SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA Knowledge Series, 2011

SIDBI Report
on
Micro, Small and Medium Enterprises Sector
2011
 SIDBI REPORT
ON
MICRO, SMALL AND MEDIUM ENTERPRISES
SECTOR
2011
This document is an output from a project funded by the Department for International Development (DFID),
United Kingdom, and implemented by Small Industries Development Bank of India (SIDBI). The views
expressed are not necessarily those of DFID/SIDBI. The contents, views, comments, etc. contained herein are
mainly based on collation of different information available from sources such as online, network links of
Catalyst Management Services Private Limited - the consulting agency (which has undertaken the study), in
person and other resources. While every effort has been made to avoid any mistake or omission, SIDBI /DFID/
Catalyst do not accept any responsibility or liability for any losses occasioned to any party as a result of our
reliance on such information. We make no representation or warranty as to the accuracy or completeness of
the information used within this assessment, including any estimates, and shall have no liability for any
representations (expressed or implied) contained in, or for any omission from, this assessment. We would also
not be, in any way, liable for the authenticity of information, data, views, opinions, comments etc. and for any
mistake/ omission or defect in the publication of any nature, whatsoever.

Team for the preparation of

SIDBI Report on MSME Sector
Project Direction
Shri S Muhnot
Chairman and Managing Director, SIDBI

Steering Committee
Shri N K Maini
Deputy Managing Director, SIDBI
Shri N Raman
Executive Director, SIDBI
Shri A K Kapur
Chief General Manager, SIDBI

Project Consultant
Catalyst Management Services Pvt. Ltd.

Project Team at SIDBI

Shri R K Das
Dr. R K Singh
Shri Amit Sethi
Shri M.B.L. Khan
Shri Niranjan Kothari
Shri Dev Kumar
Ms. Rachana Gupta
Shri Krishna Kumar Budania
 FOREWORD

MSME sector, comprising more than 3 crore units, contributes over 40% of the
total exports and forms the second largest source of employment after agriculture,
employing more than 7 crore. Over the years, MSME sector has emerged as
an important vehicle for attaining inclusive growth in the country. Information
asymmetry has been a major challenge for MSMEs, particularly those at the lower
level of the value chain. It is important to attend to the expectations of MSME
stakeholders towards access to right information, both in content and value.

Small Industries Development Bank of India (SIDBI), being the Principal Financial
Institution for the MSME sector, has been taking various initiatives to enhance the sector’s competitiveness,
along with concerted efforts to improve its informational efficiency. Sponsoring workshops/seminars/
conferences, supporting skill/technology/management programmes, developing toolkits/thematic
publications/knowledge series and coming out with a policy series (such as Factoring, Global Best
Practices, Risk Capital, Corporatization etc.) are all targeted at instilling sustainability within the sector and
building its resilience

We are pleased to share with you SIDBI’s Report on the MSME Sector 2011. The Report contains
information not only on the status, structure, policy initiatives, institutional support, prospects and outlook
of the sector, but also on the achievements under its multi agency / multi activity / multi partnership MSME
Financing and Development Project (MSMEFDP). MSMEFDP is being implemented by SIDBI for the
past few years wherein the Department of Financial Services, Ministry of Finance, Government of India
is the nodal agency and World Bank, Department for International Development (DFID), UK, KfW & GIZ
Germany are the international partners. The Project has endeavored to make MSME lending an attractive
and viable financing option as also in facilitating increased turnover and employment in the sector. The
project has attended to both demand and supply side issues of the sector through a multi-pronged approach
addressing financial and non financial aspects. Its initiative in clusters towards ‘Making Markets work for
MSMEs’ has been a pathbreaking intervention ready for replication and scaling up.

This report has been brought out under the MSMEFDP and we take this opportunity to express our sincere
thanks to the international partners, particularly DFID, UK for their support in its publication. We take this
opportunity to thank the Catalyst Team engaged by us to prepare the report, more particularly for bringing
SIDBI Report on MSME Sector 2011

in an independent perspective and transparent but neutral lens to mirror the key project achievements and
dovetail them to the domain’s requirements.

I would like to place on record my appreciation of the efforts of the SIDBI Team, led by Shri R.K. Das for
making this Report interesting by bringing in replicable case studies and role models. I would also like to
express my appreciation for the co-operation extended to SIDBI by the Ministry of Finance, Government
of India, our domestic and international partners, participating banks/state level institutions/industry
associations, Facilitator Agencies, BDS providers, Foundation for MSME Clusters and other stakeholders,
who have been directly or indirectly involved in strengthening our endeavor of empowering MSMEs.

We sincerely hope that the Report achieves its objective and shall serve as a referral point for policy
makers and researchers and a trusted knowledge access tool on MSME domain for all stakeholders.

S. Muhnot
Chairman and Managing Director

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 PREFACE

The importance of MSMEs in economic growth, job creation, regional and

local development, and social cohesion is globally accepted. The Millennium
Development goals and National priorities are aptly attended by and through this
sector. A dynamic MSME sector is important for combating poverty in restructuring
economies and ensuring inclusive growth. Globalization, the acceleration of
technological change and innovation create opportunities for MSMEs but they
also involve transition costs, increase in competition and manifold new challenges.
MSMEs need to show high adaptability and embrace these changes rapidly so as
to retain their competitiveness. Accordingly, policies need to be tailored to the expectations of MSMEs after
assessment of the needs on a sectoral / cluster basis.

Sustainable development is the buzzword. As the World is looking at us, we have realized that we need
to offer the MSME domain a concise, relevant and transparent information system encompassing the
developments, supportive ecosystem and best practices so that they attract enough investments while
becoming globally competitive.

Guided by the belief that better information leads to enhanced efficiency and better decision making, SIDBI
has continued with its series - ‘Report on MSME Sector - 2011’ with a special focus theme on sharing the
learnings under the World Bank-led multiagency MSME Financing Development Project (MSMEFDP),
steered through SIDBI. We have brought in a few case studies; select best practices and validated tools
as an offering and are confident that researchers, analysts, policy makers and other readers interested in
enterprise development will find these interesting. Our endeavor is that this report bridges the prevailing
information asymmetry challenges and acts as an encyclopedia and single stop shoppe providing
information on the MSME framework, emergent themes, solutions and addressal mechanism.

I am thankful to DFID-UK-our international partner for their support in bringing out this Report which will
help the sector, policy makers as also all other stakeholders.

N. K. Maini
Deputy Managing Director
 TABLE OF CONTENTS
S. NO. CONTENT PAGE NO.

ABBREVIATIONS USED

1. CHAPTER 1: MSMEs IN INDIA 1

1.1. Introduction to MSMEs in India 1
1.2 Statistical Overview of MSMEs in India 2
1.3 Major Stakeholders in MSME Sector 4
1.4 Key Recommendations by the Prime Minister’s Task Force on MSMEs 5
1.5 Working Group on Micro, Small & Medium Enterprises (MSMEs) Growth for the 12th Five Year Plan (2012-17) 5

2. CHAPTER 2: INSTITUTIONAL SUPPORT TO MSMEs IN INDIA 25

2.1 Institutional Framework for MSMEs in India 25
2.2 The Evolution of the Government Institutional Framework of support to MSMEs 27
2.3 Institutional Roles and Programmatic Schemes for Supporting MSMEs 29
2.3.1 MSME Development Support Set Up 29
2.3.2 Financial Support Institutions 54
2.4 Institutional Support System from the MSME Entrepreneurs’ Lens 58

3. CHAPTER 3: CLUSTER DEVELOPMENT INITIATIVES 63

3.1. MSME Cluster Development in India 65
3.2. Scheme by Ministry of Textiles, GOI 67
3.3 Schemes implemented by Department for Industrial Policy and Promotion (DIPP), Ministry of Commerce, GOI 69
3.4 Schemes implemented by Ministry of Food Processing Industries 70
3.5 State Govt. initiatives on MSMEs 72
3.6 Cluster based approach in MSME lending 75
3.7 SIDBI – Cluster Approach in MSME Sector Development 76

4. CHAPTER 4: CREDIT DISPENSATION TO MSMEs IN INDIA 77

4.1. Credit Gap in MSME sector 78
4.2. Status of Credit Flow to the MSME sector 79
4.3 Emerging Sources of Finance for MSMEs 81
SIDBI Report on MSME Sector 2011

5. CHAPTER 5: ROLE OF SIDBI 83

5.1 REFINANCE 86
5.2 DIRECT FINANCE 86
5.3 NODAL/IMPLEMENTING AGENCY FOR GOVERNMENT SCHEMES 90
5.4 RESPONSIBLE MICRO FINANCE 90
5.5 PROMOTIONAL & DEVELOPMENTAL SUPPORT 91
5.6 ASSOCIATES /SUBSIDIARIES 92
5.7 CO-ORDINATION ROLE 93
5.8 POLICY ADVOCACY ROLE 93

6. CHAPTER 6: MSME FINANCING AND DEVELOPMENT PROJECT 95

6.1 Project Framework and Theory of Change 95
6.1.1 FRAMEWORK 96
6.1.2 FULCRUM 98
6.1.3 Monitoring and Evaluation (M&E) 101
6.1.4 Key Enablers to Eco System 102
6.2 Achievement, Learning and Impact of MSME-FDP 104
6.2.1 Summary of Project Achievements and Replicable Learning 104
6.2.2 Impressions – Project Foot Prints 151

7. ANNEXURE 153

A1 Sources of Information 153

A2 List of stakeholders in the MSME Sector 155
A3 List of Clusters–MSME FDP 157
A4 BDS Market Development 158
A5 Cluster Development – Self-Assessment of Changes Due to the MSME-FDP 166
A6 BDS Market Development – Cluster Wise Status Report 171
A7 Achievements and Learning 172
A8 Briefs on Projects under Advocacy Challenge Funds 187

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 ABBREVIATIONS USED

ACDS Apex Cluster Development Society

APSFC Andhra Pradesh State Financial Corporation
BDS Business Development Services
BDSPs Business Development Service Providers
BMOs Business Membership Organizations
CART Credit Assessment and Rating Tool
CB Capacity Building
CETP Common Effluent Treatment Plant
CFC Common Facility Centre
CGTMSE Credit Guarantee Fund Trust for Micro and Small Enterprises
CIBIL Credit Information Bureau (India) Ltd.
CMS Catalyst Management Services Pvt. Ltd.
DC-MSME Development Commissioner - Micro, Small and Medium Enterprises
DFID Department for International Development, UK
EDII Entrepreneurship Development Institute of India, Ahmedabad
EE Energy Efficiency
EFL Electronica Finance Limited
GBP Great Britain Pound
GIZ Deutsche Gesellschaft für International Zusammenarbeit (GIZ)
GMP Good Manufacturing Practices
IA Implementing Agency
ICT Information and Communication Technology
IL&FS CDI Infrastructure Leasing and Financial Services Ltd. - Cluster Development Initiative
IPR Intellectual Property Rights
KfW Kreditanstalt fur Wiederaufbau
LoC Line of Credit
MoF Ministry of Finance
MSMEs Micro, Small & Medium Enterprises
MPC Mohali, Panchkula and Chandigarh
MSE Micro and Small Enterprises
SIDBI Report on MSME Sector 2011

M/o MSME Ministry of MSME

MSME-FDP MSME Financing and Development Project
NBFCs Non-banking Financial Companies
NFA Natural Facilitator Agency
NMCP National Manufacturing Competitiveness Programme
NSIC National Small Industries Corporation Ltd.
NOC No Objection Certificate
PAG Policy Advisory Group
PBs Participating Banks
PMD Project Management Division
PMEGP Prime Ministry Employment Generation Programme
PPP Public Private Partnership
PRC Project Review Committee
RBI Reserve Bank of India
RSF Risk Sharing Facility
SFCs State Finance Corporations
SDP Skill Development Programme
SIDBI Small Industries Development Bank of India
SPV Special Purpose Vehicle
SSI Small Scale Industries
TA Technical Assistance
TERI The Energy and Resources Institute
TIIC Tamilnadu Industrial Investment Corporation Limited

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 MSMEs IN INDIA

1.1 Introduction to MSMEs in India

The Micro, Small and Medium Enterprises (MSME) sector is an important pillar of Indian economy as it
contributes greatly to the growth of Indian economy with a vast network of around 3 crore units, creating
employment of about 7 crore, manufacturing more than 6,000 products, contributing about 45% to
manufacturing output and about 40% of exports, directly and indirectly. MSMEs are the driving force behind
a large number of innovations and contribute to the National growth through employment generation,
investments and exports. Considering the sector’s signifinance, the 12th Plan (2012-17) Draft Approach
paper has rightly ‘adopted the more sustainable approach of nurturing competitive MSMEs’.

The Micro, Small and Medium Enterprises Development Act, 2006 is the legal framework for development
and enhancing competitiveness of the MSME sector in the country. A major component of the Act talks
about the marketing assistance and export promotion support by the government. The Act came into
effect from 2nd October, 2006. The Act has introduced the concept of “Enterprise” as opposed to earlier
concept of industry. Subsequently, both the Central and State Governments have taken effective measures
towards implementation of the Act. While the Central Government has framed a number of Rules and
issued Notifications in respect of the Act, different State Governments have also issued notifications under
the Act, the details of which are given later in the Report under the Section “Institutional Framework for
MSMEs”.

In India, the enterprises have been classified broadly into two classes, in accordance with the provisions
of MSME Development (MSMED) Act, 2006:

► Manufacturing Enterprises: The enterprises engaged in the manufacture or production of goods

pertaining to any industry specified in the first schedule to the industries (Development and Regulation
Act, 1951). The Manufacturing Enterprise are defined in terms of investment in Plant & Machinery.

► Service Enterprises: The enterprises engaged in providing or rendering of services and are defined
in terms of investment in equipment.
SIDBI Report on MSME Sector 2011

Both classes of enterprises have been further classified into micro, small and medium enterprises based
on their investment in plant and machinery (for manufacturing enterprises) or on equipment (in case of
enterprises providing or rendering services). The present ceiling on investment to be classified as micro,
small or medium enterprises is given in the chart below.

Indian MSMEs are making good progress due to their entrepreneurship skills in Industry, Service, Retail,
IT, Agro and Food Processing, Pharmaceuticals, Precision Engineering and Manufacturing Sectors. As a
result, MSMEs are getting more and more opportunities to enhance their activities and expand & diversify
their business in core sectors. MSMEs are an integral part of the supply chain of large-scale industries
and provide vital forward and backward linkage to the overall industrial sector. As large firms outsource
more of their value added functions, MSMEs get the opportunity to climb up the value chain. MSMEs act
as ancillary to many Original Equipment Manufacturers (OEM). Globally, there is competition in terms of
product, service and quality in these equipments; hence, OEMs demand highest quality products from
MSMEs at the competitive price with timely supply system. OEMs prefer MSMEs for outsourcing, since
MSMEs have innovative capabilities in niche manufacturing, greater flexibility, lower overhead costs
and their ability to learn and absorb new technologies. Most of the MSMEs are working closely to the
expectation of these OEMs.

