CHAPTER IV ANALYSIS OF THE ROLE AND IMPACT MADE BY KFC IN THE DEVELOPMENT OF TOURISM INDUSTRY IN KERALA

CHAPTER IV ANALYSIS OF THE ROLE AND IMPACT MADE BY KFC IN THE DEVELOPMENT OF TOURISM INDUSTRY IN KERALA This chapter explains the role played and the impact made by KFC in the development of tourism industry in Kerala. The chapter also identifies certain problems confronted by tourism entrepreneurs in obtaining financial assistance from KFC. The role played by KFC in the development of tourism industry in Kerala is explained in Part-I. The problems encountered by tourism entrepreneurs in availing loans from KFC is explained in Part-II and The impact made by KFC in the development of tourism industry in Kerala in Part- III. PART- I ROLE OF KFC IN THE DEVELOPMENT OF TOURISM INDUSTRY IN KERALA The Kerala Financial Corporation plays an important role in developing the tourism industry on par with other industries in Kerala. The role played by Kerala Financial Corporation are: as financial intermediary by giving funds for meeting their varied requirements; 203

as a catalytic agent of the Government in making impact on its sales revenue, profit, employment generation and overall economic development through tourism industry; as a creator of money; as a promoter by means of providing funds to new and existing entrepreneurs for starting new tourism ventures or for diversifying their business and as a counselor by means of giving training, advices, consultancy services, etc. for further development and growth of tourism sector in Kerala. The following are the variables identified for evaluating the role of KFC with respect to the nature and form of financing tourism units: 1. Amount of loans disbursed 2. Type of loans 3. Purpose of loans 4. Stages of financing 5. Interest rate of loans 6. Cost of borrowings 7. Type of expenses incurred in cost of borrowings 8. Training rendered by the agency 9. Hand holding support of the agency 204

10. Guidance and assistance in implementing the projects 11. Guidance and support in monitoring of the projects 12. Source of information 13. Financial assistance to new entrepreneurs of tourism 14. Financial support for modernization/expansion 15. Schemes for additional facilities (hotels and resorts) 16. Takeover of loan facility 17. Schemes for fairs and exhibitions 18. Schemes for infrastructural development 19. Scheme for development of women entrepreneurs 20. Co-operation and support of officials 21. Reward for prompt payments 22. Convenient repayment schedule 23. Premature closing 24. Approach of agency at times of default 25. Inspection of the units 205

1. Amount of loans disbursed The amount of loan actually availed in absolute terms is also looked into. It is seen that the respondents availed loans ranging from less than Rs. 10 lakhs to Rs. 20 lakhs and above. It is noticed from Table-4.1 that 140 respondents (69 per cent) have obtained loans from KFC to the tune of Rs. 10 lakhs to Rs. 20 lakhs. 40 respondents (19.7 per cent) obtained loan in the category of more than Rs. 20 lakhs. 23 respondents (11.33 percent) have taken loans in the category of less than Rs. 10 lakhs from KFC. The analysis shows that 50 respondents (26.17 percent) of non KFC units obtained loans in the category of less than Rs.10 lakhs. 135 respondents (70.68 percent) have taken loan in between Rs.10 lakhs to Rs.20 lakhs. 6 respondents (3.14 percent) have taken loans in the category of more than Rs. 20 lakhs. The aggregate 275 respondents (69.79 percent) have availed loan in the category of Rs. 10 lakhs to Rs. 20 lakhs. 73 respondents (18.53 percent) have obtained loan up to Rs.10 lakhs and 46 respondents (11.67 percent) have taken loan of more than Rs.20 lakhs. In conclusion it is clear that majority of them obtained loans ranging between Rs. 10 lakhs and Rs. 20 lakhs and there is varying amount seen in between KFC units and non KFC units (Table 4.8). It is concluded that KFC disburses more loans in the category of Rs. 10 lakhs to Rs. 20 lakhs and also in the category of Rs. 20 lakhs and above, which means that KFC provides more quantity of loans towards tourism sector than other financial institutions under the study. 206

Table 4.1 Quantum of funds availed Quantum of loans disbursed Major financing by KFC % to total Non KFC % to total Total Less than Rs. 10 lakhs Rs. 10 lakhs to Rs. 20 lakhs Above Rs. 20 lakhs 23 11.33 50 26.17 73 (18.53) 140 68.96 135 70.68 275 (69.79) 40 19.70 6 3.14 46 (11.67) Total 203 100 191 100 394 (100) Source: Primary data Figures in brackets show percentage to total Analysis on the quantum of funds disbursed - KFC and non KFC The analysis in respect of the quantum of funds granted by KFC and others makes it clear that KFC advances more quantum of loans. The break-up of respondents with respect to quantum of loans availed is analysed. The majority of them availed funds from KFC ranging from Rs. 10 lakhs to Rs. 20 lakhs or even above that. The amount of loans availed is compared between KFC and non KFC borrowers using Chi Square analysis, the result of which is given in Table-4.1(1). Null hypothesis H 0 : There is no difference in the amount of loans availed by KFC and non KFC group. Alternate hypothesis H 1 : There is difference in the amount of loans availed by KFC and non KFC group. 207

