Good Things in life Begin Small           SIDBI         We Empower MSME         We Empower MSME          1
MSMEs Internationally.• Europe – SMEs, USA – SMBs, India – MSMEs, South Africa-  SMMEs, Mexico – PYMEs (Family and non-fam...
An overview of Indian MSME MSME Sector Contribution to Indian Economy      45% of industrial production      35% share ...
Importance of SMEs• Contribution to employment, growth and wealth  distribution• Provide economies with greater flexibilit...
Policy Initiatives•   Focused importance and protection since 1951•   Nationalisation of Banking and priority sector lendi...
MSMEs•   SSI definition in 80s with Rs.20 lakh investment in P & M, 1985    (35lakh), 1991(Rs.60 lakh), 1997 (Rs.300 lakh)...
MSMED Act - 2006• Micro– Investment in P & M Rs2.5 million• Small– Investment in P & M Rs50 million• Medium Investment in ...
MSME Definition in India  • Definitions vary globally  • MSMED Act 2006 in place w.e.f October 2006Category        Earlier...
MSMEs – Constraint- Small in size– Lack of Capital. Leverage constraint– Technology and Quality issues– Pricing Pressure– ...
Higher Risk Perception…- Majority Non corporate entities- Issues of corporate governance- Financial Discipline- No transpa...
SME Financing- What they wish•   Availability of finance•   Reasonable cost•   Simple delivery process•   No collaterals• ...
SME financing :Sources of debt• Family sources  – Limited resources• Unorganised sources  – Very high cost of lending  – N...
Issues in debt financing• Banks shy of lending to start ups/ green  field projects due to high risk of NPA.• High Transact...
Recent trends in MSME financing• With entry of private banks, more  sophisticated debt products have emerged  in the MSME ...
Future trends in MSME financing• Risk Rating for MSMEs : would improve credibility of  MSMEs with commercial Banks• Cluste...
India : The shift in SSI story• Scale up : Traditional to modern SSI  sector• Profile : Manufacturing to services sector.•...
New Institutional Build up•   Banks, FIs, SFCs•   Factoring Services•   Venture Capitalists/ PEs•   Technology Support & G...
MSME financing : Equity• Institutional mechanism for providing equity to  smaller SMEs in early stages of growth• More inc...
SIDBI – Background•   Constitution    –   Set up in 1990 – SIDBI Act    –   Initially wholly owned subsidiary of IDBI    –...
PRODUCTS & SERVICES                              PROJECT                               FINANCE                            ...
Indirect Finance Refinance to commercial banks, SFCs, NBFCs, SLIs Bills rediscounting Lines of credit to      State le...
Direct FinanceTerm Loan / Project loansWorking CapitalBills FinanceNon Fund Based FinanceRisk Capital                   We...
Micro Credit       - An Instrument of Financial Inclusion   Associated with over 131 MFI partners   Introduced the conce...
DEVELOPMENTAL INITIATIVESEnterprise Promotion Rural Industries Programme [RIP]    Implemented in more than 120 districts...
DEVELOPMENTAL INITIATIVESEnterprise Strengthening Skill-cum-Technology Upgradation Programme   Cluster Development Progr...
CLUSTER LEVEL INITIATIVES   Initiated Business Development Services (BDS) in Cluster   In first phase, the project is im...
SIDBI – Associates Credit Guarantee Fund Trust for Micro and Small  Enterprises (CGTMSE) SME Rating Agency of India Ltd....
Product Innovations• Working Capital• Non Fund based Products• Risk Capital• Energy Efficiency• TIFAC                     ...
Innovative Credit Delivery Models•   Industry Associations – FSIA, GSPMA•   Trade Union – Mumbai Taximen, School Vans•   N...
Innovative Technology Platforms• CART• NTREES• Working Capital Platform• MSME Exchange• MSME Mentors                 We Em...
Sustainable Initiatives•   Product for Financing Energy Efficiency•   Cluster Approach•   Identification of Energy Efficie...