1.2 Statistical Overview of MSMEs in India

It is well known that the MSME sector provides maximum opportunities for both self-employment and
wage-employment, outside agriculture sector. MSME sector contributes not only to higher rate of economic
growth, but also in building an inclusive and sustainable society in many ways through creation of non-
farm livelihood at lower cost, balanced regional development, gender & social balance, environmentally
sustainable development and above all recession proofing of economic growth, which the sector has
proven time and again.

As per the quick estimates of 4th All-India Census of MSMEs in 2006-07, the number of enterprises in
the country is estimated to be about 2.6 crore and these provide employment to an estimated 6 crore
persons. Of the 2.6 crore MSMEs, only 0.15 crore (6%) are in the registered segment while the remaining
2.45 crore (94%) are unregistered. The State-wise distribution of MSMEs show that more than 55% of
these enterprises are in 6 States only, namely, Uttar Pradesh, Maharashtra, Tamil Nadu, Gujarat, Andhra

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 MSMEs in India

Pradesh and Karnataka. Only about 7% of MSMEs are owned by women; and more than 94% of the
MSMEs are proprietorships or partnerships. MSMEs in the country manufacture over 6,000 products,
comprising of Food Products (22%), Chemical & Chemical Products (12%), Basic Metal Industries (10%),
Metal Products (8%), Electrical & Machinery Parts (6%) and others (36%). An overview of the MSME
sector is placed below in the Table 1.1.

Table 1.1: Overview of the MSME sector in India

2006-07
S. No.
Census Parameters Registered Unregistered Total
1. No. of Enterprises (lakh) 16 [6%] 246 [94%] 261 [100%]
a) Break-up in terms of Manufacturing and Services
■■ Manufacturing 10 (67%) 64 (26%) 74 (29%)
■■ Service 5 (33%) 181 (74%) 186 (71%)
b) Break up by type of social category
■■ Socially Backward
8 (50%) 126 (51%) 134 (51%)
Classes (SC/ ST/OBCs)
■■ Others 8 (50%) 120 (49%) 128 (49%)
2. Employment (lakh) 92 [17%] 503 [83%] 595 [100%]
(a) Break-up in terms of Manufacturing and Services
■■ Manufacturing 80 (87%) 224 (45%) 304 (51%)
■■ Service 12 (13%) 278 (55%) 290 (49%)
(b) Break up in terms of Male & Female
■■ Male 73 (80%) 413 (82%) 486 (82%)
■■ Female 19 (20%) 90 (18%) 109 (18%)
3. No. of Women Enterprises (lakh) 2 [14%] 17 [7%] 19 [7%]
4. No. of Rural Enterprises 7 [45%] 128 [52%] 135 [52%]
5. Share in Exports (%) 40%
6. Source of Finance 16 [6%] 246 [94%] 261 [100%]
■■ No Finance/Self Finance 14 (88%) 229 (93%) 242 (93%)
■■ Institutional Sources 2 (11%) 12 (5%) 14 (5%)
■■ Non-Institutional Sources 0.16 (1%) 5 (2%) 5 (2%)
7. Fixed Investment (` crore) 5,00,758 - -
8. Gross Output (` crore) 7,09,468 - -
Employment Per ` 1 lakh Investment in
9. 0.19 - -
Fixed Investment
10. Per unit Fixed Investment (lakh) 32.26 - -
11. Per unit Gross Output (lakh) 45.70 - -
12. Per unit Employment 5.93 - -

Note: (i) Figures in parentheses indicate the percentage to the total.

(ii) The figures indicated in point 7 to 11 are available only for registered enterprises.

Source: (i) Quick Results Fourth All India Census of MSMEs 2006-07
(ii) Annual Report of Ministry of MSME, 2010-11

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SIDBI Report on MSME Sector 2011

The MSME sector has shown significant growth of 11.6% in terms of production during the FY 2009-10.
The performance of the sector for the last three years is placed below in Table 1.2.

Table 1.2 : Performance of MSMEs

Year Total MSMEs Fixed Investment Production Employment

(in lakh Nos) (` crore) (` crore) (lakh persons)
(Current price)

272.79 5,58,190 7,90,759 626.34

2007-08
(4.51) (11.47) (11.47) (5.34)

285.16 6,21,753 8,80,805 659.35

2008-09
(4.53) (11.39) (11.39) (5.35)

298.08 6,93,835 9,82,919 695.38

2009-10
(4.53) (11.59) (11.59) (5.47)

Note: The figures in brackets show the percentage growth over the previous year.

Source : Annual Report of Ministry of MSME, Government of India, FY 2010-11.

1.3 Major Stakeholders in MSME Sector

The MSME sector has a wide range of stakeholders including the regulators, facilitators and the beneficiaries.
The framework for institutional support has evolved over a period of time. The MSME sector in the country
is highly heterogeneous in terms of its size, variety of products and services produced, and the level of
technology employed, the legal form in which it operates, etc. Given the multiplicity of sectors, multi-
disciplinary support requirements of MSME, and multi-levels of operations, the institutional mechanism for
support and development of MSME in the country is complex. Many institutions play variety of roles, and
across different levels – ministries and departments (central, state and local government), private players,
banks and financial institutions, research and technical institutions, training organizations etc., addressing
the key components of the MSME development strategy of the country.

These stakeholders are listed below (the list is indicative and not exhaustive).

(A) Regulators

- Reserve Bank of India

- State/UT Governments

- Central Ministries/Departments/ PSU’s

- Organizations under administrative control of the Ministry

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 MSMEs in India

(B) Facilitators

- Banks/Financial Institutions like SIDBI

- Entrepreneurship and Skill Development Institutions, both in the public and private sector

- Research and Development Institutions

- Educational Institutions

- International donors / development agencies

- Business Development Services providers

(C) Beneficiaries

- MSMEs (both existing and prospective) and their Associations

- Large enterprises including multinationals (as procurer of goods and services)

1.4 Key Recommendations by the Prime Minister’s Task Force on MSMEs

To identify issues inhibiting growth of the sector, a Task Force was constituted by the Hon’ble Prime Minister
in 2009. In its report, the Task Force submitted its Report in January, 2010 and made 85 recommendations
(For details please refer to SIDBI Report on MSME Sector, 2010 available in www.sidbi.in /www.msmefdp.
net) to unshackle the Indian MSMEs. These recommendations are being implemented by various Ministries
of Government of India in a time bound manner.

1.5 Working Group on Micro, Small & Medium Enterprises (MSMEs) Growth for
the 12th Five Year Plan (2012-17)
Planning Commission constituted a Working Group on Micro, Small & Medium Enterprises (MSMEs)
Growth for the 12th Five Year Plan (2012-17), under the chairmanship of Secretary (MSME) with 46
members representing various Ministries/Offices of Government of India, representatives of selected State
Governments and Industry Associations, NGOs etc. The terms of reference of the Group was to carry
forward the recommendations of the Prime Minister’s Task Force and suggest specific action plan and
milestones to be achieved within the 12th Plan period.

The Working Group constituted 11 sub-groups to deliberate various aspects of MSME sector, viz.:

1) Credit and Institutional Finance

2) Technology and Innovation
3) Skill Development and Training
4) Marketing and Procurement

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SIDBI Report on MSME Sector 2011

5) Infrastructure

6) Khadi & Village Industries

7) Coir Sector

8) Institutional Structure

9) Emerging Technologies

10) Special Areas & Groups

11) Unorganized Sector

The Working Group examined the recommendations of the 11 Sub-groups. While formulating its
recommendations, the Working Group took note of the fact that the National Manufacturing Policy (NMP)
envisages increasing the sectoral share of Manufacturing in GDP to 25% over the next decade and
generating additional 10 crore jobs in manufacturing sector through an annual average growth rate of
12-14 % in manufacturing sector. MSME sector being the major base of manufacturing sector in India,
with its contribution of over 45% in the overall industrial output, the Working Group is of the view that
the achievement of the NMP targeted growth of the manufacturing sector would necessitate substantial
enhancement of the growth rate of MSME sector during the 12th Plan from the current growth rate of
12-13%.

The Working Group decided that issues relating to growth of MSME sector may be classified under six
important verticals of i) Credit & Finance ii) Technology iii) Infrastructure iv) Marketing & Procurement v)
Skill Development & Training and vi) Institutional Structure, to provide theme based focus while devising
any strategy for the sector. The major recommendations of the Working Group are:

Credit & Finance

♦♦ Scheduled Commercial Banks (SCBs) may be directed to maintain minimum 22% in their outstanding
credit growth to MSME sector during the first two years of the 12th Five Year Plan (i.e. FY 2012-13
and FY 2013-14) and further minimum 25% during the remaining three years of the 12th Five Year
Plan (i.e. FY 2014-15, FY 2015-16 and FY 2016-17).

♦♦ Banks should achieve 10% increase in new micro enterprises borrowers on year-on-year basis
during the 12th Five Year Plan. As a Subset, banks should add at least 12 new MSMEs in their semi-
urban and urban branches.

♦♦ Guarantee coverage under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
may be increased to at least 10 times the corpus during 12th Five Year Plan. The corpus of the
scheme may be enhanced by an additional ` 10,750 crore during 12th Plan period. This is expected
to make available ` 1,80,000 crore of credit guarantees to MSEs by the end of 12th Five Year Plan.

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 MSMEs in India

♦♦ RBI-registered ‘AAA’ and ‘AA+’ rated NBFCs be made eligible for becoming Member Lending
Institution of CGTMSE, subject to availability of additional corpus of CGTMSE.

♦♦ As per the RBI instructions, Banks may adopt clusters in collaboration with Industry Associations.

♦♦ Industry Associations can become an effective institutional mechanism for facilitating credit flow to
MSME sector. The model adopted by SIDBI in this direction may be replicated by lead bank in their
domain MSME clusters.

♦♦ RBI may announce a revised OTS scheme for SMEs under which MSMEs classified in NPA category
as on 31st March 2008 would also be eligible for obtaining finance after settlement of dues under
OTS.

♦♦ Banks to strictly follow Nayak Committee norms while sanctioning working capital to MSMEs and
also adopt simplified application cum sanction form and Common Scoring Model for loan upto ` 25
lakh.

♦♦ SIDBI and NSIC may be permitted to raise SLR bonds / Tax free bonds /Capital Gains bonds from
the market as per the eligibility limit fixed by Government of India to enable these institutions in
providing cost effective credit to the MSME sector.

♦♦ Develop the capacity of the MSE loan officers by the banks to provide various advisory services like
technology upgradation, consortium-led marketing etc. to the MSEs.

♦♦ To enable the MSMEs to have access to Venture Capital (VC) Funds, the following needs to be
implemented:

◘◘ Exposure by banks to dedicated MSME VC Funds is treated as priority sector lending.

◘◘ Enhance existing exposure by banks to Capital Market cap by 20% for MSME VC Funds (from
40% to 48% for dedicated MSME VC Funds).

◘◘ Permit investment upto 10% of corpus by Pension/Provident Funds in dedicated MSME VC

funds.

◘◘ Introduce personal Income Tax rebate for investment in equity of MSMEs to be listed on the
proposed SME Exchange – Direct / Indirect through MFs.

◘◘ Exempt investments in dedicated MSME VCFs from provisioning by Banks.

◘◘ Dedicated MSME VCFs’ income be made tax-free – apart from awarding pass-through status.

◘◘ A guarantee fund with a corpus of ` 2,500 crore for the Venture / Angel fund investments in
MSMEs.

♦♦ The SME Exchange may be operationalised soon and upscaled during the 12th Five Year Plan. The
success of the MSME listings on the SME Exchange would depend a lot on the final investors of the

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SIDBI Report on MSME Sector 2011

Exchange. The final investors comprise of (i) High – net worth individuals and corporate, (ii) Qualified
institutional buyers (QIBs) like VCFs, PE funds, PFs etc and (iii) Banks. These investors can be
attracted by appropriate regulatory framework and other incentives. The first time investment in the
shares of MSMEs in the proposed SME Exchange should be eligible for personal income tax rebate.
Securities Transaction Tax should be waived for the first three years on the securities traded at the
SME Exchange. Further, a budgetary support of ` 100 crore be made to incentivize market making
and to create awareness about the proposed SME Exchange.

♦♦ Support for Marketing - Banks should come out with a short term loan scheme to provide bridge
finance to micro entrepreneurs to proactively participate in the international trade fairs during the
period they get the subsidy from Ministry of MSME.

♦♦ Performance and Credit Rating - The Ministry is already implementing a scheme to assist MSEs
in Performance and Credit Rating by recognized agencies, which facilitates favourable interest
rates from Banks as well as access to export markets. Being implemented by NSIC, the scheme
is subsidizing the performance and credit rating fees charged by the rating agencies. Keeping in
view the wide demand for assistance under the scheme, the Group recommends enhancement of
allocation under the scheme from ` 174 crore in 11th Plan to ` 600 crore during 12th Five Year Plan
period.

♦♦ Equity Financing - Lack of growth capital for the MSME sector is inhibits their growth beyond
certain point. Growth capital has the leveraging capacity for raising additional debt to support
capital expansion of these MSMEs. In order to fill the equity gap and also ensure MSMEs growth, it
is suggested to introduce a new scheme to supplement Promoter’s Contribution in case of projects
proposed to be implemented by MSMEs to avail of loans from Banks/ FIs. Accordingly, a budgetary
support of ` 5,000 crore may be made during the 12th Plan, under which equity finance will be
extended.

♦♦ Factoring Services - Delayed payments or delayed realization of receivables has all along been
a growth constraint of MSME sector by impinging on their liquidity. Factoring services by all banks,
particularly for MSMEs would help in addressing the issue and will fill an important gap in the MSME
lending as factoring assistance does not involve any requirement of collateral and help MSMEs in
sales ledger administration, collection and credit protection. In order to upscale the factoring services
for augmenting the flow of credit to MSME sector, it is suggested to enable setting up of a number
of factoring companies which requires support by way of equity capital contribution to the new and
existing factoring companies to enhance their net worth and enable them to leverage higher credit
from the institutional channels. Hence, a scheme called “Support for Factoring Services” may be
introduced with budgetary support of ` 500 crore during the 12th Plan, under which assistance would
be provided for equity / margin money support for factoring companies, Publicity & Popularization
of the scheme and provision of training for Associations on the benefits & support under factoring
services to spread awareness among individual enterprises.

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 MSMEs in India

Technology

♦♦ The Ministry may launch a Technology Acquisition Scheme to provide assistance in both, development
of indigenous R&D products as well as procurement of global technology. The possibility of a revolving
fund for technology acquisition may also be considered.

♦♦ Ministry may organize Technology exhibitions with the assistance of Technical bodies / Institutes
for disseminating information on latest technologies, and may also select certain demonstration
projects for implementation at Government cost, so that the proven technologies can be absorbed
by MSMEs.

