Financing retirees

Financing retirees

Entrepreneurship should not be forbidden for retired employees

Today there are many retired government employees who have still appetite to work and be productive as entrepreneurs. But the financial constraints deny most of them to explore their potential. When they look at the banking and financial institutions to seek funding for their entrepreneurial projects, they get disappointed. The retired employees are hardly trusted by banks and financial institutions for business activities, as they feel age is not on their side. 

However, banks, of course, have loan schemes in place for them, but only under consumer loan segment. Here the quantum of finance is too low to meet their project requirement and higher rate of interest is also a concern.

But the fact is that in the modern times, retired government employees still have time on their side. Imagine a person retiring at 60, living till at least 75 (if not more), perhaps physically weakened, but still mentally at the top. What do they do with such a long retirement? And besides the fact that the increase in life expectancy leaves retirees with too much time on their hands and their skills un-utilized.

In so many cases, people start working after retirement in private sector. They get lucrative salaries and perks which are some times higher than what the government was giving them. 

So, helping the retired employee to capitalize on potential to engage themselves in the productive activities makes a sense. Precisely, self-employment ventures through entrepreneurship should not be a forbidden area for the retired government employees, if they have skill and appetite for it. 

In the context of J&K State, opportunity has been thrown for the retired state and central government employees to explore their skill in entrepreneurship. J&K Bank has taken a lead in the banking fraternity by introducing a finance scheme (‘Start Again’) to finance start-ups of retired employees below the age of 65 years in greenfield enterprise in manufacturing and services sector.   

Some of the indicative ventures eligible for finance under the scheme include media & entertainment, tourism, healthcare, IT & allied services, food product sector, arts and crafts etc. Besides, ventures like fitness centre, kinder garden / pre-school, formal school, crèches, tuition centers also fall under the ambit of the ‘Start Again’ scheme. 

Notably, projects allied to agriculture such as pisciculture (fishery), apiculture (beekeeping), poultry, livestock, dairy, agri-clinics & agribusiness centers, aggregation agro industries, food & agro processing, etc. are also eligible for funding.

Hand holding of the retired employees seeking financial assistance for his/her entrepreneurship venture is part of the scheme. The bank shall be provided guidance to them to set up business enterprise.

Quantum of Finance is linked to the nature of activity and ranges between Rs.2.00 Lakh to Rs. 20.00 Lakh. However, the scheme has a provision of extending enhancement facility or an additional working capital facility to such units of the retired employees which generate employment. The enhanced / additional facility ranges from Rs 1.00 Lakh to Rs. 2.00 Lakh which will be basically funding the salary component of the employees working in the unit. 

The loans are primarily secured by way of hypothecation/assignment/mortgage (registered or equitable mortgage) of all the assets (fixed and current) financed by the bank. In collateral terms, the loans up to Rs.10.00 Lakh are covered under credit guarantee scheme for which the fee shall be borne by the bank. Loans above Rs.10.00 Lakh, are secured either through credit guarantee scheme for which fee shall be borne by the borrower, to be paid upfront to the trust; third party guarantee of two persons or through mortgage of property, registered or equitable,

The loan is to be repaid within 7 years including a repayment holiday of two years.

Funding the entrepreneurship projects of the senior citizens (retired government employees) is a bold step. It is a confidence booster to this segment of society and will go a long way to give them the feeling that they are still considered as strength of the socio-economic set-up. Precisely, this scheme has a huge positive impact on the social set-up. 

However, there is a word of caution for the prospective entrepreneur (retired employee). There’s an adage: Look before you leap. Cross check the circumstances around you before taking a loan for setting up the unit. Avail loan only when there is absolute need for it. A big loan outstanding will be detrimental not only to your finances but to your family too.

(The views are of the author and not that of the institution he works for)