Presentation on
BDS Led Cluster Development in
Poverty Intensive Clusters
February 21, 2014
Addressing Gaps in MSME Eco-system
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SIDBI – An Introduction
 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%)
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SIDBI
Apex institution for MSME in India
Credit
Indirect Finance
Direct Finance
Micro finance
Beyond credit
Enterprise promotion/ skill
development
Institutional solutions
SVCL- Venture Capital
Management Development
SMERA- SME Rating
Cluster Development
CGTMSE – Collateral Free
Lending
ISTSL-Technology Transfer
Marketing Support
Policy advocacy
ISARC – Asset
Reconstruction
Credit Advisory/ smallB.in
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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 - 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%
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Distribution of Indian MSMEs
4.89%
Micro
Small
Medium
0.17%
94.94%
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Indian MSME Sector - Definition
• Micro upto INR 25 lakh (<$0.041mn)
Manufacturing
Enterprises
• Small INR 25 lakh to INR 5 crore (>$0.041mn
- <$0.83mn)
• Medium INR 5 crore to INR 10 crore (>
$0.83mn - <$1.66mn)
• Micro upto INR 10 lakh(<$0.016mn)
Service
Enterprises
• Small INR 10 lakh to INR 2 crore
(>$0.016mn - <$0.33mn)
• Medium INR 2 crore to INR 5 crore
(>$0.33mn - < $0.83mn)
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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)
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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.
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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
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Cluster Intervention – Advantages
 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.
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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.
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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.
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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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Benefits from the programme……..
MSME
• 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
BDS
providers
• 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
Intangibles
MSMEs
Sector
• Cluster Development mechanism in India
• Advocacy Challenge Fund
• Making market work methodology
• Acceptance of E&S framework in sustainable financing agenda by
Banks / FIs
• 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
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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
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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
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Making Market for MSMEs
The fostering of a skilled and entrepreneurial BDS sector will lead to a self-supporting loop of
improved innovation and competitiveness in MSMEs.
BDS Providers
MSMEs
High Quality
Product Offering
reinforces
Competition in
Service Delivery
Profits
results in
Shared
BDS
Objective
leads to
attracts
Good Income
Opportunities
increases
reinforces
Growth and
Innovation
Wealth
Market
Creation
leads to
results in
Excellent Business
Services
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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
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Success Stories of BDS intervention
CREATING VALUE- Waste to Market
Taste
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 100125 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
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Success Stories of BDS intervention
Social Change
EXIM
Bank
Coir
Board
Other
Banks
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.
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Thank you
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