Download - Msm es and sidbi
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 1
Good Things in life Begin Small
SIDBI
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 2
MSMEs Internationally.
• Europe – SMEs, USA – SMBs, India – MSMEs, South Africa- SMMEs, Mexico – PYMEs (Family and non-family businesses), Rest Africa MSMEs
• Internationally SMEs are defined on employment, turnover and asset size
• EU – Micro <10, Small <50, Medium <250 employees• US – Small Business <250 and Medium <500 employees• Canada Small Business (Industry)<100, SB(Services)<50
employees• New Zealand Small Businesses <19 employees• Mexico 10 – 50 – 250 PYMEs (Manufacturing) and
10 – 50 – 100 PYMEs ( Services)• Indian MSMEs defined on Investment in Plant and Machinery
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 3
An overview of Indian MSME
MSME Sector Contribution to Indian Economy
45% of industrial production 35% share in exports More than 8000 productsOne of the major growth driver of Indian EconomyModel of Socio economic policies of the GoIDevelops appropriate indigenous technology
Second largest sector after agriculture More than 26 million unitsProvides employment to over 59 million
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 4
Importance of SMEs• Contribution to employment, growth and wealth
distribution
• Provide economies with greater flexibility. Low fixed cost
• Competitiveness in market place
• Seed bed for entrepreneurial ability and innovation
• Balanced Regional development
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 5
Policy Initiatives• Focused importance and protection since 1951• Nationalisation of Banking and priority sector
lending • Separate Ministry to monitor the Growth• Annual growth target for lending by PSBs at 20%• Focused subsidy Programme –CLCSS, TUFS, etc.• Excise Exemption limits• Credit Guarantee Fund• Specialised MSME Branches in clusters• Standard Asset provisioning & Credit risk weight
lower• Food processing as priority sector• MSMED ACT
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 6
MSMEs• SSI definition in 80s with Rs.20 lakh investment in P & M,
1985 (35lakh), 1991(Rs.60 lakh), 1997 (Rs.300 lakh), 1999 (Rs.100 lakh)
• Definition of ancillary
• Tiny Sector
• EOUs
• SSSBEs
• Medium Industries
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 7
MSMED Act - 2006
• Micro– Investment in P & M Rs2.5 million• Small– Investment in P & M Rs50 million• Medium Investment in P&M
Rs100million• National Small and Medium Enterprises
Board• Delayed Payment by large buyers
reduced to 45 days from 120 days
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 8
MSME Definition in India
• Definitions vary globally• MSMED Act 2006 in place w.e.f October 2006
Category Earlier MSME Act 2006
Investment in P&M ( Rs million)
Micro Tiny Upto 2.5 <=2.5
Small Upto 10.0 <=50.0
Medium Not defined 50.0,=100.0
Services
Micro Not defined Upto 1.0
Small Not defined <=20.0
Medium Not defined <=50.0
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 9
- Small in size– Lack of Capital. Leverage constraint– Technology and Quality issues– Pricing Pressure– high competition- no entry barriers, – lack of entrepreneurial knowledge of
market, - No R&D initiatives from sector
MSMEs – Constraint
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 10
- Majority Non corporate entities
- Issues of corporate governance
- Financial Discipline
- No transparency.- Lack of professional skills.- No growth strategies.- Marketing- Working Capital
Higher Risk Perception…
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 11
SME Financing- What they wish
• Availability of finance• Reasonable cost• Simple delivery process• No collaterals• Single window for financing
requirements• Transparency in dealings• Awareness of schemes of Banks/FIs• Support and Handholding services
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 12
SME financing :Sources of debt
• Family sources – Limited resources
• Unorganised sources– Very high cost of lending– Non transparency of terms
• Banks– Working capital– Banking facilities
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 13
Issues in debt financing
• Banks shy of lending to start ups/ green field projects due to high risk of NPA.
• High Transaction cost• Security based lending. Insistence on
collaterals. • Inadequate information• Inadequate risk assessment
mechanisms• Cumbersome lending procedures.
