Role of State Financial Corporations in the Development of

Micro, Small and Medium Enterprises : A Study with Special

Reference to West Bengal Financial Corporation
Asl,is/1 Kuan,r Sa11a
Assistant Professor,
Department of Commerce, University of Calcutta
West Bengal

Susa11ta Ka,irar
Assistant Professor,
MBA Department, Seacom Engineering College
West Bengal

Abstract : The Micro, Small and Medium. Enterprises (MSMEs) contribute almost 40% of the gross
industrial value added in the Indian economy. By its less capital intensive and high labour-absorption
nature, this sector has made significant contribution lo employment generation and rural industrialization.
However, lack of access to finance and timely credit as well as escalating costs are cited as important
reasons for under-utiliz.ation of the manufacturing capabilities of MSMEs. State Financial Corporations
have been established to provide various types of financial and non-financial assistance to this sector.
In this regard, West Bengal Financial Corporation (WBFC) was sel up in the year 1954 with the objective
of providing financial assistance to MSMEs in the stale of West Bengal. In this paper, an anempl has
been made lo analyze the role of State Financial Corporations, especially the WBFC in the development
of MSME sector.
Key words : Micro, Small and Medium Enterprises (MSMEs); State Financial Corporations; West Bengal
Financial Corporation (WBFC); Financial Assistance.

I. Introduction
The Micro, Small & Medium Enterprises (MSMEs) sector is one of the fastest growing
industrial sectors in the world economy; the Indian scenario is no different. The contribution
of MSMEs to our national economy in tenns of creating a vibrant manufacturing sector, winning
the global market through increased exports, employment generation etc. has been highlighted
on many occasions. Given the expectations from the MSMEs sector to contribute towards
achieving India's targeted economic growth rates of 9%-10%, there is a need to address the
problems faced by them. MSMEs in India are mostly in the unorganized sector and are the
source of livelihood for millions of people. The social contribution made by MSMEs is
even more significant than its economic contribution. Within the MSMEs sector, the small sector
serves as a seed-bed for nurturing entrepreneurial talent and originating units to grow eventually
to medium and large enterprises. The promotion ofMSMEs, therefore, becomes a major area for
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policy focus. Regeneration of MSMEs must receive public support particularly for the village,
cottage and micro level enterprises. Despite their economic significance, MSMEs face a number
of bottlenecks that prevent them from achieving their full potential.
Major obstacles for business development for MSMEs relate to a wide range of issues:
i. Lack of access to finance and timely credit as well as escalating cost are cited as primary
reasons for under-utilization of the manufacturing capabilities of MSMEs.
ii. The infrastructural facilities in India have not reached to the desired level. This restricts
private initiatives in this sector. Therefore, creation of better infrastructural facilities for
MSMEs must receive greater priority.
iii. A multiplicity of regulating agencies lead to harassment and inspections with greater impact
on operations of MSMEs than on larger units.
iv. With growing access to modem means of communication, particularly revolution in the
infonnation technology, the sheltered market for the MSMEs product is no longer so.
MSMEs should join hands globally to create a global commodity chain. In this regard,
MSMEs mother units in marketing, similar to mother units in production, may be promoted.
v. Cutting-edge technology becomes difficult to access for MSMEs due to the high initial costs
leaving them behind in the race for competitiveness.
Out of these the main problem in MSMEs development is inability to access timely and
adequate finance. There are several reasons for low MSMEs credit penetration, key among
them being insufficient credit infonnation on MSMEs, low market credibility of MSMEs
(despite their intrinsic strengths) and constraints in analysis. This leads to sub-optimal delivery
of credit and services to the sector.
As the access ofMSMEs to capital markets is very limited, they largely depend on borrowed
funds from banks and financial institutions. While investment credit to MSMEs is provided by
financial institutions, commercial banks extend working capital. In the recent past, with growing
demand for universal banking services, tenn loans and working capital are becoming available
from the same source. Besides the traditional needs of finance for asset creation and working
capital, the changing global environment ha~ generated demand for introduction of new financial
and support services by MSMEs. There is an urgent need to regenerate MSMEs financing. As
the MSMEs have been the greenfield for nurturing entrepreneurial talent, first generation
entrepreneurs should be facilitated in access to the desired finance through creation of
guarantee funds. Finance should not only be timely but also cost-effective.
The financing of the MSMEs sector has received some attention since independence. A
multi-level institutional structure exists for financing of small enterprises and non-fann
enterprises in India. This consists of Commercial Banks, Cooperative Banks, Regional Rural
Banks (RRBs), State Financial Corporations (SFCs). Credit to small enterprises comes under
priority sector lending programme of banks. The Reserve Bank oflndia (RBI) constantly reviews