Table-4.1(1) Chi-Square analysis -amount of loans availed and KFC and non KFC group Amount of Loan KFC Major financing Non KFC Total Count 23 50 73 Less than Rs. 10 lakhs Expected count 37.61 35.388 73.0 % to total 5.837 12.69 18.527 Count 140 135 275 Rs. 10 lakhs to Rs. 20 lakhs Expected count 141.68 133.312 275.0 % to total 35.53 34.26 69.796 Count 40 6 46 Above Rs.20 lakhs Expected count 23.70 22.299 46.0 % to total 10.15 1.522 11.675 Count 203 191 394 Expected count 203.0 191.0 394.0 Total % of Total 51.52 48.48 100 Source: Calculated from the primary data It can be seen from Table 4.1(1) that the KFC borrowers availed larger loan amounts to the tune of above Rs. 20 lakhs ie., the expected count is 23.70 whereas the actual count is 40. This explains that KFC customers are provided with higher loan amount in larger quantities. However, the non KFC borrowers expected count are 22.29 and the actual count is 6 which shows that the non KFC borrowers availed lesser quantity of loans in this category. Also it is seen that the KFC borrowers availed larger loan amounts to the tune of Rs. 10 lakhs to Rs. 20 lakhs i.e, the expected count is 141.68 whereas the actual count is 208

140. This explains that KFC customers are provided with higher loan amount in larger quantities. However, in this category, expected count of the non KFC borrowers is 133.31 against the actual count of 135. This shows that the non KFC borrowers availed lesser quantity of loans in this category. The relationship is tested by means of Chi-square, which is given in Table -4.1 (2). Table 4.1(2) Chi- Square value Value Df Asymp. Sig. (2-sided) Pearson Chi-Square 34.875a 2.000 Likelihood Ratio 38.099 2.000 Linear-by-Linear Association 32.572 1.000 N of Valid Cases 394 0 cells (.0%) have expected count less than 5. The minimum expected count is 22.30. It is noticed from Table-4.1(2) that there is a statistically significant relationship between the variables. Also it is certain that they are statistically significant (P < 0.001) which indicates that we can be certain that KFC borrowers are provided with high volume of loans than the non KFC borrowers. Thus the null hypothesis H 0 is rejected and the alternate hypothesis, H 1 : There is difference in the amount of loans availed by KFC and non KFC group, is accepted. The symmetric measures are given in Table-4.1 (3). 209

Table 4.1(3) Symmetric measures Value Asymp. Std. eror a Approx. T b Approx. Sig. Nominal by Nominal Phi.298.000 Cramer's V.298.000 Ordinal by ordinal Kendall's tau-b -.276.043-6.127.000 N of valid cases 394 a. Not assuming the null hypothesis. b. Using the asymptotic standard error assuming the null hypothesis. It is noticed from Table- 4.1(3) that it provides measures of the strength of the relationship or effect size. The phi of 0.298 indicates a larger than typical effect (Cohen, 1998) in this case. 2. Type of loans KFC and other institutions provide various kinds of loans such as short term, medium term and long term. This classification is made on the basis of the duration for which the loans are extended. The break-up of KFC and non KFC respondents on different types of loans are shown in Table-4.2. 210

Table 4.2 Types of loans availed from the agency Types of loans Major financing KFC % to total Non KFC % to total Total Short Term 20 9.85 53 27.75 Medium Term 145 71.42 132 69.11 Long Term 38 18.72 6 3.14 Total 203 100 191 100 Source: Primary data 73 (18.53) 277 (70.3) 44 (11.17) 394 (100) Figures in brackets show percentage to total It is seen from Table-4.2 that 145 respondents (71.42 per cent) of the borrowers of KFC and 132 respondents (69.11 per cent) of the borrowers from non KFC availed medium term loans. 38 respondents (18.72 per cent) of the borrowers of KFC and 6 respondents (3.14 per cent) from the borrowers of non KFC availed long term loans. Only 9.85 per cent of the borrowers of KFC and 27.75 per cent of the borrowers of non KFC availed short term loans. To sum up both KFC and non KFC borrowers are provided financial support with short, medium and long term loan facility but majority of them avail medium and long term loans which could be used for meeting their capital expenditure needs. It is evident from the data that KFC leads in these category i.e., the long term lending given by KFC is more when compared to other institutions. 211

Analysis and the testing of hypothesis in respect of type of loans of KFC and non KFC group The analysis on various types of loan given by KFC to tourism finance borrower is by way of long term loan, medium term and short term loan. A large majority of the respondents (more than 50 per cent) are obtaining the medium and long term loans from KFC. But as far as non KFC institutions are concerned they are extending more short term loans than medium and long term loans and it is clear from the analysis of the data obtained from them. Not only the quantum of loans advanced by KFC is more than other institutions, but also KFC extend various types of long term loans exclusively for tourism sector alone such as schemes for modernisation, expansion, diversification, infrastructural development, acquisition and starting up of new units and other schemes. A targeted sum is also set apart for such schemes. The various types of loans availed by the KFC borrowers are compared with the borrowers of other institutions using Chi-Square analysis and the result of which is shown in Table-4.2 (1). Null Hypothesis H 0 : There is no difference in the type of loans availed by KFC and non KFC group. Alternate Hypothesis H 1 : There is difference in the type of loans availed by KFC and non KFC group. 212

Table 4.2 (1) Chi Square Analysis: Type of loans - KFC and non KFC Type of loans Major financing Total KFC Non KFC Count 20 53 73 Short Term Expected count 37.611 35.388 73.0 Count 145 132 277 Medium Term Expected count 142.72 134.28 277.0 Count 38 6 44 Long Term Expected count 22.67 21.33 44.0 Total Count 203 191 394 Expected count 203.0 191.0 394.0 Table 4.2(2) Chi Square value Value Df Asymp. Sig. (2-sided) Pearson Chi-Square 38.471a 2.000 Likelihood Ratio 41.663 2.000 Linear-by-Linear Association 37.728 1.000 N of Valid Cases 394 a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 21.33. 213

