Modi government may be trying to project a pro-backward community image but that does not seem to be coming out through its schemes. The venture capital fund for scheduled caste entrepreneurs, meant to fund entrepreneurial dreams of scheduled caste businessmen, seems to be failing in its objective of doing so. The fund managed by IFCI, has not made any investment in the current financial year (2017-18) so far. In 2015-16, it invested only Rs one crore out of its allocation of Rs 102 crore.
In its fiftieth report on demand for grants, the parliamentary standing committee on social justice and empowerment said that since introduction of this scheme in 2014-15, the allocation for this scheme is on wane.
"In 2015-16, the BE of Rs 102 crore was reduced to Rs 0.01 crore because IFCI, the implementation agency of the scheme, could not spend the allocated funds. Since then very less amount has been allocated under this scheme every year and there is "nil" utilisation in 2017-18", said the committee in its report.
A venture capital fund for scheduled castes was announced in 2015 and a corpus of Rs 200 crore was assigned to IFCI.
There are over 20 crore scheduled caste people in the country, but only 2 per cent are in business. The venture fund aims to change that. With awareness levels being low, many aspiring scheduled caste entrepreneurs do not even know about the availability of this window.
One of the criteria to get funded from IFCI is that the business should be registered as company. However, the problem is that most of the small businesses in India are run as proprietorship, essentially one man business. There are 3.61 crore MSMEs in India out of which 95 per cent are not registered.
Since entrepreneurs at that stage are sceptical about diluting equity, the investments happen in the form of debt. It charges an interest rate of 10 per cent, as opposed to banks which charge anywhere between 13.5-15 per cent.
The scheme has been recently revised and the rates have been further reduced. It will now offer debt at 8 per cent and 7.75 per cent in case of women or disabled entrepreneurs. The minimum limit of the financial assistance has also been reduced from Rs 50 lakh to 20 lakh.
So far, IFCI has sanctioned and disbursed Rs. 239.12 crore and Rs.163.92 crore to 63 and 50 beneficiaries respectively since the launch of the scheme.
Taking note of the fact that this scheme is entirely a new approach by the department in the field of promotion of entrepreneurship among scheduled castes, the committee recommended the department to set up a strong and effective mechanism to ensure that the allocated funds are utilised in full.