♦♦ The Government initiatives viz. Defence offset policy, MSME procurement policy etc, need to be
leveraged suitably to ensure that MSME sector becomes technically advanced and competitive.
The indigenization of latest components and technology would be encouraged through Technology
Acquisition initiatives.

♦♦ Technology Incubators of Ministry of S&T would be replicated through Accelerator model for
technology development and encouraging innovations. The financing of these initiatives will be
assisted by Government to maximum possible extent.

♦♦ As regards to Innovation, the best practices of other countries such as Israel or Darfa Model of USA
may be examined and suitably adopted for Indian scenarios. This is especially, to boost MSMEs in
Defence and Security sectors wherein huge growth potential would exist in coming years.

♦♦ Procurement of Machinery and Equipments

◘◘ Under CLCSS, assistance is provided for procurement of machinery and equipment for
technology upgradation. The project ceiling under the scheme is needed to be enhanced to
` 5 crore to provide support for acquisition of state-of-the-art equipments, which would be
needed for Medium Sector.

♦♦ Support for Soft Skills

◘◘ Under NMCP, support is already being provided for implementation of best practices for
enhancing productivity, quality and product designs along with assistance for enhancing
marketing. NMCP also has a component for Infrastructural Support through Tool Rooms.

◘◘ One reason for lesser success of NMCP may be separate schemes for separate components
which need separate implementation channel /mechanism. The components of NMCP may
be divided into three groups – i) Product and process related, ii) Marketing related and iii)
Infrastructure related, which may be addressed under the respective verticals.

◘◘ It would be appropriate to combine all schemes related to productivity, quality and design into
one scheme, which may be offered on a ‘cafeteria’ mode. The leveraging of similar initiatives

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SIDBI Report on MSME Sector 2011

by other ministries and departments including State Governments will have to consider in
specific industry verticals.

◘◘ Cluster/Industry verticals may be invited to develop own packages with combination of various
tools as per the requirements under the new scheme, which may be implemented through the
respective nodal agencies/experts.

♦♦ Emerging & Innovative Sectors

◘◘ The emerging sectors may be provided assistance on a higher scale under each of the three
proposed schemes for technology acquisition, procurement of equipments and support for soft
skills, respectively.

◘◘ Similarly, higher scale of assistance may be decided for adoption of clean manufacturing
technologies, renewable energy sources and environment friendly processes.

◘◘ A key issue for investment in emerging technologies will be regarding critical mass of production.
This will be encouraged by taking lead through Government Procurement. The procurement
policies of MSME and defence offset policies will encourage MSMEs in this matter.

♦♦ Information and Communication Technology

◘◘ NMCP has a separate component for ICT application. As ICT today covers all areas of activity
of an enterprise – processing, training, marketing, infrastructure planning etc., the need for a
separate component on ICT may be reconsidered.

◘◘ More appropriately, there should be support for application of ICT in each of the five verticals /
support – Finance, Technology, Marketing, Infrastructure and Skill Development.

◘◘ The use of new concepts such as CLOUD Computing will offer an effective and affordable
solutions for early ICT penetration during 12th Five Year Plan. The CLOUD computing would
minimize the investment risks for MSMEs. It is expected that upto 90% of registered MSMEs in
the country, would be using ICT applications by the end of 12th Five Year Plan.

Infrastructure

♦♦ Industrial Infrastructure Development

◘◘ To complement efforts of State and Central Government, private sector (companies and SPVs)
should also be allowed for development of infrastructure.

◘◘ Maintenance of industrial estates is a critical component for successful functioning of Industrial

Enterprises in any Industrial estate/area. Industries Associations, Local bodies, state govt.
agencies, SPVs may be entrusted to take care of the issue on self sustaining basis by levying
maintenance charges, or one time collection.

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 MSMEs in India

◘◘ Availability of Land for MSEs has to be ensured. State governments may earmark at least one
industrial estate in each block. Government may identify barren lands and allot it to MSEs at
affordable price or set up industrial estates.

◘◘ Land use classification may be updated, based on demand. Clear Policy should be evolved on
“Change of Classification for Industrial purpose”.

◘◘ Deemed Local Body Status should be given to manage Industrial estates by bringing necessary
changes in rules / procedures. SPVs should be formed in each estate with representation from
the Government and the Developing agency. It should be empowered to collect charges and
maintain the estate.

◘◘ Industrial Township Act, like the one in Tamilnadu, may be invoked for estates having more
than 50 Acres of Land. This should be made mandatory under the ‘Panchayat Raj Act’.

◘◘ Smaller estates, where the Deemed Local Body Status / Industrial Township Act could not be
invoked, local body can share the revenue with the SPV.

◘◘ Availability of Power is one of the major criteria of an Industrial estate. Many states, particularly
Tamilnadu is facing acute power shortages. Captive power generation has to be encouraged.

◘◘ Electricity Act has to be amended to wheel power by Estates /Clusters and distribute among
them (At present the Act permits only an individual captive power user to transport power).

◘◘ SPVs should be authorized to buy power from anywhere and distribute it to its member units.

◘◘ Many states are providing uninterrupted power supply to MNCs and depriving even the normal
power to MSMEs. Priority in providing Power connection as well as uninterrupted power should
be ensured for MSEs. Electricity Act may be amended to stop any unfair practice.

◘◘ 50% Subsidy should be given to Micro Units for buying Gensets.

◘◘ Providing good, motorable roads is one of the foremost duties of a Government. Roads are
very essential for an Estate. Many of our estates lack this. There is an urgent need to up-grade
the existing estates.

◘◘ Demand based additional ID projects may be permitted in district, subject to 90% allotment
and 50% setting up of units in approved ID projects in one district.

◘◘ Assistance for upgradation of existing industrial estate may be made more attractive in order
to get proposals from state govt. for upgrading of existing.

◘◘ More awareness is required regarding infrastructure development through MSE-CDP. Scheme

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SIDBI Report on MSME Sector 2011

should be made more liberal by allowing expenditure variations for various components within
the overall funding support of the Government.

◘◘ Provision under MSE-CDP scheme may be made for Product Specific Modular Estates having
Raw material Bank, Technology Resource Centre, Design Centre, Business Centre, Tool
Room, Incubation Centre, Training Centre, Mini Trade Fair Centre etc.

◘◘ Land and infrastructure constraints are a major problem, particularly in bigger and metro cities.
Flatted Factory Complexes may be encouraged under MSE-CDP. Likewise, accommodation
problem of industrial workers may be addressed by supporting dormitories. SPVs may run the
dormitories on sustainable basis.

◘◘ Setting up of CFC under MSE-CDP may be allowed for activities not dovetailed under any
other verticals.

♦♦ Infrastructure for Quality Assurance

◘◘ There is a need to set up quality testing laboratories for MSMEs in almost every cluster/
industry concentration, district/major industrial area. This activity can be undertaken under
Public Private Partnership mode. The Group recommends setting up of 100 nos. quality testing
laboratories including strengthening of existing MSME Testing Centers during the 12th Plan
Period.

♦♦ Development of Marketing Infrastructure for MSMEs

◘◘ Establishment of Display Halls/Exhibition Grounds and Information Dissemination Centers.

There is a need to provide assistance to MSMEs to enable them to show case their products
and capabilities to produce high quality products and also to sell them at spot. Setting up of
display halls and exhibition centers, in each State capital or major industrial centers having
concentration of MSMEs is recommended. This scheme can be implemented by the Central
or State Organizations, Industry Associations, Export Promotion Councils in the Public Private
Partnership mode. District Industries Centers (DICs) having adequate vacant land can also
support this activity by creating such infrastructure. The Group recommends establishment of
10 nos. exhibition halls and display centers.

◘◘ The Group also recommends that Information Dissemination Centers should be established
during the 12th Plan period for dissemination of information with one main centre for coordinating
the activities of all the centers.

♦♦ Setting up of New Tool Rooms and Technology Development Centers

◘◘ Towards enhancing skill level of workers of MSME Sector, setting up of 100 Tool Rooms/
Technology Development Centers(TDCs)/ Central Footwear Technology Institutes (CFTIs) is

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 MSMEs in India

recommended which will provide specialized training to the existing and prospective workers
of the manufacturing sector. These Institutions set up in Industrial Districts / Clusters with
state of the art machines shall provide training to the youth to make them readily employable
in high growth sectors like auto components, engineering, leather, garments etc. Necessary
Budgetary allocation has been proposed under Infrastructure vertical. There is also need for
upgradation and modernization of the existing 18 Tool Rooms/ TDCs of the Ministry.

Marketing & Procurement

♦♦ Public Procurement Policy

◘◘ Marketing is a major concern for the MSMEs. To ensure a reasonable market share for MSMEs
in the Government procurement, a public procurement policy has been announced under
MSMED Act, 2006. The policy envisages the target of 20% of the total procurement made by
Central Ministries/Depts./PSUs. The overall target of 20% would be made mandatory at the
end of 3 years. Out of the 20% target of annual procurement from MSEs, a sub-target of 4%
has been earmarked for procurement from MSEs own by SC/ST entrepreneurs. The policy will
facilitate in improving the market access of MSEs through Government procurement and also
develop linkages between micro and small enterprises and large enterprises.

♦♦ Market Development Assistance

◘◘ Convergence of Existing MDA Scheme - The convergence of ‘Marketing Development

Assistance (MDA) scheme run by Ministry of MSME, NSIC, KVIC and Ministry of Commerce
needs to be made. Uniformity in the concessional rates for space rental, air fare etc. by various
organizations will make the scheme clearer and commonly acceptable by its end-users. A
uniform selection criterion should also be laid down for all implementing agencies.

♦♦ Increased budgetary allocation for Organization /Participation of Exhibitions - Presently, the

budgetary limit for participation in a domestic exhibition/trade fair is restricted to ` 10 lakh. Similarly,
for organizing the domestic exhibition / trade fair the maximum budgetary support is ` 30 lakh.
Keeping in view, the expenditure involved in participation/organizing the event, the ceiling may be
enhanced from ` 10 lakh to ` 30 lakh and ` 30 lakh to ` 60 lakh respectively.

♦♦ Organization of Specific Fairs - In addition to participation in International fairs/exhibitions, Industry

associations should be encouraged to organize MSME specific fairs after identifying the markets/
products for aggressive marketing. Chambers of Commerce (Indian & foreign) and Indian embassies
should be actively involved in this exercise.

♦♦ Advance intimation for Participation in Exhibitions - Participation in exhibitions/fairs should be

decided in advance (preferably yearly schedule at the beginning of the year) and publicized through
Industry Associations/other means to achieve better participation from MSMEs.

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SIDBI Report on MSME Sector 2011

♦♦ Dissemination of the Scheme - Awareness of the scheme should be enhanced by dissemination

of information w.r.t. participation by MSMEs in national/international exhibitions.

♦♦ Wider Participation in Exhibitions - MSMEs operating in small towns, remote/tribal areas and
women entrepreneurs should be encouraged to participate in fairs/ exhibitions. Help of Industries
Associations could be taken to identify MSMEs who can participate in such fairs after taking into
account their product range and quality of products.

♦♦ Accordingly, the budget allocation for MDA scheme needs to be enhanced.

♦♦ Bar Coding - To make the scheme more effective, Group recommends the following:

◘◘ Wider publicity be given for creating awareness of the scheme.

◘◘ Presently, reimbursement of one time registration fee is covered in MDA scheme and
the reimbursement of recurring annual charges are covered under NMCP scheme. It is
recommended that both components of the scheme should be merged into one scheme.

◘◘ In addition to micro and small enterprises, the scheme should also be extended to medium
enterprises. The ceiling of reimbursement should be 90% of one- time registration fee and
annual charges in case of MSEs and 50% in case of medium enterprises.

◘◘ Reimbursement of annual charges should be extended from present first three years to first
five years.

◘◘ The existing disbursement procedure be amended wherein Government should provide

funds to GS1 India directly and GS1 India will utilize these funds by releasing to MSEs on
reimbursement basis and will report periodically to the Ministry of MSME about the status of
utilization of budget.

♦♦ Packaging & Designing - There is only one specialized institution i.e. Indian Institute of Packaging
(IIP) in the country which imparts training in packaging and designing and it is unable to meet the
huge demand of MSME sector. It is recommended that more numbers of specialized institutions
need to be set up during the 12th Plan Period. In addition, the awareness of these institutions should
also be spread among the MSMEs to avail benefits under the scheme.

♦♦ Establishment of Marketing Organizations (SPVs) in Clusters - Marketing Organizations in

Clusters can be established through formation of Special Purpose Vehicles (SPVs) in the form
of Cooperative Societies to support MSMEs in the procurement of raw materials and marketing
of their products. These societies should involve in designing of products, branding of products,
advertisement of products and e-marketing through B2B portals. Group recommends setting up 36
societies/companies in the form of SPVs during the 12th Five Year Plan Period.

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 MSMEs in India

♦♦ Greater Use of Information Technology (IT) - To make greater use of IT in the MSME sector, Sub
Group recommends for developing and implementing an international user friendly B2B portal to
make it accessible to larger section of MSMEs of India and abroad during the 12th Five Year Plan
Period.

♦♦ Implementation of Schemes through ‘’Voucher Delivery System’- ‘Voucher Delivery System’

(VDS) can be introduced for implementing the various government schemes in an effective and
efficient manner. Under the VDS mechanism, upon presenting the voucher by implementing agency
under the scheme, the bank will reimburse and release the amount to nominated implementing
agency directly. The system will ensure faster disposal of the proposals leading to timely achievement
of targets under the schemes.

♦♦ Brand Building - Group felt the need to build All India Marketing Assistance Network through
physical and electronic means. This can be achieved by building and coordinating the efforts of
various institutions engaged in the promotion and development of MSME sector at State, Regional
and Cluster levels and also by involving MSME Associations in the country to undertake various
marketing functions. Group suggests that it would be apt to make NSIC as an Apex organization to
coordinate the efforts of the various institutions. NSIC can provide help in organizing/participating
national and international exhibitions, formation of Special Purpose Vehicle (SPV) for marketing in
clusters through societies/companies, providing consultancy etc. Further, efforts should be made
to promote industry specific brand building of Indian products. MSEs may be extended support to
create awareness about their products through participation in overseas trade shows.

♦♦ Enabling Global Footprint of Indian MSMEs - Today, India is one of the fastest growing economies
in the World and poised to become an economic super power. This has been fuelled by the excellent
growth rate of Indian economy during the past decade and also the stagnation suffered by the
developed world during the recent period. The deceleration of the developed economies, sovereign
debt issues in the European countries and USA etc. have stymied exports from developed countries.
On the other hand, the high growth rate of Indian economy during the recent period has enabled
an outward bias to the Indian Industry. While acquisitions by Industry leaders viz., Jaguar Land
Rover by Tata and African Telecom Company Zain by Bharti are making the global headlines, these
are also opening newer opportunities for the Indian MSMEs in the overseas markets. With the
enhancement of the productivity and quality, a significant section of Indian MSMEs have acquired
global competitiveness. Exploring newer markets and opportunities, particularly in developing world
like Africa could be multi folded through enabling services like information on new markets /products,
offshore warehousing, offshore manufacturing, product promotion etc. Government can provide
necessary facilitation by cluster / consortia based initiatives through PPP mode. Government can
facilitate the global footprint of Indian MSMEs by providing support for conducting market studies
in new markets for newer products, developing brand equity of Indian MSMEs particularly for niche

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SIDBI Report on MSME Sector 2011

products like herbal medicines, health care, education etc., developing market intelligence on
enterprises available for take over etc. The Group recommends that a dedicated scheme with a
corpus of at least ` 1000 crore during the 12th Plan period may be launched to support the MSMEs
in their above initiatives.

