1. Seite 1 IICA’s National MSME Conclave 2014 Emerging Financing Options for the MSME Sector 19 November 2014

2. 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

3. 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

4. Seite 4 Energy Environment Sustainable Economic Development 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

5. 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

6. 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

7. 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)

8. 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

9. 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

10. 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

11. Seite 11 Thank You GIZ – REF Team Wolfgang Leidig (wolfgang.leidig@giz.de)wolfgang.leidig@giz.de Poonam Sandhu (poonam.sandhu@giz.de) Anja Shivhare (anja.shivhare1@giz.de) Devyani Hari (devyani.hari@giz.de)devyani.hari@giz.de Katharina Kuehn (katharina.kuehn@giz.de) Neha Kumar (neha.kumar@giz.de)neha.kumar@giz.de SIDBI PMD Team AK Kapur (akapur@sidbi.in)akapur@sidbi.in Anand P Srivastava (anandp@sidbi.in)