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 14
Recent trends in MSME financing
• With entry of private banks, more sophisticated debt products have emerged in the MSME market :– Cash flow based business– Derivative products
(currency/commodity)– Asset based simplified lending – Rent works/ rent discounting– Receivables and related derivatives– Credit Insurance
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 15
Future trends in MSME financing
• Risk Rating for MSMEs : would improve credibility of MSMEs with commercial Banks
• Cluster approach to reduce transaction cost • Simpler assessment modules• CIBIL : credit delinquency data would enable faster
assessment• Credit Insurance cover as collateral.• Recognition of NBFC/MFI capacity to reach to MSMEs. • Partnership arrangement between Banks and NBFCs• Credit Delivery Channels with Associations
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 16
India : The shift in SSI story
• Scale up : Traditional to modern SSI sector
• Profile : Manufacturing to services sector.
• Scope : Domestic to global space• Definition: SSI to MSME definition• Subsidised finance to risk based
finance
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 17
New Institutional Build up• Banks, FIs, SFCs• Factoring Services• Venture Capitalists/ PEs• Technology Support & Guidance• Incubators• Mentoring services• Rating Services• Credit Guarantee Fund, Risk Sharing Models and credit
insurances• ARCs• MFIs and SHGs - Credit to Poor & unbanked• Risk Capital and sub-debt financing• Credit Information Services
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 18
MSME financing : Equity
• Institutional mechanism for providing equity to smaller SMEs in early stages of growth
• More incubators for startups• Simplified listing mechanism for SMEs to
access capital markets• Small cap exchange/ trading of unlisted
companies• Technology Innovation- Development,
commercialisation and scaling up of the new Technology
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 19
SIDBI – BackgroundSIDBI – Background
• Constitution– Set up in 1990 – SIDBI Act– Initially wholly owned subsidiary of IDBI– Act amended in 2000 – to broad base shareholding– Authorised Capital – Rs.1000 Crore – Paid-up Capital – Rs. 450 Crore – Shares held by 35 GoI owned/controlled Banks, Insurance
Companies and FIs • National Presence
– 6 Zonal offices – 103 Branches across all the states
• Mandate– Promotion, financing and development of MSMEs and to co-
ordinate the functions of institutions serving the sector.
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 20
PRODUCTS & SERVICESPRODUCTS & SERVICES
REFINANCE
WORKING CAPITAL FINANCE
(Fund/ Non-fund)
RECEIVABLE FINANCE
MICRO CREDIT
PROMOTIONAL & DEVELOPMENTAL
ACTIVITIES
TECHNOLOGY UPGRADATION, Energy Efficiency
Clean Environment
RISKCAPITAL
PROJECT FINANCE
Term Loan
SIDBI
One Stop Shop
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 21
Indirect FinanceIndirect Finance
Refinance to commercial banks, SFCs, NBFCs, SLIs Refinance to commercial banks, SFCs, NBFCs, SLIs
Bills rediscountingBills rediscounting
Lines of credit to Lines of credit to
State level InstitutionsState level Institutions
Factoring CompaniesFactoring Companies
NBFCsNBFCs
Capacity building of SFCsCapacity building of SFCs
Resource Support to Micro Finance InstitutionsResource Support to Micro Finance Institutions
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 22
Direct FinanceDirect Finance
Term Loan / Project loansTerm Loan / Project loans
Working Capital Working Capital
Bills FinanceBills Finance
Non Fund Based FinanceNon Fund Based Finance
Risk CapitalRisk Capital
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 23
Micro Credit Micro Credit - An Instrument of Financial Inclusion- An Instrument of Financial Inclusion
Associated with over 131 MFI partnersAssociated with over 131 MFI partners
Introduced the concept of rating of MFIsIntroduced the concept of rating of MFIs
Extend Capacity Building GrantsExtend Capacity Building Grants
Help transform NGOs/Societies to MFIsHelp transform NGOs/Societies to MFIs
Over 60 lakh beneficiaries Over 60 lakh beneficiaries
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 24
DEVELOPMENTAL INITIATIVESDEVELOPMENTAL INITIATIVES
Enterprise PromotionEnterprise Promotion Rural Industries Programme [RIP]Rural Industries Programme [RIP]
Implemented in Implemented in more than 120 districts in 24 more than 120 districts in 24 statesstates
Cumulatively, almost 32,600 units promoted; Cumulatively, almost 32,600 units promoted; Capital formation of over Euro 17 mln and Capital formation of over Euro 17 mln and Employment generation of more than 100 Employment generation of more than 100 thousand persons.thousand persons.
