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Entrepreneurship

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Entrepreneurship ­ MGT602
VU
Lesson 37
CAPITAL SOURCES IN PAKISTAN
PROVINCIAL LEVEL INSTITUTIONS
1. Punjab Small Industries Corporation (PSIC)
In the province pf Punjab PSIC was established in 1972 as an autonomous body for the promotion and
development of the small-scale industries in the province. The PSIC covers the critical areas of investment
promotion and provision of credits for setting up new industries and modernization of the existing ones. It
also promotes the common facility center, technology transfer, guidance, handicrafts development and
design facilities.
(a) Financing and Loans
PSIC is providing two types of loans to its clients, working capital and capital investment
loans. The maximum limit of loan is RS. 7.5 Lac. There are district officers appointed for
monitoring the loan recovery and in the case of unrecoverable loans, they are transferred
to the revenue authorities. PSIC has managed to recover 81.6% of all loans given out.
Disbursing Rs. 1768.537 million to 6339 units through its 8 regional offices ( till 31-02-
2001). The debt equity ration for loan up to Rs. 7.5 Lac is 70:30.
(b) Industrial Estates
PSIC has developed 14 industrial estates in various areas of the Punjab. The costs of land
within these industrial states have been subsidized to allow the development of the small-
scale sector.
(c) Services and Programs
PSIC has also launched "Rural Industrialization Program" to control unemployment and
strengthen the marginal household income through stimulation of industrial growth in
the urban and rural areas of the Punjab.
PSIC has established various types of service centers e.g. metal industries development
center, Sialkot, Engineering service centers. Gujranwala, institute of pottery
development, Shahdara etc
2: Sindh Small Industries Corporation (SSIC)
SSIC was established in 1972 having motives to indulge into promotional activities of small-scale industries
in Sindh. The objectives of SSIC include financial assistance, education of craftsman, census and survey of
cottage and small industries, procurement and distribution of raw materials to artisans and craftsman. SSIC
was also involved in the Prime Minister's self-employment scheme for the dispersal of the micro credits.
(a) Industrial Estates and Colonies
The SSIC has established 17 industrial estates in Sindh. Total number of plots developed
there are 1938 and there are 302 units working utilizing 571 plots. There are six different
craftsman colonies established having 92 shops.
(b) Financing Schemes
The SSIC also launched a credit scheme in 88,/89. The rate of markup was 7% for
industrial estates and 11% for factories outside the industrial estates. The scheme was
discontinued in 1993 due to shortage of funds although SSIC has created already 526
jobs and disbursed 20.6 million rupees. In October 1992, a self-employment scheme was
started for locally manufactured machinery (LMM). The loan ceiling is 1 million with the
markup rate of 14%. The total amount disbursed to 171 units is rupees 98 million. The
recovery rate is 47%.
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Entrepreneurship ­ MGT602
VU
3. Small Industries Development Board (SIDB) NWFP
The SIDP was established in 1972. It is playing a promotional role to support and assist the development
of small and cottage industry in the province. The SIDB is an autonomous body, focusing on manpower
training, model projects and industrial infrastructure. It has 14 regional offices in the different cities of
NWFP.
a. Training Centers
SIDB has established carpet centers in five cities of NWFP and has trained 1327 number
of trainees. The SIDB has established "Patti" training centers, textile training and
"gabba" training centers which has trained 151 trainees.
b. Development Programs and Model Projects
SIDB has also launched various women development programs, which has trained 2062
women trainees in a number of fields of work. The SIDB is also involved in establishing
other various kinds of model projects for wood working, leather goods, wool spinning,
ceramic device etc. The total number of trainees trained is about 8000.
c. Industrial Estates
SIDB has established 9 industrial estates. There are a total of 1620 plots and the total
jobs created are 4405.
d. Financial Assistance
SIDB is also managing different credit schemes for small industries. To date, a total
number of 198 million rupees have been disbursed to 452 enterprises. SIDB is also
disbursing credit under the self-employment scheme.
4. Directorate of Industries (Balochistan)
The directorate of industries was formed in 1976 and it looks after all the promotional schemes for SMEs.