Table 4.2(3) Symmetric measures Value Asymp. Std. Error a Approx. T b Approx. Sig. Nominal by Nominal Phi.312.000 Cramer's V.312.000 Ordinal by Ordinal Kendall's tau-b -.298.042-6.702.000 N of valid cases 394 a. Not assuming the null hypothesis. b. Using the asymptotic standard error assuming the null hypothesis. It can be seen from Table-4.2(1) that in the case of medium term loans with respect to the KFC group the expected count is 142.72 whereas the actual count is 145 whereas in the case of non KFC group the expected count is 134.28 and the actual count is lesser i.e., 132. The table indicates that the KFC borrowers availed more long term loans ie, the expected count is 22.67 whereas the actual count is 38. This explains that KFC customers are provided with more long term loan facility. However, in the case of non KFC borrowers the expected count is 21.33 and the actual count is 6 which shows the non KFC borrowers availed lesser long term loans. The Chi-Square test is conducted and the value of asymptotic significance is 0.000. This is less than the cut off value of 0.05 at 5 percent significance level. Hence the alternate hypothesis, H 1 is accepted and the null hypothesis H 0 is rejected. Hence it is proved that there is significant difference in the type of loans availed by KFC and non KFC group. 214

The symmetric measures are given in Table-4.2 (3). The relationship is tested to measure the strength. As is seen from Table-4.2 (3) that it provides measures of the strength of the relationship or effect size. The Phi of 0.312 indicates a larger than typical effect (Cohen, 1998). Hence the formulated hypothesis that the major role of KFC in the development of the tourism sector is providing of more loans for long term periods to tourism units is proved and hence significant. 3. Purpose of loans The purpose for which loans are granted is also enquired into. Basically KFC grant loans for long term for acquisition of business or for modernization, diversification or expansion and also for starting new ventures of tourism operations in Kerala. The data from respondents on the purpose for which loan are granted is collected and is presented in Table - 4.3. Table 4.3 Purpose of loans Purpose of loan Major financing by KFC % to total Non KFC % to total Total Fixed capital 102 50 85 45 187 (47) Working capital 76 37 90 47 166 (42) Both 25 13 7 8 32 (11) Total 203 100 191 100 394 (100) Source: Primary data Figures in brackets show percentage to total 215

102 respondents (50 per cent) of KFC avail loans basically for the purpose of acquisition of new resorts/hotels, modernization of existing ones or expansion of existing one and for diversification of new product lines in tourism sector. 76 respondents (37 per cent) of KFC finance borrowers availed loan for meeting working capital requirements from KFC. 25 respondents (13 per cent) of KFC borrowers availed loans for meeting both the fixed capital and working capital requirements. (Table- 4.3) 90 respondents (47 per cent) of non KFC group availed more short term loans for meeting working capital requirements. 85 respondents (45 per cent) avail long term loans for meeting capital expenditure requirements. Only very few, 7 respondents (8 per cent) availed loans to meet both fixed as well as working capital needs. To conclude that a total of 187 respondents (47 per cent) availed loans in order to meet fixed capital requirements and 42 per cent of them availed loans for meeting working capital and the rest for both. It means that the lending institutions provide both long term loans as well as short term loans for meeting their fixed and working capital needs but in varying proportions i.e., KFC provide more loans for meeting the fixed capital requirements in the tourism sector. Analysis of the purpose of loans KFC and non KFC financing The significance of the purpose for availing the loans and type of financing (KFC and non KFC tourism finance borrowers) are tested by using Chi-Square and the results of which are displayed in Table 4.3(1). Null Hypothesis H 0 : There is no significant relationship between the nature of tourism financing (KFC and non KFC group) and the purpose for availing the loan. 216

Alternate Hypothesis H 1 : There is significant relationship between the nature of tourism financing (KFC and non KFC group) and the purpose for availing the loan. Table 4.3(1) Chi Square Analysis: Purpose of availing the loan - KFC and non KFC Purpose for availing loan Major financing by Total KFC Non KFC Fixed capital Count 102 85 187 Expected count 98.6 88.4 187.0 Working capital Count 76 90 166 Expected count 87.5 78.5 166.0 Both Count 25 16 41 Expected count 16.9 15.1 32.0 Total Count 203 191 394 Expected count 203.0 191.0 394.0 Table 4.3(2) Chi Square value Value Df Asymp. Sig. (2-sided) Pearson Chi-Square 11.741a 2.003 Likelihood ratio 12.325 2.002 Linear-by-linear association.571 1.450 N of valid cases 394 a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 15.13. 217

Table 4.3 (3) Symmetric Measures Value Approx. Sig. Nominal by nominal Phi.175.003 Cramer's V.175.003 N of valid cases 385 The Chi Square test is conducted and the value of asymptotic significance is 0.003. This is less than the cut off value of 0.05 at 5 per cent significance level. Hence the alternate hypothesis, H 1 : There is significant relationship between the nature of tourism financing and the purpose for availing the loan, is accepted and null hypothesis H 0 is rejected. The symmetric measures are given in Table-4.3 (3) to show the strength. Hence it is proved that there is significant relationship between the nature of tourism financing and the purpose for which the loan was availed. 4. Phase at which loan is applied for Loans of varying types are applied by respondents in different phases at which they need. It may fall under two broad heads viz., at the commencing of the unit and after the commencement or during the time of working. The responses on availing of loans during the different phases are shown in Table-4.4. 218

Table 4.4 Different stages of financing Phases of financing Major financing by KFC % of total Non KFC % of total Total At the commencement After commencement / during working 138 67.98 161 84.29 299 (75.89) 65 32.02 30 15.71 95 (24.11) Total 203 100 191 100 394 (100) Source: Primary data Figures in brackets show percentage to total It is clear from Table-4.4 that 138 respondents (67.98 per cent) availed financial support for KFC at or before the commencement of the business. 65 respondents (32.02 per cent) availed financial support after the commencement or during the running of the business. In the case of borrowers of tourism finance from other institutions i.e., non KFC group 161 respondents (84.29 per cent) availed financial support from non KFC at the commencement of the business. 30 respondents (15.71 per cent) availed financial support after the commencement or during the running of the business. The overall position shows that majority of them i.e., 299 respondents (75.89 percent) are of the view that they availed the loan before the commencement of business. 219