♦♦ E-marketing - Group felt that E-marketing would be very helpful for MSME Sector in resolving their
marketing related problems and recommends that it may be promoted through the following:

◘◘ E-marketing can be promoted through launching of specialized MSME portals. The portal
should contain the information of prospective buyers, sellers, products etc.

◘◘ The establishment of e-Kiosks in Govt. & private domain would also help in enhancing marketing
capabilities of MSMEs. These e-Kiosks can be involved in providing market intelligence, market
requirements, Branding of products, advertisement of products & creating E-tools, E-marketing
B2B portals.

◘◘ Creation of Special Purpose Vehicle (SPV) in the form of societies/companies can also help in
promoting E-marketing through B2B portal.

♦♦ Offset - Set up a mechanism in the M/o Defence to ensure that the offsets under defence purchases
are suitably focused to support SMEs in upgrading their capacities.

Skill Development and Training

♦♦ Development of Entrepreneurial Skill

◘◘ The Skill and Entrepreneurial Development Programmes of the Ministry of MSME are the
flagship programmes of the Government, since 1960s, for providing unemployed youth with
necessary skill for wage employment and particularly for starting of micro enterprises. Keeping
in view the increasing number of youth joining the job market in the next five years, the scheme
may be continued with enhanced scope and quality. The Prime Minister’s National Council on
Skill Development was constituted on 1st July 2008. The objectives of the Council are to lay
down overall broad policy objectives, financing and governance models and strategies relating
to skill development with a framework of private public partnership. The Council has set a
target of creating 50 crore skilled people by 2022 with emphasis on inclusiveness. To achieve
the targets set for the Ministry of MSME by the Prime Minister’s Skill Development Council of
training 15 crore persons within 2022 and more than 40 lakh persons during the 12th Five Year
Plan period (2012-17), the Ministry need to develop a mission for skill development linked with
the entrepreneurial promotion with adequate budgetary support.

◘◘ Equitable access to training for all youth of India is another benchmark initiative of the Prime
Minister’s Skill Development Mission. Towards facilitating skill development of youth from the
weaker section, the Ministry of MSME is already providing skill development training to SC/ST/

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 MSMEs in India

Women and differently able persons free of cost. For focused programmes for these categories
of youth, there is also provision for stipends. To facilitate participation of more youth from the
weaker section in the skill development programmes of the Ministry, the Ministry may set up
focused Entrepreneurial Development Institutes (EDIs) in the backward areas and districts.
These EDIs may provide residential skill development programmes for the youth from the
backward areas.

◘◘ There is also an urgent need for convergence of skill development programmes conducted
by the various divisions and offices under the Ministry of MSME as well as programmes
conducted by other Ministries. The Ministry has already taken initiative for standardization of
curricula of skill development programmes conducted by various divisions and offices. This
programme may be appropriately harmonised so that a youth may join a skill development
programme according to his immediate requirement and present qualification/background
and subsequently upscale his skill through more advanced programmes, viz., starting from
the grass root level programmes conducted by KVIC, MSME-DIs etc. and can reach to the
advanced programmes conducted by the MSME Tool Rooms/TDCs and EDIs.

◘◘ In this regard, linkage of the skill development programmes of the Ministry with the proposed
National Vocational Education Qualification Framework (NVEQF) is also essential, so that after
completion of training on skill development, the participant is appropriately certified to be able
to join next level of programmes conducted by any institution conducting programmes under
NVEQF. This will also need accreditation of the skill development programmes conducted
by the Ministry under the overall framework of NVEQF, thus making these programmes an
integral part of the overall national level skill development framework.

◘◘ Developing a labour market information system (LMIS) is also essential for identifying present
and future skill gaps in the various sectors of the economy and accordingly, design and conduct
skill development programmes. Ministry of Labour & Employment has already started an initiative
in this regard and when the system is developed, it can be accessed by the Divisions / Offices
under the Ministry conducting skill development programmes, to develop appropriate regional
and sectoral training curricula. However, as the focus of the skill development programmes
of the Ministry is to cater to the requirements of the MSME sector, these programmes are
required to be conducted in closed collaboration with the sectoral stakeholders, particularly the
MSME Associations. This will ensure providing skill to the youth as per the requirements of the
local/regional MSMEs, which in turn ensure placement of the trainees.

♦♦ Upscaling of Training Infrastructure

◘◘ The MSME Development Institutes under the office of DC-MSME are conducting skill
development programmes since 1960s. With the increasing number and range of the
programmes, these MSME-DIs need to be strengthened with equipments and facilities for

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SIDBI Report on MSME Sector 2011

providing quality training. For this purpose, training labs and workshops on technologies like
automobile repair, mobile repair etc. should be provided to these institutes. As majority of
the training programmes are conducted outside, providing mobile training vans may also be
considered.

◘◘ The MSME Testing Centers/Testing Stations are providing training in laboratory technologies
/ calibrations, along with testing services. Keeping in view the large demand for the skill, the
training capacity of these TC/TS should be enhanced with adequate training facilities.

◘◘ The 10 tool rooms and 8 Technology Development Centers under the Ministry are providing
high level skill development programmes. Keeping in view the huge demand for such skill at
least 100 such tool rooms TDCs/ CFTIs may be opened in growth oriented clusters / Industrial
districts.

◘◘ The 3 National level Entrepreneurship Development Institutes under the Ministry are conducting
trainer’s training programmes for domestic and international participants. The training facilities
of EDIs should be further upscaled with International linkage for developing curricula, pedagogy
etc. to make them centers of excellence for skill and entrepreneurial development.

◘◘ Similarly, the training facilities of NSIC, KVIC and Coir Board should also be upgraded to cater
to their focal constituencies.

♦♦ Transparency in Implementation and Quality Assurance

◘◘ Towards wide and transparent dissemination of the training programmes of the Ministry, a single
web-based portal should be launched, which will provide complete and detailed information
about the training programmes being organized/planned by the various offices/agencies under
the Ministry all over the country. In fact, the same portal should have a provision for submitting
online application by the prospective candidates.

◘◘ At present, the Ministry does not have a system for rating the training programmes organized
by the various offices/agencies under the Ministry and particularly those conducted by the
private partner institutions. It is necessary to implement a rating system immediately for the
training institutions and place the same in public domain.

◘◘ It is also necessary to develop a hierarchy of the levels of various training programmes

organized by various agencies viz., the programmes conducted by KVIC for the village/rural
artisans at level one and hi-tech programmes conducted by the Tool Rooms at the highest level
with the level of other programmes in between. This may help the prospective participants to
join a programme according to their skill requirements.

◘◘ There is also an immediate need for assuring quality of the programmes conducted. This could
be ensured through quality of the Training Faculty, standardization of the course curricula

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 MSMEs in India

and real time monitoring of the programmes conducted. While quality of the faculty could be
ensured through a systemic quality upgradation programme of the faculty, the training curricula
need to be standardized by consultation with MSME Associations, expert agencies and other
Stakeholders. Real time monitoring of the programmes is possible through management
information system software.

♦♦ Virtual SME University

◘◘ Government has constituted NSDC to facilitate participation of private sector and civil society
in Skill Development Programmes. The programme modules conducted by NSDC supported
institutions need also to be harmonized with the programme modules of the Ministry. Ideally,
there should be an independent national level institution/body to harmonies conducting of the
programmes, the quality of the programmes and the level of the programmes at all-India level.

◘◘ The task mentioned above may be best done by a virtual SME University with the necessary
intellectual and financial resources, which can provide the necessary accreditation service
to the training institutes/organizations, decide the level of the programmes and also certify
individual trainers as per their proficiency level.

◘◘ The proposed University should also maintain online data base of the accredited institutions
as well as trainers whose services can be availed by the skill development institutions as
per their requirements. Towards further synergizing skill development programmes at all-India
level, the University should provide certification of the participants, after completion of the
programme, with appropriate grading/rating. Logically, the data base of the certified trainees,
available online, will function as a virtual employment exchange.

♦♦ Training on PPP Mode

◘◘ The Ministry is already operating a scheme “Assistance to Training Institutions” (ATI) under
which State level entrepreneurship Institutes are provided financial support to upgrade and
upscale. Under the Scheme, private/NGO promoted training institutions are also assisted in
conducting skill development programmes. The scheme is being presently implemented only
by the National level Entrepreneurship Development Institutes (EDIs) under the Ministry. As
enhancing the skill of unorganized sector will be a focal area of the Ministry during the 12th Five
Year Plan, all offices/ divisions of the Ministry should upscale their training capacity through
PPP mode under the ATI Scheme. It would be essential to enhance the budget allocation
under the ‘assistance to training institution’ scheme to at least ` 2,500 crore.

◘◘ The Ministry is also required to make special allocations to set up EDIs in special areas viz., NE
region, Jammu & Kashmir, Naxalites affected areas etc. and the special categories of persons
like differently-able, destitute etc. For these categories of candidates, special residential
programmes may also be considered.

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SIDBI Report on MSME Sector 2011

◘◘ At present, the programmes of the Ministry are provided almost free, with the exception of
the high level programmes conducted by the Tool Rooms and the National level EDIs. Ideally,
all training programmes conducted by the Ministry should be fee-based to enhance their
sustainability and support from the Ministry to desiring participants may be released through
credit vouchers.

♦♦ Hand Holding of Trainees

◘◘ The process of facilitating skill development starts with identification of the prospective
entrepreneurs and completes only with handholding of the trained entrepreneur to start an
enterprise with required finance etc. The Ministry already operates a flagship scheme, PMEGP
for subsidizing bank credit to new entrepreneurs. PMEGP need to be enlarged to take care of
credit need of at least 50% of the trainees of the programmes conducted by the Ministry.

◘◘ Handholding of new entrepreneurs for setting up the enterprise, operations and marketing
is also essential for success. Towards this end, the existing scheme of the Ministry, Rajiv
Gandhi Udyami Mitra Yojna needs to be further upscaled. Along with the individuals and other
institutions, industry associations should also be encouraged to provide handholding services
to new entrepreneurs. For this purpose, adequate support package may be developed.
Ideally, hand holding should be an integral part of the skill development programme with the
training agencies providing required hand holding services to the trainees for employment/self
employment.

♦♦ Faculty Development and Upgradation - To provide state of the art skill to the participants of the
skill development programmes conducted by the Ministry, skill upgradation of the training faculty
is essential. For this purpose, the Ministry should initiate a programme for periodic upgradation
of skill of the officers of the Ministry to make them aware about the global developments in the
area of skill development. Ideally, the faculty development programme should have linkages with
skill development Institutions of Germany, Japan and other countries having strong national skill
development framework. Research and development initiatives should also be encouraged among
the training faculty leading to regular publication of research papers in frontier and innovative
skill development approaches. The issue of faculty retraining is addressed under the Institutional
Structure vertical.

♦♦ Programmes for North East and Special Category States - Deriving demographic dividend from
the burgeoning youth population is a challenge for India, particularly in the North Eastern States,
hilly and terrorist infected Special Category States and the districts affected by leftwing extremism
(LWE). Widening of skill development network of the youth is required in these special areas to

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 MSMEs in India

ensure peace through economic development. This Group has recommended setting up of Special
EDIs in these States and Areas to provide skill development training to the youth, preferably through
residential courses. These programmes should focus on activities based on locally available
resources and requirements of the local industries. For this purpose, appropriate linkage with the
industry Associations, local administration and other agencies engaged in economic development in
these areas need to be ensured.

♦♦ TREAD Scheme - The Trade Related Entrepreneurship Assistance and Development (TREAD)
Scheme of the Ministry is a focal programme for assistance to illiterate & semi literate women of rural
and urban areas for self employment. Under the Scheme, assistance is provided to nongovernmental
organizations for capacity building of women in self employment through various non-farm activities.
The projects from NGOs for handholding, training and providing marketing support to illiterate & semi
literate women of rural and urban areas are provided linkage to bank finance with upto 30% of the
project cost subsidized by Government. The Scheme need to be further upscaled to encourage self-
employment in women, particularly, from rural and backward areas with further increase in allocation.

♦♦ Standing Committee on Skill Development for the MSME Sector - The Group recommends
constitution of a Standing Committee under the Minister In charge of MSME to regularly review,
monitor and upscale the skill development initiatives of the Ministry. The Committee should have
representations from all Stakeholders, viz., Apex Chambers of Commerce, MSME Associations,
other Ministries engaged in Skill Development etc.

Recommendations on Institutional Structure

♦♦ Environmental issues

◘◘ A list of items should be prepared by Central Pollution Control Board from amongst the items
notified by State Pollution Control Boards for exemption from NOC and consent for setting up
unit & operation respectively. The list of items should be reviewed every year and amended.

◘◘ Establishment of a compliance assistance centre for MSMEs in MSME Development Institutes

to create awareness on better environment management practices, policies and procedures
as well as for better compliance of environment regulations.

♦♦ Labour issues

◘◘ The compliance of labour related enactments should be linked with incentives. This will make
the enterprises compete for setting up standards of excellence, both in product and labour
markets.

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SIDBI Report on MSME Sector 2011

◘◘ Following labour laws may consolidate:

- Factories Act, 1948

- Maternity Benefits Act, 1961

- Workmen’s Compensation Act, 1952 and

- Contract Labour (Regulation & Abolition) Act, 1970

◘◘ Emphasis to be made in the existing as well as upcoming labour related statutes for self
declaration and self certification for the requirements under concerned provisions of the Acts.

◘◘ Inspections should be streamlined. It should be based on authentic information/complaint and

should be carried out after the written permission of an officer higher by two ranks in hierarchy.

♦♦ MSMED Act, 2006

◘◘ Defined limit of investment in plant and machinery for classifying the micro, small and medium
enterprises may be deleted from the MSMED Act, 2006 and should be announced through
Notifications.

◘◘ The monetary limit of penal provisions of MSMED Act, 2006 should be provided in Rules
instead of in the Act.

◘◘ Delayed payment of earnest money/security money should be included for payment of penal
interest in case of MSEs as per provision in Chapter 5 of MSMED Act, 2006.

◘◘ Amount of award given by Micro & Small Enterprises Facilitation Council should be realizable
as arrear of land revenue.

