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Cluster Financing
Cluster Financing
Chapter V
In this chapter, we discuss the survey results with respect to the funding scenario in the Indore cluster (for instance, procurement of funds, sources of funds and difficulties in obtaining finance).
The survey revealed that as much as 84% of the companies find it easy to procure funds. A small proportion of 8% of the companies find it difficult in procuring funds. Chart 5.1: Funding scenario (%)
About 71% of the companies procure finance from public sector banks. About 29% of the sample companies procure funds from private banks. Chart 5.2: Sources of funds for pharma companies in the cluster (%)
Among the surveyed companies, around 57% have taken loans in the past two years. The survey revealed that about 36% of the companies in the sample foresee financing requirements for their business over the next two years.
The survey revealed that 70% of the companies did not face any major obstacles in procuring funds. Among the firms which faced obstacles in obtaining credit, 15% indicated the conservative lending approach of banks/financial institutions to be a major obstacle. About 15% of the respondents attributed the cumbersome procedure, collateral requirements and hidden charges as moderate obstacles in obtaining credit. Table 5.1: Degree of obstacles faced in obtaining credit (%)
Obstacle/Response Major obstacle Moderate obstacle Minor obstacle Not an obstacle
Source: D&B Study
Cumbersome procedure 0 15 15 70
Insufficient assistance 0 0 29 71
Lack of transparency 0 0 28 72
Collateral requirements 0 14 16 70
Hidden costs 0 15 14 71
The survey revealed that more than half of the companies (around 53%) find it very easy to procure funds. A small proportion of 7% of the companies find it difficult to procure funds. Chart 5.4: Procurement of funds (%)
More than 90% of the companies procure finance from public sector banks. Only around 7% of the sample companies procure funds from private sector banks. Chart 5.5: Sources of funds for textile companies in the cluster (%)
Among the surveyed companies, around 80% have taken loans in the past two years. Further, a significant 40% of the companies in the sample foresee financing requirements for their business over the next two years.
According to the survey, high interest rates, along with hidden charges and lack of transparency are three major obstacles faced by the companies in procuring funds. Further, conservative lending approach and insufficient assistance are some of the moderate obstacles faced by the companies in obtaining credit. Table 5.2: Degree of obstacles faced in obtaining credit (%)
Obstacle/Response Interest rates Major obstacle Moderate obstacle Minor obstacle Not an obstacle
Source: D&B Study
Cumbersome procedure 0 7 13 80
Insufficient assistance 0 13 13 74
Lack of transparency 7 7 13 73
Collateral requirements 0 7 20 73
Hidden costs 13 20 7 60
20 7 13 60