role of sidbi in financing small-scale...

CHAPTER VII

ROLE OF SIDBI IN FINANCING

SMALL-SCALE INDUSTRIES

Finance is aptly described as the lifeblood of industry. No business

enterprises can reach its full potential of growth and success without adequate finance.

However with the low rate of capital formation in the country, chronic shortage of

finance is experienced in the industrial sector. The gravity of the problem is more acute

in the small-scale industries. This has multiplied several folds after liberalisation and

globalisation. Shortage of finance has become a major handicap in the healthy g~owth

and expansion of this sector. Compared to international rate, the rate of interest in India

is very high. In this scenario the institutional finance assumes considerable importance.

Due to the gap between the need and supply of finance to small industrial units, SIDBI is

endowed with the responsibility of making available adequate finance to the small-scale

units at reasonable cost. In this chapter an attempt is made to assess the role of SIDBI in

financing small-scale industries.

This chapter serve:; the fourth and fifth objectives of the study. On the basis

of the objectives four hypotheses are formulated. The analysis is divided into two parts.

In part A the nature and form of assistance disbursed are analysed. In part B the impact

made by SIDBI in financing the SSI units is studied. In part A the hypotheses A, B and C

are tested. In part B the hypothesis D is tested. The hypotheses are:

A. SIDBI disburses more long-term loan than other agencies.

For testing the hypothesis the following variables are analysed:

1. Quantity of loan disburset L

2. Type of loan disbursed

3. Purpose of loan

B. The cost and terms oiSIDBI loans are more attractive compared to loans from

other sources.

Using the following variables this hypothesis is tested:

1. Cost of borrowing

2. Rate of interest

3. Loan instalments

4. Gestation period of the loan

5. Opinion about gestation 3eriod

6. Sufficiency of long term loan

7. Sufficiency of short-term loan.

C. Obtaining loans from SIDBI is less difficult compared to other sources.

Following variables are used for testing the hypothesis:

1. Disparity in the amount applied and sanctioned

2. Time lag between applict~tion and sanction

3. Co-operation of the offic,als

4. Difficulty experienced in obtaining the loan.

D. SIDBI has created more impact on the development of SSI than other agencies

Variables analysed for testing the hypothesis are:

1. Average profit earned

2. Mean value added

3. Mean capacity utilised

4. Linkages created.

A. Nature and form of assistance disbursed

1. Quantity of loan disbursetl

The average amount of loan disbursed is depicted in Table 7.1

Table 7.1.

Districtwise Classification of the Average Amount of Loan Disbursed

(Amount in Rupees)

1 Total I I

10201720 1 4100200

Name of District SIDBI aided units

Thimvananthapurarn 2455040

Ernakulam 2471200

2873240

L I I I Source: personal inwstigation

Other agency

aided units

1234400

1048200

948000

It is clear from table that SIDBI has disbursed more amount of loans than the

other agencies. While SIDBI has disbursed an average amount of Rs: 10201720, other

agencies have disbursed Rs: 4100200 only. The loan operations of SIDBI and other

agencies are different in all districts. The organisationwise analysis (Table 7.1A) reveals

that units in the form of companies have received more assistance from SIDBI. In the

case of sole proprietorship more amount is provided by other agencies. In the sizewise

analysis in all size groups except the first categoxy, the average assistance provided by

SIDBI is more. In the first category the average amount of loan provided by other agency

is higher.

Organisationwise and Investment Levelwise Classification of the

Average Amount of Loan Disbursed

(Amount in rupees)

( Classification I SIDBI aided units I Other agency aided units 1

A. Organisationwise: l-----+---li----i Proprietorship 89415

Partnership 1619848

Company 3908617

5617880

I I I Source: Personal investigation

764634

1077647

1381000

3223281

B. Investment levelwise:

Up to Rs: 10 Lakhs 342000

Rs: 10 to 40 Lakhs 909953

Rs: 40 to 70 Lakhs 3782650

Above Rs: 70 Lakhs 5250000

10284603

From the analysis it is evident that more amount of loan is disbursed by

784523

799838

1322727

3650000

6557088

SIDBI. It will be clear h m the Figure 7.1

I

Figure 7.1

Average amount of loan disbursed I I

EKM

Type of Loan Disbursed

The type of loan disbursed by the two sources is shown in Table 7.2. While

S D B I specialises in term loans, both types of loans prevalent in the second group with

term loan dominating. Out of the sampled units 100 percent of the SIDBI aided units in

all the four districts are availed only term loans. Of the other agency aided units more

than 60 percent units in all the districts availed long-term loans. Districtwise analysis

reveals significant difference in all the districts with the same overall trend reflected

everywhere.

