SME Cluster Development – SIDBI Experience
Presentation by
Rakesh Rewari
Deputy Managing Director
We empower Micro, Small and Medium Enterprises
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Indian SME Sector –
An Overview


The SME sector a strong pillar of Indian Economy
Contribution to Economic Growth, Poverty Reduction,
employment creation
•
No. of SMEs – 29 million units
o 95% micro enterprises
•
Second largest source of employment- 66 million
•
Contributes 45% of industrial output and 33% of exports
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SME Clusters in India
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In India, more than 6,500 MSME clusters :
•
6,000 Artisans / Micro Clusters
•
700 SME Clusters, out of which 300 modern clusters.
Wide range of clusters from artisan/traditional to modern/high
tech
•
Artisan - Leather, Woolen knit wears, Glass ware and Bangles etc.
•
Modern /High tech - Machine Tools, Auto components etc
In some urban clusters, Growth unplanned.
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Challenges of SME Clusters

Impact of Globalization and global crisis
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Subsidy / concessional financing being phased out
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High risk of SMEs – banks’ perception
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Technology, Marketing, manpower challenges
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Common facilities – issues

Environmental issues of cluster in urban areas

Limited implementing agencies/BDS providers in the private
sector
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Cluster Development – Advantages for
Bankers
 Identification
mitigation.
of
common
risk
elements
and
their
 Greater outreach with single financial product.
 Standardization
transaction cost.
of
documentation
–
reduction
of
 Easy monitoring and follow-up.
 Better information and inter-firm comparison.
5
Cluster Development - Key role by Government


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MSE Cluster Development Programme
• Soft Intervention – training programme, skill development
• Hard Intervention - 75-90% grant for infrastructure
projects or development of common facilities
Scheme of Fund for Regeneration of Traditional Industries
(SFURTI)
• development of traditional/artisan clusters like khadi,
village or coir industries
Industrial Infrastructure Up-gradation Scheme –
• development of physical, technological, R&D Infrastructure
in cluster.
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Cluster Development by SIDBI –
Guiding Principles

Increase competitiveness of clusters

Support Common facility, new technology, skill upgradation,
common brands, joint marketing.

To ensure high replicability and dissemination potential.

Introduce international best practices.
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Financial – Business driven
Facilitating greater flow of credit to clusters

MoU with banks for Joint / co-financing of projects in
identified clusters

Financing in clusters through MoU with SME Industry
Associations
•
FSIA – Pre-approved limits to members for unforeseen
business related Expenses.

Thrust on Energy Efficiency in Clusters.

Partnership with World Bank & Government of India to
finance energy efficient measures/technologies in 75
clusters.

Concessional loans for clean production measures, common
effluent plants, renewable energy in targeted clusters.
Financial – Business driven
Facilitating greater flow of credit to clusters

Introduced a “ Green Loan Scheme” to provide concessional
loans to environmentally sustainable facilities/services with
cluster focus.

Environment friendly measures through linkages –
assistance to Mumbai Taxi owners to replace old taxis with
CNG taxis, financing of LPG auto rickshaws in Chandigarh,
Solar Lantern in North-Eastern India.
Financial – Business driven

Financing infrastructure in cluster
•


Financing for market development
•
Supported setting
Coimbatore
•
Supported KASSIA for setting up of permanent trade fair
and display center
up
of
permanent
trade
fair
in
Developing CDM / carbon credit
•

Development and financing of textile park in Tirupur
Financing credit support to SMEs in Jodhpur steel rerolling cluster to implement measures for CDM
Developed a faster credit delivery model ( CART) and shared
with banks/FIs
Developmental – Activity-based
SIDBI supported :
• Support to Jamnagar Association to set testing lab
• Rajkot – Development of cluster website and SPV for foundry
cluster on PPP mode
• Capacity Building
in the areas like Skill upgradation,
entrepreneurship development, financial management etc.
• Kanpur –Skill upgradation for product improvement
Developmental – Activity-based

Skill Development
• 12 skill development centers has been established, 21
linked up / institutionalized and 4 others are likely to be
setup soon.
• Wages of women artisans increased > 3 times
• Skill efficiency increased by 10-15%

Walk-through energy audits
• Energy Efficiency increased by > 15%

Sick/closed CFCs activated
• Now profitably running, benefited more than 1000 SMEs.
Developmental – Activity-based

Rural Cluster Development
• Rural Industries Programme for development of viable and
self-sustaining tiny/small enterprises in rural India by
harnessing local entrepreneurial talent.
• To address the problems such as rural unemployment, better
commercial exploitation of the local resources and
addressing the problem of urban migration.
•
•
Designed as a comprehensive Business Development
Services programme.
Ultimately linked to bank finance.
 Implemented in more than 100 districts in 24 states

Cumulatively,
almost
30,600
units
promoted;
Employment generation of more than one lakh persons.
BDS in SME Clusters
MSME Financing and Development Project (MSMEFDP)
 A World Bank led project called MSME Financing and Development
Project (MSMEFDP).
 BDS in 26 clusters in the areas of new technologies, use of IT,
skill development, energy efficiency, marketing, etc.
 Supported SMERA to develop Green Ratings, first time in the
country – starting with a Foundry Cluster.
 Micro Enterprises Business Information Counselors (MEBIC)
• Provided services to 755 prospective entrepreneurs
 Capacity building of Industry Associations for greater credit flow.
 msmementor.in- A national level database of BDS provider to
mentor, handhold and provide expert services to MSMEs.
 Organising BDS clinic, BDS Bazar, Exposure visits, etc.
Lessons Learnt

Credit with hand holding required

Govt plays key role for support services

Identify local agencies for implementation

Strategy for each cluster may be different

For quick success look at leaders in clusters.

Integrated approach
Associations

Long haul - Be prepared to finding fine tuning strategy.

Publicize success stories, best practices

Intervention schemes should be simple, easy to understand.
by
Govt.,
Banks,
BDS
providers,
THANK YOU
We empower MSMEs
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