Re-engineering and Strengthening of DC MSME and its Field Offices

♦♦ MSME Development Institutes of the Ministry of MSME provide facilitation to the new and existing
entrepreneurs in developing their enterprises. With the implementation of Micro, Small and Medium
Enterprises Development (MSMED) Act, 2006, two new sectors were classified in the country i.e.
medium sector and service sector, which required special attention for promotion and growth as
these sectors were identified for the first time in any statute. The total number of small and micro units
tremendously increased from 33 lakh in 2000-01 to 2.6 crore in 2007. The number of entrepreneurs
trained in 2002-03 was 10,739 which have increased 8.2 times to 99,635 in 2010-11. Contrary to
that the trainers and technological force of officers in MSMEDIs has gone down by 30%. Office of
DC, MSME and MSMEDIs need to be strengthened both in terms of facilities and manpower to take
additional charge of medium enterprises, formulate and implement promotional measures for them
to make India a land of sunrise and technologically advanced enterprises. To provide support at the
grass root level to MSMEs, there is an immediate need for the resurgence of DC MSME and its field
establishments. For effective co-ordination, regional setup is also required. Re-engineering of the

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 MSMEs in India

MSME Development Institutes and the office of Development Commissioner, MSME may be taken
up during the 12th Plan Period. The Group recommends allocation of ` 900 crore during the 12th
Plan Period for re-engineering and strengthening of DC MSME & its field offices.

♦♦ Rapid Technological Innovations, concept of multi dimensional expertise, innovative methods of

management, make a strong case for periodical training of MSME-DO Officers. With globalization,
the MSMEs of our country are required to discover potential and new avenues and explore new
destinations for marketing in the world. Now MSMEs have to develop competitiveness to deal with
the challenges posed by multinationals in India. Not only this, the MSMEs of India must expand their
operations in other countries by opening manufacturing facilities or service stations abroad. Some
of the areas where immediate training of the MSME-DO officers may be instrumental in bringing
about the above said impact are manufacturing process, re-usable asset management, product and
service design, hardware development, supply chain management and the Government Policy in
select countries in the areas related to MSMEs and its impact on the MSME development in that
country. A minimum of three officers from each MSME-DI and five officers from Office of DC-MSME
should be deputed for training for the above purpose every year. The Group recommends allocation
of ` 100 crore during the 12th Plan Period for this purpose.

♦♦ Application of e-governance

◘◘ Introduction of filing of Entrepreneurs Memorandum under the MSMED Act was an important
initiative towards liberalization of the MSME sector. The Group recommends for application of e
governance for streamlining of the procedures and for that purpose setting up of an information
and data base network among the DICs, MSME-DIs and the Ministry.

◘◘ The provision of the delayed payment under the MSMED Act was another facilitator for ensuring
regular cash flow to the Micro & Small Enterprises against the supplies made. The Micro &
Small Enterprises Facilitation Councils (MSEFC) stipulated under the Act to be set up at the
State level were foreseen as facilitators to the MSEs. The Group recommends introduction of
an information and communication network for operation and monitoring of these MSEFCs. A
budget of ` 100 crore may be allotted for ICT enabled upscaling of the EM filing and MSEFC
operations.

♦♦ Creation of comprehensive database - Creation and maintenance of comprehensive database

for MSME sector, including the unorganized sector is a pre-requisite for sound policy formulation.
Regular updating of database for the sector is important, which requires better administrative
mechanism and enhanced budget provision. Further, there is a need for sectoral data research
and compilation of data on Government/Public Sector procurement from MSE sector. An allocation
of ` 2,000 crore may be kept for creation of comprehensive data base.

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SIDBI Report on MSME Sector 2011

MSME sector of India is today at the gateway of global growth on the strength of competitive and quality
product range. However, facilitation from the Government is required to minimize the transaction costs of
technology upgradation, market penetration, modernization of infrastructure etc. History shows that only
with persistent and effective Government support in these areas, the SMEs of countries like Japan, Korea
etc. emerged as global players. The PM’s Task Force has already taken significant initiatives in this regard.
The above recommendations of this Working Group for the 12th Plan period will be vital enabler towards
achieving quantum jump in the growth of MSME sector through participative, transparent and scalable
policies and schemes of Government of India.

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 INSTITUTIONAL SUPPORT TO
MSMEs IN INDIA

2.1 Institutional Framework for MSMEs in India

The institutional support to MSMEs in India has evolved over a period of time, with increasing support to
address the key challenges faced by the sector. The MSME sector in the country is highly heterogeneous
in terms of its size, variety of products and services produced, and the level of technology employed, the
legal form in which it operates, etc. Given the multiplicity of sectors, multi-disciplinary support requirements
of MSMEs, and multi-levels of operations, the institutional mechanism for support and development of
MSMEs in the country is complex. Many institutions play variety of roles, and across different levels –
ministries and departments (central, state and local government), private players, banks and financial
institutions, research and technical institutions, training organizations etc., addressing the key components
of the MSME development strategy of the country.

At the country level, the Ministry of MSME is the overall policy making and coordinating body for the
MSMEs in the country. Both central and state governments are involved in promoting MSMEs, with the
primary responsibility resting with the State Governments. The Central Government supplements the
efforts through various initiatives, schemes and incentives. There exists several ministries, institutions and
departments, both at state and central level, which are involved in the promotion and development of this
sector. Some of these have a MSME-specific focus, while others are of a cross-cutting nature.

The central ministries have institutional structures to implement various MSME focused schemes and
programmes. The ministries and departments periodically come out with policy measures, specialized
institutions, special purpose vehicles, and support measures to develop and strengthen MSMEs. Within
the sector-specific ministries, the textile and food processing are very important for MSMEs, as these
sectors constitute a third of MSMEs in the country, and also extremely labour intensive generating
SIDBI Report on MSME Sector 2011

significant employment in the country1. Each ministry and department has their plans to develop schemes
and implement them independently.

Apart from these ministries and departments, there are other institutions that play critical role at different
levels in providing services and support - banks and financial institutions, refinancing institutions, technology
developers, skill building institutes, marketing agencies, etc.

The institutional support for MSMEs can be classified under two broad frameworks. First framework
pertains to Development Support Institutions, which includes Advisory Set-ups and Policy setups.

♦♦ Advisory Set-ups: It comprises of distinguished professionals and intellectuals serving in their

individual capacities, and include Prime Minister’s Office (PMO), Planning Commission, National
Board for MSMEs and National Manufacturing Competitiveness Council (NMCC).

♦♦ Policy Set-ups: Institutions under this head include the Reserve Bank of India, the country’s apex
Banking Institution entrusted with setting the monetary policy viz. Interest Rates, Credit supply, etc.
The Ministry of Micro, Small & Medium Enterprises is responsible for initiating appropriate policy
measures, programmes and schemes for the promotion of MSMEs, and rendering assistance to
provide a comprehensive range of services and common facilities to the sector. The roles and
functions of the Office of the Development Commissioner (MSME), major R&D Programmes, and
services such as exhibitions, buyer-seller meets, and measures like the Rajiv Gandhi Udyami
Mitra Yogna are covered in the chapter. The Department of Industrial Policy and Promotion (DIPP)
under the Ministry of Commerce has several roles and functions, such as the Formulation and
implementation of industrial policy and strategies for industrial development in conformity with the
development needs and national objectives; Monitoring the industrial growth, and the Formulation of
Foreign Direct Investment (FDI) Policy and promotion, approval and facilitation of FDI. The Ministry
of Textiles is responsible for policy formulation, planning, development export promotion and trade
regulation in respect of the textile sector. The Ministry of Food Processing Industries is responsible
for developing a strong and vibrant food processing sector; with a view to create increased job
opportunities in rural areas, enable the farmers to reap benefit from modern technology, create
surplus for exports and stimulate demand for processed food. The Ministry of Women and Child
Development had been set to give the much needed impetus to the holistic development of women
and children. The schemes of the Ministry like Swashakti, Swayamsidha, STEP and Swawlamban
enable economic empowerment of the women.

1
Government of India (2010), Prime Minister’s Task Force on MSME

26
 Institutional Support to MSMEs in India

The second framework includes Financial Support Institutions, which can be further divided into National
Level and State Level Institutions.

♦♦ National Level Institutions include Commercial Banks, Regional Rural Banks, Cooperative Banks,
Refinancing Institutions [(Small Industries Development Bank of India (SIDBI)], National Bank for
Agriculture and Rural Development (NABARD) and National Housing Bank (NHB), Khadi and Village
Industries Commission (KVIC), National Small Industries Corporation (NSIC) and North Eastern
Development Finance Corporation Ltd. (NEDFi).

♦♦ State Level Institutions include State Financial Corporations (SFCs), State Industrial Development
Corporations (SIDCs), The State Small Industries Development Corporations (SSIDCs) etc. The 18
SFCs across the country provide financial assistance by way of term loans to MSMEs. At present,
there are 28 SIDCs in the country, of which 11 also function as SFCs and are, therefore, termed as
Twin-Function IDCs.

2.2 The Evolution of the Government Institutional Framework for support to

MSMEs
The roots for present institutional framework for MSME development can be linked back to the
recommendations of the International Perspective Planning Team, 1953-54, which had then recommended
the creation of small sector department under the then Ministry of Industry, a marketing corporation and
centers equipped with appropriate machineries and other facilities for training of small entrepreneurs.
In pursuance of these recommendations, Small Industries Development Organization (now named as
Office of DC-MSME), National Small Industries Corporations (NSIC) and small industry extension training
institutes were set up for providing support to the sector. Over the last 5 decades, institutional framework
has undergone many changes and the whole network has been expanded. Each state had also set
up institutions to assists the sector. The whole network was enlarged with the establishment of District
Industries Centers in 1978 and thereafter, but followed basically the same approach of earlier decades.

At the central level, the Ministry of Micro, Small and Medium Enterprises (MoMSME) is the Nodal Ministry
for policy matters relating to MSMEs and provide focused attention to the promotion and development
of the MSME sector. The main role of the Ministry of Micro, Small and Medium Enterprises (MoMSME)
and its organizations is to assist the MSME Stakeholders in their efforts to encourage entrepreneurship,
employment and livelihood opportunities and enhance the competitiveness of MSMEs in the changed
economic scenario. To achieve its objectives, the Ministry runs various schemes /programmes attempting
to address various key challenges related with credit, marketing, infrastructure, skill development &
technology, which are implemented through its organizational network.

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SIDBI Report on MSME Sector 2011

Ministry of Micro, Small & Medium Enterprises envisions a vibrant MSME sector by promoting growth and
development of the MSME Sector, including Khadi, Village and Coir Industries, in cooperation with various
Ministries/Departments, State Governments and other Stakeholders, through providing support to existing
enterprises and encouraging creation of new enterprises.

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 Institutional Support to MSMEs in India

2.3 Institutional Roles and Programmatic Schemes for Supporting MSMEs

2.3.1 MSME Development Support Set-up

► Advisory Set-up
Advisory Council is intellectual structures that are periodically set up by Government as an interface
with Civil Society in regard to the formulation and implementation of the MSME policies and measures.
These comprise distinguished professionals drawn from diverse fields of development activity who
serve in their individual capacities.

Through these platforms, the Government has access not only to their expertise and experience
but also to a larger network of Research Organizations, NGOs and Social Action and Advocacy
Groups. The Council makes detailed recommendations to the Government in the areas of priority
and provides independent feedback on the impact of action initiated in various sectors.

Prime Minister’s Office (PMO)

Based on representations received from the interest groups, PMO sets up appropriate task force to reconcile
competitive interests and forces pulling in different directions. In the year 2009-10, the PMO set up a Task
Force under the Chairmanship of the Principal Secretary to the Prime Minister to examine various issues
relating to the MSME sector. The Task Force has made many far-reaching recommendations. PMO has
established Prime Minister’s Council on Micro and Small Enterprises in the Prime Minister’s Office which

29
SIDBI Report on MSME Sector 2011

would oversee implementation of these recommendations on a half - yearly basis. The Ministry of MSME
is the servicing arm for the Council.

Planning Commission

The Planning Commission was set up by a Resolution of the Government of India in March 1950 in
pursuance of declared objectives of the Government to promote a rapid rise in the standard of living of
the people by efficient exploitation of the resources of the country, increasing production and offering
opportunities to all for employment in the service of the community. The Planning Commission was
assigned with the responsibility of making assessment of all resources of the country, augmenting deficient
resources, formulating plans for the most effective and balanced utilization of resources and determining
priorities. The economic planning has always been according special thrust to the MSME sector.

The Approach Paper of the Planning Commission for the 12th Plan period (FY-2012-13 to FY-2016-17)
mentions MSME Sector as the foundation for the overall manufacturing sector. Nurturing competitive
MSMEs would help in absorbing new technologies and improving productivity in manufacturing sector,
with stimulation of the growth of dynamic clusters as a key to such an approach.

The Approach Paper also stresses on need for skilled human resources for competitive enterprises
and linking Skill Development and training initiatives with industry requirements. It also stresses the
importance of penetration of information and communication technology, which can enhance the overall
competitiveness of the sector as well as the quality of governance. Further, it also recognizes the important
role of innovation in spurring growth and unleashing potential of enterprises. Thrust on frugal innovation
will result in generation of affordable and accessible products and services of global standards.

National Board for MSMEs

The Central Government established the National Board for Micro, Small and Medium Enterprises
(NBMSME) as per the provisions of the MSMED Act, 2006, to facilitate coordination and inter-institutional
linkages among various Ministries, State Governments, Banks, Financial Institutions, MSME- Industries
Associations, etc., the NBMSME has been constituted as the apex statutory advisory body to advise the
Government on all issues pertaining to the MSME sector.

The Minister in-charge of the Ministry of MSME, Government of India is the Chairman of the Board. The
Board comprises MSME/Industry Ministers of State Governments, Secretaries of various Departments
of Government of India, MPs from both the Houses of the Parliament, the heads/senior representatives
of financial institutions, industry associations and eminent experts in the field of Economics, Industry and
Science & Technology which meets periodically.

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 Institutional Support to MSMEs in India

National Manufacturing Competitiveness Council

The National Manufacturing Competitiveness Council (NMCC) was set up by the Government in October
2004 to provide a continuing forum for policy dialogue to energize and sustain the growth of manufacturing
industries in India. The NMCC looks into the total area of manufacturing activities in the context of increasing
need for employment opportunities and to unlock the full potential of Indian Industry.

To achieve its objectives, NMCC is adopting the twin approach of drawing a National Strategy for
Manufacturing which attempts to identify the areas of policy interventions and outlines the strategic
directions that need to be pursued in order to realize higher levels of growth and employment and
simultaneously, concentrate on certain sub-sectors of manufacturing where necessary policy interventions
can unleash higher growth rates and expansion of markets. The NMCC has recommended a national level
as well as sector level /industry level specific policy initiatives as is required for augmenting the growth of
manufacturing sector. Ten elements have been identified for attention by the NMCC as a part of its long
term manufacturing strategy:

►► Enhance Government focus on manufacturing competitiveness.