Table 7.2

Districtwise Classification of the Type of Loan Disbursed

( Name of district 1 SIDBI aided units 1 Other agency aided units I

Source: personal investigation

The Organisationvfise and Investment levelwise analysis (Table 7.2A)

reveals that SIDBI granted only long term loans. While different forms and sizes of

units in other group are granted both type of loans.

Table 7.2A

Purpose of Loan


'I'ype of Loan Disbursed

Loans are granted to borrowers for acquiring fixed assets like purchase of

Classification

A. Organisationwise:

Proprietorship

Partnership

Company

Total

B. Investment

levelwise:

uptoRs:1oLakhs

Rs: lOto40Lakhs

Rs: 40 to 70 Lakhs

Above Rs: 70 Lakhs

Total

Source: Personal

land, construction of factory builtling, purchase of plant and machinery, equipment etc.

Sho

-

-

investigation

Loans are also given for workink: capital needs such as to meet cost of raw material,

transportation expenses, maintenmce of inventories, bill receivables, and book debts.

Some times composite l o q are issued to meet both the needs of fixed capital and

working capital. Districtwise classification of the purpose of loan is depicted in Table 7.3

Table 7.3

Districtwise Classification of the Purpose of the Loan

Other agency aided units

Thiruvanathapwam 25

Ernakulam

Idukki

Kozhikode

Total


Table 7.3 shows the purpose for which the loan is sanctioned by the agency.

Significant difference is observed between the groups in this matter. All the SIDBI aided

units are utilising the loan amount for the purpose of acquiring fixed assets. Where as in

the other group the loan have been given for financing the working capital fixed assets

and both requirements. Districtwise analysis reveals significant difference in all the

districts with the same overall trend reflected everywhere. All the forms (Table7.3A) of

business units aided by SIDBI tire found to differ from the corresponding categories in

the other group. All of the SIT)BI aided units have been given loans to acquire fixed

assets. Investment levelwise analysis also reveals that all of the SIDBI aided units have

been given loans to acquire fixcd assets. While the counterparts in the other group have

been given dual-purpose loan So difference is observed among the different size

categories.

Table 7.3A .

Organisationwise and Investment Levelwise

Classification of the Purpose of the Loan

Source: Personal investigation

In the above analysis, all the four variables studied show significant

Other agency aided units Classification

difference between the groups. It is seen that SIDBI has disbursed more amount of loans

SIDBI aided units

and all the loans disbursed are term loans and these have been given primarily for

purchasing fixed assets. On the clther hand other agencies have disbursed both short term

and long-term loans. The bulk of the loans disbursed are found to be long-term loans.

This proves that SIDBI is providing more long-term loans. Hence. the fifth hmothesis

that SIDBI disburses more lone-term loan than other financing aeencies can be acceoted.

Cost and Terms of the Loan

1. Cost of Borrowing

A prospective borrower has to bear certain costs for obtaining the loan in

addition to payment of interest. Such costs are cost of application form, processing fee,

travelling expenses. These costs increase the financial burden of the borrower. Table 7.4

gives the average cost of borrowing incurred by two groups.

Table 7.4

Districtwise Classification of the Average Amount Spent for Obtaining Loan

(Amount in rupees)

Other agency aided units k8.value

4400.00 5.80*

I I I

Kozhikode 12880.00 5500.00 1 3.11* 1 I I

Average 12+d918.00 L 1 I I I

*Significant at 5 percent level


SIDBI aided units a e found to have spent on an average Rs: 12810 for

obtaining loans while other agemy aided units have spent Rs: 4918. This difference is

found to be statistically significant. From this it may be inferred that the cost of obtaining

loan from SIDBI is higher. Insistsnce on a large number of documents and certificates,

multitude of trips the borrower has to make for getting the loan sanctioned have

contributed to the high cost of borrowing from SIDBI. Districtwise analysis reveals

significant difference in all the districts. The cost of borrowing associated with SIDBI

loans is found to be higher in all districts. Organisaiionwise analysis (Table 7.4A) shows

significant difference in all orgiinisation with SIDBI aided units reporting higher cost of

borrowing. Investment levelwise analysis discloses significant difference in the second

and third category with SIDBI aided units again reporting higher cost.