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the flow of credit to this sector. To improve the flow of credit, the RBI has constituted several
committees and working groups since 1991. Notable among the committees are Nayak
Committee, Kapur Committee and Ganguly Committee. Appropriate measures have been taken
by the RBI and Government from time to time based upon the decisions of the Standing
Committee on SSI set up by the RBI. An exclusive refinancing bank, called Small Industries
Development Bank of India (SIDBI) was set up in 1990 for the purpose of channeling of finance
to MSMEs in an organized manner. Further, refinance to SFCs has also been made attractive
in terms oflow rates of interest. The issue of providing micro-credit to micro-enterprises through
the development of SHG-Bank Linkage Programme rests mainly with National Bank for
Agricultural and Rural Development (NABARD). However, major part of SHG-Bank Linkage
credit is in the form of micro-credit to meet production and consumption needs and not for
micro-enterprises. The Government of India has launched the Credit Linked Capital Subsidy
Scheme (CLCSS), which aims at facilitating technology upgradation of MSMEs in specified
products or sub-sectors.
Performance, problems and other issues of MSMEs in India has been investigated and
examined by academicians, researchers and analysts from time to time. Some of the works
related to institutional support are mentioned below.
Peter (1996) examined the performance of small-scale industries by drawing a sample of
543 SSis in Jammu and Kashmir established under 14 District Industries Centers (D!Cs) situated
in different districts and supporting agencies and institutions. The study attributed prevalence of
sickness among SSI units to lack of coordination between DIC and other supporting agencies or
institutions. The other factors identified were inadequate technical support to the entrepreneurs,
delay in payment of bills, low recovery of bank funds, innumerable laws etc.
Manic/cave/ (1996) examined 849 listed problems over the life cycle i.e. marketing,
managerial and a financial on a sample of 364 SSI units from Kamarajar district of Tamil Nadu.
The study indicated significant dominance by marketing and financial problems in the formation
stage and relative prevalence of managerial problems throughout the life cycle.
Satyanarayan and Misra (2001) identified chronic sickness among SSls due to inadequate
application of internal management techniques about marketing, organizing, management
financial control, decision-making changes and above all the planning similar to those assessed
by SB! Study Team (1975). Their study stressed upon the effectiveness of works management,
receivable management for seeking adequate control on cash flow pipeline and above all
ensuring reliable scientific planning for the prevention of sickness.
Madasamy and Xavier (2002) conducted a pilot survey on 275 respondents for analyzing the
performance of36 production and 39 sales centers (Khadi Gramodyog Bhavan, Khadi Vastralaya
and Orama Shilpa in Sarvodya Sangh district located at Srivilliputtur town of Tamil Nadu).
The problems identified are non-availability of skilled labour, delay in sanctioning loans from
district institutions and settlement of rebates by State Board, absence of training centre, separate

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research and development (R&D) cell for quality improvement and the adoption of uniform
cost-oriented pricing policy.
Reddy (2003) evaluated the entrepreneurial process and identified problems of poverty,
low capital base, insufficient base-security needed for securing financial assistance from
development agencies, complex administrative procedures, lack of awareness about government
schemes, non-Cooperation by officers, low repayment of borrowed amount among 120 scheduled
caste and scheduled tribes in three regions of Andhra Pradesh.
Tagoe, Nyarko and Anuwa-Aarh (2005) examined the impact of financial sector
liberalization by reviewing documents and interviewing people from a bank, a non-bank
financial institutions and the National Board for Small Scale Industries (NBSSI) on electric-
mechanical, printing and manufactur:ing firms in Ghana. They identified the lack of access to
formal credit attributed to differential risk perceptions of financial institutions, weak MSME-
investors relations and persistent government borrowing leading to credit crunch for small
enterprises.
There are so many issues related to MSMEs have been highlighted from the above
literatures. However, our study specially is dealt with the role of WBFC in developing of
MSMEs in the state of West Bengal. The State Financial Corporations since their inception
directly and indirectly are assisting in different ways towards the development of small-scale
industries'. The present study tries to analyse the role of SFCs specially the West Bengal
Financial Corporation in the development of MSMEs in West Bengal. Data have been collected
from research papers, conference documents and annual reports of the State Financial
Corporations including West Bengal Financial Corporation, $IDBI and RBI Handbook. We have
used simple statistical tools to analyse data.
The study is divided into six sections. Section-II deals with meaning and concept of micro,
small and medium scale enterprises. Ev.olution of State Financial Corporations is discussed in
Section-Ill. An overview of the West Bengal State Financial Corporation is highlighted in
Section-IV Section-V discusses the analysis of role of WBFC in the development of MSMEs
Sector. Section-VI concludes the study.
2. Meaning and Concept or Micro, Small and Medium Scale Enterprises
Micro enterprises are generally artisan-based, located mostly in rural and semi-wban areas.
These enterprises use local skills anQ resources and sell their products locally. Lower level of
investment in machinery require in these enterprises. They are spread throughout the country
and include such activities as handlooms, khadi, sericulture, coir, bidi-making, embroidery
knitting, wood-carving and other handicrafts. Small and medium enterprises use power driven
machines and possess some technological sophistication. The market for these industries is
relatively wide and quite often includes export market. Their products include hosiery goods,
rubber goods, ready-made gannents, motor-parts, electronic goods, sports goods and engineering
goods.

