A workshop for Small and Medium Enterprises (SMEs) on Wednesday advocated new funding mechanisms for SMEs as alternatives to traditional bank loans to develop their business and align quality controls on their products to international standards.
The one-day workshop was organised jointly by the Confederation of Indian Industry (CII), United Nations Industrial Development Organisation (UNIDO), Indian Venture Capital Association (IVCA) and Indian Angel Network (IAN).
In his keynote address, S. Chandramohan, convenor, Panel on Economic Affairs & Taxation, CII Tamil Nadu & Chief Financial Officer, TAFE Ltd., said a major lacuna in funds availability for SMEs was the lack of a sub-target for banking institutions in the overall policy framework unlike in the case of agriculture. The usual practice for financing institutions was to securitize the portfolio of the existing loans that did not amount to direct lending, he said. Pointing out that the availability of finance was as critically important for the survival of SMEs as technology infusion and quality standards, he said the workshop could create more awareness among SMEs on alternative finance options for their growth.
The workshop structured over three training modules is expected to bridge the gap between SMEs and equity investors including private equity funds, which have recently grown in India, said Bruno Valanzuolo, Chief Technical Advisor of the Consolidated Project, UNIDO.
“In addition to independent players, major financial institutions such as ICICI have also established equity funds for SMEs. However, very few promoters of SMEs have the appropriate information and knowledge to approach such equity investors.”
While SMEs are considered to be key players in economic development in India, access to finance continues to be a major challenge for their growth. It is in this context that the training programme has been developed as part of the Consolidated Project for SME Development in India (“Consolidated Project”), UNIDO, together with IVCA and IAN, he said.
The workshop in Chennai involves sensitising SMEs about alternative finance options, exploring private equity funding processes and mentoring sessions.
T.C.M. Sundaram from the Indian Venture Capital Association said the IVCA as a representative body of investors was focused on the SME segment. The expected credit target for the next 5 to 6 years was about $ 80 billion, he said.
CII and UNIDO would provide support for SMEs under ‘FinExe' – a Finance Excellence initiative for SMEs in identifying various funding options and also help them in preparing project proposals for large organisations said Sujith Haridas,Regional Director, CII, Southern Region.