Table 7.4A


Average Amount Spent for Obtaining Loan


(Amount in rupees)

2. Rate of Interest

Classification


Proprietorship

Partnership

Company

Total


Up to Rs: 10 Lakhs

Rs: 10 to 40 Lakhs

Rs: 40 to 70 Lakhs

Above Rs: 70 Lakhs

Total


Table 7.6 shows the bcrrowers opinion about the rate of interest

SIDBI aided units

5775

15439

13957

35171

3545

6465

23900

18692

52602

Other agency

aided units

3385

5588

6520

15493

2857

4629

5982

13167

26635

d.f

59

65

70

30

103

29

30

t.value

2.91*

1.63

3.61*

1.16

2.63*

2.6*

1.14

-

Table 7.5

Districtwise Classification of the Borrower's Opinion

About the Rate of Interest



It is observed from the table that majority (68 percent) of the SIDBI aided

units opined that the rate of interest is high. In the case of other agency aided units 42

percent opined that the rate of nterest is reasonable. But the calculated value of Chi

Square was found to be significmt only in Thiruvananthapuram. In Thiruvananthapuram

there is difference between the SIDBI aided units and other agency aided units with

regard to the opinion about inkrest rate. In Idukki and Kozhikode more number of

SIDBI aided units reported that the rate of interest is high but the difference is not

statistically significant. However majority of the SIDBI aided units reported that the rate

of interest is high. A good numher of other agency assisted units feel that the interest

charged is not high. The Organisationwise analysis (Table7.5A) shows significant

difference in the case of partnership firms and companies. Large number of SIDBI aided

partnership firms and companies opined that the interest rate is high. Sizewise analysis

discioses significant difference in the second and fourth size category. A fair number of

SIDBI aided units feel that the interest rate is high.

Table 7.5A

Organisationwise and Investment Levelwise Classification of Borrower's

Opinion About the rate of Interest.


Loan Instalmeats

The number of instalments in which the loan amount is released is depicted in Table 7.6

Table 7.6

Districtwise Classification of the Loan Instalments

Name of I SIDBI aided units 1 Other agency aided units ( d.f 1 x2

Ab.3- Above 3 instalments

* Significant at 5 percent level


SIDBI is found to have disbursed the loans in two or more instalments, in

majority (67 percent) of cases. While in the other group, 50 percent of the units the loans

are released in one or two instalnents. Significant difference is also seen between the

groups in all the districts except Emakulam. The same overall pattern is reflected in

Idukki, and Kozhikode that SIDB!: dividing the amowlt into more number of instalments

compared to the other group. Em.kulam presents a different picture. In Emakulam, the

other agency-aided group is also seen to have released the amount in more instalments.

Organisationwise analysis (Table 7.6A) shows significant difference with the same

overall pattern evident in alI the categories. Investment levelwise analysis also reveals

significant difference in all size grc ups.

Table 7.6A

Organisationwise and Investment Levelwise Classification

of the Loan Instalments

A.3- Above 3 * Significant at 5 percent level


4. Gestation Period of the Lo:~n

Loans are repayable in periodical instalments usually after a specified period

known as gestation period. This is because of the fact that the loan takes some time to

start generating income. In small-scale industries where financial resources are limited,

borrowers prefer a long gestation period. The gestation period of the loan disbursed by

the two sources is shown in Table 7.7

Table 7.7

Districtwise Classification of the Gestation Period of the

Loan Disbursed (In months)


Significant differencc is seen between the groups in the gestation period of

the loans. Majority (97 percent) of the SIDBI aided units are found to enjoy more than

six months gestation period and a good number are enjoying more than a year time. In

the case of other agency aided wits majority of the units (80 percent) are found to have

less than 1 year gestation period .'with a big chunk of units (41 percent) given less than six

months period. The same trend i:; evident in all the districts. In organisationwise analysis

(Table7.7A) proprietary concerns and partnership firms and companies in two groups are

found to differ significantly. While most of the units in the SIDBI aided group have

above one-year gestation period. Majority of units in the other group are found to enjoy

up to six months gestation period.

Investment levelwise analysis shows significant difference in all the

categories. Here also same patteln is evident. SIDBI aided units in all the categories are

enjoying a longer duration.

Table 7.7A

Organisationwise and Intestment Levelwise Classification of Gestation

Pericrd of the Loan Disbursed

Classification I SIDBI aided units I Other agency aided units

Opinion About Gestation Period

Table 7.8 shows the borrowers opinion about gestation period of loan

disbursed.

Table 7.8

Districtwise Classification of Borrower's Opinion About

Gestation Period of the Loan Disbursed

Name of district I SIDBI aided units I Other agency aided units I d.f 1 ~2

Kozhikode 20 25 20

Total 8 1 19 100 69 31 100


I i-----r.. . .+ .. .

Table reveals that majority of the beneficiaries in both the group are satisfied

with the gestation period of the loans. Districtwise analysis shows no significant

difference between the groups in any of the districts. Most of the beneficiaries in either

group expressed their satisfaction about the gestation period. Constitution wise analysis

(Table 7.8A) shows significant difference only in the case of partnership firms. While 90

percent of the SIDBI aided part~lership units are satisfied with the gestation period,

majority of the other agency aided partnership firms are dissatisfied with the gestation

period. Investment levelwise analysis reveals significant difference in the second

category only. In this category a significantly higher number of other agency-aided units

are found to be dissatisfied with th~: gestation period.

