1
AfDB‟s 2011 Annual Meetings
AfDB – EMRC SME Forum :
Bridging the Missing Middle Gap in Africa
Session on
‘Innovative Sol...
2
Indian MSME Sector – An Overview
Contribution to Economic Growth, Poverty
Reduction, Employment Creation:
No. of MSMEs...
3
Role of SIDBI – „The‟ Development Bank
Background
 Under an Act of Parliament - April 1990;
 Promotion, financing and ...
4
4
One Stop Solution for MSME sector
SIDBI
SVCL- Venture Capital
SMERA- credit
rating- green rating
ISTSL-technology
tran...
Indian MSME - Segments
Loans upto
US$ 1100/-
MFIs
No paper work, social
collateral,
Loans from
US$ 1100/- to
US$ 22,000
Mi...
Financial Inclusion –
Micro Finance by SIDBI
 Thrust on unserved, underserved, rural and
unorganised sectors serving Nati...
Propagating Responsible Micro Finance
 Promoting transparency and reduction
in Interest rates;
 Created “Lenders‟ Forum”...
Beyond Micro Finance:
„Missing Middle‟ Approach
 In India, about 20% of credit demand of
micro enterprises met by formal ...
Why Micro Enterprises ?
 Meet development agenda. High
incremental employment creation;
 Creating larger SME clients for...
Approaches to MEL
 Co-branding
NBFCs
BMOs (Industry Associations)
 Banking Correspondent model
 Buying out the portfo...
Test Launch – Direct MELs
In FY2009, SIDBI started MELs:
 Loans for working capital and/ or
equipment
 Credit Guarantee...
Direct MEL– Lessons Learnt
 Absence of formal financial information;
 Need to bring in simplified process and
assessment...
Direct MEL – Future Outlook !
 Draw from international practices in
MELs e.g., downscaling;
 Design a scalable model cov...
Missing Middle - Partners
 ADB : LoC of US$ 50 mio & TA of US$ 3 mio
to develop, access to finance and business
developm...
15
Contact Details
Navin Kumar Maini
Deputy Managing Director
Small Industries Development Bank of India,
Head Office, SID...
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AfDB-EMRC SME Forum Session 3 NK_Maini

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AfDB-EMRC SME Forum Session 3 NK_Maini

  1. 1. 1 AfDB‟s 2011 Annual Meetings AfDB – EMRC SME Forum : Bridging the Missing Middle Gap in Africa Session on ‘Innovative Solutions to Address the Financial needs of SMEs’ N K Maini Deputy Managing Director Small Industries Development Bank of India June 06,2011
  2. 2. 2 Indian MSME Sector – An Overview Contribution to Economic Growth, Poverty Reduction, Employment Creation: No. of MSMEs – 30 mio, 95% MEs; 2nd largest source of employment - 70 mio; Contributes 45% of industrial output and 50% of exports; Outsourcing, linkages with large units/ MNCs increasing vertical integration. Paradigm shift from protection to enabling, economic - enterprise growth to sustainable -inclusive growth.
  3. 3. 3 Role of SIDBI – „The‟ Development Bank Background  Under an Act of Parliament - April 1990;  Promotion, financing and development of MSMEs and co-ordinate the functions of institutions serving the sector;  Presence:  >600 MSME clusters through 103 branches;  indirect support to network of >84,000 branches of banks/ FIs/ MFIs;  Cumulative financial support of US$ 45 billion to 32 million MSMEs.
  4. 4. 4 4 One Stop Solution for MSME sector SIDBI SVCL- Venture Capital SMERA- credit rating- green rating ISTSL-technology transfer-pCDM CGTMSE – credit guarantee- RSF Improve flow of Credit to MSMEs Entrepreneurship / Enterprise promotion Credit delivery models Business Development Services Missing Middle – Downscaling / upscaling Refinance Direct Credit - Risk Capital - Sustainable Finance Structured products 4ISARC – Asset reconstruction Micro Finance - Nurturing MFIs
  5. 5. Indian MSME - Segments Loans upto US$ 1100/- MFIs No paper work, social collateral, Loans from US$ 1100/- to US$ 22,000 Missing Middle Lack of information, considered risky, small ticket size, high transaction cost. Loans above US$ 22,000 Formal FIs Availability of Info, reasonable ticket size and manageable transaction costs, well banked
  6. 6. Financial Inclusion – Micro Finance by SIDBI  Thrust on unserved, underserved, rural and unorganised sectors serving National priorities and MDGs;  Through Micro Finance (loans upto US$ 1100);  Nurtured 150 plus MFIs for on-lending;  Pioneered the concept of rating of MFIs;  Mainstreaming - Commercial Banks now funding MFIs;  Cumulative Beneficiaries >30 mio persons.
  7. 7. Propagating Responsible Micro Finance  Promoting transparency and reduction in Interest rates;  Created “Lenders‟ Forum” to promote co-operation among MFI lenders;  India Microfinance Platform;  Code of Conduct Assessment Tool;  Credit Bureau to avoid multiple lending;  Encouraging information sharing amongst MFIs.
  8. 8. Beyond Micro Finance: „Missing Middle‟ Approach  In India, about 20% of credit demand of micro enterprises met by formal financial institutions;  Of the total bank loan, only 25% are for loans up to US$ 22,000 – a vast sector missing out on credit availability;  Thus, SIDBI thrust now on this “Missing Middle” segment – from US$ 1100 to US$ 22,000.
  9. 9. Why Micro Enterprises ?  Meet development agenda. High incremental employment creation;  Creating larger SME clients for the future;  Foothold in a segment that can be targeted by banks/ MFIs in the future-mainstreaming. 9
  10. 10. Approaches to MEL  Co-branding NBFCs BMOs (Industry Associations)  Banking Correspondent model  Buying out the portfolios  Direct MEL 10
  11. 11. Test Launch – Direct MELs In FY2009, SIDBI started MELs:  Loans for working capital and/ or equipment  Credit Guarantee coverage – borne by SIDBI  Test launch through 7 MFBs  Avg. interest of 12% p.a.  Avg. loan of US$ 4000  500 MELs covered 11
  12. 12. Direct MEL– Lessons Learnt  Absence of formal financial information;  Need to bring in simplified process and assessment techniques;  Large numbers need high standardisation;  Our rate very attractive – to client;  Need for intensive follow up/ monitoring (outsourcing ?);  Capacity building needs of intermediaries/ clients. 12
  13. 13. Direct MEL – Future Outlook !  Draw from international practices in MELs e.g., downscaling;  Design a scalable model covering entire credit cycle;  A separate integrated software – user friendly, can be shared with other lenders;  Simplified process and tools to assess the loan against borrower‟s cash flows;  Expert credit rating model initially – statistical model once a pool of MELs is available. 13
  14. 14. Missing Middle - Partners  ADB : LoC of US$ 50 mio & TA of US$ 3 mio to develop, access to finance and business development services by micro enterprises. TA is women centric for supporting micro-entrepreneurship for women empowerment in selected states and capacity building of the staff of MFIs, to sensitize them towards the specific needs and opportunities of the sector.  GIZ, Germany : To provide capacity building support towards cluster centric approach for MEL
  15. 15. 15 Contact Details Navin Kumar Maini Deputy Managing Director Small Industries Development Bank of India, Head Office, SIDBI Tower, 15, Ashok Marg, Lucknow – 226001, India Tel.: +91-522-2288508 Fax: +91-522-2286925 Mob.: +91-99190 02367 E-mail : nkmaini@sidbi.in Website: www.sidbi.in WE EMPOWER MSMEs

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