Financing small enterprises

June 08, 2011 06:26 pm | Updated 06:26 pm IST - Chennai

Title: India Micro,Small & Medium Enterprises Report 2011. Author: Institute of Small Enterprises and Development. Photo: Special Arrangement

Title: India Micro,Small & Medium Enterprises Report 2011. Author: Institute of Small Enterprises and Development. Photo: Special Arrangement

Foremost among ‘recent innovations and initiatives’ – discussed in ‘ India Micro, Small & Medium Enterprises Report 2011 ’ from the Institute of Small Enterprises and Development ( >www.isedonline.org ) – is the establishment of centralised processing cells in banks and financing institutions.

Reminding readers about a key recommendation of the Chakraborty Committee that up to Rs 10 million loan origination, sanction, monitoring and so on should take place at the branch level, the report however rues that the implementation of this recommendation is yet to see the light of the day.

In a section on ‘venture capital financing,’ the authors of the report fret that both the deal flows and the angel investment portfolios are tiny, and that just about 50 start-ups a year appear to be benefited. Behind the poor flows they see social and cultural issues, such as ‘lack of trust, cynicism about founders/ promoters, labour laws, tax avoidance/ evasion route of the enterprises.’

The report highlights the SME (small and medium enterprises) Fund, an initiative from the Government of India and SIDBI to give impetus to the flow of funds to the SME sector. “Under the Fund, assistance is being provided to SMEs at an interest rate of 200 basis points below the Bank’s PLR. Direct assistance is being extended to SMEs through SIDBI’s own offices at 9.5 per cent rate of interest as also by way of providing refinance to the primary lending institutions.”

A study of value.

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