Total

25

25

1

1

.764

2.914

! Satisfied

Emakulam 22 3

Total

25

25

i1ot Satisfied

14

17

satisfied

11

8

Table 7.8 A

Organisationwise and Investment Levelwise Classification of Borrower's Opinion

About Gestation Period of the Loan Disbursed.


Sufficiency of the Loan Amount

Long-term Loan

Table 7.9 depicts the bo-rower's opinion about the sufficiency of the long-

term L,oan.

Table 7.9

Districtwise Classification of the Borrower's Opinion About the

Sufficiency of the Long-term Loan

A.90- Above 90%


Table 7.9 indicates that 45 percent of the SIDBI aided units opined that the

long-term loan supplied by SIDBI is to meet only 60-80 percent of their requirements. 11

percent of units reported that they got only 20-40 percent of their requirements. For

meeting the remaining portion they aepend on other sources. In the case of other agency-

aided units majority (58 percent) opined that, they received above 90 percent of long-

term loan requirements. 28 percent units reported that, they got 60-80 percent of their

requirements. However significant difference is observed between SIDBI aided units and

other agency aided units in this regard. Constitutionwise and investment levelwise

anaGsis (Table7.9A) also reveal the s m e overall trend.

Table 7.9 A

Organisationwise and Investment Levelwise Classification of Borrower's Opinion

About Sufficiency of Long-term Loan

Classification SIDBI aided units ( Other agency aided units

Short-term Loan

Table 7.10 shows the tiistrictwise classification of the borrowers opinion '

about sufficiency of short-term loan.

Table 7.10

Districtwise Classification of the Borrowers Opinion About the Sufficiency


Table 7.10 shows the sufficiency of short-term loan. The SIDBI aided units

reported that, the short-term loans are not granted to them. While majority of the other

1 units are received above 90 percent of their short-term loan requirements.

Significant difference is seen tetween the groups in all districts. Organisationwise

analysis (Table 7.10A) shows sig~iificant difference with the same overall pattern evident

in all the categories. Sizewise analysis also reveals significant difference.

Table 7.10 A

The cost and terns of the loans have been analysed using seven variables. As

many as four variables record sign~ficant difference between the groups. Of these SIDBI

loans are found to be not attractive in respect of four variables namely cost for obtaining

loan, rate of interest, sufficiency cd long-term loan and sufficiency of short-term loan.

The gestation period of the loan dtsbursed by the SIDBI is found to be attractive. This

leads to the conclusion that other agency loans are more attractive. Hence. the sixth .

hwothesis that the cost and -of SIDBI loans are more attractive com~ared to . loans from other sources stands d i s p m

Source of Finance to Meet Insufficiency

Table 7.1 1 shows the districtwise classification of the source from which the

borrowers meet their insufficiency. The alternatives available under the variables are

assigned weights using a five-point scale. The main source identified by the respondent

unit is assigned five points, the nexi important source four points and so on. The scores

assigned to each alternative are then aggregated. The alternative records the highest score

is ranked first, the next highest score is ranked second and so on.

Table 7.11

Districtwise Classification of Ranking of Source from which the

M.L- Money lenders, C.B- Commercial banks

Borrowers make Good the Insufficiency.

0.S- Other sources

Name of

district

Thiruvanantha

puram

Ernakulam

Idukki

Kozhikode

Total

Figures in parentheses are the score c'btained


0W.S- Own savings, F&R- Friends imd relatives

SIDBI aided units

The major sources from which the units meet their insufficiency are

0W.S

5 (38)

5 (32)

5 (35)

5 (49)

5

(154)

presented in Table 7.1 1. Borrowing from friends and relatives with a score of 354 is

found to be the major source for the SIDBI aided units. Commercial banks rate second

F&R

l(77)

l(84)

l(99)

l(94)

1

(354)

the score being 308. Tile other sources in the order of importance are other sources

M.

4(4

4(5

3(6

4(5

(21

(score 244) Moneylenders (score 21'') and own savings (score 154) In the case of units

financed by other agencies, Friends ilnd relatives with a score of 235 is found to be the

major source of finance. Commercial banks rate second (score 180). The other sources

with a rank of 163 are the next main source. Moneylenders rate fourth and own savings

rank last with a score of 93. In the Organisation and Investment levelwise analysis,

(Table7.11A) the same overall pattern is reflected in different form of business units and

different size categories.