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In 1950, the government grouped small-scale industrial undertakings into two categories-
those using power but employing less than 50 persons and those not using power but employing
less than 100 persons. All small scale enterprises had capital investment of less than Rs. 5 lakh.
In 1966, the small scale enterprises were defined as undertakings with a fixed capital inveslment
of less than Rs.7.5 lakh and ancillaries with a fixed capital investment of Rs. 10 lakh. In 1975,
this limit was revised to Rs. IO lakh for small scale enterprises and Rs. 20 lakh for ancillaries.
Subsequently, under the Industrial Policy Statement of 1980, this limit was further raised lo
Rs. 20 lakh in case of small scale industries and Rs. 25 lakh for ancillaries units. Simultaneously,
in the case of tiny units, the limit of investment has been raised from Rs.I lakh to Rs. 2 lakh. The
government has again revised the investment limit of small-scale to Rs.35 lakh and for ancillary
units to Rs. 45 lakh in I 985. The investment ceiling in plant and machinery for small scale
industries has been raised from Rs. 35 to Rs. 60 lakh and correspondingly for ancillary units
from Rs. 45 lakh to Rs. 75 lakh as per Industrial Policy Statement of 1990. Investment ceiling
with respect to tiny units has been increased from Rs. 2 lakh to Rs. 5 lakh.
In 1997, on the recommendation of Abid Hussain Committee, the government has raised the
investment limit on plant and machinery for small units and ancillaries from Rs. 60/75 lakh to
Rs. 3 crore and that for tiny units from Rs.5 lakh to Rs.25 lakh. The government in 2000 has
reduced the investment limit on plant and machinery from Rs. 3 crore to Rs. 1 crore, but the
investment limit for investment in tiny units has been retained as Rs.25 lakh. Prior to the
enactment of the Micro, Small and Medium Enterprises Development Act (MSMED) 2006,
small industries in India comprised tiny, cottage, traditional village and modem small
enterprises. The MSMED Act provides the first-ever legal framework recognizing the concept
of enterprise (comprising both manufacturing and service entities), defining medium enterprises
and integrating the three tiers of these enterprises, namely micro, small and medium. According
to the MSMED act, MSMEs are classified into (a) enterprises engaged in the manufacture
or production of goods and (b) enterprises engaged in providing or rendering services.
(a) Manufacturing Enterprises : The enterprises engaged in the manufacture or production
of goods pertaining to any industry specified in the first schedule to the Industries (Development
and Regulation) Act, 1951 are called Manufacturing Enterprise. MSMEs have been defined
based on investment in plant and machinery.

Manufacturing Enterprises

Enterprises Investment in Plant & Machinery

Micro Enterprises Does not exceed rupees twenty five lakh
Small Enterprises More than rupees twenty five lakh but does not exceed rupees five crore
Medium Enterprises More than rupees five crore but does not exceed rupees len crore
(b) Service Enterprises : The MSMEs engaged in providing or rendering of services are
classified as below :
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Service Enterprises
Enterprises Investment in Equipments
Micro Enterprises Does not exceed rupees ten Iakh
Small Enterprises More than rupees ten lakh but does not exceed rupees two crore
Medium Enterprises More than rupees two crore but does not exceed rupees five core

The MSMED Act defines 'enterprise' instead of industry to give due recognition to the
service sector. This act also strengthens the legal provisions to check delayed payments lo micro
and small enterprises.
3. Evolution or State Financial Corporations in India
In order to provide medium and long-tenn credit to industrial units, Industrial rinancial
Corporation of India (IFCI) was set up under the Industrial Finance Corporation Act I 948. The
objective was mainly to provide the credit to those undertakings, which fall outside the nonnal
banking activity. The state governments also expressed their desire to set up similar corporations
in the state to supplement the activities of -the IFCI. Main intention of state governments that
time was to provide financial assistance to small and medium scale industries within the state
but outside the activities of the IFCI.
To implement the views expressed by the State Governments the State Financial Corporation
Bill was introduced in Parliament in the year 1951. The State Financial Corporation Act passed
in I 951 and empowered each state and union territory to establish State Financial Corporation
with a view to provide financial assistance to micro, small and medium scale industries. It
provides loan to sole trading concern, partnership finn, private limited companies and public
limited companies.
At present, there are 18 State Financial Corporations in India. Out of these 17 were set up
under the State Financial Corporations Act (SFCs) 1951. The Tamil Nadu Industrial Investment
Corporation Ltd. established in 1949 under the Companies Act as Madras Industrial Investment
Corporation, also functioning as SFC. Exhibit-I shows the position of the State Financial
Corporations in India.
Apart from the above SFCs, State Industrial Development Corporations (SIDCs) also act as
SFCs for providing assistance to MSMEs in some states and union territories. The following
states and union territories have SIDCs viz. Andaman & Nicobar, Arunachal Pradesh, Daman &
Diu and Dadra & Nagar Haveli, Goa, Manipur, Meghalaya, Mizoram, Nagaland, Tripura.,
Pondicher,y and Sikkim.
4. West Bengal Financial Corporation : An Oveniiew
As per report of the 3rd All India Census of Industrial units, conducted during 2001-02, the
number of registered SSI units in the Slate of West Bengal was 42,148 having employment of
2,54,81 I persons and unregistered SSI units was about 7,29,240 which employed 19,14,295

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persons from this sector is about 38% of the total export from the state. Hence, this sector
needs more attention. Several studies show that this sector faces a lot of obstacles for further
development. So, they need more institutional support either financial or non-financial. Different
types of institutions either in the state level or central level are supporting MSMEs throughout
the country in various ways. Out of these SFCs play a significant role to promote and
development of MSMEs.

