Seite 1

IICA’s National MSME Conclave 2014

Emerging Financing Options for the MSME Sector

19 November 2014

Seite 2

Context

The MSME sector crucial to achieve inclusive growth

• 9% contribution to GDP

• 45% contribution to manufacturing

• 40% contribution to exports

• Second largest provider of employment

YET

Less than 10% of the sector accesses finance from institutional sources

• Lack of timely, adequate and economical credit

• Lack of funds for growth and expansion, modernisation etc.

• Lack of collateral to avail bank financing

• Lack of access to different sources of finance viz. risk capital

MSME sector is unable to achieve its full potential

Seite 3

Need of the hour

• Increase banking access to number of units – cheaper loans, simpler processes, smaller ticket sizes, alternative to collateral based funding

• Improve financing for different requirements – sustainability investments (Energy efficiency etc.), loans for expansion, marketing activities etc

• Increased availability of different sources of finance

• Improve awareness amongst MSMEs about existing schemes and benefits – Low awareness on existing schemes and benefits

Seite 4

Energy Environment

GIZ in BriefDeutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

• 100% federally owned, public-benefit enterprise, supporting the German Government in achieving its objectives in the field of international cooperation for sustainable development

• promoting international cooperation for sustainable development and international education work.

• > In 130 countries worldwide; > 17,000 staff members

Promoting MSME Growth = a priority area of GIZ Private Sector Development

Priority Areas in India of German Development Cooperation

Seite 5

GIZ’s initiatives for the MSMEs

Responsible Enterprise Finance (with SIDBI as partner) - REF constituted to improve supply of risk capital and sustainability-oriented loan products for MSMEs

• ESG framework for SME Lending

• Sustainability oriented financial products and services

• Improved supply of risk capital for social enterprises

• Guidelines for responsible Financing

MSME Umbrella Program – aimed to modernise the MSME sector and improve their competitiveness

• Improving the implementation of policies and programmes of the Ministry of MSME

• Better access to market oriented financial and non-financial services

• Promoting innovation

Seite 6

Financial Literacy and Education Workshops

• Workshops aimed to increase awareness about existing schemes for MSMEs and get better understanding of bankers’ expectations in loan applications

• Focus on micro and small enterprises

• 50 workshops across the country spanning different sectors

• Workshops attended by multiple stakeholders – banks, NBFCs, MSMEs, business associations

Over 300 additional workshops have been conducted outside the program on banks request and funding by banks

Seite 7

Missing Middle Enterprise Finance

• Objective was to improve access to finance for micro enterprises

• Typical loan requirement between INR 50,000 to INR 10, 00,000

• Focus on training of Regional Rural Banks/ Urban Cooperative Banks/ District cooperative banks especially for downscaling techniques for MEL

• Way forward

• Training programs underway with partner banks

• SIDBI implementing 100 training workshops in different MSME clusters for RRBs/UCBs and DCBs

• Line of Credit committed from KfW to SIDBI for missing middle financing (anchored in SIDBI foundation for micro credit)

Seite 8

Sustainability oriented Products & Services

Aim to improve supply of loans for sustainability oriented investments

Some of the activities include:

• Energy Efficiency Financing

• Loans for Energy efficiency measures

• Training for bankers to understand EE and evaluate projects (50 workshops completed)

• Pilots underway to test financial products for EE loans

• Supporting SIDBI in their end to end energy efficiency (4E) project

• Loans for women entrepreneurs

• Loans for renewable energy

Seite 9

Accessing Funds from alternate sources

• Ensuring increased supply of risk capital to social enterprises and start ups

• Increasing market transparency to facilitate flow of capital to social enterprises

• Strengthening incubation support for social enterprises and start ups

• Strengthening supply of risk capital for social enterprises and start ups

• Developing a pipeline of strong social enterprises to receive financing from SIDBI Venture Capital

Seite 10

Your thoughts and feedback

• Your engagement with GIZ on the Responsible Enterprise Finance Program

• REF program taken forward through multi-stakeholder working groups

• Is there anything else that you would like us to include under Sustainability?

• Important to get your views on what works

Seite 11

Thank You

GIZ – REF Team

Wolfgang Leidig (wolfgang.leidig@giz.de)

Poonam Sandhu (poonam.sandhu@giz.de)

Anja Shivhare (anja.shivhare1@giz.de)

Devyani Hari (devyani.hari@giz.de)

Katharina Kuehn (katharina.kuehn@giz.de)

Neha Kumar (neha.kumar@giz.de)

SIDBI PMD Team

AK Kapur (akapur@sidbi.in)

Anand P Srivastava (anandp@sidbi.in)