Table 7.11A

Organisationwise and Investmeat Levelwise Classification of the Source from which

Borrowers Make Good the Insufficiency

levelwise:

Figures in the parentheses are the score obtained


Other agency aided units Classification SlDBI aided units

Ease of Obtaining Loan

1. Disparity in the Amount Applied and Sanctioned

The projected returns of a project are an important factor determining the

size of loans. If the financing organisation feels that the amount applied does not

commensurate with the expected 1,etums the amount of loan is slashed. In the case of

small-scale industries where, scarcity of fund is acute, such reduction will put into more

problems. This disparity in the amount of loans demanded and the amount sanctioned is

presented in Table 7.12

Table 7.12

Ditrictwise Classificatio~~ of the Average Amount of Disparity in the

Amount Applied for and Sanctioned.

The magnitude of disparity for SIDBI aided units on an average comes to Rs:

(Amount in Rupees)

1335400 while the corresponding figure for the other agency-aided group is 1065000.

Name of District

Thiruvananthapuram

Emakulam

Idukki

Kozhikode

Total

However this difference in average amount of disparity between the groups is not

significant. The insistence of 100 percent security cover for the advance is the principle

Sourw. Personal investigation.

SDBI aided units

160400

380000

522000

273000

1: 35400

reason for the disparity. Districtwise analysis shows no significant difference between


440000

125000

300000

200000

1065000

the groups in four districts. Organisationwise analysis (Table 7.12A) shows significant

difference between the groups in the case of proprietorship concern and companies.

Partnership firms do not show any significant difference between the groups. Sizewise

analysis discloses no significant difference between the groups with regard to disparity in

the amount applied and sanctioned.

Table 7.12A

Orgasnisationwise and Investment Levelwise Classification of the Average

Amount of Disparity in the Amount Applied for and Sanctioned


(Amount in rupees)

Time Lag Between Application and Sanction of Loan

Classification


Proprietorship

Partnership

Company

Total


Up to Rs: 10 Lakhs

Rs. 10 to 40 Lakhs

Rs: 40 to 70 Lakhs

Above Rs: 70 Lakhs

Total

The delay in sanctioning loan may lead to delayed execution of the project

and delayed production. This wi 1 increase the cost of the project and reduce the

* Significant at 5 percent level

SII>BI aided units

137833

304100

575555

1017488

121200

204200

900000

575000

1800400

profitability. The time taken by the units to get the loan sanctioned is displayed in Table

Other agency aided

units

300000

566666

137500

1004 166

433333

300000

50000

- 783333

hs.value

2.23*

1.42

2.162*

1.40

1.24

1.22

-

Table 7.13

Districtwise Classification of the Time Lag Between the Application and

*Significant at 5% level

Source: Personal investigation.

There is significant di:&erence only in Idukki and Kozhikode in the time

Sanctioning of Loan

taken by two groups of units to ge: the loan sanctioned. In Idukki more than 50 percent

of SIDBI aided units are found to have waited for 9 to 12 weeks. In Kozhikode more

Name of district

Thiruvananthapurarn

Emakulam

Idukki

Kozhikode

Total

than 50 percent are found to have waited for more than six weeks. More than 50 percent

of other agency-aided units are found to have waited to 3 to 6 weeks. Organisationwise

analysis (Table 7.13A) shows significant difference in all the categories other than

proprietorship. Time taken by Proprietorship concerns to get the loan sanctioned is found

to be less than 12 weeks in most ~f the cases in either group. Significant difference is

B.3- Below three weeks,

B.

3.

2

14

seen between the groups in the second size categoly. There is difference in other size

categories also but the difference is not statistically significant.

3- 6-

6 9

9 4

7 5 8

3 5 3

2 5 6

N 21

Table 7.13A


Time Lag Between Application and Sanctioning . . - Classification SIDE1 aided units 1 Other agency aided units


B3w - Below 3 weeks, 9-12 W &A - 9 to12 weeks and above

3. Co-operation of the Oficials

Even though the schemes operated by the lending institution is good, the

borrowers may hesitate to apprclach the institution if the services rendered by the

officials are not good. Table 7.14 depicts the opinion of the beneficiaries regarding the

co-operation of the officials.

Table 7.14

Districtwise Classification of the Borrower's Opinion


About Co-operation of Ofllicials.

The number of dissatisfied customers is found to be lower in SIDBI aided

Name of district

Thiivananthapuram

Emakulam

Idukki

Kozhikode

Total

group compared to other group. This trend is pronounced in Thi~vananthapuram, Idukki

F.S

23

18

19

24

84

and Kozhikode, where there are no dissatisfied customers. The number of partially

F.S- Fully satisfied, P.S- Partially sarisfied

N.S- Not satisfied

satisfied customers is found to be lower in the other agency aided group compared to the

SIDBI aided group. This trend is more in Kozhikode where there are no partially

satisfied customers. Organisationwis~: and investment levelwise analysis (Table 7.14A)

shows difference in partially satisfied units. Partially satisfied customers are more in the

SIDBI aided units. However, the difference between two groups is not significant. The

organisationwise and sizewise anaiysis also reveal no significant difference.

