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 Seite 3

•

GIZ in Brief

Deutsche 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

Energy Environment Sustainable Economic Development

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GIZ’s initiatives for the MSMEs

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 • • • •

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 Seite 5

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) Seite 7

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

project end to end energy efficiency (4E)

Loans for women entrepreneurs Loans for renewable energy Seite 8

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 9

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 10

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]) Seite 11