Exhibit 1 : State Financial Corporations & Year of Establishment

SI.No. Name of the State Financial Corporation Year of Establishment
I. Andhra Pradesh State Financial Corporation 19S6
2. Assam Financial Corporation t9S4
3. Bihar State Financial Corporation 19S4
4. Delhi Financial Corporation 1967
s. Gujarat State Financial Corporation 1960
6. Haryana State Financial Corporation 1967
7. Himachal Pradesh Financial Corporation 19SS
8. Jammu and Kashmir State Financial Corporation 19SS
9. Kamataka State Financial Corporation 19SS
10. Kerala Financial Corporation 19S3
II. Madhya Pradesh Financial Corporation 19SS
12. Maharashtra State Financial Corporation 19S6
13. Orissa State Financial Corporation 19S6
14. Punjab Financial Corporation l9SS
IS. Rajasthan Financial Corporation l9SS
16. Tamil Nadu Industrial Investment Corporation Limited 1949
17. Uttar Pradesh Financial Corporation 19S4
18. West Bengal Financial Corporation 19S4

The Wes/ Bengal Financial Corporation (WBFC) is a state level financial mst1tut1on
established in 1954. The WBFC has its active presence throughout the st.ate by its regional
offices. Currently it has 14 branches, three regional offices and its head office situated al
Kolkata. Its regional offices are duly equipped to coordinate the activities in the North Bengal
as well as South Bengal.
WBFC has been catering to the financial needs of tiny, small and medium scale units
within the state of West Bengal through its well-knit branch network. It helps the micro, small
and medium enterprises to implement their new projects, expansion of the existing projects and

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modernization or technological up-gradation of their schemes. Currently its assistance has been
extended lo more than 42 different types of industries. The following types of industries are
being benefitled from the WBFC such as (i) coal mining, (ii) metal mining, (iii) crude petroleum
and natural gas, (iv) food processing, (v) mineral water, (vi) beverage industries,
(vii) manufacturer of tobacco, (viii) manufacturer of footwear, (ix) other wearing apparel and
made up of textile goods, (x) manufacturer of wood, wood products and cork, (xi) manufacturer
of furniture and fixture, (xii) manufacturer of paper and paper products, (xiii) printing,
publishing, packaging and allied industries, (xiv) manufacturer of leather and leather products,
(xv) manufacturer of rubber and jule products, (xvi) manufacturer of chemical and chemical
products including pharmaceutical, (xv) stone quarrying clay and sandpit, other non-mineral
water industry, (xv) manufacturer of petroleum and coal products, (xvi) basic metal industries,
(xvii) manufacturer of metal products, (xviii) manufacturer of machinery, (xix) manufacturer
of electrical and telecom machinery, (xx) manufacturer of transport equipments etc.
The Policy Statement of WBFC is as follows:
"WBFC is committed to help genuine entrepreneurs in the micro, small, and medium sector
enterprises in achieving their goals in setting up new manufacturing and service industries
or modernizing and or/expanding their existing units, by providing timely financial inputs
at reasonable interest rates. It also helps such entrepreneurs to receive assistance from
other departments of the central and state governments in obtaining allied services for
realization of their dreams. And, is also committed in continually improving its internal
processes and systems."
Till dale, the Corporation has its credit exposures to agro based processing, engineering,
software, readymade garments, hosiery & knitting, hotels, healthcare, nursing homes,
pharrnaceulicals, hatcheries and many other industries and services. The WBFC has been
operating as an 'A' category SFC in terms of SJDBI categorjzation. WBFC has been granted
the right and license to be listed in the BIS's register of Licenses of Quality Management
Systems Certification in accordance with IS/ISO 9001 :2008, from January 2010 through January
2013 with a renewal basis.
5. Analysis 9f Role of WBFC in the Development of MSMEs Sector
Like other SFCs in India, the WBFC has been devoting itself to the task of promotion and
development of the small scale industries of the state for the last 57 years. Despite all odds, the
Corporation has been marching ahead by registering increases in the amount of sanction,
disbursement and recovery of credit. WBFC always acts in close coordination with the state
level promotional and development agencies, commercial banks, the Government and others.
Counseling and tiQtely delivery of credit to the entrepreneurs in need are the facets of
its mission. The Corporation has a strong determination to continue its helping hand to the
development of the under-privileged segments of the industrial economy of the state to make