Table 7.14A

Organbationwise and Investment Levelwise Classification of

Borrower's Opirrion About Co-operation of Officials

Significant at 5 percent level


4. Difficulty Experienced in Obtaining the Loan

For obtaining the lorn a lot of paper work and formalities are involved.

Sometimes the treatment of the officials of the funding agency may be hasty. The

responses of the beneficiaries regarding difficulty experienced in getting the loan are


Table 7.15

Districtwise Classification of Difficulties Experienced in Obtaining Loans

Name of district

Thi~vatXithap~ram &

Ernakulam

Idukki

Kozhikode

Total


No difference is observed between SIDBI aided units and other agency aided

units in this regard. Majority of units in either group are found to have faced no difficulty

in getting the loans. Districtwisc: analysis reveals difference in Ernakulam and

Kozhikode. More SIDBI aided unit: reported difficulty in getting the loans while in the

case of other group, majority of the units do not experience any difficulty. Opposite is

the case in Ernakulam, where more other agency aided units reported difficulty.

However the difference is not significant. Organisationwise analysis (Table 7.15A)

discloses no significant difference in any group. In sizewise analysis also, no significant

difference is seen in any of the size categories.

Table 7.15A

Oganisationwise and Investment Levelwise Classification of Borrowers Experienced


Difficulty in Obtaining Loans

Nature of Difficulty

Classification


Proprietorship

Partnership

Company

Total

B.Investment

levelwise:

u p to Rs: 10 Lakhs

Rs: 10 to 40 Lakhs

Rs: 40 to 70 Lakhs

Above Rs: 70 Lakh

Total

Significant at 5

The major difficulties faced by SSI units aided by the funding agency are

Diffi- No

percent level


Table 7.16

Districtwise Classification of Ranking of Difficulty Experienced in Obtaining Loan.

C.P- Complicated procedure, D.S- Difficulty in furnishing security

D.C.D- Delay in clearness documerlt, T.D- Too many documents

LB- Inconsistent behavior of officials

Figures in parentheses are the score obtained


The difficulty in furnishing security with a score of 174 is found to be the

major problem faced by SIDBI aided units. Complicated procedure ranks second the

score being 154. The other problerns ranks in the diminishing order of severity are the

delay in clearness documents from government (score 130), the preparation of too many

documents (score 96) and the incon:;istent behavior of officials (score7).

In the case of other agency aided units also ranked the difficulties in the

same order. The most important problem is the difficulty in furnishing security with a

score of 164 and the inconsistent behavior of officials ranks the last with a score of 15.

Districtwise analysis shows difficulty in fiunishiing security as the major

problem of the SIDBI aided units in all the districts. The severity of other problems is

similar in all the districts. In the case of units aided by other agencies, the problem of

difficulty in furnishing security is ;onsidered the major problem in all the districts. But

the delay in commercial prodtdion ranks second in Thiruvananthapuram and

Kozhikode. In Ernakulam and Idukki complicated procedure ranks second. However in

all the districts inconsistent behaviour of the officials ranks last. From the

constitutionwise analysis (Table7.16A) the difficulty in furnishing security is the major

problem of the units in both groups. But delay in commercial production is the second

main problem of companies in both groups. However inconsistent behavior of officials

d s last in all the categories. The same overall pattern is found reflected in the different

size categories in both groups with the exception of the third category in the SIDBI aided

group. In this category the most difficult problem is the complicated procedure.

Difficulty in finishing security ranks only second.

Table 7.16A

Organisationwise and Investment Levelwise Classification of Nature of

Difiiculty Experienced by Borrowers

Classification


A total number of four variables have been analysed to find out the ease of

obtaining loan from SIDBI. Only one variable reveals significant difference namely time

lag between application and sanction, SIDBI is found to take longer time to sanction

loans than other agencies. The analvsis does not suvvort the seventh hvvothesis stating

that. obtaining loans from SIDBI is less difficult compared to other sources.

Analysis of Impact of SIDBI Finance

1. Average Profit Earned

The basic objective of ;i business unit is to make profit. A moderate level of

profit is essential for the existence md healthy growth of any business unit. The average

amount of profit earned by the units are displayed in Table 7.17

Table 7.17

Districtwise Classification of Average Amount of Profit Earned by the Sample Units

(Amount in Rupees)

aided units 1 Name of District

- 1 8 14460 418600


Units in the SIDBI aided group have generated an aggregate profit of Rs:

SIDBI aided units

814460 while units in the other agency aided group have generated only Rs: 418600. In

Other agency

all the districts the SIDBI aided units earned more profit. The difference is high in

Idukki. In Idukki the profit earned by SIDBI aided units are more than 2.5 times than that

of other agency-aided units. Organisationwise analysis (Table 7.17A) reveals that SIDBI

aided units in company form have earned more than 2 times profit than that of the other

agency aided units. Proprietorshill concern and partnership concern also earned more

profit than the other agency aided ~ni t s .

