Volume-3, Issue-5, October-2013 ISSN No.: 2250-0758 International Journal of Engineering and Management Research Available at: www.ijemr.net Page Number: 73-77 The Role of KSFC in Promotion of Enterprises and Employment Generation in Karnataka Srinivas K T Associate Professor, CIMS-B School, Jayanagar, Bangalore, INDIA Abstract: The economic development of any country depends upon the existence of a well and strong organized financial system. It is the financial system which supplies the necessary financial inputs to enterprises or industries for the production of goods and services which in turn promote the well-being and standard of living of the people of the country by generating good number of employment opportunities. Financial system of any country consists of financial markets, financial institutions and financial instruments. State Financial Corporation s (SFCs) are also a part of financial system contributes for economic development of the country. The present study addresses on role of Karnataka State Financial Corporation (KSFC) in promotion of enterprises and employment generation for economic development. From the survey data it is found that KSFC promoted 1.66,726 enterprises by investing nearly Rs. 12,226.27 crore over the last 54 years since its inception as on 31-3-2013 and generated or created approximately more than 10 lakhs of employment to the people of the Karnataka. From the present study, it is found that for last six years i.e. from 2007-08 to 2012-2013 KFSC financed 4057.89 crore of amount for promoting 8,696 enterprises in the state of Karnataka with creation of employment to 55,149 persons. And also it is found that KSFC focus on development Micro, small and medium enterprises as its inception objective. If we look at the performance of the Karnataka State Financial Corporation is really admirable. Keywords: SFCs, KSFC, Economic development etc. I. INTRODUCTION III. STATE LEVEL INSTITUTIONS Financial institutions plays very important role in the economy of any country. These institutions facilitate covenant and effective channels of savings and investments, in a developing country like India, the role of these institutions becomes more pronounced in order to achieve rapid economic growth. Considering the need for such institutions, Industrial Financial Corporation of India (IFCI) was setup in 1948 II. NATIONAL LEVEL INSTITUTIONS A wide variety of financial institutions have been set up at the national level. They cater to the diverse financial requirements of the entrepreneurs. They include all India development banks like IDBI, SIDBI, IFCI Ltd, IIBI; specialized financial institutions like IVCF, ICICI Venture Funds Ltd, TFCI; investment institutions like LIC, GIC, UTI; etc. At the same time it was felt that there is necessity to establish similar institution with a view to assisting smaller industries in different state needs of all the same concerns sprawled all over the country. Several financial institutions have been set up at the State level under the State Financial Corporation ACT, 1951 with view to providing medium and ling-term finance to medium and small industries and which supplements the financial assistance provided by the all India institutions. They act as a catalyst for promotion of investment and industrial development in the respective States. They broadly consist of 'State financial corporations and State industrial development corporations. 73
IV. STATE FINANCIALCORPORATIONS S (SFCs): A state-level financial institution plays a crucial role in the development of small and medium enterprises in the concerned States. They provide financial assistance in the form of term loans, direct subscription to equity/debentures, guarantees, discounting of bills of exchange and seed/ special capital, etc. By now there are 18 SFCs functioning in the different states of the Indian union, these institutions are closely modeled on the lines of IFCI, but different in the scope of their activities. V. INCEPTION OF THE KSFC Karnataka financial corporation was established by the government of Karnataka on 30 th March 1959 under the provisions of SFCs act 1951 passed. All along, KSFC has played a pioneer role in the development of micro and small scale enterprises in the state of Karnataka. It has fulfilled the objectives of developmental lending such as industrialization of backward areas, assistance to weaker sections, promoting first generation entrepreneurs, assistance technocrats and women, several units, which received start up assistance from KSFC have today become large industrial conglomerates. VI. NATURE OF THE BUSINESS CARRIED Nature of the business of the KSFC is mainly lending Business. KSFC is a financial super market; it extends all types of financial assistance in the form of long term loans, short-term loans (in the form of corporate loans), lease finance, hire purchase finance, merchant banking and financial service etc. KSFCs assistance covers almost all types of industrial and service sectors. KSFC is a category one