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it adequately strong and capable of meeting the challenges of the days ahead. It has an organized
cell to undertake appraisal of the industrial projects. Timely follow-up of the projects for
implementation and to carry on liaison with other co~agencies, amongst others are its one of
objectives to ensure successful launching of newer projects.
WBFC provides loans to MSMEs at reasonable interest rate, so that they can take the
advantages of loans. Their repayment period is also detennined after making the consultatiQn
with them. Interest rates charged by WBFC is betwee~W% lo 13. 75%.
The principal areas of concern affecting the development of the MSMEs sector identified
by various studies include:
• Limited access and cost of finance;
• Lack of marketing skills and market knowledge;
• Inadequate management and entrepreneurial skills;
+ Lack of access to infrastructure;
• Lack of access to land;
• Inappropriate technology;
t Lack of information, and
• A hostile regulatory environment.
Over the time WBFC is offering based on the needs of MSMEs, 10 types schemes for
different categories of enterprises which are summarized in Exhibit 2.
Finally, the WBFC is olferin,g financial assistance in the following purposes to MSMEs:
+ New projects
+ Expansion of the existing projects
+ Diversification of activities
• Rehabilitation
+ Modernization
It offers long and medium-tenn loan which is repayable ordinarily within a period not
exceeding 20. years. It grants financial assistance to any single industrial concern under
corporate or co-operative sector as also to partnership, sole proprietorship or Joint Hindu
Family. It also provides financial assistance generally to those industrial concerns whose paid
up share capital and free reserves do not exceed Rs. 3 crore and to lay special emphasis
on the development of backward areas and small scale industries. It subscribes or purchases the
stock, shares, bonds or debentures of an industrial concern subject to a maximum of 30 percent
of the subscribed capital or 30 percent of paid up share capital and free reserve of the concern,
whichever is less.

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Exhibit 2: Schemes Offered by WBFC

Name of the Eligible Sector Purpose of Scheme Amount of Loan
Scheme
(i) General 1iny, small scale • For acquiring fixed and/or current • For proprietary tinn,
Scheme industries, medium assets for selling up new industrial/ partnership finn may gel
scale industries and service unit ror expanding modemi- Rs. 2 Crore (may raise
service sector zing, diversifying or units. · upto Rs.8 Crore)
• For profossional practice such as • For others the amount or
consultancy venture, tourism related loan is Rs. S Crore (may
activities, rendering medical services, raise upto Rs. 20 Crore on
setting up restaurants/inrrastructure, case to case basis and
infonnation technology projects, cons- subject to availability of
truction projects transport sector etc. clearance rrom SIDBI).
(ii) Composite :finy Sector For acquiring fixed assets and/or working • Rs. I .SO Lakh (Max.) only
Loan Scheme capital under Bangla Swanirbhar
(CLS) Kannasansthan Prak.alpa
(BSKP)
• Rs.0.50 Lakh (Max.) in
other Cases
(iii) Scheme for Service scc1or For acquiring new passenger, commercial 75% of Project Cost
Small Road vehicles and for meeting initial taxes, (Maximum Vehicle-20)
Transport insurances e1c.
Operators (SRTO)
(iv) National Tiny Sector, SSI and Same as applicable under General • Tenn Loan Rs. 32.50 Lakh
Equily Fund Service Sector Scheme (Max.)
Scheme (NEFS)
• son Loan Rs. 10.00 Lakh
(Max.)
(v) Single Tiny Sector, SSI and For acquiring both fixed assets and as Rs. 1.34 Crore (Max.)
Window Scheme Service Sector working ca()ital for acquiring current (Including tem1 and working
(SWS) assets capital loan

(vi) Technology Tiny Sector, SSI and • For acquiring capital equipment, need Rs. 0.67 cron: (max.)
Development and to units graduating to based civil work (not exceeding 25%
Modernization MSI (within or the Project Cost)
Scheme (TDMS) overall investment • For acquisition of additional land
ceiling or Rs. 375 • Acquisition or technical knowhow,
Lakh . in Plant and deigns, drawings and fashion forecast,
Machinery) fonn SSI where relevant to specilic product
group.
• Upgrad.ation or process 1echnology
and products with thrust on quality
improvement

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Nam.e of the Eligible Sector Purpose of Scheme Amount of Loan

Scheme
(vii) Technology Tiny Sector, SSI and • Te<:hnology upgradation and Same as applicable under
Upgradation Fund MSI (units may be modernization of production facilities General Scheme
Scheme for Jute new or existing) t Units engaged in twisting, wool
and Textile scouring and combing, synthetic
Industry filament yam texturing, crimping and
(11JFSm) twisting, spinning, viscose filament
yam weaving, knitting including non-
woven fabric embroidery and
technical textiles, gannents and made
up manufacturing, processing or
Cibers, yam, fabrics, gannents and
made-ups are eligible borrowers.
(viii) Equipment Tiny Sector, SSI and t Acquisition of machinery/equipment, Same as applicable under
Refinance Service Sector (units including DG set, indigenous/ General Scheme
Scheme(ERS) may be new or imported, which are nol related lo any
existing) specific project
• Additional need based civil work at
the existing location, miscellaneous
fixed assets, additional MWC (nol
exceeding 25% or the projecl cosl)
may also be considered.