Entrepreneurship Development Programme (EDP)Entrepreneurship Development Programme (EDP) Over 2661 EDPs / Over 66,000 participants Over 2661 EDPs / Over 66,000 participants
trainedtrained
Small Industries Management Programme (SIMAP)Small Industries Management Programme (SIMAP)Non financial services for
MSMEs
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 25
DEVELOPMENTAL INITIATIVESDEVELOPMENTAL INITIATIVESEnterprise StrengtheningEnterprise Strengthening Skill-cum-Technology Upgradation Programme Skill-cum-Technology Upgradation Programme
Cluster Development Programme Cluster Development Programme Marketing, technology, permanent exhibition Marketing, technology, permanent exhibition
centres, etc.centres, etc.
North-East Initiative North-East Initiative Micro enterprise loans, MFI activities, Project Micro enterprise loans, MFI activities, Project
profiles and RIPsprofiles and RIPs 10 cluster development programmes have been 10 cluster development programmes have been
sanctioned in the NERsanctioned in the NER Small Loan Scheme for North East at concessional Small Loan Scheme for North East at concessional
rate.rate.Non financial services for
MSMEs
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 26
CLUSTER LEVEL INITIATIVESCLUSTER LEVEL INITIATIVES
Initiated Business Development Services (BDS) in Cluster In first phase, the project is implemented in 3 clusters-
Coir cluster at Alleppey Leather cluster at Kanpur Fruits & Vegetable Processing at Pune
BDS interventions involves training, consulting & other services to address internal
constraints faced by MSMEs in clusters Marketing & information services to gain access to better
services. In first phase about 120 programs & events were organised which
has reached over 4500 beneficiaries. 15 more clusters are proposed to be covered under second phase
in pharms, knitwear, engineering, dyes & chemicals, leather, floor coverings, etc..
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 27
SIDBI – AssociatesSIDBI – AssociatesCredit Guarantee Fund Trust for Micro and Small Credit Guarantee Fund Trust for Micro and Small
Enterprises (CGTMSE)Enterprises (CGTMSE)
SME Rating Agency of India Ltd. (SMERA)SME Rating Agency of India Ltd. (SMERA)
SIDBI Venture Capital Ltd.SIDBI Venture Capital Ltd. (SVCL) (100% subsidiary)(SVCL) (100% subsidiary)
SIDBI Trusteeship Company Ltd SIDBI Trusteeship Company Ltd (100% subsidiary)(100% subsidiary)
India SME Technology Services Ltd. (ISTSL)India SME Technology Services Ltd. (ISTSL)
India SME Asset Reconstruction Co. Ltd. (ISARC)India SME Asset Reconstruction Co. Ltd. (ISARC)
SFCsSFCs
TCOsTCOs
CO-PROMOTEDCO-PROMOTED – –FACTORING COMPANIESFACTORING COMPANIES- Canbank Factors- Canbank Factors
- SBI Factors- SBI FactorsNorth Eastern Development Finance CorporationNorth Eastern Development Finance CorporationIndian Institute of EntrepreneurshipIndian Institute of EntrepreneurshipSIDBI Conglomerate
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 28
Product Innovations
• Working Capital
• Non Fund based Products
• Risk Capital
• Energy Efficiency
• TIFAC
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 29
Innovative Credit Delivery Models
• Industry Associations – FSIA, GSPMA• Trade Union – Mumbai Taximen, School Vans• NBFCs – Electronica Finance• OEM Channel (Jyoti, ACE, Laxmi)• MFIs• Equity Financing through VC Funds• Technology Incubator through IIT, Kanpur
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 30
Innovative Technology Platforms
• CART
• NTREES
• Working Capital Platform
• MSME Exchange
• MSME Mentors
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 31
Sustainable Initiatives
• Product for Financing Energy Efficiency• Cluster Approach• Identification of Energy Efficient Equipments• Concept of Green Rating• PCDM Project at Jodhpur• Mumbai Taxi Financing• Financing CNG Auto at Chandigarh through DFC• Financing Solar Lanterns in North East through FWWB- MFI.• Green Loan Scheme
We Empower MSME We Empower MSME We Empower MSME We Empower MSME 32
T h a n k Y o u
We Empower MSMEs…