1

Presentation on

BDS Led Cluster Development inPoverty Intensive Clusters

February 21, 2014

Addressing Gaps in MSME Eco-system

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 IntroductionSIDBI – An Introduction

3

SIDBISIDBIApex institution for MSME in India

SIDBISIDBIApex institution for MSME in India

4

Snapshot of Indian MSMEsSnapshot 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 - 2nd largest after agriculture Contributes 45% of manufacturing 43% of exports 8% share of GDP Registered around 13% growth during 11th Five Year plan against

overall economic growth 6.5%

5

Distribution of Indian MSMEsDistribution of Indian MSMEs

6

Indian MSME Sector - Definition Indian MSME Sector - Definition

7

Challenges :Gaps in MSME Eco system 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)

8

Defining ClusterDefining 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.

9

Needs of a ClusterNeeds 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

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 – AdvantagesCluster Intervention – Advantages

11

GoI InterventionsGoI 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.

12

SIDBI’s Cluster InterventionSIDBI’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 promotion70 clusters in association with MoMSME and BEE75 clusters in the area of skill upgradation / marketing linkages19 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.

13

SIDBI’s other initiativesSIDBI’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.

14

15

Benefits from the programme……..Benefits from the programme……..

16

MSMEFDP-Project CoverageMSMEFDP-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

17

Business Development ServicesBusiness 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

18

Competition in Service Delivery

results in

attractsleads to

reinforces

High Quality Product Offering

Good Income Opportunities

Growth and Innovation

Profits

Excellent Business Services

MSMEs BDS Providers

WealthCreation

SharedObjectiveBDS Market

leads to results 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 MSMEsMaking Market for MSMEs

19

Methodology of Cluster DevelopmentMethodology 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

2020

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 interventionSuccess Stories of BDS intervention

21

Before Intervention After 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 interventionSuccess Stories of BDS intervention

22

Thank youThank you