Self Employment Scheme

The Department of National Handicapped Finance and Development (NHFD) has been set by the Indian Government to promote economic and development activities undertaken by persons with disabilities. Under the NHFD department, self-employment scheme for the disabled persons was developed to support them financially by providing the loan facilities for trading activity. In this article, we look at the procedure for applying Self Employment Scheme in detail.

Purpose of the Loan      

Self Employment Scheme is to afford financial assistance to the economically weaker section of the disabled for establishing the business in their area.

Eligibility Criteria

The eligibility criteria for applying Self Employment Scheme are listed below:

• The beneficiary should be the disabled person or belonging to the cooperative society of the disabled person.
• The beneficiary should possess the minimum degree of disability not less than forty per cent.

Income Criteria

The income criteria for applying to this scheme are specified here:

• Rural Areas: Unemployed, disabled persons whose family income is below Rs.22,000/ per annum are eligible for availing loan facility.
• Urban Areas: Unemployed, disabled persons whose family income is below Rs.24,000/ per annum are eligible for availing loan facility.
• In the case of self-dependent disabled, the individual income will be taken into account.
• The minimum age limit for availing loan is 18 years, and the maximum age is 55 years.
• The financial eligibility is also applicable to a member of a cooperative society of disabled persons, an association of disabled persons and firm raised by disabled persons seeking financial assistance from NHFDC.
• The applicant must be a citizen of India.
• The applicant should be the permanent resident of the state where the project has been set up.
• The applicant should possess an education qualification or experience relevant to the project.
• The applicant should not have any outstanding debt from any other financial organisation.
• The applicant should be from the agricultural background, and project location should be in the agricultural area if seeking loan under the scheme “Assistance for agricultural activities”.

Type of Fund

NHFDC can provide the following types of loans under the scheme:

Term Loan

NHFDC can grant Term Loan to a disabled entrepreneur or group of disabled entrepreneurs. Under the Term Loan Scheme, loans are provided up to 100% of project cost are as follows:

•  The project with high working capital, the quantum of loan will depend upon the total cost of the project.
•  If the total value of the scheme does not exceed Rs.50,000, the scheme will be handled as a composite loan, and no distinction will be given between fixed asset and working capital. In such cases, loans will be issued up to 100% of the total value.
• If the unit cost of the project is above Rs.50,000 but not more than Rs.1,00,000 then the ratio of fixed assets to working capital will not be more than 1:3 ratio.
• If the unit cost of the scheme is more than Rs.1.00 lakh, only 50% of the working capital requirement will be included in the project value as working capital margin to reach the unit value of the project, outstanding amount of the working capital has to be financed by the banks as the cash credit limit.

Project Details

The details of the project cost are explained below:

Project Cost	NHFDC Share	Channelising Agent Share	Promoter’s Share
Below Rs.50,000	100%	Nil	Nil
Above Rs. 50,000 and up to 1 lakh	95%	5%	Nil
Above Rs. 1 lakh and up to Rs. 5 lakhs	90%	5%	5%
Above 5 lakhs	85%	5%	10%

Margin Loan (Seed Capital)

• Seed Capital assistance is given to entrepreneurs availing term loan from State Financial Corporation (SFC) / other financial institution.
• Seed Capital assistance aims to meet the gap in the equity specified by the term lending institutions as per their debt-equity ratio.
• The entrepreneur has to arrange a minimum of 20% of the equity.
• NHFDC may provide Seed Capital assistance up to 80% equity required to be funded by the beneficiary for the total project cost up to Rs.50 lakhs.
• Seed Capital assistance is interest-free, but the channelising agencies will levy a service charge of 1%  per annum from the beneficiaries and pay 0.5% per annum to NHFDC.
• Seed Capital has to be repaid within a maximum duration of 7 years from the date of the first disbursement. In case the seed Capital assistance remains unpaid beyond seven years, the same will be changed into term loan at the expiry of the seventh year at an interest applicable to NHFDC term loan and to be paid within three years in quarterly instalments from the date of conversion into a term loan.
• Projects considered for Seed Capital assistance will not be eligible for any other financial aid from NHFDC.

Rate of Interest

The rate of interest of the loan amount is explained below:

Loan Amount	Interest Rate	Interest (Channelising Agent )	Total
Loan amount less than Rs.50,000	3%	2%	5%
Loan amount above Rs. 50,000 and up to 1 lakh	4%	2%	6%
Above Rs.1 lakh and upto Rs.5.00 lakhs	7%	2%	9%
Above 5 lakhs	8%	2%	10%

Note: For women with disability, a rebate of 2% on interest is provided. For timely repayment of loan rebate of 0.5% on interest is provided.

Sanction of Loan

• The loan will be sanctioned by the channelising agency for final disbursement to a beneficiary with the previous approval of NHFDC. The channelising agency will forward the loan applications for the approval of NHFDC.
• For a loan under assistance for skill and entrepreneurial development, the application will be received and appraised by NHFDC directly. The investment will be approved and disbursed by NHFDC.
• Board of Directors of NHFDC will approve all projects with loan component exceeding Rs.10 lakhs.

Recovery of Loan

• The entire loan should be repaid within a reasonable period but not exceeding seven years including the moratorium period. The repayment will be on half yearly/ quarterly/monthly basis. For agriculture and horticulture projects repayment every year. The repayment term will be worked out during the appraisal and sanction of the scheme by income potential of the proposed project.
• A proper moratorium period depending on the merit and requirement of the project will be allowed.
• A rebate of 0.5% upon the interest is given for timely payment for all instalment.
• A penal interest of 3% will be imposed from the channelising agency for any default in timely repayment. The channelising agency will also impose 3% of panel interest from the beneficiary for default in the repayment.

Security

• The guarantee is required from concerned State Government for the sanction and disbursement of the loan by NHFDC to State Channelising Agencies. In case of default, the NHFDC will be free to request the guarantees or deduct its instalments from the future projects of the relevant agency to be financed.
• NHFDC also accepts the Bank Guarantee or any other form of security acceptable to it for grant of loans.