equity through venture capital funds
that focus on MSMEs.
Subsidies - SIDBI offers a variety of schemes with low interest rates and flexible
terms. SIDBI has in-depth knowledge and a broader understanding of available
schemes and loans, which can assist enterprises in making the best decision for their
businesses.
Transparency - Its processes and rate structure are open to the public. There are no
additional fees.
 Self-help Groups (SHGs)
A self-help group is a financial intermediary committee usually composed of 10 to 25 local women
between the ages of 18 and 40. Most self-help groups are in India, though they can be found in
other countries, especially in South Asia and Southeast Asia.
Self-help Groups (SHGs) are informal associations of people who come together to find
ways to improve their living conditions. They are generally self-governed and peer-
controlled.
People of similar economic and social backgrounds associate generally with the help of
any NGO or government agency and try to resolve their issues, and improve their living
conditions.

The emergence of Self Help Groups – Origin and Development in India

1. The origin of SHGs in India can be traced back to the establishment of the Self-
Employed Women’s Association (SEWA) in 1972.
2. Even before, there were small efforts at self-organising. For example, in 1954, the
Textile Labour Association (TLA) of Ahmedabad formed its women’s wing in order to
train the women belonging to families of mill workers in skills such as sewing, knitting,
etc.
3. Bhatt, who formed SEWA, organised poor and self-employed women workers such as
weavers, potters, hawkers, and others in the unorganised sector, with the objective of
enhancing their incomes.
4. NABARD, in 1992, formed the SHG Bank Linkage Project, which is today the world’s
largest microfinance project.
5. From 1993 onwards, NABARD, along with the Reserve Bank of India, allowed SHGs to
open savings bank accounts in banks.
6. The Swarn Jayanti Gram Swarozgar Yojana was introduced in 1999 by GOI with the
intention of promoting self-employment in rural areas through formation and skilling of
such groups. This evolved into the National Rural Livelihoods Mission (NRLM) in 2011.
 Self-help Groups (SHGs)
Evolution Stages of Self Help Groups in India
Every Self-help group usually goes through 3 stages of evolution
stated below:
* Formation of group
* Funding or Formation of Capital
* Development of required skills to boost income generation for the
group

Many self-help groups are formed with the assistance of Self- help to
promote agencies.

The various types of Self-help promoting agencies are stated below:

* Non-governmental Agencies
* Government
* Poverty Management Programmes
* State & Commercial Banks
* Microfinance Institutions
* SHG Federations
* SHG Leaders/Entrepreneurs
 Self-help Groups (SHGs)
Functions of Self Help Groups
* They try to build the functional capacity of poor and marginalised sections of
society in the domain of employment and income-generating activities.
* They offer collateral-free loans to sections of people that generally find it hard
to get loans from banks.
* They also resolve conflicts via mutual discussions and collective leadership.
* They are an important source of microfinance services to the poor.
* They act as a go-through for formal banking services to reach the poor,
especially in rural areas.
*They also encourage the habit of saving among the poor.

Problems of Self Help Groups (SHGs)

* Need for extending this idea into the poorest families, which is not necessarily
the case at present.
* Patriarchal mindset prevailing which prevents many women from coming
forward.
* There are about 1.2 lakh branches of banks in rural areas as opposed to 6 lakh
villages in the country. There is a need to expand banking amenities further.
* Sustainability and the quality of operations of such groups have been
questionable.
* There is a need for monitoring cells to be established for SHGs across the
country.
The SHGs work on mutual trust. The deposits are not safe or secure.
 Self-help Groups (SHGs)
Need for Self Help Groups
1. One of the chief reasons for rural poverty is the lack of access or
limited access to credit and financial services.
2. The Rangarajan Committee Report highlighted four major reasons for
lack of financial inclusion in India. They are:
 * Inability to give collateral security
 * Weak credit absorption capacity
 * The insufficient reach of institutions
 * Weak community network
3. It is being recognised that one of the most important elements of
credit linkage in rural areas is the prevalence of sound community
networks in Indian villages.
4. SHGs play a vital role in giving credit access to the poor and this is
extremely crucial in poverty alleviation.
5. They also play a great role in empowering women because SHGs
help women from economically weaker sections build social capital.
6. Financial independence through self-employment opportunities also
helps improve other development factors such as literacy levels,
improved healthcare and better family planning.