Investment levelwise analysis reveal that SIDBI aided units in all categories

except the first category earned more profit than that of the other agency aided units.

Table 7.17A

Organisationwise and Investment Levelwise Classification of the Average Profit

Earned by the Sample Units


(Amount in rupees)

The chart showing the average profit earned by the SIDBI aided units and

Classification


Proprietorship

Partnership

Company

Total


Up to Rs: 10 Lakhs

Rs: 10 to 40 Lakhs

Rs: 40 to 70 Lakhs

Above Rs: 70 Lakhs

Total

otlier agency-aided units are shown in Figure 7.2.


SIDBI atded units

-

149725

134697

274936

559358

249.55

1 12721

100000

4 9231

766907

Other agency aided

units

99268

99382

120640

3 19290

69190

101435

1 16636

240000

527261

t.value

2.5 1

.85

1.17

.895

.735

1.06

1.26

Figure 7.2

Average Profit earned

Kozhikcde

District

2. Mean Value Added

Profit is a narrow measure of evaluating the performance of an organisation

especially in assessing a firm's achievements in realising its socio economic objectives

characterised by increase in production, creation of employment opportunities, provision

of necessary infrastructure etc.. . Value added concept incorporates dl these factors and

more. So it is a much better tool for evaluating a f m ' s performance. Value added is the

excess of total value of output over the cost of bought in materials and services from

outside. The amount of value added by two groups is given in Table 7.18

Table 7.18

Districtwise Classification of the Mean Value Added

(Pmount in Rupees)

I Name of District I SIDBI aided units I Other agency aided units I

I Kozhikode

I Ernakulam I I

I 5070144

I I 4 J Source: personal investigation

1937600

Total I 28408190

The average amount of mean value added by SIDBI assisted units come to

1 1698896

Rs: 2.84 crores. Where as the other agency aided group the corresponding figure is Rs:

1.16 crores. This difference is found to be statistically significant. Districtwise analysis

shows significant difference in all districts except Kozhikode. In Kozhikode the

difference is low compared to other districts. The 'difference is very high in

Tbvananthapuram. Here the value addition by SIDBI aided units are more than four

times of the value addition by other agency aided units.

In the Organisationwise analysis (Table 7.18A) SIDBI aided proprietorship

concerns and companies have more value addition. But the other agency aided

partnership firms have more value addition.

Sizewise analysis reveals that in all size categories except the fourth category

the SIDBI aided units have more value addition. Table 7.18 reveal that SIDBI aided units

have more value addition than the olher agency aided units.

Table 7.18A


Mean Value Added

amount in rupees)

IDBI aided units

I - Source: Personal investigation



Proprietorship

Partnership

Company

Total


Up to Rs: 10 Lakhs - Rs: 10 to 40 Lakhs

Rs: 40 to 70 Lakhs

Above Rs: 70 Lakhs

Total

The mean value added is graphically represented in Figure 7.3

2392680

3373939

11723641

17490260

1 168509

2197934

14855000

11759230

29980673

1475326

4433941

3249200

9158467

979638

1506387

4227636

22000000

28713661

Figure. 7.3 Mean value added by SIDBI aided units and other agency aided units

sidbi Womer 1

IDK KZKD TM EKM

3. Mean Capacity Utilised

The capacity utilization is a percentage of the value of actual production with

the installed capacity. (installed capacity is here taken to denote the total production

capacity i.e. output potential of a unit for the products manufactured if the existing plant

and machines are assumed to be working in continuous operation throughout the year)

Table 7.19 shows the mean percentage capacity utilization by units in both groups.

Table 7.19

I (Percentage) ( aided units I I l value l

Districtwise Classification of the Mean Percentage of Capacity Utilied

Name of District

Thiruvananthapuram

Ernakulam

SIDBI aided units

bercentage)

62

57.2 56.8 I I I I I

I I I I I I *Significant at 5 percent level

Idukki I I I I I


Other agency

Kozhikode

SIDBI aided units are utilising their installed capacity to a greater extent than

66.3

the other agency aided units. In the districtwise analysis, there is no significant difference.

d.f

57.6 ( 45 ( 1.41 1 .16

46.3

between the groups in Ernakulam. In Thiruvanathapuram and Idukki SIDBI aided units

54.4 ( 45 ( -2.17 1 .04*

have utilised more capacity but in Kozhikode the case is just the reverse, the other

t.value

agency-aided units have utilised more capacity. In the organisationwise analysis (Table

P.