(ix) Extended Tiny Seclor, SSI and • Acquisition or machinery/equipment, Same as applicable under
MSI (units may be including DG sel, indigenous/ General Scheme
Credit Facility
new or exisling) imported, which are nol related to any
S<:hcme (EFS)
specific project
• Additional need based civil work al
the existing location, miscell-aneous
fixed assets, additional MWC (nol
exceeding 25% of the project cost)
may also be considered.

(x) Working Small & Mediwn • For financing working capital Need based working capital
Capital-cum-Term Enterprise. Existing requirement less margin of
Loan Scheme borrowers or the 25%
(WCTLS) Corpora.lion having
excellent . .ck rec-
ords are primarily
eligible. However,
existing good units
not 8$iSted earlier
will also be consi-
demi on merit.

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 Ashlsh Kuamr Sana and Susanta Kanrar

Purpose wise financial assistances to MSMEs provided by the WBFC are shown in
Exhibit-3.
Exhibit 3 : Purpose-wise Loan Sanctioned for the Period from 2008-09 to 2009-10
Nature of 2009-10 2008-09 Since Inception
Assistance Number Amount Number Amount Number Amount
or Units (Rs. lo lakh) or Units (Rs. lo lakh) of Units (Rs. in lak.b)
New nrojects 125 10,889.28 201 11,069.54 16,704 127,348.19
Expansions 126 9,360.75 97 6,314.66 4,943 66,504.33
Diversifications I 300 2 146 49 1,093.17
Rehabilitations 5 112.59 0 0 65 1,021.32
Modemiz.ations 21 2,795.71 18 1291.55 252 9,162.87
Total 277 12,579.9393 318 18,821.75 22,013 2,27,142.88
Source : Annual Reports of WBFC
From Exhibit 3 it has been found since inception WBFC provided more assistances to new
project units. In the financial year 2009-10, 125 units were benefited from this institution with
an amount of Rs. I 0,889.28 lakh, although the amount was slightly higher in the previous year.
126 industrial units received financial assistance for their expansion purpose during the financial
year 2009-10 and the amount was Rs. 9,360.75 lakh, whereas in financial year 2008-09, Rs.
6,314.66 lakh was sanctioned for 97 units. Since inception to 2009-10, total 4,943 SSI units
got financial assistance for their ex.pansions and an amount of was Rs. 66,504.33 lakh sanctioned
to them. In financial year 2009-10, only one unit got assistance for diversification purpose
and an amount of Rs. 300 lakh was assisted. For modernization of existing units, WBFC granted
assistances to 21 different industrial units an amount of Rs. 2,795.71 lakh in the financial year
2009-10. Since inception till the financial year 2009-10, almost 22,013 MSMEs benefited from
the WBFC with an amount Rs. 2,27,142.88 lakh.
WBFC offers loan to different sectors of MSMEs. Exhibit-4 shows the sector wise loan
sanctioned for the period from 2008-09 to 2009-10.
Exhibit 4 : Sector wise Loan Sanctioned for the Years 2008-09 and 2009-10
2008-09 2009-10
Sector No. of Amount No. or Amount
Unit9 (Rs, In Lakh) Units (Rs. In Lakh)
Micro & SSI units 175 12210 227 13268
Small Road Transport 30 99 30 169
Operators (SRTO)
Medium Seale Enterorises (MSE) 36 6617 SI 10190
Tola! 241 18920 308 23627
Source : Annual Reports of WBFC
In the financial year 2009-10, 227 micro and SSI units got assistance from the WBFC an
amount of Rs.13, 268 lakh, whereas in the previous financial year the number was 175 and the

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loan sanctioned was Rs. 12,210 lakh. In case of Small Road Transport Operators sector, number
of units are same in both the years though amount of assistance much higher in financial year
2009-10. Medium scale units assisted by Rs. 10,190 lakh in the financial year 2009-10 whereas
in the previous year the amount was Rs. 6,6 I7 lakh.
Trend of loan disbursement and number of units of MSMEs benefitted for the period from
1999-2000 to 2009-10 are shown in Exhibit S.
Exhibit 5 : Trend of Loan Disbursement from 1999-2000 to 2009-2010
Year Number Amount Disbursed Loan disbursed per o/o or Increase or Decrease
or units (Rs. in Lakh) unit (Rs. in Lakh) in loan per unit
1999-00 494 7996 16.186 -
2000-01 667 9492 14.231 (12.078)%
2001-02 749 14400 19.225 35.092%
2002-03 595 14170 23.815 23.875%
2003-04 338 11778 34.846 46.319%
2004-05 JR'.? 18148 47.507 34.334%
2005-06 368 18996 51.619 8.655%
2006-07 263 16067 61.091 18.349%
2007-08 271 18920 69.815 14.280%
2008-09 241 18920 78.506 12.448%
76.711
'
2009-10 308 23637 24.878%
Source : Annual Report of \\ BFC, Various years
Descriptive Statistics
Variables Minimum Maximum Sum Mean Std. Deviation
Number of units 241.00 749.00 4676.00 425.0909 175.32054
Amount Disbursed 7996.00 23637.00 172524.00 15684.0000 4669.31286