merchant banker as approved by Securities and Exchange Board of India (SEBI). The Merchant Banking Division takes up management of public issues, DPG syndication of loans, bills discounting etc. The other activities are subscription to the non-convertible debentures and factoring services. Sources of funds for KSFC are Share capital, Line of credit from SIDBI, Line of credit from banks, fixed deposits; Seed capital and other agency funding, Margin money from state Level Corporation, Recoveries, Income from interest and other activities. KSFC provides long term loan for Establishing the new firm, Expansion of the existing firm, Modernization of the firm, Technology up gradation, Working capital requirements. VII. STATEMENT OF THE PROBLEM In order to provide medium and long term credit to industrial undertakings, which fall outside the, normal activities of Commercial Banks, a Central Industrial Finance Corporation was set up under the Industrial Finance Corporation Act. 1948 (XV of 1948). The State Governments wished that similar Corporations should also be set up in the States to supplement the work of the Industrial Finance Corporations. The intention is that the State Corporations will confine their activities to financing medium and small scale industrial and will, as far as possible, consider only such cases as are outside the scope of the Industrial Finance Corporation statement of objects and reasons for establishment SFCs in India. The research gaps and relevant questions which strike the mind from above statement of objects and reasons for establishment of SFCs are: a) how much KSFC financed for promotion of enterprises in the state of Karnataka, b) how many number of enterprises promoted by KSFC in the state of Karnataka c) what contribution by KSFC for employment generation in state of Karnataka. Hence there arises a need to address aforesaid questions in the present research study. VIII. OBJECTIVE 1. To study the investment made by KSFC 2. To study number of enterprises promoted by KSFC 3. To study Industry wise investment made by KSFC 4. To study the employment generation through KSFC investments 5. To offers suggestions based on findings of the study. IX. SCOPE OF THE STUDY The present study is confined to Karnataka state financial corporation only and study is restricted for the period of six years from 2007-08 to 2012-2013, and data is analyzed and interpreted to achieve the above said objective based on information gathered during the above mentioned period. X. SOURCES OF DATA COLLECTION To achieve aforesaid objectives data is gathered from KSFC annual reports, and other documents. XI. PLAN OF DTA ANALYSIS The information collected is represented in tabular form and graphically represented with the help of charts and graph. 74
XII. DATA ANALYSIS AND INTERPRETATION 15.86% against 2009-10. It is advisable for the corporation to enhance it service still more for the establishment of knowledge based industries for coming years for economic development. The above table depicts the Gross sanctions of KSFC, with number of enterprises promoted. During 2007-08 KSFC financed Rs.368.15crores to promote 1,195 enterprises. Here one thing important to mention that financial assistance is increased by 53.53%. During the above mentioned period. During 2008-09 amount is increased to Rs.565.24 crores to promote 1,420 enterprises. During 2009-10 investment is increased to Rs. 631.49 crores to establish 1,461 enterprises in state of Karnataka. During 2010-11 it increased to Rs. 731.63 crores to promote 1,537 enterprises, and during 2011-12 it increased to Rs. 817.32 crores to establish 1,485 enterprises. During 2012-13 KSFC promoted 1,598 enterprises with financial assistance of Rs.944.06 crore. The above table depicts the number of enterprises promoted and employment generation by KSFC. If we look at the table during 2007-08 KSFC promoted 1,195 enterprises with generating employment to 7,430 persons. During 2008-09 corporation promoted 1,420 units with creation employment to 8,611 persons. During 2009-10 KSFC promoted 1,461 enterprises with creation employment to 9,722 persons. During 2010-11 it promotes 1,537 units with generating employment to 9,948 persons. During 2011-12 KSFC promoted only 1,485 enterprises with generation employment to 9,080 persons, as compared to previous years promotion of enterprises and creation of employment is less even investment is increased by 11,71%. During 2012-2013 it promotes 1,598 enterprises with creation of employment to 10,358 persons. From the above graph it can be inferred that over the period of time the KSFC promoting good number of enterprises with good amount of financial assistance to industries. From last six years i.e. 2007-08 to 2012-13 corporation promoted 8,696 enterprises by financing 4057.89 crore. If we look at graph during 2008-09 investment made by KSFC is increased by 53.53% against 2007-08. During 2010-11 financial assistance increased by From the above graph it can observe that corporation promoted 8,696 enterprises by generating employment to 55,149 persons in the state of Karnataka. 75