7.19A) SIDBI aided partnership fim,s have utilised more capacity. But the other agency

aided sole proprietorship concerns and companies performed better. Comparing two

groups on the basis of the size of investment shows that units assisted by SIDBI in the

first and last category have performed better than other agency aided units coming in the

same category. But in the second and third category the other agency aided units

performed better.

Table 7.19A

Organisationwise and Investment Levelwise Classification of Mean Percentage

Capacity Utilised


Classification


Proprietorship

Partnership

Company


Up to Rs: 10 Lakhs

Rs: 10 to 40 Lakhs

Rs: 40 to 70 Lakhs

Above Rs: 70 Lakhs

The capacity utilised by SIDBI aided units and other agency-aided units are

SIDBI aided units I Other agency aided units P.value

(percent

55

59.09

58.93

53.63

57.9

60

59.53

shown in Figure 7.4


Figure 7.4

Mean capacity utilised by SIDBI aided units and other agency aided units

Mean capacity utilized mother mSIDB u

El TI

District

Causes for Underutilisation

It was observed that the installed capacity of the units under study has not

been fully and properly utilised. Several factors were responsible for the underutilisation

of the installed capacity. The causes for the underutilisation of the installed capacity are

depicted in Table 7.20. The main reason for the underutilisation of capacity reported by

majority of the units in both groups is the low demand for the products. The lack of

adequate finance is the second reason for underutilization of capacity. Few units face the

problem of non-availability of raw materials. There is no significant difference between

the units in two groups in four districts with regard to causes for the underutilisation of

capacity.

Table 7.20

Districtwise Classification of the Causes for the UnderUtiliation of Capacity


L.F- Lack of finance

N.A.R- Non availability of raw mat1:rials

L.D- Low demand

Name of district

Thiruvananthapuram

Ernakulam

Idukki -- I Kozhikode

1 Total

In the organisationwise analysis (Table 7.20A) also the low demand for the

product is the main cause for the underutilisation of capacity in all forms of business

organisations. No significant difference between the different forms of units in two

groups with regard to the cause:: for underutilisation of capacity. The investment

levelwise analysis also shows the same pattern and the causes for underutilisation of


SIDBI ail

capacity of units in different categories is not satisfactorily significant.

L.F

5

6

9

27

N.A.R

- 3

7 - 2 2

7

Table 7.20A

Organisationwise and Investn~ent Levelwise Classification of the Causes for


Underutilisation of Capacity


Classification

4. Linkages Created

The most obvious and direct way in which industrial units produce their

SIDBI aided units

impact on the economy of the area is, of course, in terms of output and employment.

Whatever the produce adds to the do~nestic product of the district and most of the units


also employ iocal workers to a major extend. The other direct way through which such

an impact is created are through backward linkages by using materials and semi

d.f x2

processed products and through forward linkages by supplying such materials and

products for production and consun~ption locally.

Both the type of linkages has been calculated for the sample unit using the

procedure described in the methodology. The magnitude of the linkages created by two

groups of units is displayed in Table 7.21

Table 7.21

Districtwise Classifications of the Linkages Created


The bulk of units in either group are found to have created only medium

level of linkages. Statistical test does not reveal any significant difference between the

groups in the level of linkages created. The same trend is visible in all the districts except

in Emakulam and Thiruvanathapuram. In Emakulam SIDBI aided units are found to

have produced a higher level of linkage. In Thiruvanathapuram the other agency aided

uniis are found to have produced a higher level of linkage. In constitutionwise analysis

(Table 7.21A) other agency aided prc~prietorship concerns and partnership firms created

more linkages. But in the case of company SIDBI aided companies are fared better.

Sizewise analysis indicates significant difference between the groups only in the third

and fourth category. Here also SILJBI aided units have performed better by producing a

higher level of linkage.

Table 7.21A

Organisationwise and Investmenl Levelwise Classification of the Linkages Created


In order to analyse the impact made by SIDBI on SSI units a total of four

variables have been studied. Significant difference is observed in respect of two variables

only. SIDBI aided units are generated more profit and they have done better value

addition. Significant difference is not found between two groups with regard to capacity

utilization. Other agency-aided uniis have created more linkages. Hence. the hvuothesis

that. SIDBI has created more immct than anv other financing aeencies does not hold

eood.

In addition to finance the SSI sector has large and varied developmental

needs. The following chapter analyses how far the SIDBI is successful in meeting the

developmental needs of the SSI uni .s.

role of sidbi in financing small-scale...

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