►► Creating conditions for investment in and growth of the manufacturing sector.
►► Lowering the cost of manufacturing.
►► Investing in innovations.
►► Strengthening education and training at all levels.
►► Adoption of global best practices in manufacturing.
►► Right market framework, competition and regulation.
►► Issues relating to competitiveness in small and medium industries.
►► Competitiveness of public sector manufacturing industries.
►► Infrastructure development.

The programme finalized by the NMCC and implemented through the Ministry of MSME mainly deals with
firm level competitiveness.

In order to revive the manufacturing sector, particularly the MSME Sector, and to enable them to adjust
to the competitive pressures caused by liberalization and moderation of tariff rates, a new scheme called
the “Manufacturing Competitiveness Programme” was launched to help them strengthen their operations
and sharpen their competitiveness. The scheme is to be implemented under the National Manufacturing
Competitiveness Council (NMCC) in consultation with the industry.

The National Manufacturing Competitiveness Council (NMCC) has finalized a five-year National
Manufacturing Programme. Ten schemes have been drawn up including schemes for promotion of ICT,
mini tool room, design clinics and marketing support for MSMEs.

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SIDBI Report on MSME Sector 2011

NMCC Schemes
S. No. Name
1. Marketing Support /Assistance to MSMEs (Bar Code)
2. Support for Entrepreneurial and Managerial Development of SMEs through Incubators
3. Enabling Manufacturing Sector to be competitive through Quality Management Standard & Quality
Tech. Tools (QMS/QTT)
4. Building Awareness on Intellectual Property Rights (IPR) for MSMEs
5. Lean Manufacturing Competitiveness Scheme for MSMEs
6. Mini Tool Rooms proposed to be set up by Ministry of MSME (MTR)
7. Design Clinic Scheme for design expertise to MSMEs Manufacturing sector (DESIGN)
8. Marketing Assistance & Technology Up-gradation Scheme in MSMEs. (TEQUP)
9. Technology and Quality Upgradation Support to MSMEs
10. Promotion of ICT in Indian Manufacturing Sector (ICT)

1) Marketing Assistance and Technology Upgradation Programme (Bar-Code)

Marketing Assistance

The basic objective of financial assistance is to enhance the marketing competitiveness of Micro &
Small Enterprises (MSEs). Cost sharing in 80:20 ratio upto total cost of ` 10 lakh between GoI and
Unit. The objectives of the scheme are to be achieved by performing the following major activities
for MSMEs through Government of India financial assistance in the manner laid down in these
guidelines:

■■ Technology Up-gradation in Packaging.

■■ Skill Up-gradation /Development for Modern Marketing Techniques.
■■ Competition Studies.
■■ Special component for North-Eastern Region.
■■ New Markets through State /District level local Exhibitions/Trade Fairs.
■■ Corporate Governance Practices.
■■ Marketing Hubs.
■■ Reimbursement towards ISO 18000 /ISO 22000 /ISO 27000 - Certification.

Technology Upgradation Programme (Bar-Code)

■■ Providing 75% of one-time registration fee and annual recurring fee (for first three years) paid
by MSEs to GS of India.

■■ Popularizing the adoption of bar codes on large scale amongst MSEs, and

32
 Institutional Support to MSMEs in India

■■ Motivating and encouraging MSEs for use of bar codes through conducting seminars on Bar
Code, etc.

2) Support for Entrepreneurial and Managerial Development of MSMEs through Incubators

The main objective of the scheme is to promote emerging technological and knowledge based
innovative ventures that seek the nurturing of ideas from professionals beyond the traditional activities
of Micro, Small & Medium Enterprises (MSMEs). Such entrepreneurial ideas have to be fostered and
developed in a supportive environment before they become attractive for venture capital.

Under this scheme, 100 “Business Incubators” (BIs) are to be set up under Technology Institutions
over the next 4 years [@ say 25 per year] and each BI is expected to help the incubation of about
10 new ideas or units. For this service, which includes the provision of laboratory /workshop facilities
and other assistance /guidance to young innovators, each BI will be given between ` 4 lakh and ` 8
lakh per idea /unit nurtured by them, limited to a total of ` 62.5 lakh for the ten units.

3) Enabling Manufacturing Sector to be competitive through Quality Management Standard &

Quality Tech - Tools (QMS/QTT)
This component envisages Micro & Small Enterprises to understand and adopt the latest Quality
Management Standards (QMS) and Quality Technology Tools (QTTs) so as to become more
competitive and produce better quality products at competitive prices. The adoption of these tools
will enable MSEs to achieve:

■■ Efficient use of resources.

■■ Improvement in product quality.

■■ Reduction in rejection and re-work in the course of manufacturing.

■■ Reduction in building up inventory at the various stages in the form of raw materials, work-in-
progress, finished components, finished products, etc.

This will also enable the MSEs to enter into or strengthen their position in the export market.

4) Building Awareness on Intellectual Property Rights (IPR) for MSMEs

The main activity proposed under this scheme cover the following broad areas of interventions:
■■ Awareness /Sensitization Programmes on IPR (` 1 lakh Max per Proposal)

■■ Pilot Studies for Selected Clusters/Groups of Industries (` 2.50 lakh Max per Proposal)

■■ Interactive Seminars/Workshops (` 2 lakh Max per Proposal)

■■ Specialized Training

●● Short Term (ST) (` 6 lakh Max per Proposal)

●● Long Term (LT) (` 45 lakh Max per Proposal)

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SIDBI Report on MSME Sector 2011

■■ Assistance for Grant on Patent/GI Registration

●● Domestic Patent (` 0.25 lakh Max per Proposal)

●● Foreign Patent (` 2 lakh Max per Proposal)

●● GI Registration (` 1 lakh Max per Proposal)

●● Setting up of ‘IP Facilitation Centre for MSME (` 65 lakh Max per Proposal)

●● Interaction with International Agencies

●● Domestic Intervention (` 5 lakh Max per Proposal)

●● International Exchange Programme (` 7.5 lakh Max per Proposal)

5) Lean Manufacturing Competitiveness Scheme for MSMEs

The objective of the Scheme is to enhance the manufacturing competitiveness of MSMEs through
the application of various Lean Manufacturing (LM) techniques (5S System, Visual Control, Standard
Operating Procedures, Just in Time, NBAN System, Cellular Layout, Value Stream Mapping, TPM
(Total Productive maintenance), etc.)

The general approach involves engagement of Lean Manufacturing Consultants (LMC) to work with
selected MSMEs in the chosen clusters with financial support by the Government. A maximum of
80% of the project cost for each cluster will be borne by the Government. The assistance would
be limited to the first year, of the Scheme, which would cover 100 Mini Clusters (approximately 10
MSMEs per cluster), spread all over the country.

The objectives of Scheme are to increase the competitiveness of the MSME sector through the
adoption of LM techniques with the objective of:

■■ Reducing waste

■■ Increasing productivity

■■ Introducing innovative practices for improving overall competitiveness

■■ Inculcating good management systems, and

■■ Imbibing a culture of continuous improvement

6) Mini Tool Rooms proposed to be set up by Ministry of MSME (MTR)

The objective of the scheme is to set up mini tool room through PPP model, State PPP model and
Centre - State Model. The financial assistance upto ` 9 crore would be provided under the scheme.
This scheme is expected to improve the competitiveness of MSMEs, reduce the demand and supply
of skilled labour, etc.

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 Institutional Support to MSMEs in India

7) Design Clinic scheme

The objective of Design Clinic Scheme is to enhance the understanding and application of design
and innovation in MSMEs. It aims to promote design as a value adding activity and integrating the
same into the mainstream business and industrial processes of MSMEs. The Scheme will help
MSMEs to avail independent and professional advice on all aspects of design. Practical support will
be provided to MSMEs through seminars, workshops and one-to-one advice by design experts for
new product development as well as enhancing existing product portfolio. The total scheme budget
will be ` 73.58 crore, out of which ` 49.08 crore will be GoI assistance and the balance amount will
be contributed by the beneficiary MSMEs.

8) Marketing Assistance & Technology Up-gradation Scheme in MSMEs

Clubbed with (1) above

9) Technology and Quality Upgradation Support to MSMEs (TEQUP)

The following activities have been envisaged under the scheme towards fulfillment of the above
objectives:

■■ Capacity Building of MSME Clusters for Energy Efficiency, Clean Development Interventions
and other technologies mandated as per the global standards.
■■ The initiatives planned under this activity include:
●● Conducting awareness programmes
●● Supporting energy audits
●● Identifying energy efficient technologies

■■ Creation of Detailed Project Reports (DPRs) and replication of model DPRs at the cluster level.

■■ Implementation of Energy Efficient Technologies (EET) in MSME units.

■■ This will be achieved through:

●● Invitation of bankable DPRs from MSMEs
●● Financing of DPRs through SIDBI and other financial institutions

■■ Setting up of Carbon Credit Aggregation Centers (CCA) for introducing and popularizing clean
development mechanism (CDM) in MSME clusters. Under this activity, CCAs will be setup in
16 clusters to aid registration of CDMs by MSMEs and ensure that aggregation of CDMs to
ensure that sufficient volume is obtained for trading on commodity exchanges.

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SIDBI Report on MSME Sector 2011

■■ Encouraging MSMEs to acquire product certification /licenses from National /International

bodies and adopt other technologies mandated as per the global standards. Towards this
cause, eligible MSMEs will be provided financial support for obtaining national and international
product certificates.

■■ Studying the Impact of the scheme, administration and other miscellaneous activities.

10) Promotion of Information and Communication Technology in MSME Sector

The Scheme envisages for a planned model of IT adoption in potential MSME clusters based on
need analysis of stake holders. Under this scheme, 100 clusters will be benefited in respect of
standardization of their business process, improvement in delivery time, reduction in inventory
carrying cost, improvement in productivity and quality of production, controlling of cost & time,
improved customer satisfaction etc., through need based ICT interventions. The total budget under
the scheme is ` 105 crore including Government of India (GoI) contribution of ` 47.70 crore.

The main objective of the scheme is to carry out diagnostic mapping of potential clusters and motivate
them to adopt the ICT tools and applications for their production & business processes, with a view
to improve their competitiveness in national & international market.

The developmental outputs expected from the scheme will be:

■■ Large number of MSMEs across the country (about 5,000) will reap the benefits from the
scheme.

■■ ICT interventions will improve competitiveness of MSME sector resulting in enhanced export of
these MSMEs and increased share in domestic and international markets.

■■ The scheme will facilitate:

●● In extending the support of basic ICT infrastructure to MSMEs.

●● In sensitizing MSMEs with potential benefits of ICT tools and promote their adoption in
the entire chain of business from procurement of raw material to after sales & service.

●● Encouragement of indigenous development of sector /cluster specific software solutions

on need basis.

●● Standardization of the business processes / activities across the enterprise through ICT
application.

●● Creation of knowledge networks amidst the clusters across the country to facilitate
forward and backward linkages.

●● Awareness towards the adoption of business software such as ERPs, e-procurement,

e-marketing, etc.

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 Institutional Support to MSMEs in India

●● Continuous HRD development in ICT related applications; and

●● Incentivizing MSMEs and Software partners for long term partnership in ICT adoption.

National Commission for Enterprises in the Unorganized Sector

The National Commission for Enterprises in the Unorganized Sector (NCEUS) had been set up as an
advisory body for the informal sector to bring about improvement in the productivity of these enterprises for
generation of large-scale employment opportunities on a sustainable basis, particularly in the rural areas.
The Commission has recommended appropriate measures to enhance the competitiveness of the sector
in the emerging global environment and link the sector with the institutional framework in areas such as
credit, raw material, infrastructure, technology up gradation and marketing. Very valuable recommendation
for Micro, Small and Medium Enterprises for the informal sector have also been made by the Commission,
some of which have already been accepted and implemented. The Commission has since been wound up
on April 30, 2009.

► Policy Set-up

Reserve Bank of India (RBI)

Reserve Bank of India is the central bank and monetary authority of India, which sets the monetary and
credit polices. Its priority sector lending policy and guidelines with regard to rehabilitation of sick industries,
viability norm, definition of sick industries, directly impacts the MSME sector. In numerous other ways, RBI
indirectly and directly controls credit and finance issues relating to MSMEs. A Standing Advisory Committee
of the RBI on MSME Sector constantly looks into the credit related problems of the MSME Sector.

Ministry of MSME

The President under Notification dated May 09, 2007 had amended the Government of India (Allocation
of Business) Rules, 1961. Pursuant to this amendment, Ministry of Agro and Rural Industries and Ministry
of Small Scale Industries were merged into a single Ministry, called the Ministry of Micro, Small and
Medium Enterprise. This Ministry initiates appropriate policy measures, programmes and schemes for
the promotion of MSMEs, which include the setting up of network of institution at the field level to render
assistance and to provide a comprehensive range of services and common facilities for MSMEs. These
are supported by a host of other central /state government departments, promotional agencies, non-
governmental organization, autonomous organizations, etc. which provide support to MSMEs in different
ways. The Ministry also coordinates with other ministries / departments and different organizations in the
interest and welfare of the MSME sector.

The range of services covers techno-economic and managerial aspects, training, testing facilities and
marketing assistance through the agencies created for the specified functions. These activities are carried
out through attached offices /organizations, namely, Office of Development Commissioner, MSME [DC
(MSME)], Khadi and Village Industries Commission (KVIC), Coir Board and National Small Industries

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SIDBI Report on MSME Sector 2011

Corporation (NSIC). The objectives, role and functions of these departments/ organizations are given
below:

The Vision of the Ministry is to have a vibrant Micro, Small and Medium Enterprises (MSME) sector in India.
The Ministry envisions that the sector will have a healthy growth with a large number of enterprises being
set up and their graduation by upscaling into small and medium enterprises. This would be accompanied
by enhancement of their contribution to the GDP, manufacturing output, employment and exports. For
those already established, their upward graduation to next higher levels of investments and market shares
would be welcomed. On an organizational level, transition of the sector from a predominantly unorganized
to the organized sector, would be endeavoured.

The Mission of the Ministry is to promote growth and development of Micro, Small and Medium Enterprises,
including Khadi, Village and Coir industries, in cooperation with concerned Ministries / Departments, State
Governments and other stakeholders by providing support to existing enterprises and encouraging creation
of new enterprises.

The objective of the Ministry is to support and develop existing MSMEs; creation of new enterprises;
support to Khadi, Village and Coir industries. The gamut of these objectives is a wide spectrum of support
to entrepreneurship and skill development of MSMEs and such other ancillary objectives so as to create a
complete promotional eco system.

The functions of the Ministry include inculcation of entrepreneurial culture amongst youths, facilitation
of credit flow to MSMEs, improving competitiveness of MSME, promotion of MSMEs through cluster-
based approach, marketing support to MSMEs, creation of new Micro Enterprises through Prime Minister’s
Employment Generation Programme (PMEGP), support to Khadi and Village Industries (KVI) sector,
support to Coir Industry, entrepreneurship and skill development.

