facilitating credit in the sme marketplace -...
TRANSCRIPT
Facilitating Credit in the SME
Marketplace
CA. K. Raghu
President, The Institute of Chartered Accountants
of India
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SMEs As the Backbone of Indian Economy
• The Medium and Small and Medium Enterprises Sector (MSME) is governed by a separate
Ministry of Micro , Small and Medium Enterprises
• The MSME Sector contributes around 9% of GDP
• SMEs employs close to 40% of India's workforce and contributing 45% to India's
manufacturing output,.
• The country's 1.3 million SMEs account for 40% of India's total exports.
• Micro Small Medium Enterprises has been playing an significant role in the development of the
country and employs 805.24 lakh of persons.
• As per the Indian Economic Survey 2013-14 the sector contributes with 31.8% of the
manufacturing enterprises and it has showed a increasing trend of the growth from 11% in the
year 2010-11 to 19% in the year 2011-12 and reached about 14% in the year 2012-13.
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Key Industries In Which SMEs Operate
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Indian Perspective
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Global Perspective
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Need Of Credit In The SME Market Place
The SMPs organizational operational and financial limitations as
compared to non SMPS therefore;
• SMEs need financing for two basic purposes:
• Working capital financing and,
• Capital expenditures financing
• The debate on SMPs and non-SMPs is not on account of professional knowledge,
skills and training imparted to them or for that matter the level of expertise and
skills possessed by them. It is for addressing the core issues driving their
sustenance i.e Infrastructure Financing. Without which they cannot operate
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Constraints to SME Financing
SME FINANCE CHALLENGES
POOR CUSTOMER KNOWLEDG
E
SMEs SKILLS AND
LITERACY
LOW PROFITABILIT
Y
LACK OF CREDIT DATA
POOR BUSINESS ENABLER
LACK OF CAPITAL
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Non-financial Barriers To SME Development
• Tax Rates
• Corruption
• Electricity
• Transportation
• Regulations
• Lack Of Business And Management Skills
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G20 and Growth of SMEs Financing
• Alternative sources of SME finance should be encouraged, with appropriate
protection for stakeholders involved.
• SMEs must adopt new technology and embrace the digital economy to become
globally competitive.
• SMEs and industry organisations should submit specific instances of existing red
tape requiring reform to relevant members of a nation’s executive for review
• Tendering and insurance requirements for government business should be
streamlined and reduced for SMEs.
• ‘Economic gardening’ of local small firms, through which SMEs are encouraged to
take on an extra worker or two, can incrementally increase employment.
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Indian Government Role in SME Developement
Fundamental role played by Government in ensuring a supportive
enabling environment and expanding the frontier for SME Finance.:
• Stable macro economic environment
• An effective financial infrastructure
• Supportive legal and framework
• Offering concessional loans by International organisation to governments to
support bank lending to SMEs
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Support initiatives provided by the Government with the greatest
representation in the stocktaking exercise include:
• Funded financing facilities extended via state banks and/or private
financial institutions;
• Credit guarantees also extended via state banks and/or private
financial institutions; and,
• State bank initiatives.
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Role of ICAI In SMP/SME Sector
Facilitation of Specialized Loan Scheme through Public Sector Banks
• The ICAI has taken an initiative to arrange financial assistance to all members in practice /
firms in the form of specially designed loan scheme through Corporation Bank. Through the
scheme, eligible Chartered Accountants can avail finance for setting up of offices including
cost of furniture/fixture/office equipments-computers and other accessories
Revised Minimum Recommended Scale of Fees for the Professional assignments
done by Chartered Accountants for Class ‘A’ & Class ‘B’ Cities
• The ICAI has taken a major initiative for prescribing the Revised Minimum Recommended
Scale of Fees for the professional assignments done by the members of ICAI. The
recommendation is about the fee to be charged as per the work performed for various
professional assignments and the amount quoted under respective heads of professional
work.
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Way Forward
• Redefine MSME
• Availability and Cost of Credit
• Assistance in Marketing
• Increase Productivity
• Technology Upgradation
• Skill Development
• Improve Infrastructure
• Fix incentives/Tax related issues
• Develop an Institutional Framework
• Resolve Sector Specific Issues
• Crowd funding a new concept in evolution is an alternative source of capital for SMEs
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Thank You!