Loan disbursed per unit is positively increasing over the years except the year of2000-0l.
Although the total amount of loan disbursed as well as number of units in the year 2000-01 was
more than the year of 1999-2000. From the above exhibit it has been found that during lhe period
minimum and maximum numbers of units were sanctioned loan assistance in the year 2008-09
and 2001-02 respectively. Total numbers of units were benefited during the period was 4676.
For proper managing the different types of activities relating to the receiving of loan
proposal, managing of such proposal, disbursement of loan, WBFC divided the entire state
into four categories. Exhibit-6 shows the disbursement of loan based on geographical spectrum.
Overall growth of loan disbursement is 12% in financial year 2009-10 in comparison with
the previous year 2008-09. Category '8' districts consisted the industry-oriented seven districts
and almost 75. 74% of the total loan has been disbursed in financial year 2009-10 whereas in
Category 'D' districts captured only 6.29% of the total loan in financial year 2009-10. Category

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'A' dislricts covered only by the Kolkata Municipal Corporation and loan disbursed to MSMEs
was 10.66% of the total loan in the financial year 2009-2010.
Exhibit 6 : Geographical Spectrum of Disbursement of Loan
Cate- Districts Loan Disbursement Loan Disbursement Percentage of
gory 2008-2009 2009-2010 growth/(fall)
Rs.in Percentage Rs.in Percentage w.r.t.to
Lakh Lakh 2008-2009
A. Kolkata Municipal 3,144 18.86% 1,993 10.66% (37)%
Corporation (KMDA area)
B. North and South 8,463 50.77% 14,155 75.74% 67%
24 PGS, Howrah,
Hooghly, Bardhaman,
Nadia & Purba Medinipur
C. Murshidabad, 577 3.46% 1,367 7.31% 137%
Birbhum, Maida,
Jalpaiguri and Darjeeling
D. Purulia, Bankura, Pashchim 4,484 26.91% 1,173 6.29% (74)%
Medinipur, Uttar and Dakshin
Dinajpur, Coochbehar
and Sunderban Areas
Total 16,668 100% 18,688 100% 12%
Loan sanclioned, dISbursement, recovery and number ofumts of MSMEs benefitted for the
period from 2000-01 to 2009-10 are shown in Exhibit 7.
Exhibit 7 : Loan Sanctioned, Disbursement, Recovery and No. of Sanctioned Units for
the Period from 2000-2001 to 2009-2010
Year Sanctioned Loan Sanctioned Loan Disbursement Total Recovery
Units (Rs. in Lakh) (Rs. in Lakh) (Rs. In Lakh)
2000-01 667 9492 6879 9327
2001-02 795 14400 9586 10137
2002-03 595 14170 10600 12484
2003-04 338 11778 10137 14433
2004-05 377 17803 11098 15774
2005-06 368 18996 11472 11824
2006-07 263 16067 13525 12849
2007-08 271 21955 14537 15727
2008-09 241 18920 16668 15907
2009-10 308 23637 18688 18206
Total 4223 167218 123190 136668

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Descriptive Statistics
Variables Minimum Mutmum Mean Std. Deviation
Sanctioned Units 241.00 795.00 422.30 192.90703
Loan Sanctioned 9492.00 23637.00 16721.80 4414.89655
Loan Disbursement 6879.00 18688.00 12319.00 3540.85906
Total Recovery 9327.00 18206.00 13666.80 2821.57733
Correlation between Loan Sanctioned and Loan Disbursement
Variables Tests Loan Sanctioned Loan Disbursement
Loan Sanctioned Pearson Correlation I .867(")
Sig. (2-tailed) .001
N 10 10
Loan Disbursement Pearson Correlation .867("•) I
Sig. (2-tailed) .001
N 10 10
•• Correlation is significant at the 0.01 level (2-tailed).
It has been found from the above exhibit that tolal amount of loan assistance sanctioned
during the period from 2000-01 to 2009-10 was Rs. 167,218 lakh for 4223 units. At the same
period Rs.123,190 Lakh was disbursed and Rs.136,668 lalch was recovered from the MEMEs.
The loan recovery rate is highly satisfactory. The average loan sanctioned, disbursed and
recovery were Rs.16,721.80; 12,319.00; 13666.80 lalch respectively. It is further observed that
there is a positive correlation between loan sanctioned and disbursement which is .867 and
significant at the I% level.
Along with financial assistances, WBFC also provides non-financial assistances which are
basically fee-based services to the MSMEs. Some of the services mentioned below:
• Project advisory and investment appraisal of small scale units;
• Project conceptualization and related services. It includes the followings- (i) guidance
in relation to selection of projects; (ii) preparation of feasibility studies, capital structuring,
techno-economic feasibility, financial engineering, project management design etc.
• Provides guarantee for loans raised by industrial units from commercial banks and state
cooperative banks.
• Subscribe the shares, bonds and debentures of industrial concerns but not of any company
having limited liability.
+ UndeIWrite the issue of shares, bonds and debentures of industrial concerns.
+ Documentation of various project documents.
• Placement of debt-equity including (i) design of the structure of instruments (ii) placement
of instruments with financial institutions, bank etc.