Thank You We Empower MSMEs…    We Empower MSME    We Empower MSME   32
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  • Msm es and sidbi

    1. 1. Good Things in life Begin Small SIDBI We Empower MSME We Empower MSME 1
    2. 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 2
    3. 3. An overview of Indian MSME MSME Sector Contribution to Indian Economy  45% of industrial production  35% share in exports  More than 8000 products  One of the major growth driver of Indian Economy  Model of Socio economic policies of the GoI  Develops appropriate indigenous technology  Second largest sector after agriculture  More than 26 million units  Provides employment to over 59 million We Empower MSME We Empower MSME 3
    4. 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 4
    5. 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 5
    6. 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 6
    7. 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 7
    8. 8. MSME Definition in India • Definitions vary globally • MSMED Act 2006 in place w.e.f October 2006Category Earlier MSME Act 2006 Investment in P&M ( Rs million)Micro Tiny Upto 2.5 <=2.5Small Upto 10.0 <=50.0Medium Not defined 50.0,=100.0ServicesMicro Not defined Upto 1.0Small Not defined <=20.0Medium Not defined <=50.0 We Empower MSME We Empower MSME 8
    9. 9. MSMEs – Constraint- 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 We Empower MSME We Empower MSME 9
    10. 10. Higher Risk Perception…- Majority Non corporate entities- Issues of corporate governance- Financial Discipline- No transparency.- Lack of professional skills.- No growth strategies.- Marketing- Working Capital We Empower MSME We Empower MSME 10
    11. 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 11
    12. 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 12
    13. 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 13
    14. 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 14
    15. 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 15
    16. 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 16
    17. 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 17
    18. 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 18
    19. 19. SIDBI – 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 19
    20. 20. PRODUCTS & SERVICES PROJECT FINANCE Term Loan RISK REFINANCE CAPITAL TECHNOLO NG CAPITAL UPGRADATINANCEd/ Non-fund) SIDBI Energy Effic Clean Enviro PROMOTIONAL & RECEIVABLE DEVELOPMENTAL FINANCE ACTIVITIES MICRO CREDIT We Empower MSME One Stop MSME We EmpowerShop 20
    21. 21. Indirect Finance Refinance to commercial banks, SFCs, NBFCs, SLIs Bills rediscounting Lines of credit to  State level Institutions  Factoring Companies  NBFCs Capacity building of SFCs Resource Support to Micro Finance Institutions We Empower MSME We Empower MSME 21
    22. 22. Direct FinanceTerm Loan / Project loansWorking CapitalBills FinanceNon Fund Based FinanceRisk Capital We Empower MSME We Empower MSME 22
    23. 23. Micro Credit - An Instrument of Financial Inclusion Associated with over 131 MFI partners Introduced the concept of rating of MFIs Extend Capacity Building Grants Help transform NGOs/Societies to MFIs Over 60 lakh beneficiaries We Empower MSME We Empower MSME 23
    24. 24. DEVELOPMENTAL INITIATIVESEnterprise Promotion Rural Industries Programme [RIP]  Implemented in more than 120 districts in 24 states  Cumulatively, almost 32,600 units promoted; Capital formation of over Euro 17 mln and Employment generation of more than 100 thousand persons. Entrepreneurship Development Programme (EDP)  Over 2661 EDPs / Over 66,000 participants trained Small Industries Management Programme (SIMAP) Non financial services for MSMEs We Empower MSME We Empower MSME 24
    25. 25. DEVELOPMENTAL INITIATIVESEnterprise Strengthening Skill-cum-Technology Upgradation Programme Cluster Development Programme  Marketing, technology, permanent exhibition centres, etc. North-East Initiative  Micro enterprise loans, MFI activities, Project profiles and RIPs  10 cluster development programmes have been sanctioned in the NER  Small Loan Scheme for North East at concessional rate. Non financial services for MSMEs We Empower MSME We Empower MSME 25
    26. 26. CLUSTER 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 26
    27. 27. SIDBI – Associates Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) SME Rating Agency of India Ltd. (SMERA) SIDBI Venture Capital Ltd. (SVCL) (100% subsidiary) SIDBI Trusteeship Company Ltd (100% subsidiary) India SME Technology Services Ltd. (ISTSL) India SME Asset Reconstruction Co. Ltd. (ISARC) SFCs TCOsCO-PROMOTED – FACTORING COMPANIES - Canbank Factors - SBI Factors North Eastern Development Finance Corporation Indian Institute of Entrepreneurship We Empower MSME We Empower MSME SIDBI Conglomerate 27
    28. 28. Product Innovations• Working Capital• Non Fund based Products• Risk Capital• Energy Efficiency• TIFAC We Empower MSME We Empower MSME 28
    29. 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 29
    30. 30. Innovative Technology Platforms• CART• NTREES• Working Capital Platform• MSME Exchange• MSME Mentors We Empower MSME We Empower MSME 30
    31. 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 31
    32. 32. Thank You We Empower MSMEs… We Empower MSME We Empower MSME 32
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