During 2008-09 15.89% increase in employment to persons as against 2007-08. During 2012-13 there is increase in 14.07% employment generated by corporation as against 2011-12. This leads to improvement in standard of leaving of people and reduction in unemployment. those sectors generate more employment to the society. From the above table it can see that hotel/restaurants/construction activities sector got highest amount i.e. 41.34% of total investment of KSFC from last six years. Food sector received 580.41 crore of amount of total investment for the last six years stood at second place. Engineering sector stood at third place by receiving 10.15% of total investment i.e. 411.68 crore. Non-metallic products and Miscellaneous Manufacturing sector stood at fourth and fifth place respectively by receiving 8.21% and 8.11% of total investment of KSFC out of last six years. Textile and readymade Garments, Printing and Publishing and Others sectors also stands in prominence place by receiving 3.26%, 2.41% and 3.66% of total investments KSFC respectively from last six years. The above table depicts industry wise or sector wise investment for the period of six years. And also it helps to know which sector getting more prominence in investment by KSFC and those sectors which gains more importance in terms of investment, it can be inferred that, From the above graph it can observe that hotel/restaurants/construction activities sector stood first with financial assistance of 41.34% out of total investment made by KSFC, it is almost half of the total investment. it can inferred Hotel and Restaurants/ construction activities belongs to service sector, at present service sector is playing dominant role in attracting financial assistance. Food industry stands second by receiving 14.30 % of total investment from last six years by KSFC. Engineering sector stood at third place by receiving 10.15% of total investment i.e. 411.68 crore. From the above graph it can be inferred that service sector is gaining more prominence by financial institutions for financial assistance. And know fact that, at present service sector like IT and ITES, Communication, Food and beverages etc, are generating more number of employment opportunities and contributing nearly more than 60% to Indian GDP. 76
XIII. CONCLUSION Karnataka is one of the top five industrialized states in the country The State continued to play pioneering role in Industry and provided ample investment opportunities. Hailed as the Silicon Valley of India, Karnataka maintained its numerousness position in the Country in the export of IT & IT related products. Bangalore, the capital of Karnataka was rated as one of the Top Ten Hi-Tech Cities of the World. Karnataka State Financial Corporation should respond positively to the requirements of the industrial, service and other sectors of Karnataka. Because Industries have been considered as the engine of economic growth as well as backbone of the economy because industries generates employment opportunities and people will get the employment out of industries development, once the people gets the employment, people purchasing power as well as standard of living will improve or increase. In this background there is need of strong financial system with financial institutions to promote industries for the economic growth of the country. Karnataka State Financial Corporation also plays a vital role in Promotion of Enterprises and Employment generation for economic development. KSFC has promoted many enterprises and helped newly emerging entrepreneurs to develop their plan towards their objectives and implement it, which also helps in economic growth of the country and it also provides employment opportunities to many people. It also gives suggestions to the enterprises which have taken financial assistance from KSFC at the initial stage and it also provides working capital loan to the enterprises. From the research study it can conclude that KSFC is playing major role in state of Karnataka in promotion of enterprises and employment generation. KSFC is also performing on par with other any other national financial institutions in promotion of industries, but still lot of scope is there to improve its operation for establishment of industries. At last the performance of KSFC in promotion of enterprises is commendable and worthwhile. REFERENCES [1] Roy Roth well, Walter Zegveld (1982) Innovation and Small and Medium Sized Finn. Their Role in Employment. And in Economic Change, Frances Printer (publishes) London. [2] J.C Sandesara (1988), Institutional Frame Work for Promoting Small-scale Industries in India, Asian Development Review, Vol. No: 2 Pp. 10-40. [3] B Narayanan(1964), Financing of Industries in Bihar, (An Industrial Development Bank for Bihar) Ph.D Thesis, Bihar University, [4] Annual Reports of KSFC: 2007-08, 2008-09, 2009-10, 2010-11, 2011-12 and 2012-13 77 2011-13 Vandana Publications. All Rights Reserved