2. 1 Presentation on BDS Led Cluster Development in Poverty Intensive Clusters February 21, 2014 Addressing Gaps in MSME Eco-system

3. 2  Set up under an Act of Parliament - April 1990  Promotion, financing and development of MSMEs and Co-ordinate the functions of institutions serving the sector  Presence – serving 600 MSME clusters with its 85 branch offices and indirect support through network of more than 80,000 branches of banks/FIs/MFIs for on-lending to MSMEs  Cumulative financial support of about USD 51.63 billion, resulting in benefiting the MSME sector through more than 32 million loans.  Total assets : USD 900 million (Gross NPA of only 0.98%) SIDBI – An Introduction

4. 3 SIDBI Apex institution for MSME in IndiaSIDBI Credit Indirect FinanceDirect Finance Micro finance Beyond credit Enterprise promotion/ skill development Management Development Cluster Development Marketing SupportPolicy advocacyCredit Advisory/ smallB.in Institutional solutions SVCL- Venture CapitalSMERA- SME Rating CGTMSE – Collateral Free Lending ISTSL-Technology Transfer ISARC – Asset Reconstruction

5. 4 Snapshot of Indian MSMEs  A vehicle for Faster, Sustainable and more Inclusive Growth.  Platform for Entrepreneurship Development  > 31 million enterprises, > 6,000 products  > 100 million employment - 2 nd largest after agriculture  Contributes 45% of manufacturing  43% of exports  8% share of GDP  Registered around 13% growth during 11 th Five Year plan against overall economic growth 6.5%

6. 5 Distribution of Indian MSMEs

7. 6 Indian MSME Sector - Definition Micro upto INR 25 lakh (<$0.041mn) Small INR 25 lakh to INR 5 crore (>$0.041mn - <$0.83mn) Medium INR 5 crore to INR 10 crore (> $0.83mn - <$1.66mn) Manufacturing Enterprises Micro upto INR 10 lakh(<$0.016mn) Small INR 10 lakh to INR 2 crore (>$0.016mn - <$0.33mn) Medium INR 2 crore to INR 5 crore (>$0.33mn - < $0.83mn ) Service Enterprises

8. 7 Challenges :Gaps in MSME Eco system  Financial Gaps  Adequate, timely and cost effective credit  Access to equity / risk capital & financing innovation  Financing support for sustainable measures, financing knowledge based / intangible rich projects in service sector, marketing & brand building, etc.  Non Financing gaps  Infrastructure adequacy  Marketing – procurement of raw material, designing, product development, etc.  Lack of quality and affordable advisory services  Skill development – lack of managerial competence and proper skill set  Technology upgradation  Information dissemination  Timely access of Business Development Services (BDS)

9. 8 Defining Cluster  "A cluster is a sectoral and geographical concentration of similar, related or complementary micro, small and medium enterprises that share common facilities, that derive common benefits of economies of scale and scope, and that are faced with common threats".  In India, around 650 SME clusters and 6000 artisans clusters exist.

10. 9 Needs of a Cluster  Credit needs  Financial requirement of MSMEs in a cluster  Common needs  Testing Centres  R&D Centres  Product & Process development centres  Tool rooms  Infrastructure needs  Roads  Sewerage  Water sanitation  Power supply  Industrial sheds  Developed information and networking system  Common marketing platform

11. 10  Viability: Makes the units competitive, enhances market competitiveness.  Subsidiarity: Enhances value addition, economies of scale and scope for strong forward & backward linkages.  Risk Mitigation: Facilitates Banks / FIs to offer credit in a targeted fashion with greater assurance of repayments.  Complimentarity: Synergy with other programmes by other agencies, yielding maximum benefits.  Replicability: Intervention in similar other clusters become smooth and quick yielding.  Significance to Regional/National Economy: Boosts regional industrial growth and in turn national growth through more efficient use of raw material, power, increase in productivity leading to increase in income. Cluster Intervention – Advantages

12. 11 GoI Interventions  GoI is supporting cluster development through various schemes viz. MSE-CDP  Subsidy available upto 25 lakh for soft intervention.  Subsidy up to 90% (on project cost of 15 crore) for establishing Common Facility Centre in clusters.  Subsidy up to 80% (on project cost of 10 crore) for infrastructure projects.  Integrated Handloom Development Scheme - for providing financial assistance for holistic development of Weavers’ clusters.  Scheme of Fund for Regeneration of Traditional Industries (SFURTI) – Integrated cluster based development of traditional industries in Khadi Village and Coir Sectors.

