Govt creates fund to boost SME growth
March 7, 2008
Since SSI reservation is getting increasingly restricted and the sector is being exposed to competition, the government is creating a new fund – to be managed by the Small Industries and Development Bank of India (SIDBI) – to provide risk capital to the micro, small and medium enterprises (MSME). That the sector has become vulnerable to competition from big industrial houses has been acknowledged by the government in proposing this fund.
In the 2008 Budget, the finance minister has announced that SIDBI will reduce the guarantee fee for loans to the MSME sector to 1% from the prevailing 1.5% and the annual service fee to 0.5% from the earlier 0.75%. Fund outlay for the sector has also been increased to Rs 1,854 crore (budget estimate) for fiscal 2009 against Rs 1,644 crore (revised estimate) for the current fiscal. The finance minister has announced that funding for the sector would continue despite dereservation of items.
The government may, however, further reduce number of reserved items for the sector from the present 35 as The Economic Survey has suggested that the phased deletion of items should be continued. Government had dereserved 125 items last year, while 79 items were dereserved in February. Of the 35 product categories reserved for the MSE sector presently, most are in food, plastic, chemicals, and steel sectors.
In terms of total production, the sector is growing at the rate of more than 10% for the last four years. Total production by the MSE sector (excluding the medium enterprises) is expected to be Rs 4,71,663 crore in 2006-07 up 12.6% from the last year’s figure.
(Source: economictimes.com)
Soros, Google.org, Omidyar plans SME firm in India
February 20, 2008
Soros Economic Development Fund (SEDF), Omidyar Network and Google.org announced that they are working together to create a $17 million (around Rs 68 crore) small to medium enterprise (SME) investment company for India to create job opportunities and spur greater economic participation. The joint investment company is expected to provide capital to small and medium businesses in underserved markets.
Most of the existing SME funds make investments in the $3-5 million range leaving out a significant portion of the market. The investment company will target this “missing middle” with equity investment between $500,000-3.5 million. Many small and medium Indian businesses lack formal funding options because of the gap between loans offered by microfinance institutions and the larger investments of commercial banks and private equity firms, said a press release from Google India.
SEDF, Omidyar Network and Google.org plan to locate the investment advisor at the Indian School of Business (ISB), Hyderabad to leverage the school’s SME expertise. Dr. Reuben Abraham, currently ISB’s director of the Base of Pyramid Lab and a board member of SEDF, is expected to be the senior advisor.
The investment company will hire an experienced investment advisor and two experienced senior investment analysts based in India to recommend and build the pipeline of portfolio investments.