Analysis of phase at which funds availed KFC and non KFC group The phase at which long term loans are availed by respondents are analysed. It is clear from the analysis that a large majority of them make use of funds at the beginning stage of the unit. But there are establishments who invest in new projects after entering into the business for which they need funds to invest. The analysis is of which is given in Table-4.4(1). Null Hypothesis H 0 : There is no difference in the phase at which loans were availed by KFC and non KFC group. Alternate Hypothesis H 1 : There is difference in the phase at which loans were availed by KFC and non KFC group. Table 4.4(1) Chi Square Analysis- Phase at which agency units approached for loans KFC and non KFC Phase at which units approached for loans At the starting of the unit After the commencement of the unit Total Major financing KFC Non- KFC Total Count 138 161 299 Expected count 154.053 144.946 299.0 % to total 35 40.86 75.89 Count 65 30 95 Expected count 48.94 46.05 95.0 % to total 16.5 7.614 24.11 Count 203 191 394 Expected count 203.0 191.0 394.0 % of Total 51.52 48.48 100 220

It is seen from Table-4.4 (1) that the KFC borrowers availed loans at different phases. Out of the total, 299 borrowers availed loan at the time of commencement of the business and 95 respondents availed loans after some time. When compared to KFC borrowers, more number of non KFC borrowers availed loans at the commencement of the business. But in the case of units which availed loans some period after the commencement, 65 KFC borrowers and 30 non KFC borrowers availed the loan. The total number of units in this category is 95 and majority is from the KFC group. This explains that KFC customers are provided with financial support at the commencement of the unit or during the time when it is operating when compared to non KFC borrowers. Table-4.4 (2). The relationship is tested by means of Chi-Square and the results are given in Table-4.4 (2) Chi-Square analysis Value df Asymp. Sig. (2- sided) Pearson Chi-Square 14.312a 1.000 Likelihood ratio 14.609 1.000 Linear-by-linear association 14.275 1.000 N of valid cases 394 0 cells (.0%) have expected count less than 5. The minimum expected count 46.05. 221

Table-4.4 (3) Symmetric measures Value Approx. Sig. Nominal by nominal Phi.191.000 Cramer's V.191.000 N of valid cases 394 The Chi Square test is conducted using SPSS and the value of asymptotic significance is 0.000. This is less than the cut off value of 0.05 at 5 per cent significance level. Hence the alternate hypothesis H 1 is accepted and null hypothesis H 0 is rejected. Hence it is proved that there is significant difference in the phase at which loans were availed by KFC and non KFC group. 5. Level of satisfaction on interest rate of loans The level of satisfaction of respondents on interest rate of loans are enquired into with respect to the KFC and non KFC group and tabulated in Table- 4.5 Table 4.5 Satisfaction level of respondents on the interest rate of loan Rate of KFC % to total Non KFC % to total Total Interest Highly Satisfied 29 14 26 14 55 (14) Satisfied 52 26 30 16 82 (21) Neutral 27 13 40 21 73 (18) Dissatisfied 80 39 75 39 155 (39) Highly dissatisfied 15 8 20 10 35 (8) Total 203 100 191 100 394 (100) Source: Primary data Figures in brackets show percentage to total 222

It is seen from Table- 4.5 that 95 respondents (47 per cent) of the borrowers of KFC expresses their dissatisfaction on the interest rate of KFC. 81 respondents (40 per cent) are satisfied with interest rate. 27 respondents (13 per cent) are neutral in recording their level of satisfaction. 56 respondents (30 per cent) of the borrowers of non KFC recorded that they are satisfied with the rate of interest charged. 40 respondents (21 per cent) are neutral towards this aspect and 95 respondents (49 per cent) of the borrowers of non KFC group are dissatisfied with the rate of interest charged as loans. 137 respondents (35 per cent) out of 400 are of the opinion that they are satisfied with the rate of interest charged on loans. Whereas 190 respondents (47 per cent) recorded, a level of dissatisfaction on the interest charged by institutions. 73 respondents (18 per cent) are neutral in giving any information about the interest charged. It is concluded that a large majority of the respondents are not satisfied with the rate of interest charged by KFC and others. KFC lend loans by charging interest at 13.5 per cent but the effective rate of interest is only to 10.50 per cent after reduction on prompt payment and for credit rating. Since the respondents are not able to avail all facilities given by way of reduction in interest rate, they are liable to pay the usual rate which they seem high. Anyhow there exists difference in interest rate as far as KFC and others are concerned. Analysis of the satisfaction of interest rate of loans KFC and non KFC group The significant level of satisfaction of interest rate of loans with the category of the tourism finance borrowers are tested by using Chi-Square and the results of which are shown in Table 4.5 (1). 223

Null Hypothesis H 0 : There is no association between the satisfaction level of interest rate and the type of financing (KFC and non KFC group). Alternate Hypothesis H 1 : There is association between the satisfaction level of interest rate and the type of financing (KFC and non KFC group). Table 4.5(1) Satisfaction level on the interest rate of the loan Satisfaction level on the interest rate Major financing by KFC Non KFC Total Highly satisfied Count 29 26 55 Expected count 28.3 26.7 55.0 Satisfied Count 52 30 82 Expected count 42.2 39.8 82.0 Neutral Count 27 40 67 Expected count 34.5 32.5 67.0 Dissatisfied Count 80 75 155 Expected count 79.9 75.1 155.0 Highly dissatisfied Count 15 20 35 Expected count 18.0 17.0 35.0 Total Count 203 191 394 Expected Count 203.0 191.0 394.0 224