13. 12 SIDBI’s Cluster Intervention  SIDBI adopts ‘Credit Plus’ approach and Cluster based interventions are an integral part of SIDBI’s developmental initiatives. SIDBI has so far supported :  75 clusters in the area of EE financing and promotion  70 clusters in association with MoMSME and BEE  75 clusters in the area of skill upgradation / marketing linkages  19 clusters under MSME-FDP by promoting BDS in the area of new technology, skill upgradation, EE and marketing.  5 foundry clusters under WB-GEF project.  120 rural and districts clusters through Rural Industries Programme (RIP) promoting more than 38000 enterprises and employment generation of 1.10 lakh persons.  300 Credit Advisory Centers in as many clusters in partnership with cluster level industry associations.

14. 13 SIDBI’s other initiatives  Facilitating greater flow of credit to clusters  Scheme for Small Enterprises Financial Centres (SEFC): SIDBI has entered into Memorandum of Understanding (MoU) with 15 commercial banks covering over 200 clusters for Joint / co-financing of projects including working capital and non-fund based facilities for the MSME sector.  To augment credit flow to SMEs by way of fair pricing and removing informational asymmetry through SMERA rating. SMERA has entered into MoUs with 30 banks and institutions. SMERA has also completed risk profiling of 8 clusters.

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16. 15 Benefits from the programme…….. About 100 thousand MSMEs got benefitted. MSME benefitted 55000 and > 10000 from BDS & LoC respectively directly Employment went up by 24% Sales and Income went up by 86 % & 42% respectively MSME 450 new BDS introduced in 19 MSME Clusters Institutionalization of BDS providers 773 BDS providers trained Over 700 transactions with project support and over 1400 without project support BDS providers Cluster Development mechanism in India Advocacy Challenge Fund Making market work methodology Acceptance of E&S framework in sustainable financing agenda by Banks / FIs Intangibles Cadre of BDS providers / national experts on cluster development Public Private Partnership promotion (over 40 PPPs) International awards won by project, SIDBI Liasoning and close integration of cluster MSMEs / network development MSMEs Sector

17. 16 MSMEFDP-Project Coverage  7 subsectors- 7 FAs- 19 clusters, over 100 professionals  Over 42000 Principal MSMEs  Cumulative turnover of over INR 620 billion  Direct / indirect employment to over 2 million people  Project Objectives  Comparative advantage to competitive advantage  Downscale to upscale -ME development  Judicious Blending of financial and Non financial services  Promoting eco system- CB of institutions, BDS, PA, Network

18. 17 Business Development Services  Business Development services are wide range of Services used by entrepreneurs to help them operate efficiently and grow their businesses.  It includes training consultancy & advisory services, marketing assistance, information, technology development and transfer, and business link promotion as also financial services.  By fostering Business Development Services (BDS) in 19 clusters SIDBI targeted at soft infrastructure with both long term and short term intervention.  These 19 clusters have over 42,000 Principal MSMEs with cumulative turnover of over INR 620 billion.  Direct / Indirect employment to over 20 lakh people

19. 18 Competition in Service Delivery results in attractsleads to reinforces High Quality Product Offering Good Income Opportunities Growth and Innovation Profits Excellent Business Services MSMEsBDS Providers Wealth Creation Shared Objective BDSMarket leads toresults in reinforces increases The fostering of a skilled and entrepreneurial BDS sector will lead to a self-supporting loop of improved innovation and competitiveness in MSMEs. Making Market for MSMEs

20. 19 Methodology of Cluster Development  Selection of a Cluster  Selection of a Cluster Development Agency  Intervention  Diagnostic study of cluster  Trust building / strategic MoUs  Preparation of action plan (AP) for intervention  AP implementation  Exit / hand over after making it self sustainable.  Monitoring and evaluation  Impact assessment / dissemination / replication

21. 20 1.1000 Women Engaged in making Whips out of scrap earning R 10-15 p/d 2.Helped in product introductions, new design development, skill upgradation, marketing linkages 3.Income increased R 100- 125 p/d 4.Deptt of Industries has linked the initiative with their prog. 5.37 Women got artisan card which facilitates access to credit, market and Health insurance CREATING VALUE- Waste to Market Taste Success Stories of BDS intervention

22. 21 Before InterventionAfter Intervention 98% women in spinning. Two women had to walk 10-12 kms per day on hand driven equipments. Income was Rs 80-90 per day with production of 8-10 kg / day Technical BDS roped-in introduction mechanized machines. Person can sit. Produce 17 Kg/day. M/c cost has been reduced with R&D from Rs 85000 to Rs 45000. EXIM Bank Coir Board Other Banks Success Stories of BDS intervention

23. 22 Thank you