These measures would not only encourage SME activity but also have a salutary impact on their efficiency and hence, on their overall requirements of finance. Newer forms of SME financing need to be fostered viz., venture capital and leasing.
Commercial banks and local government funding agencies would need to play a major role in venture capital financing while insurance funds and pension funds could be tapped as important sources of finance. Leasing, on the other hand, requires a less rigorous legal and regulatory framework vis-à-vis bank lending, since the leasing company retains the ownership of assets till the end of the lease.