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 Ashlsh Kuamr Sana and Susanta Kanrar

• Provides guarantee for loans raised by industrial concerns which is re•payable within a
period not exceeding 20 years and which are floated in the public market.
• Provides guarantee for deferred payments in cases where industrial units have purchased
capital goods on a deferred payment basis.
t Assist in organizational structural changes like : (i) analysis of operational performance
(ii) study of existing organizational structure (iii) study of the existing statures and rules
and regulations (iv) market analysis with respect to products (v) review of domestic and
international scenario (vi) valuation of fixed assets and inventory (vii) advising on formation
of new entity (viii) preparation of relevant agreements/legal documents .
• Provides guarantee for deferred payments in cases where industrial units have purchased
capital goods on a deferred payment basis etc.

VI. Conclusion and Suggestions

State Financial Corporations are playing an active role for promoting and developing ofMSMEs
throughout the country. The activity of WBFC towards the development of MSMEs within
its limited financial capacity is also praiseworthy. WBFC is also continuously trying to reach
more and more small•scale units in the state of West Bengal. Its increasing rate of loan assistance
brings MSMEs form sick units to a viable one in so many cases. It has been found that few
districts of the state are not getting this assistance adequately. The reason might be either
insufficient number of encouraging entrepreneurs, or unable to set up new projects in their
areas. So, WBFC should establish more branches in rural districts particularly in Birbhum,
Coochbehar, Dakshin Dinajpur, Maida, Murshidabad and Paschim Medinipur. WBFC should
arrange some short·tenn courses for entrepreneur, relating to training and other technical issues.
To make an effective promoter of the MSMEs sector, it may also offer awareness training
programmes to the potential small entrepreneurs even with the help of District Industries Centre
(DIC) and also organize to assist special type soft loan for the MSMEs so that inclusive growth
would be achieved. Their loan payment procedures also require making someway easy so that
lhe small entrepreneur can understand and access financial and other assistance.

Rererences
Books & Journal Articles
Bhole & Mahakud (2009), "Financial Jnslirulions and Markets, " Tata McGraw Hill Education Private
Limited, New Delhi.
Gomez Clifford (2008), "Financial Markets, Jnstitulions & Financial Services", Prentice-Hall of India
Private Limited, New Delhi.
Gurusamy. S (2009), "Financial Markel and Jnslitulions", Tata McGraw Hill Education Private Limited,
New Delhi.
Machiraju H R (2002), "Indian Financial·System", Vikas Publishing House Pvt. Ltd, Noida

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Madasamy V. and A Joseph Xavier (2002), Production and Marketing of KVI Products in Virudhunagar
Dislricy, Tamil Nadu, Indian Journal of Marketi11g, Vol. XXXII, No. I 2, Dec, pp. 23-32.
Manickavel S (1996), Organizational Life Cycle Model for Small Business Development and Survival",
Abhigyan, Vol. XV, No. J, pp. JJ-39
Peter Andreas (1996), "Role ofD/Cs in the Promotion ofSmall Scale /11d11stries in Jammu and Kashmir",
Unpublished Ph.D. Thesis in University of Jammu, pp 43-384
Reddy M Kasi (2003)," Entrepreneurial Process among Scheduled Castes and Scheduled Tribes in Andhra
Pradesh", The Indian Journal of Commerce, Vol. 56, No. I, Jan-Mar, pp. 83-87
Satyanarayan A and Chandra S. Misra (200 I), "Management of Industrial Sickness: An Internal Exercise",
Strategy-The Jour11al for Management Development, Vol. V, November, pp. SB-61
Tagoe Noel, Ernest Nyarko Nyaarko and Ebenezer Anuwe-Aarh (2005), "Financial Challeges Facing
Urban SMEs under Financial Sector Liberalization in Ghana", Journal of Small B11si11ess
Management, Vol. 43, No. J, pp. 331-343.
Reports
• Annual Report of WBFC, Various Years
• SFC Act ( l 9S I & 2002 and various amended)
, MSMED Act 2006
• Report on Banking-Industrial Development Bank of India
• RBI Reports on Financial Institutions, Various Years
• Annual Report of Industrial Development Bank of India
• Annual Reports of SIDBI, Various Years

Websites Co11sulted
• www.rbi.org
• www.idbi.org
• www.msfcfinance.com
• www.msme.org
• www.wbfc.org

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