Table 4.5(2) Chi-Square value Value Df Asymp. Sig. (2-sided) Pearson Chi-Square 9.107a 4.048 Likelihood ratio 9.190 4.047 Linear-by-linear association 1.943 1.163 N of valid cases 394 a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 16.97 Table 4.5(3) Symmetric measures Value Approx. Sig. Nominal by nominal Phi.152.048 Cramer's V.152.048 N of valid cases 394 The Chi-Square test is done and the value of asymptotic significance is 0.048. This is greater than the cut off value of 0.05 at 5 % significance level. Hence the alternate hypothesis H 1 is accepted and null hypothesis H 0 is rejected. Hence it is proved that there is difference in the satisfaction level with respect to the interest rate at which loans were availed by KFC and non KFC group. 226 225

6. Cost of borrowings The various amounts spend for availing loan are in the form of processing fees and other expenses which may vary from one institution to the other. The amount spent as cost of borrowings ranges between less than Rs. 2,500 to Rs. 10,000 and above. Table- 4.6 Cost of borrowings Cost of borrowings (Rs) Major financing KFC % to total Non KFC % to total Less than Rs. 2500 42 21 23 12 Rs. 2500 5000 89 43 85 45 Rs. 5000 10000 45 22 55 29 Above Rs. 10000 27 14 28 15 Total 203 100 191 100 Source: Primary data Total 65 (16) 174 (44) 100 (25) 55 (14) 394 (100) Figures in brackets show percentage to total 89 respondents (43 per cent) of KFC belong to the category of Rs.2,500 and Rs. 5,000 with respect to the cost of borrowings. Whereas 85 respondents (45 per cent) of the borrowers of non KFC fall in this category. 45 respondents (22 per cent) of KFC and 55 respondents (29 per cent) of non KFC belong to the category of Rs.5,000 to Rs.10,000 with respect to the cost of borrowings. 227 226

27 respondents (14 per cent) of KFC and 28 respondents (15 per cent) of non KFC group spent Rs. 10,000 and above as the cost of borrowings. 42 respondents (21 per cent) of KFC and 23 respondents (12 per cent) of the borrowers of non KFC spent only less than Rs. 2,500/- as the cost of borrowings. The overall position shows that 239 respondents (60 per cent) belong to the category of up to Rs. 5,000 as cost of borrowings. Whereas 155 respondents (40 per cent) fall in the category of above Rs. 5,000 as cost of borrowings. (Table-4.6). To conclude the cost of borrowings is less in KFC than others. 7. Types of expenditures involved in cost of borrowings The cost of borrowings include expenses on documentation, project preparation, travel and other expenses like expenditure on furnishing security, bribing, other fees etc. It is essential that the financial institutions should take necessary care in order to reduce the cost of borrowings. The break-up of the respondents and the major expenditures incurred in the cost borrowings are given in Table- 4.7. 228 227

Table- 4.7 Major expenditure incurred in the cost of borrowings Major part of the cost of borrowing expenditure Major financing KFC % of total Non KFC % of total Expenses on documentation 108 53 111 58 Project report preparation expense 60 30 55 29 Travel 20 10 15 8 Other expenses 15 7 10 5 Total 203 100 191 100 Source: Primary data Total 219 (56) 115 (29) 35 (9) 25 (6) 394 (100) Figures in brackets show percentage to total It is seen from Table-4.7 that 108 borrowers (53 per cent) of KFC incurred documentation expense as the major expense in the cost of borrowings. Whereas 111 borrowers (53 per cent) of non KFC incurred documentation expense as the major expense incurred in the cost of borrowings. 60 borrowers (30 per cent) of KFC incurred project preparation expense as the major expense incurred in the cost of borrowings. 229 228

Whereas 55 borrowers (29 per cent) of non KFC incurred project preparation expense as the major expense incurred in the cost of borrowings. 20 respondents (15 per cent) of KFC incurred travel expense as the major expense in the cost of borrowings. Whereas 10 respondents (8 per cent) of non KFC incurred travel expense as the major expense in the cost of borrowings. 15 respondents (7 per cent) of KFC incurred other related expenses (expenditure on furnishing security, bribes, etc.) as the major expense in the cost of borrowings. Whereas 10 respondents (5 per cent) of non KFC incurred other related expenses as the major expense in the cost of borrowings. It is concluded that the majority of the tourism borrowers incurred expenses in the form of documentation charges in order to obtain loans from their financial institution. This is an additional financial burden with respect to tourism entrepreneurs who intend to avail loans from any of the financial institution. Analysis of the type of expenses incurred on cost of borrowings KFC and non KFC group The significance of type of expenses with the category of the tourism finance borrowers are tested by using Chi-Square and is presented in Table 4.7(1). Null Hypothesis H 0 : There is no association between the type of expenses on cost of borrowings and type of financing (KFC and non KFC group). Alternate Hypothesis H 1 : There is association between the type of expenses on cost of borrowings and nature of financing (KFC and non KFC group). 230 229

Table 4.7(3) Chi Square analysis: type of expenses on cost of borrowings-kfc and non KFC group Major financing by Type of expenditure KFC Non KFC Total Expenses on documentation Count 108 111 219 Expected count 112.8 106.2 219.0 Preparation of project report Count 60 55 115 Expected count 59.3 55.7 115.0 Travel Count 20 15 35 Expected count 18.0 17.0 35.0 Others Count 15 10 25 Expected count 12.9 12.1 25.0 Total Count 203 191 394 Expected count 203.0 191.0 394.0 Table 4.7(2) Chi-Square value Value Df Asymp. Sig. (2-sided) Pearson Chi-Square 1.609a 3.657 Likelihood ratio 1.617 3.656 Linear-by-linear association 1.578 1.209 N of valid cases 394 a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 12.12. 230