[Link]/free-ias-prep/self-help-group/
 Micro Finance in India (MFI)

History of Microfinance
 The history of microfinance can be traced back to the
middle of the 1800s. During the 1800s, the benefits of
small credits to entrepreneurs and farmers was written by
Lysander Spooner, the theorist, as a way to get people out
of poverty. Later, the first cooperative lending bank was
founded independently by Friedrich Wilhelm Raiffeisen to
support the farmers in rural Germany.
 The term “microfinancing” was first used in the 1970s
during the development of Grameen Bank of Bangladesh,
which was founded by the microfinance pioneer,
Muhammad Yunus. In 1976, Yunus institutionalized the
approaches of microfinance, along with the foundation of
Grameen Bank in Bangladesh. Since, in the developing
countries, a large number of people still depends largely
on subsistence farming or basic food trade for their
livelihood, therefore, smallholder agriculture in these
developing countries has been supported by the
significant resources.
 Micro Finance in India (MFI)

History of Microfinance
 The history of microfinance can be traced back to the middle of the
1800s. During the 1800s, the benefits of small credits to entrepreneurs
and farmers was written by Lysander Spooner, the theorist, as a way to
get people out of poverty. Later, the first cooperative lending bank was
founded independently by Friedrich Wilhelm Raiffeisen to support the
farmers in rural Germany.
 The term “microfinancing” was first used in the 1970s during the
development of Grameen Bank of Bangladesh, which was founded by the
microfinance pioneer, Muhammad Yunus. In 1976, Yunus institutionalized
the approaches of microfinance, along with the foundation of Grameen
Bank in Bangladesh. Since, in the developing countries, a large number
of people still depends largely on subsistence farming or basic food trade
for their livelihood, therefore, smallholder agriculture in these developing
countries has been supported by the significant resources.
 Microfinance has its origins in the mid-nineteenth century.
 The concept of providing minor credits to entrepreneurs and farmers to
alleviate poverty was proposed by Lysander Spooner in the 1800s.
 Friedrich Wilhelm Raiffeisen established the first cooperative lending
bank to assist farmers in rural Germany.
 The term "microfinancing" emerged during the growth of Bangladesh's
Grameen Bank in the 1970s, founded by microfinance pioneer
Muhammad Yunus.
 Grameen Bank formalized microfinance practices after its establishment
in 1976.
 Micro Finance in India (MFI)

Objectives of Microfinance
 Transform into a financial institution that
supports the development of sustainable
communities.
 Assist in the supply of resources that benefit the

poorest members of society. In this aspect,

women are given special attention because they
have successfully established income-
generating businesses.
 Examine the choices available to aid in the

faster eradication of poverty.

 Encourage poor people to start their businesses.

 Empowering rural people by teaching them

basic skills so that they can start their

enterprises and earn money.
 Micro Finance in India (MFI)

Micro Finance Associated Challenges

 Inadequate Data: While overall loan accounts have been increasing
the actual impact of these loans on the poverty-level of clients is
sketchy as data on the relative poverty-level improvement of MFI
clients is fragmented.
 Impact of COVID-19: It has impacted the MFI sector, with collections
having taken an initial hit and disbursals yet to observe any
meaningful thrust.
 Social Objective Overlooked: In their quest for growth and
profitability, the social objective of MFIs—to bring in improvement
in the lives of the marginalized sections of the society—seems to
have been gradually eroding.
 Loans for Conspicuous Consumption: The proportion of loans
utilized for non-income generating purposes could be much higher
than what is stipulated by RBI. These loans are short-tenured and
given the economic profile of the customers, it is likely that they
soon find themselves in the vicious debt trap of having to take
another loan to pay off the first.

 Micro Finance in India (MFI) - Know Its Objectives & Structure ([Link])
 Micro Finance - Definition, Features & Significance. Read more on Microfinance for UPSC exam.
([Link]
 Micro Finance in India (MFI)

Benefits of Microfinance
 As per the World Bank estimates, more than 500
million people have improved their economic
conditions via microfinance-related entities.
 Also, the International Finance Corporation (IFC)
estimated that, as of 2014, over 130 million people
were directly benefited from the microfinance-
related operations.
 But, approximately only 20% of the three billion
people who fall under the category of the world’s
poor can avail these microfinance operations.
 IFC also helped in establishing or improving the
credit reporting bureaus in 30 developing nations.
 Microfinance is also a source of capital for the
people. It also empowers women in particular,
which may lead to more stability and prosperity for
families.