Further more, the directorate is also involved in providing various kinds of advisory and consultancy
services.
a. Training Centers
The directorate operates sixty-three training centers in various trades, one service center,
5 sales and display shops and one small-industries estate. Of the 63 training centers,
about third are carpet centers, seven are embroidery centers and the others cover areas
like tailoring, wood work, marble work, mazri and durree production.
FINANCIAL INSTITUTIONS
In order to meet this financing requirement, a number of institutions have been formed. These are:
Small Business Finance Corporation (SBFC).
Youth Investment Promotion Scheme (YIPS).
Regional Development Finance Corporation (RDFC).
Industrial Development Bank of Pakistan (IDBP).
A few commercial banks such as Allied Bank Limited and First Women Bank Limited have also started
schemes to provide loans to low-income clients who are generally not able to access the formal source of
financing.
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Entrepreneurship ­ MGT602
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Small Business Finance Corporation (SBFC)
It was established in 1972 as a federal entity. The main aim was at the time of establishment, to assist small
entrepreneurs for self-employment and setting up cottage industry. The mark up was kept lower; the
majority lending was towards self-employment leaving only 2% for small industries.
Restructuring SBFC
The management took over in year 2000 and restructured the entire corporation. The restructuring was
based on the facts that SBFC has deviated from its main aim resulting in a weak balance sheet. 70% of its
credit portfolio was infected by non-performing loans. Usage of information technology was non-existing
and the management was ineffective. There were 1400 employees at 96 branches. The internal control and
management was highly ineffective with poor quality of human resources, poor work ethics, poor
infrastructure and non-existence of training and development culture.
Restructured SBFC
The total number of branches has been reduced to 63 around 270 people opted for golden
handshake. Separate human resource department has been setup, a separate information technology
department was established to spread IT knowledge among SBFC employees, and a treasurer division has
been setup in Karachi, which is responsible for management of cash and surplus funds.
Financing Programs
SBFC is financing various types of projects such as Gem Stones, cotton ginning, textile apparel, and
marble processing etc. currently SBFC can disburse up to rupees 1.5 million for a project having total cost
of five million and lend up-to 50% of the total project cost of small businesses but for that total project
cost should not exceed 50 million. It can also share up to 30% of total projected cost for a medium sized
industry where the total project cost does not exceed rupees 100 million.
Regional Development Finance Corporation
The Regional Development Finance Corporation was established in 1985 having paid up capital of Rs.
172,500 million and with the specific objective of promoting the industrialization of the less developed
areas of the country. RDFC is a multi-product financial institution. It participates in money market, capital
market and micro credit delivery. The head office of RDFC is located at Islamabad and a network of 14
branches carries out its operations across the country. Besides financing of medium to large sized industrial
concerns RDFC has been involved in disbursing micro and small sized loans. However, over the last few
years the organization has restrained from forwarding long-term project loans and currently is in the
process of recovering loans from the borrowers.
Financing Programs
Various schemes have been initiated with credit lines from local as well as foreign sources. It has also
started a micro credit scheme called the Credit for Rural Women (ICRW) under which small loans ranging
from Rs. 25000 to Rs. 200,000 are disbursed to women entrepreneurs on subsidized interest rates of 10%.
The total disbursements under the scheme stand at Rs. 2.5 million. RDFC was allocated a credit line of Rs.
167 million for the self-employment schemes out of which a total of Rs. 80 million was disbursed.
Industrial Development Bank of Pakistan
IDBP is Pakistan's one of the oldest development financing institution created with the primary objective
of extending term finance for investment in the manufacturing sectors in the economy. Over the years
however, the bank has emerged as an institution fostering the growth and development of SME sector
stimulating industrial progress in the rural or less developed regions of the country. As a part of its services
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Entrepreneurship ­ MGT602
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the bank offers business development assistance through providing information on potential small-scale
investment projects. In this regard numerous pre-feasibility studies have been developed for identification
of viable sub sectors.
The Role of NGOs
The NGOs are working on socio-economic sector in the development of SMEs. They are privately owned
organization registered under the social welfare act. They normally work through grants, aids or donation
based finances. They are having a very constructive role in the SME development. The special property of
this sector is gender development. They at some places tried to replicate Grameen banks model.