Table 4.7(3) Symmetric measures Nominal by Nominal Value Approx. Sig. Phi.064.657 Cramer's V.064.657 N of Valid Cases 394 The Chi-Square test is conducted and the value of asymptotic significance is 0.657. This is greater than the cut off value of 0.05 at 5 percent significance level. Hence H 0 is accepted and H 1 is rejected. Hence it is proved that there is no significant difference in the type of expenses on cost of borrowings among the KFC and non KFC group. 8. Training rendered by the agency The Kerala Financial Corporation and some other financial institutions also extend financial and other support the development and growth of the industrial sector in Kerala including tourism industries. It provides various training such as training for developing entrepreneurs, manpower training, computer & information systems training, customer related training, marketing and promotions training, training on environment management, etc. They give training for over all development of the tourism sectors. So also they extent training for advancement in career. For planning man power in the tourism and other related sectors training are provided. For new generation entrepreneurs entrepreneurial training is extended. In relation to dealing and maintaining customer relations they extended the customer related training. Training is important to entrepreneurs who start new ventures. 232 231

The respondent units have expressed there views in regard to the training received from the financial institutions. The analysis and break-up of respondents on various sort of trainings extended by KFC and non KFC borrowers are given in Table - 4.8. Table - 4.8 Response on training Major financing by Total Sl. No. Type of training KFC % to total Non KFC % to total 1 Entrepreneurship development training 2 Customer relationship training 3 Computer & Information Systems training 68 33.5 32 16.75 100 15 7.4 9 4.71 24 17 8.4 34 17.80 51 4 Manpower training 5 2.5 12 6.3 17 5 Training for marketing & promotions of the unit 23 21.18 6 3 29 128 63.05 93 48.69 221 Total trained (56.1) 203 100 191 100 394 Grand Total (100) Source: Computed from primary data Figures in brackets show percentage to total It is seen from Table - 4.8 that the majority of the respondents in toto received entrepreneurship development training as the popular training extended by various financial institutions to the development of tourism industry in Kerala. Similar type training is also received by 68 respondents (33.5 per cent) of the borrowers of the KFC 232

and 32 respondents (16.75 per cent) of non KFC. Of the total 394 respondents 100 respondents (25.38 per cent) are in this category. Training on computer & information systems applications is also received by the respondents. This type of training is received by 17 respondents (8.4 per cent) of of KFC and 34 respondents (17.8 per cent) of non KFC group. Thus a total of 51 respondents (25.12 percent) out of the total respondents have received this kind of training from their financial institutions. The third popular type of training received by respondents in the sample is training for marketing and promotions of the. 23 respondents (21.18 per cent) of the borrowers of KFC and 6 respondents (3 per cent) of the non KFC borrowers supported it. In aggregate 7.36 per cent of the respondents (29 respondents) received this type of training. The next type of training is customer relationship training. 15 respondents (7.4 per cent) of KFC and 9 respondents (4.71 per cent) of non KFC received this. Whereas 5 respondents (2.5 per cent) and 12 respondents (6.3 per cent) respectively from KFC and non KFC borrowers viewed that they received training in respect of man power management. Hence entrepreneurship development training is the most popular type of training provided by KFC to the entrepreneurs of tourism. To conclude one of the important steps taken by KFC for developing tourism sector in Kerala is by means of extending various trainings in this field. This view is supported by a large majority of tourism entrepreneurs. 9. Handholding support Another important variable taken for evaluating the role of KFC in promoting tourism industry in Kerala is handholding support. An important variable which leads to 233

development of any industrial sector depends upon the timely help in various forms extended by financing agencies. The role of KFC in the form of handholding support is enquired into. The responses are collected and is presented in Table- 4.9. Table 4.9 Handholding support of agency Handholding support Major financing by KFC % to total Non KFC % to total Total Yes 134 66 102 53 236 (60) No 69 34 89 47 158 (40) Total 203 100 191 100 394 (100) Source: Computed from primary data Figures in brackets show percentage to total It is clear from Table-4.9 that the KFC extends handholding support after issuance of loans. They direct the industry in such a way to develop its activities by providing the timely and needful support and assistance by the KFC then and there. 134 respondents (66 per cent) reported that the KFC extend timely help for the success and development of tourism sector in Kerala. The same is extended to borrowers of non KFC by their lending institutions. 102 respondents (53 per cent) out of the total borrowers received hand holding support from their financial institution. To conclude 236 respondents (60 per cent) are of the opinion that the KFC and others extend handholding support for the development of the industry in which it is 234

financed whereas 158 borrowers of tourism finance did not receive any such support. Among the two groups KFC is extending more hand holding support to the tourism entrepreneurs. 10. Guidance and assistance in implementing projects The financing institution often guides and assists the industries in implementing the project in a way it give the desired result. The Kerala Financial Corporation also renders such a help to tourism industry in which it is financed. The break-up of data regarding the guidance and support shown by the financial institutions in implementing of projects are shown in Table- 4.10. Table 4.10 Guidance and support in implementation of projects Major financing by Guidance and support in implementation KFC % to total Non KFC % to total Total 215 Yes 120 59 95 49.74 (54.56) 179 No 83 41 96 50.26 (45.43) 394 Total 203 100 191 100 (100) Source: Primary data Figures in brackets show percentage to total It is seen from Table-4.10 that 120 respondents (59 per cent) received sufficient guidance and assistance for implementation of projects by KFC. The same is received by Non KFC borrowers i.e., 95 respondents (49.74 per cent) availed all sort of help from their 235