Office of the Development Commissioner (MSME)

The Office of DC (MSME) was established as Small Industries Development Organization (SIDO) in
1954 on the basis of the recommendations of the Ford Foundation. Over the years, it has witnessed
its role to evolve into an agency for advocacy, handholding and facilitation of the MSME sector. The
organization provides economic information services and also advises Government in policy formulation
for the promotion and development of MSME sector. Recognizing the dynamics of the new environment in
which these units were operating, the Office of the DC (MSME) focuses on providing support in the fields
of credit, marketing, technology and infrastructure. The emerging global trends and national developments
have transformed the role of the organization into that of catalyst of growth of MSMEs in the country. The
main services rendered are:

■■ Advising the Government in policy formulation for the promotion and development of MSME Sector.

■■ Providing techno-economic and managerial consultancy, common facilities and extension services
to the MSME Sector.

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 Institutional Support to MSMEs in India

■■ Making Available facilities for technology upgradation, modernization, quality improvement and
infrastructure.

■■ Developing Human Resources through training and skill upgradation.

■■ Providing economic information services.

■■ Maintaining a close liaison with the Central Ministries, Planning Commission, State Governments,
Financial Institutions and other organisations concerned with development of MSME Sector

■■ Evolving and coordinating Policies and Programmes for development of the Sector as ancillaries to
large industries

The Office provides a comprehensive range of common facilities, technology support services, marketing
assistance, etc. through its network of MSME Development Institutes (MSME - DIs); MSME Testing
Centers (MSMETCs); Field Testing Stations (MSMETSs); Autonomous Bodies – which include MSME
Tool Rooms (MSME-TRs); MSME Technology Development Centers (MSME-TDCs) and MSME Footwear
Training Institutes (MSME-TDC-CFTIs). There are also two Departmental Training Institutes (MSME-TIs).

Schemes implemented by Ministry of MSME, GOI

Credit Linked Capital Subsidy Scheme for Technology Upgradation - The MoMSME is operating a
Scheme, namely, Credit Linked Capital Subsidy Scheme (CLCSS) for Technology Upgradation of Micro and
Small Enterprises. The Scheme aims at facilitating Technology Upgradation of Micro and Small Enterprises.
The Scheme was launched in October, 2000 and revised w.e.f. 29.9.2005. The revised scheme provides
for 15% Capital Subsidy (12% prior to 29.9.2005) on institutional finance availed by them for induction of
well-established and improved technology in approved subsectors/ products. The maximum limit of eligible
loan for calculation of capital subsidy under the scheme is ` 100 lakh with a maximum subsidy of ` 15 lakh.
The admissible capital subsidy under revised scheme is calculated with reference to purchase price of
the plant and machinery, instead of the term loan. Cumulatively till December 31, 2010, 11,114 units have
been sanctioned subsidy amounted to ` 523 crore.

Credit Guarantee Scheme - The Government of India launched the Credit Guarantee Fund Scheme for
Micro and Small Enterprises in August, 2000, with the objective of making available credit to micro and
small enterprises (MSEs), particularly micro enterprises, for loans up to ` 100 lakh without collateral/third
party guarantees. The Scheme is being operated through the Credit Guarantee Fund Trust for Micro and
Small Enterprises (CGTMSE) set up jointly by the Government of India and Small Industries Development
Bank of India (SIDBI). The Scheme covers collateral free credit facility (term loan and/ or working capital)
extended by eligible member lending institutions (MLIs) to new and existing micro and small enterprises up
to ` 100 lakh per borrowing unit. The guarantee cover provided is up to 75% of the credit facility up to ` 50
lakh with an incremental guarantee of 50% of the credit facility above ` 50 lakh and up to ` 100 lakh (85%
for loans up to ` 5 lakh provided to micro enterprises, 80% for MSEs owned/ operated by women and all

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SIDBI Report on MSME Sector 2011

loans to NER). One time guarantee fee of 1.5% of the credit facility sanctioned (0.75% for NER including
Sikkim) and Annual Service Fee of 0.75% is collected from the MLIs. As on 31st December 2011, there
were 125 eligible lending institutions registered as MLIs of the Trust comprising of Public Sector Banks,
Private Sector Banks, Regional Rural Banks (RRBs), foreign banks and other Institutions viz., National
Small Industries Corporation (NSIC), North Eastern Development Finance Corporation Ltd. (NEDFi),
Delhi Financial Corporation, Kerala Financial Corporation, Tamilnadu Industrial Investment Corporation
Ltd., Jammu & Kashmir Development Finance Corporation Ltd. (JKDFC), Export Import Bank of India
(EXIM Bank) and Small Industries Development Bank of India (SIDBI). Cumulatively as on December 31,
2011, 7,15,458 proposals have been approved for guarantee cover for a total sanctioned loan amount of
` 32,941 crore.

(Reference: http://www.cgtmse.com/About_us.aspx)

ISO 9000/ISO 14001 Certification Reimbursement Scheme - Incentive Scheme of reimbursement

of expenses for acquiring Quality Management System (QMS) ISO 9000 Certification /Environment
Management (EMS) ISO 14001 Certification to the extent of 75% or ` 75,000 whichever is lower, for Small
Scale /Ancillary /Tiny /Small Scale Service Business Enterprises (SSSBE) Units.

MSME Marketing Development Assistance (MSME-MDA) - The scheme offers funding up to 75% in
respect of to and fro air fare for participation by MSME Entrepreneurs in overseas fairs/trade delegations.
The scheme also provide for funding for producing publicity material (up to 25% of costs), sector specific
studies (up to ` 2 lakh) and for contesting anti-dumping cases (50% up to ` 1 lakh) - for individual MSMEs
& Associations.

■■ Participation in the International Exhibitions /Fairs - For registered Small & Micro manufacturing
enterprises with DI/DIC.

■■ Financial Assistance for using Global Standards (GS1) in Bar-coding - Recognized the
importance of bar-coding and avail financial assistance through Office of DC (MSME).

■■ Purchase and Price Preference Policy - This is administered through the Single Point Registration
Scheme of NSIC. Under this, 358 items are reserved for exclusive purchase from MSME by Central
Government. Other facilities include tender documents free of cost, exemption from earnest money
and security deposit and 15% price preference in Central Government purchases - for individual
MSMEs.

(Reference: http://www.dcmsme.gov.in/sido/SSIMDA.htm)

Mini Tool Rooms - Assistance up to 90% or ` 9 crore, whichever is less for setting up new Mini Tool
Rooms. For up-gradation of existing Tool Rooms, assistance is 75% or ` 7.5 crore - for State Governments.

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 Institutional Support to MSMEs in India

Assistance for Strengthening of Training Infrastructure of existing and new Entrepreneurship Development
Institutions - For strengthening training infrastructure in EDIs, assistance up to 50% or ` 50 lakh whichever
is less - for State Governments.

(Reference: http://dcmsme.gov.in/schemes/scminitool.htm)

Scheme of National Award - The Micro, Small & Medium Enterprises (MSMEs) in India have seen a vast
development in the last five decades. The MSMEs have registered tremendous growth as also progress in
terms of quality production, exports, innovation, product development and import substitution, very much
beyond the expected objectives of setting up MSMEs by the planners of industrial production base in the
country. The Ministry of Micro, Small and Medium Enterprises, with a view to recognizing the efforts and
contribution of MSMEs, gives National Award annually to selected entrepreneurs and enterprises under
the scheme of National Award. The schemes functioning under DC (MSME), the Awards are provided
under 4 Categories-Outstanding MSMEs (3 Sub-Categories), R&D Efforts in MSMEs (2 Sub-Categories),
Quality Product & Entrepreneurship Services.

(Reference: http://www.dcmsme.gov.in/schemes/award_scheme.htm)

Scheme to Support 5 Selected University / Colleges (to Run 1200 Entrepreneurship Clubs per Annum)
- A package for the promotion of Micro and Small Enterprises, based on the Circular No. 2(6)/2006-MSME
Policy dated the 7th November, 2006 has been approved by the Cabinet Committee for Economic Affairs
(C.C.E.A.). The scheme is to support 5 universities (to run 240 clubs per year and each club may have
a membership of 50 entrepreneurs) to run Entrepreneurship Clubs (one each from Northern, Western,
Eastern, Southern and North East region). The scheme has been devised to encourage entrepreneurs
to run self-employment ventures of MSEs. The scheme envisages to create a facilitation environment
extending hard intervention in the form of technology and soft interventions like arranging workshops,
seminars, guidelines to obtain ISO certification, ISI Marks, participation in Trade Fairs, implementation of
Quality Management Tools, etc.

MSME Development Institutes - The MSME Development Institutes (MSME-DIs) all over the country
mainly perform the following functions:

■■ Organizing Entrepreneurship, Management and Skill Development Programmes.

■■ Assistance / Consultancy to prospective and existing entrepreneurs.

■■ Preparing State and District Industrial Profiles.

■■ Formulating Project Profiles of Products / Industries suitable and feasible in the MSME Sector.

■■ Conducting Energy Conservation, Pollution Control, Quality Control & Upgradation.

■■ Assisting Ancillary Development.

■■ Making Available Common Facility Services in Workshop /Laboratories.

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SIDBI Report on MSME Sector 2011

The MSME Development Institutes (MSME-DIs) also have Common Facility Workshops in various
trades. MSME-DIs are, inter-alia, providing techno-managerial consultancy assistance to MSMEs through
conducting different activities like Seminars, Industrial Campaigns, Preparation of Feasibility Reports
& Area Survey Reports, In-plant Studies, EDPs, and Common Facility Workshop, etc. MSME-DIs also
coordinate with the State Governments, Directorate of Industries (DICs), Industry Associations, etc. for the
overall development of MSME Sector.

MSME-DIs are hosting various training programmes for first generation potential entrepreneurs, existing
industrial workers and managers. The ultimate aim is to promote the MSME sector of the country by
inculcating entrepreneurial culture in the respective area as well as to enhance productivity of the existing
industries of that State/Area. Different types of training programmes conducted for entrepreneurship
development and promotion are:

♦♦ Industrial Motivation Campaigns (IMCs): Industrial Motivation Campaigns (one day duration) are
organized to identify and motivate traditional/nontraditional entrepreneurs having potential for setting
up MSEs so as to lead them towards self-employment. Emphasis is being given to organize the
maximum number of programmes in rural / remote areas, particularly for weaker sections of the
society.

♦♦ Entrepreneurship Development Programmes (EDPs): Entrepreneurship Development

Programmes are being organized as a regular training activity to cultivate the latent qualities of
youth by enlightening them on various aspects that are necessary to be considered while setting
up enterprises. The course contents of such Entrepreneurship Development Programmes are so
designed as to provide useful information on product/process design, manufacturing practices
involved, testing and quality control, selection and usage of appropriate machinery and equipments,
project profile preparation, marketing avenues/techniques, product/service pricing, export
opportunities, infrastructure facilities available, finance and financial institutions, cash flow, etc. No
fees are charged from SC, ST, women and physically handicapped participants in the stipendiary
programmes, rather they are eligible for a stipend of `125 per week.

♦♦ Entrepreneurship Skill Development Programme (ESDPs): Comprehensive training programmes

are organized to upgrade existing skills and to create new skills in workers and technicians of
existing units and educated unemployed youth by organizing various technical training courses for
them. The basic objective has been to provide training to unskilled/semi-skilled workers engaged
in MSE sector and to equip them with better and improved techno-managerial skills of production.
Emphasis is being made to organize the maximum programmes in rural areas particularly for weaker
sections of the society. Specific tailor-made programmes are organized for the skill development of
the socially disadvantage groups (OBC, SC, ST, Minorities and Women) in remote regions /pockets
of the States. These programmes are also called ‘Out- Reach Programmes’ as these are conducted
in rural/less developed areas.

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♦♦ Management Development Programmes (MDPs): The basic objective of imparting training in

management subjects is to improve the MSMEs in the decision-making and in enhancing productivity/
profitability. Potential entrepreneurs are trained so that they can set up and run their own enterprises.

♦♦ Business Skill Development Programme (Tailor made Course): Tailor made courses namely
Business Skill Development Programme (BSDP) have been introduced for new entrepreneurs
through select Business schools/Technical institutions etc. The programmes have been devised
to encourage educated unemployed youth/students basically from Business Schools/Technical
Institutes to start self–employment ventures.

♦♦ Entrepreneur - cum-Skill Development Programme (ESDP) on Biotechnology: Biotechnology

is playing an important role in diverse sectors such as human and animal health care, plant and
agriculture sciences, food and nutrition, environment etc. The areas of tissue cultures, bio-fertilizers,
bio-pesticides, mushroom cultivation, solid waste management etc. are given priority for ESDPs.

♦♦ WTO Sensitization Workshop: A separate WTO Cell had been created in 1999 for co-ordinating
the latest developments in regard to its different Agreements affecting the functioning of MSEs. The
broad objectives of the Cell, inter-alia, include:

◘◘ To keep abreast with the recent developments in WTO;

◘◘ To disseminate information to MSME Associations and MSMEs units about the various
provisions of the WTO;

◘◘ To coordinate with other Ministries and Departments of the GoI on issues pertaining to the
likely impact of WTO for the MSME sector;

◘◘ To fine-tune the existing policy and programmes for MSMEs in line with the WTO Agreements;
and

◘◘ To organize WTO awareness/workshops/ seminars for MSMEs.

♦♦ Vendor Development Programme (VDP) for Ancilliarisation - Vendor Development Programmes

(VDPs) are being organized by MSME-DIs in the country to provide common platform for MSEs as
well as large public sector enterprises to interact with each other with a view to identifying emerging
demands of the buyer organizations simultaneously providing an opportunity for displaying the
capabilities of the MSMEs and their industrial ventures. Such programmes have proved to be of
immense use in locating suitable entrepreneurs by a number of buying organizations including the
Public Sector Enterprises, various wings of Defence, Railways and others in indigenising a number
of products which hitherto have been imported at a colossal cost.

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MSME Testing Centers and MSME Testing Stations

The Office of the DC (MSME) is operating four MSME Testing Centers located at New Delhi, Mumbai,
Chennai and Kolkata. These Testing Centers provide testing and calibration facilities to industries in
general and MSMEs in particular for raw materials; semi finished and finished products, manufactured by
them. These Centers are equipped with the state-of-the art indigenous and imported equipments in the
disciplines of Chemical, Mechanical, Metallurgical and Electrical Engineering for undertaking Performance
Test, Type Test and Acceptance Test of semi-finished, finished products, etc. The Centers also undertake
calibration works for Measuring Instruments and Equipment conforming to international standards. These
Centers are accredited by internationally recognized National Accreditation Board of Testing & Calibration
Laboratories (NABL) Certification as per ISO 17025.

These Centres also provide consultancy services in testing and quality management and in process quality
system to MSMEs. Besides, in order to adequately cope up with the emerging manpower requirements in
the industry. These Testing Centers organize training in testing of the products for young person’s so as
to enable them secure gainful employment in Quality Control Laboratories of various industries, and also
assist different Government Departments in testing the materials procured by them.

