seite 1 iica’s national msme conclave 2014 emerging financing options for the msme sector 19...
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IICA’s National MSME Conclave 2014
Emerging Financing Options for the MSME Sector
19 November 2014
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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
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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
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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
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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
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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
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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)
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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
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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
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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
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Thank You
GIZ – REF Team
Wolfgang Leidig ([email protected])
Poonam Sandhu ([email protected])
Anja Shivhare ([email protected])
Devyani Hari ([email protected])
Katharina Kuehn ([email protected])
Neha Kumar ([email protected])
SIDBI PMD Team
AK Kapur ([email protected])
Anand P Srivastava ([email protected])