institution whenever they implement projects by utilizing the loans. To conclude, 215 respondents (54.56 per cent) availed sufficient help and co-operation from the financing agencies while implementing projects and this is true with respect to a large majority of KFC aided group. 11. Guidance and support in monitoring of projects The KFC assists not only in guiding the process of implementation of projects but extends beyond the monitoring as well. It means to assess whether the project produce desired result after its implementation. The break-up of respondents regarding the guidance and assistance in monitoring of projects imparted by the financing institutions are depicted in table- 4.11 Table - 4.11 Assistance on monitoring of projects Monitoring of projects Major financing by KFC % to total Non KFC % to total Yes 125 61.58 86 45.03 No 78 38.42 105 54.97 Total 203 100 191 100 Source : Primary data Total 211 (53.55) 173 (46.45) 394 (100) Figures in brackets show percentage to total It is noticed from Table-4.11 out of the total respondents of KFC aided group, 125 respondents (61.58 percent) have received the help of the agency in monitoring of 236

projects. In the case of non KFC group, only 86 respondents (45.03 percent) received the agency assistance in this regard. It is therefore presumed that KFC assists not only in guiding the process of implementation of projects but also extends beyond to the monitoring as well. It is a means to assess whether the project produce desired result after its implementation. This is an additional service provided by the financing agency. 12. Source of information Source of information about the agency helps to understand the extend of awareness of the financial institution among the public as well as among the tourism entrepreneurs. It also helps the financial institution to ascertain the influencers who help the entrepreneurs in selecting the agency. The views of respondents regarding source of schemes and also for choosing the agency are given in Table 4.12. Source Table 4.12 Source of information for choosing the schemes and agency KFC Major financing by % to KFC total (203 respondents) Non KFC % to non KFC total (191 respondents) Total Responses (KFC and non KFC) Friends and relatives 185 91 175 91.62 360 Radio/TV /news Paper: advertising 170 83.74 172 90.05 342 Department of Tourism 142 70 140 73.3 282 Others 16 8 14 7.3 30 Source: Primary data Figures in brackets show percentage to total 237

It is clear from Table- 4.12 that 185 respondents (91 per cent) of the borrowers of KFC are of opinion that they are aware about various schemes and the institutions from friends and relatives. The same opinion is given by 175 borrowers of non KFC (91.62 per cent). 170 respondents (83.74 per cent) of the borrower of KFC and 172 respondents (90.05 per cent) of the borrowers of non KFC reported that they know the institutions and its schemes from advertisement through news papers, TV and Radios. According to 142 respondents (70 per cent) of the borrowers of KFC and 140 respondents (73.3 per cent) of the borrowers of non KFC are of the opinion that they know the schemes and are aware about the institutions basically on account of the Department of Tourism. Only a few respondents reported that they get it from other source such as agencies, seminars and loan mela. 13. Financial assistance to new entrepreneurs of tourism One of the roles taken by Kerala Financial Corporation in the development of tourism industry is the support extended by way of entrepreneurial loan for the new entrepreneurs. Now the Kerala Financial Corporation extends financial support to new entrepreneurs in the tourism sector of Kerala. For the corporation they set apart Rs. 2,000 lakhs under this scheme for those corporates, companies and co-operative and Rs. 800 lakhs for other cases. i.e., other than corporates, companies and co-operatives owned tourism industries. In this scheme 66.67 per cent of the cost of project is met by the KFC and the period of loan is usually for 10 years. The break-up of respondents on financial assistance to the new entrepreneurs of tourism is given in Table- 4.13. 238

Table 4.13 Entrepreneurial loan for new entrepreneurs Types of units KFC Major financing by % to total Non KFC % to total Started afresh 67 33 78 41 New units of existing units 80 39 76 40 Not availed 56 28 37 19 Total 203 100 191 100 Source: Primary data Total 145 (37) 156 (40) 93 (23) 394 (100) Figures in brackets show percentage to total As is seen from Table-4.13, of the total 80 respondents (39 per cent) of KFC group availed entrepreneurial support by starting new units of the existing enterprises. Among the KFC group, 67 new entrepreneurs (33 per cent) started new units which were financed by KFC. 56 respondents (28 per cent) did not avail any such facility. Out of the total, 78 respondents (41 per cent) of non KFC availed the facility of entrepreneurial assistance for starting units afresh. Out of the total respondents, 145 respondents (37 per cent) are new entrepreneurs who started new units and availed financial support for the same, 156 respondents of the existing units started new tourism businesses and 93 respondents (23 per cent) did not avail this facility. Of the total, 145 respondents (37 per cent) reported that they availed the scheme of entrepreneurial assistance for starting tourism units afresh. 156 existing units (40 per cent) 239

availed this facility by starting new tourism business. In conclusion a large majority of them made use of the new entrepreneurial loan and started tourism units in Kerala. 14. Financial support for modernization/expansion Kerala Financial Corporation assisted tourism industries in Kerala by providing funds under modernization/expansion scheme. This facility is given to tourism industries for raising the facility of the already existing units. The scheme is available to modernization of existing hotels, resorts, etc. The break-up of respondents in the availing of this scheme of financial assistance is given in Table 4.14. Modernisation/expansion Scheme Table - 4.14 Financial support under modernization / expansion scheme Major financing KFC % to total Non KFC % to total Total Availed 122 60.09 98 51.31 Not availed 81 39.91 93 48.69 Total 203 100 191 100 Source : Primary data Figures in brackets show percentage to total 220 (55.84) 174 (44.16) 394 (100) 122 respondents (60.09 percent) of KFC and 98 respondents (51.31 percent) of non KFC reported that they availed the loan facility for modernization/expansion of their units. 81 respondents (39.91 per cent) and 93 respondents (48.69 percent) of the borrowers of KFC and non KFC respectively, did not use this facility for this purpose. 240