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Table of Contents:
  1. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:DEFINITION OF ENTREPRENEUR
  2. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:Possibility of New Venture Formation
  3. ENTREPRENEURIAL PROCESS/START UPS:GOVERNMENT AS AN INNOVATOR
  4. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND:ENTREPRENEURIAL PROCESS
  5. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…)
  6. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):CLIMATE FOR ENTREPRENEURSHIP
  7. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):PROBLEMS AND SUCCESSFUL EFFORTS
  8. THE INDIVIDUAL ENTREPRENEUR:ENTREPRENEURIAL BACKGROUND AND CHARACTERISTICS
  9. THE INDIVIDUAL ENTREPRENEUR (continued…):Personal Values, Work History, MOTIVATION
  10. THE INDIVIDUAL ENTREPRENEUR (continued…):ROLE MODELS AND SUPPORT SYSTEMS
  11. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES:INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES, Minority interests
  12. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):DIRECT FOREIGN INVESTMENT
  13. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):BARRIERS TO INTERNATIONAL TRADE
  14. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):ENTREPRENEURIAL PARTNERING
  15. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):SOURCES OF NEW IDEAS
  16. CREATIVITY AND THE BUSINESS IDEA:METHODS OF GENERATING NEW IDEAS, CREATIVE PROBLEM SOLVING
  17. CREATIVITY AND THE BUSINESS IDEA:PRODUCT PLANNING AND DEVELOPMENT PROCESS
  18. LEGAL ISSUES FOR THE ENTREPRENEUR:NEED FOR A LAWYER, PATENTS
  19. LEGAL ISSUES FOR THE ENTREPRENEUR:TRADEMARKS, LICENSING
  20. LEGAL ISSUES FOR THE ENTREPRENEURS:PRODUCT SAFETY AND LIABILITY, INSURANCE
  21. CREATING AND STARTING THE VENTURE:WHAT IS THE BUSINESS PLAN, PRESENTING THE PLAN
  22. CREATING AND STARTING THE VENTURE (Continued….):WRITING THE BUSINESS PLAN
  23. CREATING AND STARTING THE VENTURE (Continued….):
  24. CREATING AND STARTING THE VENTURE (Continued….):WHY SOME BUSINESS PLANS FAIL, MARKETING PLAN
  25. THE MARKETING PLAN:MARKET RESEARCH FOR THE NEW VENTURE
  26. THE MARKETING MIX:STEPS IN PREPARING THE MARKETING PLAN
  27. THE ORGANIZATIONAL PLAN:DEVELOPING THE MANAGEMENT TEAM, LEGAL FORMS OF BUSINESS
  28. THE ORGANIZATIONAL PLAN (Continued….)
  29. THE ORGANIZATIONAL PLAN (Continued….):THE LIMITED LIABILITY COMPANY
  30. THE FINANCIAL PLAN:OPERATING AND CAPITAL BUDGETS
  31. THE FINANCIAL PLAN (Continued….):PRO FORMA INCOME STATEMENTS, PRO FORMA CASH FLOW
  32. PRO FORMA SOURCES AND USES OF FUNDS:PERSONAL FUNDS, FAMILY AND FRIENDS
  33. PRO FORMA SOURCES AND USES OF FUNDS:COMMERCIAL BANKS
  34. BANK LENDING DECISIONS:SMALL BUSINESS ADMINISTRATION LOANS
  35. SOURCES OF CAPITAL:GOVERNMENT GRANTS
  36. SOURCES OF CAPITAL:PRIVATE PLACEMENT, BOOTSTRAP FINANCING
  37. CAPITAL SOURCES IN PAKISTAN:PROVINCIAL LEVEL INSTITUTIONS, FINANCIAL INSTITUTIONS
  38. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  39. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  40. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  41. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  42. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  43. NEW VENTURE EXPANSION STRATEGIES AND ISSUES:JOINT VENTURES, ACQUISITIONS
  44. NEW VENTURE EXPANSION STRATEGIES AND ISSUES (Continued….):DETERMINING THE PRICE FOR AN ACQUISITION
  45. ENTREPRENEURSHIP & PAKISTAN:GENDER DEVELOPMENT STATUS WOMAN AS AN ENTREPRENEUR IN PAKISTAN