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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-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
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
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
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
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
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
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                             8
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
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
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
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
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
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
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
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
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
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
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
PRODUCTS & SERVICES
                              PROJECT
                               FINANCE
                              Term Loan
                                                 RISK
           REFINANCE
                                                CAPITAL




                                                            TECHNOLO
 NG CAPITAL
                                                           UPGRADAT
INANCE
d/ Non-fund)
                             SIDBI                         Energy Effic
                                                          Clean Enviro




                                             PROMOTIONAL &
          RECEIVABLE
                                             DEVELOPMENTAL
            FINANCE
                                                ACTIVITIES
                               MICRO
                               CREDIT

                          We Empower MSME
                              One Stop MSME
                          We EmpowerShop                     20
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
Direct Finance

Term Loan / Project loans

Working Capital

Bills Finance

Non Fund Based Finance

Risk Capital




                   We Empower MSME
                   We Empower MSME   22
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
DEVELOPMENTAL INITIATIVES

Enterprise 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
DEVELOPMENTAL INITIATIVES
Enterprise 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
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
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
 TCOs
CO-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
Product Innovations

• Working Capital

• Non Fund based Products

• Risk Capital

• Energy Efficiency

• TIFAC



                      We Empower MSME
                      We Empower MSME   28
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
Innovative Technology Platforms
• CART

• NTREES

• Working Capital Platform

• MSME Exchange


• MSME Mentors
                 We Empower MSME
                 We Empower MSME   30
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
Thank You

 We Empower MSMEs…

    We Empower MSME
    We Empower MSME   32

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Msm es and sidbi

  • 1. Good Things in life Begin Small SIDBI We Empower MSME We Empower MSME 1
  • 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. 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. 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. 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. 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. 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. 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 8
  • 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. PRODUCTS & SERVICES PROJECT FINANCE Term Loan RISK REFINANCE CAPITAL TECHNOLO NG CAPITAL UPGRADAT INANCE d/ Non-fund) SIDBI Energy Effic Clean Enviro PROMOTIONAL & RECEIVABLE DEVELOPMENTAL FINANCE ACTIVITIES MICRO CREDIT We Empower MSME One Stop MSME We EmpowerShop 20
  • 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. Direct Finance Term Loan / Project loans Working Capital Bills Finance Non Fund Based Finance Risk Capital We Empower MSME We Empower MSME 22
  • 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. DEVELOPMENTAL INITIATIVES Enterprise 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. DEVELOPMENTAL INITIATIVES Enterprise 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. 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. 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  TCOs CO-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. Product Innovations • Working Capital • Non Fund based Products • Risk Capital • Energy Efficiency • TIFAC We Empower MSME We Empower MSME 28
  • 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. Innovative Technology Platforms • CART • NTREES • Working Capital Platform • MSME Exchange • MSME Mentors We Empower MSME We Empower MSME 30
  • 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. Thank You We Empower MSMEs… We Empower MSME We Empower MSME 32

Hinweis der Redaktion

  1. Domestic debt rating
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