To conclude, a large majority of the respondents (55.84 per cent) are of the opinion that they avail the facility of modernization/expansion schemes (Table- 4.14) and this is more utilized in the case of KFC group. Thus role played by KFC and others in the promotion of tourism industry in Kerala through the financial support for modernization/expansion of projects is being utilized by a large number of tourism entrepreneurs. 16. Scheme for existing hotels / resorts for additional facilities Another important lending facility offered by KFC and other institutions in the development of tourism industry in Kerala is the schemes for existing hotels and resorts for providing additional facilities organized by tourism entrepreneurs in Kerala. This is a special scheme to hotels and resorts. The break-up of availed and not availed category of respondents of the schemes of existing hotels /resorts are shown in Table- 4.16. Table 4.16 Scheme for hotels and resorts (additional facility) Major financing Schemes for hotels and resorts KFC % to total Non KFC % to total Availed 105 52 66 35 Not availed 98 48 125 65 Total 203 100 191 100 Total 171 (44) 223 (56) 394 (100) Source: Primary data Figures in brackets show percentage to total 241

105 respondents (52 per cent) of the borrowers of the KFC availed the scheme for Hotels/Resorts etc. and the rest 98 respondents (48 per cent) did not avail this facility. Whereas 66 respondents (35 per cent) of non KFC availed this facility and the rest did not. Of the total 394 respondents, 171 respondents (44 per cent) utilized this facility of diversification of projects for more profitable running of the business. 17. Take over of loans facility Another scheme given by KFC for all types of borrowers is the takeover facility. It means any institution take loan already from any banking company or other institution which are taken over and financed by KFC as a new loan. The institutions other than KFC also have the same scheme of assistance. This is a great help to borrowers for taking advantage of the current facility available. The break-up of respondents on the basis of number of units availed and not availed is depicted in Table- 4.17. Table- 4.17 Facility for takeover of loans Major financing Takeover of loan KFC % to total Non KFC % to total Total 154 Availed 68 33 86 45 (39) 240 Not availed 135 67 105 55 (61) 394 Total 203 100 191 100 (100) Source: Primary Data Figures in brackets show percentage to total 242

As is noticed from Table- 4.17, 68 respondents (33 per cent) from the borrowers of KFC availed the facility of takeover of loans. Whereas the same is availed by 86 respondents (45 per cent) of non KFC. In aggregate 154 respondents (39 per cent) have utilized the scheme of assistance of takeover of loans. To conclude 39 percent of the respondents in the sample utilized the facility of take over loan which is beneficial to the unit. 18. Special schemes for fairs and exhibitions There are special schemes for availing financial support for participation in fairs and exhibitions at state, national or at international levels. This facility is now enjoyed by hotel industry as well. The tourism units also participates in fairs and exhibitions by availing the facility extended by KFC. The KFC set apart Rs.800 lakhs under in this scheme. The break-up of the number of respondents who availed and not availed this scheme is given in Table- 4.18. Table 4.18 Schemes for fairs and exhibitions Schemes for fairs and exhibitions Major financing KFC % to total Non KFC % to total Total 70 Availed 56 27.59 14 7.3 (17.76) 324 Not availed 147 72.41 177 92.67 (82.23) 394 Total 203 100 191 100 (100) Source: Primary data Figures in brackets show percentage to total 243

It is noticed from Table-4.18 that 56 respondents (27.59 per cent) of KFC finance borrowers and 14 respondents (7.3 per cent) of non KFC tourism finance borrowers availed this facility. 147 respondents (72.41 per cent) of KFC and 177 respondents (92.67 per cent) of non KFC did not avail this facility. 70 respondents (17.76 per cent) reported that they enjoyed the facility and participated in fairs especially during festival seasons like Onam, Christmas, Ramzan, New year, etc. 19. Schemes for infrastructural development There are schemes extended by KFC and other institutions for the development of infrastructural facilities. 66.67 per cent of the cost of project is met by KFC under this scheme and the period of loan is usually for 10 years. The analysis of the break-up of respondents under different category is shown in Table- 4.19. Table- 4.19 Scheme for infrastructural development of project Scheme for Infrastructural development Major financing KFC % to total Non KFC % to total Availed 98 48 65 35 Not Availed 105 52 126 65 Total 203 100 191 100 Source: Primary data Total 163 (41) 231 (59) 394 (100) Figures in brackets show percentage to total It is clear from Table 4.19 that 105 respondents (52 per cent) of the borrowers of KFC and 126 respondents (52 per cent) of the borrowers of non KFC did not avail this 244

facility. This facility is availed by 98 respondents (48 per cent) of the KFC tourism finance borrowers and 65 respondents (48 per cent) of the non KFC tourism finance borrowers. This will help in the development of more infrastructural facilities in tourism in Kerala. 20. Scheme for the development of women entrepreneurs As part of the development there is a need for empowering women entrepreneurs to take decisions and managing business, and the KFC also contributes a lot towards development of women entrepreneurs in Kerala. Also, under this scheme, for the development of women entrepreneurs an amount up to Rs.50 lakhs are provided towards this scheme. The rate of interest changed in this scheme is also very less i.e., 9 per cent which is less than 13.5 per cent of the effective rate of interest. This scheme will help in encouraging women entrepreneurs to establish new tourism units in Kerala. The break-up of tourism finance borrowers of KFC and non KFC on availing this scheme is shown in Table - 4.20 Table 4.20 Scheme for the development of women entrepreneurs Scheme for development of entrepreneurship KFC Major financing % to total Non KFC % to total Availed 41 20.19 33 17.27 Not availed 162 79.80 158 82.73 Total 203 100 191 100 Source: Primary data Total 74 (18.78) 320 (81.22) 394 (100) Figures in brackets show percentage to total 245