SME Lending - Sectoral Analysis


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made by Vishal Patil, Neha Jain, Malay Srivastav

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SME Lending - Sectoral Analysis

  1. 1. Neha JainMalay Srivastava Naveen Panchal Vishal B. Patil
  2. 2. Who are the Lenders???? Who are the Borrowers????Origin of Lending and Borrowing???
  3. 3. IndiaClassification Manufacturing Service Enterprises EnterprisesMicro Upto Rs.25 lakh Upto Rs.10 lakhSmall Above Rs.25 lakh & upto Above Rs.10 lakh & Rs.5 crore upto Rs.2 croreMedium Above Rs.5 crore & upto Above Rs.2 crore & upto Rs.10 crore Rs.5 crore Source : Ministry of Small Scale Industries vide its notification No. S.O. 1722(E) dated October 5, 2006.
  4. 4. JAPANClassification Large Medium SmallManufacturing >200 200> >13 13>Wholesale Trade >66 66> >3.33 3.33>Retail Trade > 33 33> >3.33 3.33>Services >66 33> >3.33 3.33> Above Numbers in Rs. Crore Conversion Rate Used 1 Yen = Rs. 0.658 Source: Japan International Cooperation Agency , 2009
  5. 5. FRANCE AND GERMANYCategory Employees Turnover(Thresh Balance sheet old) Total (Threshold)Micro <10 14 14Small <50 68 68Medium-Sized <250 340 292 Above Numbers in Rs. Crores Conversion rate 1 Euro= Rs. 68.58 Source: European Commission 2003, Commission Recommendation of 06/05/2003 concerning the definition of micro, small and medium-sized enterprises, Brussels
  6. 6. Country GDP GDP(In Rs. SME % Loan Value (Rank) In $ trillion) GDP as % of trillion (@ 45.02, (2010- GDP 31 March 2010) 2011) USA(1) 14.582 657.4 51 4.93 China(2) 5.878 265.02 58.5 48.67 Japan(3) 5.497 247.82 - 35.90Germany(4) 3.309 149.206 53.8 - France(5) 2.560 115.410 56 10.64 India(9) 1.729 77.947 8 4.34 (World GDP $ 63.044 trillion )(World Bank, 2010)Source: (Independent Evaluation Group) , European Commision (SBA Fact Sheet)ASSOCHAM, Government Website)
  7. 7.  Debt 3100 BC :Dates back to ancient worlds, clay tablet recording Interest bearing loans in Mesopotamia(3100 BC) 1171 Republic of Venice issued Bonds at 5% interest rate to replete war depleted treasury. 1262-1379 credibility of bonds was established and were traded in Italian cities and beyond. Equity Market 1259- Shares of Bazacle Mill company were traded(France). 1288- Swedish Company Stora documented share transfer. 1500- British Merchants started experimenting with Joint stock companies. 1600- East India Company. 1602- Dutch East India Company issued share and was traded on Amsterdam stock Exchange. 1856- Joint Stock Option company Act provided Limited Liability for all Joint Stock Company.
  8. 8.  1460- Stock Exchange can be tracked back to Antwerp, Belgium. 1602- Amsterdam Stock Exchange. 1602- First IPO by Dutch East India Company. 1698- London Stock Exchange. 1792- 24 Stockbrokers established rules for buying and selling of bonds and shares of companies, Buttonwood agreement. 1817- NYSE Board Established by signers of Buttonwood agreement. 1875- The Native share and Stock broker Association (Bombay Stock Exchange.) 1992- NSE India. 1971- NASDAQ, Worlds First Electronic Stock Exchange. Source: worlds-first-stock-exchange/
  9. 9.  International Finance Corporation(Est. 1956), World Bank has 1.3 mn loans outstanding to SME totaling $97.1 bn globally(end of 2009)( Asian Development Bank (Est. 1966) Outstanding Loan to India $ 24.122 bn(31 Dec 2010) ( Adoption of Sophisticated Credit Scoring Methodology by Wells Fargo of USA. By 2004 $ 6.3bn Outstanding loan to SME, 94% were Unsecured. 1981(Technology adoption)-Online Services started in Newyork by Citibank, Chase Manhattan where keyboards were used an signals were send through phonelines. 1994-Stanford Federal Credit Union started online Internet Banking Services, California.Introduction of packages and tools for financing trade Trade Financing Instruments( Letter of Credit, Counter Trade, Factoring, Pre shipping Financing, Post shipping Financing) Export Credit Insurance. Export Credit Guarantees.
  10. 10.  SIDBI(April1990, promote, finance and develop Small sectors) Opening of Indian Economy. MSMED ACT 2006, Credit facility for MSME as per instruction and guidelines of RBI. SMERA joint venture between SIDBI and Dun and Bradstreet Information services India private Ltd.(2005)(Wikipedia and SMERA website) CIBIL(Incorporated 2000, caters to commercial and Consumer Segments.) (Prime Minister Task Force recommendation, Jan 2010 dedicated stock exchange/platform for SME) New IIP will track growth of SME(proposed).(
  11. 11.  Indian Bank Rs(Advances) SBI 1,10,812 ICICI 71720 PNB 45296 Canara Bank 29958 Bank Of Baroda PNB 27365 Bank Of India 21000 UCO Bank 15727 Central Bank of India 11901
  12. 12. Foreign Bank(Top 5 Global Bank in India) Citi Bank, Standard Chartered Bank, HSBC, Deutsche Bank, Barclays.International Development Institutions Asian Development Bank. IFC, World Bank.
  13. 13.  End User SME( .pdf) Rating Agency. Banks. Promoters Employee. Government. Government Schemes. Government Bodies like NABARD, PFC. RBI. Lobbyist. NBFC. Venture capitalist. IT service providers.
  14. 14.  No. of Branches. Geographical coverage. Interest Rate. Transparency. Information Confidentiality. Efficiency in Operation. Fees and Charges. Interest. Services(Funded, Non funded, Value Added Services, Internet Banking). Collateral/Security.
  15. 15. 98765 Banks43 NBFC2 Venture1 Capitalist0
  16. 16. Thank You
  17. 17.  Early History: Blood Money, Bride Money. Stone Age: Precious Metals. 3rd Millennium BC: Earliest Banking. 700 BC : Coins(Lydia) 500 BC: International Banking. 118 BC: Fiat Money(China) 800 AD: Printed Note (China) 17th Century: Modern Banking Note(Amsterdam)Source : Swedish Institute)
  18. 18.  “ All the participants in the summit reiterated that limited access to financial services was primarily due to lack of information on SME. While higher interest rate and lack of collateral were some of the key constraints faced by SME in undertaking economic activity , limited credit data and information on SME resulting in bank’s reluctance to grant credit to SME. (Report from CII, Ministry of MSME,)