MSME Tool Rooms (MSME-TR)

The 10 MSME-TRs have been set up as a result of Indo-German and Indo-Danish collaborations to assist
MSMEs in technical upgradation and provide good quality tooling through designing and producing tools,
moulds, jigs & fixtures, components, etc. These also provide training and consultancy for tool and die
makers. These are located at:

- MSME-Tool Room (Central Tool Room), Ludhiana;

- MSME-Tool Room (Indo German Tool Room), Ahmadabad;

- MSME-Tool Room (Indo German Tool Room), Indore;

- MSME-Tool Room (Indo German Tool Room), Aurangabad;

- MSME-Tool Room (Central Tool Room & Training Centre), Kolkata;

- MSME-Tool Room (Central Tool Room & Training Centre), Bhubaneswar

- MSME-Tool Room (Indo Danish Tool Room), Jamshedpur;

- MSME-Tool Room (Tool Room & Training Centre), Jalandhar;

- MSME-Tool Room (Central Institute of Tool Design), Hyderabad and

- MSME-Tool Room (Tool Room & Training Centre), Guwahati

These Tool Rooms are providing services in the area of tool design and manufacture; precision machining;
heat treatment; technical training and consultancy to metal working industry; in general and micro & small

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enterprises in particular so as to improve the quality and productivity of such units. These Tool Rooms
were set up for fulfilling the tooling and training requirements of the MSMEs in the fields of tool design and
manufacture and training of technical personnel in these fields.

These institutions organize different long-term ‘Postgraduate Diploma in Tool Design and CAD CAM’
Course and Vocational Training Programmes for school dropouts.

MSME Technology Development Centers (MSME TDCs)

MSME Technology Development Centers (MSME TDCs) are product specific Centers for looking into their
specific problems and rendering technical services, developing and upgrading technologies and manpower
development & training in specific product groups like Foundry & Forging; Electronics; Fragrance & Flavour;
Sport Shoes; Electrical Measuring Instruments and Glass. MSME TDCs include the Electronics Service
& Training Centre (ESTC), Ramanagar; Institute for Design of Electrical Measuring Instruments (IDEMI),
Mumbai; Fragrance & Flavour Development Centre (FFDC), Kannauj; Centre for Development of Glass
Industry (CDGI), Firozabad; Central Institute of Tool Design (CITD), Hyderabad; Process-cum-Product
Development Centre (PPDC), Agra and Process-cum-Product Development Centre (PPDC), Meerut. The
main objective of these TDCs are to develop human resources for meeting the requirements for transfer of
technology in different fields, viz. electronic items, instrumentation industries, sport goods; to promote and
modernize the glass industry, foundry and forge industries and technological upgradation of essential oils,
aroma chemicals, fragrance and flavour industry in the country.

These Centers are also running training courses on repair and maintenance of CNC machines; addition of
fiber optics testing facilities; tailor-made training modules designed as per the requirements of the industry
with emphasis on hands-on training. The CDGI, Firozabad provides technical support to MSME sector
glass units through promoting installation of energy efficient glass melting furnaces, auxiliary furnaces,
introduction of new types of glasses & their standardization, introduction of developed techniques for the
decoration of glassware’s, etc.

MSME Training Centers - Details of some of the Centers are :

MSME Training Institutes (Central Footwear Training Institutes, MSME-TICFTI) at Agra and Chennai are
engaged in developing designs for accelerating exports and providing training for manpower in footwear
industry. The basic objective of these institutes is to develop human resources for footwear and allied
industries through various training programmes on footwear technology and allied services. These institutes
conduct long term, short term and part time training courses on different subjects of footwear technology.
Besides, these institutes provide technical support services to the user industry through making their
facilities available to them. The institutes also provide services for development of new products and
patterns as per given sample or concept.

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National Small Industries Corporation

National Small Industries Corporation (NSIC) Ltd., an ISO 9001 certified Company, was established by
the Government of India in 1955. The strategic objectives, for which the Corporation was established,
include “to aid, counsel, assist, finance, protect and promote the interest of small industries in India.” With
the enactment of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, medium
enterprises also came into its ambit. To enhance the competitiveness of micro, small & medium enterprises,
NSIC provides integrated support services in the areas of Marketing, Technology, Finance, etc. NSIC is
implementing the schemes of Marketing Assistance and Performance & Credit Rating on behalf of the
MoMSME.

National Institute for MSME (NI-MSME)

NI-MSME was originally set up as Central Industrial Extension Training Institute (CIETI) in New Delhi in
1960 as a Department under the Ministry of Industry and Commerce, Government of India. The Institute
was renamed as Small Industry Extension Training (SIET) Institute. SIET is managed by Governing
Council, appointed by the Government of India.

Centers of Excellence
SIET was conferred the status of national institute by the Government of India with the charter of assisting
in the promotion of Small Enterprises mainly by creating a pro-business environment. In 1984, the UNIDO
had recognized SIET as an institute of meritorious performance under its Centers of Excellence Scheme.
Subsequently, it was also accorded the national status in the same year and SIET Institute became NISIET.
Since then, the institute has come a long way, carving a place of distinction for itself in the domain of
entrepreneurship promotion, achieving recognition both at the national level and in the international arena.
The Institute, in order to reflect the expanded focus of its objectives was rechristened as Ni-MSME from
11th April 2007 and re-designed its structure and organization.

The primary objective is to be the trainer of trainers. Today, with the technological development and ever-
changing market scenario, the involvement has undergone changes too. From being merely trainers the
institue widened its scope of activities to consultancy, research, extension and information services.

National Institute for Entrepreneurship and Small Business Development (NIESBUD)

NIESBUD is an apex body for coordinating and overseeing the activities of various institutions/ agencies
engaged in entrepreneurship development, particularly in the area of small industry and small business.
Key activities are:

- Evolving effective training strategies and methodology.

- Standardising model syllabi for training various target groups.

- Formulating scientific selection procedure.

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- Developing training aids, manuals and tools.

- Facilitating and supporting Central / State / Other agencies in organising entrepreneurship

development programmes.

- Conducting training programmes for promoters, trainers and entrepreneurs.

- Undertaking research and exchange experiences globally in development and growth of

entrepreneurship. The Institute is actively involved in creating a climate conducive emergence of
entrepreneurship.

Indian Institute of Entrepreneurship

With the aim to undertake training, research and consultancy activities in MSME sector focusing on
entrepreneurship development, the Indian Institute of Entrepreneurship (IIE) was established in the year
1993 in Guwahati by the Ministry of Micro, Small and Medium Enterprises, Government of India as an
autonomous national institute. The institute began operating from April 1994 with the North East Council
(NEC), Governments of Assam, Arunachal Pradesh and Nagaland and SIDBI as its other stakeholders.

The policy direction and guidance to the institute is provided by its Board of Management whose Chairman
is the Secretary to Government of India, Ministry of Micro, Small and Medium Enterprises (MSME). The
Governing Council of the institute is headed by Chairman, NEC and the Executive Committee is headed
by the Secretary, Ministry of MSME, and Government of India.

The objectives are:

- To organize and conduct training for entrepreneurship development.

- To evolve strategies & methodologies for different target groups & locations & conduct field tests.

- To identify training needs and offer training programmers to Government and non-Government
organizations engaged in promoting and supporting entrepreneurship.

- To document and disseminate information needed for policy formulation and implementation related
to self-employment.

- To identify, design and conduct training programmes for existing entrepreneurs.

- To prepare and publish literature related to entrepreneurship and industrial development.

- To organize seminars, workshops and confer conferences for providing a forum for interaction and
exchange of views by various agencies and entrepreneurs.

- To conduct research for generating knowledge to accelerate the process of entrepreneurship

development.

- To act as a catalyst for development of elf-employment /entrepreneurship, industry/business.

- To evolve, design and help in the utilization of various media for creating entrepreneurship.

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The activities of the Institute include identification of training needs, designing and organizing programmers
both for development functionaries and entrepreneurs; evolving effective training strategies and
methodologies for different target groups and locations; organize seminars, workshops and conferences for
providing forum for interaction and exchange of views by various agencies and entrepreneurs; undertaking
research on entrepreneurship development, documenting and disseminating information needed for policy
formulation and implementation on self-employment and entrepreneurship.

The Institute acts as a catalyst for entrepreneurship development by creating an environment for
entrepreneurship in the support system, developing new entrepreneurship, helping in the growth of existing
entrepreneurs and propagation of entrepreneurial education.

Khadi and Village Industries Commission

The Khadi & Village Industries Commission (KVIC), established under the Khadi and Village Industries
Commission Act, 1956, is a statutory organization engaged in promoting and developing khadi and village
industries for providing employment opportunities in rural areas, thereby strengthening the rural economy.
The KVIC has been identified as one of the major organizations in the decentralized sector for generating
sustainable rural nonfarm employment opportunities at low per capital investment. This also helps in
checking migration of rural population to urban areas in search of the employment opportunities.

Coir Board

Coir Board is a statutory body established by the Government of India under a legislation enacted by the
Parliament, viz. Coir Industry Act, 1953 (45 of 1953) for the promotion and development of Coir Industry in
India as a whole. The main functions of the Board as laid down in Section-10 of the Coir Industry Act are
given below:

- It shall be the duty of the Board to promote by such measures as it thinks fit the development, under
the control of the Central Government, of the Coir Industry.

- Without prejudice to the generality of the provisions of Sub-Section (l) the measures referred to
therein may relate to.

- Promoting exports of coir yarn and coir products and carrying on propaganda for that purpose;

- Regulating under the supervision of the Central Government the production of husks, coir yarn
and coir products by registering coir spindles and looms for manufacturing coir products as also
manufacturers of coir products, licensing exporters of coir yarn and coir products and taking such
other appropriate steps as may be prescribed;

- Undertaking, assisting or encouraging scientific, technological and economic research and

maintaining and assisting in the maintenance of one or more research institutes;

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- Collecting statistics from manufacturers of, and dealers in, coir products and from such other
persons as may be prescribed, on any matter relating to the coir industry, the publication of statistics
so collected or portions thereof or extracts there from;

- Fixing grade standards and arranging when necessary for inspection of coir fiber, coir yarn and coir
products;

- Improving the marketing of coconut husk, coir fiber, coir yarn and coir products in India and
elsewhere and preventing unfair competition;

- Setting up or assisting in the setting up of factories for the producers of coir products with the aid of
power;

- Promoting cooperative organization among producers of husks, coir fiber and coir yarn and
manufacturers of coir products;

- Ensuring remunerative returns to producers of husks, coir fiber and coir yarn and manufacturers of
coir products;

- Licensing of retting places and warehouses and otherwise regulating the stocking and sale of coir
fiber, coir yarn and coir products both for the internal market and for exports;

- Advising on all matters relating to the development of the coir industry;

- Such other matters as may be prescribed.

Main activities of the Coir Board are in the areas of:

- Research and development in coir technology

- Modernization of extraction and processing of coir fiber

- Product development and diversification

- Testing and service facility

Mahatma Gandhi Institute for Rural Industrialization (MGIRI)

Mahatma Gandhi Institute of Rural Industrialization at Wardha has been developed during the past 6 years
by the collaborative efforts of KVIC and IIT Delhi. It was decided to set up this National Institute at the
historical premises of Maganwadi, Wardha. The Institute is oriended to :

- Create a science and technology hub for KVI sector by developing strong linkages and interface
with other Institutions in the field of rural industrialization.

- Build a database of technologies available in KVI sector.

- Facilitate setting up of rural industrial estates and clusters with necessary infrastructural facilities
like power, specialized tool rooms, testing and marketing facilities.

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SIDBI Report on MSME Sector 2011

- Undertake and sponsor projects capable of giving substantial fillip to larger and increased market
penetration to selected products of village industry.

- Promote innovation through pilot studies and field trials through research, extension, education and
training.

- Conduct specialized human resource development programmes in generic areas such as Total
Quality Management, creativity and innovation besides, rural entrepreneurship development.

- Provide Training to Trainers of the Centers of KVIC and Khadi & Village Industries Boards of state
governments.

MGIRI, Wardha consists of six major divisions catering to the generic areas of rural industrialization as
given below:

- Khadi & Textile Industries division

- Bio-processing and Herbal based Industries division

- Chemical Industries division

- Rural Crafts and Engineering division

- Rural Infrastructure and Energy division

- Management and Systems division

Ministry of Textiles

The Ministry of Textiles is responsible for policy formulation, planning, development, export promotion and
trade regulation of the Textiles Industry.

Objectives

●● To make available adequate raw material to all sectors of Textiles Industry.

●● To augment the production of fabrics at reasonable prices from the organized and decentralized
sectors.

●● To lay down guidelines for a planned and harmonious growth of various sectors with special
emphasis on the development of the handlooms sector due to its large employment potential.

●● To monitor the techno-economic status of the industry and to provide the requisite policy framework
for modernization and rehabilitation.

The developmental activities of the Ministry are oriented towards making adequate quantities of raw material
available to all sectors of the textile industry and augmenting the production of fabrics at reasonable prices
from the organized and decentralized sectors of the industry. Towards this objective, the Ministry lays down
guidelines for a planned and harmonious growth of various sectors of the industry. Special emphasis is

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given to the development of handlooms in view of its large employment potential. The Ministry monitors the
techno-economic status of the industry and provides the requisite policy framework for modernization and
rehabilitation. The Ministry coordinates the activities of Textiles Research Associations and lends financial
support to them for undertaking research and development.

Some schemes of the Ministry are:

●● Technology Upgradation Fund Scheme (details of the scheme in chapter of credit dispensation
to MSME sector).

●● Modified Group Workshed Scheme.

●● Development of Mega Power looms, Handlooms and Handicrafts Clusters Scheme (details of the
scheme in chapter on cluster development).

●● Integrated Scheme for Power loom Cluster Development (details of the scheme in chapter on
cluster development).

●● Textile Workers’ Rehabilitation Fund Scheme (TWRFS) - The Textile Workers’ Rehabilitation Fund
Scheme came into force with the objective to provide interim relief to textile workers rendered
unemployed as a consequence of permanent closure of any particular portion or entire textile unit.
Assistance under the Scheme is payable to eligible workers only for the purpose of enabling them
to settle in another employment.

Ministry of Food Processing Industries

The Ministry of Food Processing Industries, set up in July 1988, is the main central agency of the Government
responsible for developing a strong and vibrant food processing sector; with a view to create increased
job opportunities in rural areas, enable the farmers to reap benefit from modern technology, create surplus
for exports and stimulating demand for processed food. Its main focus areas include -- development
of infrastructure, technological up gradation, development of backward linkages, enforcement of quality
standards and expanding domestic as well as export markets for processed food products.

The functions of the Ministry can be broadly classified as follows:

■■ Policy Support

●● Formulation and implementation of policies for food processing industries within overall national
priorities and objectives.

●● Facilitating the creation of a conducive policy environment for healthy growth of the food
processing sector.

●● Promoting rationalization of tariffs and duties relating to food processing sector.

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SIDBI Report on MSME Sector 2011

■■ Developmental Support

●● Assistance under various plan schemes

●● Widening the R&D base in food processing by involvement of various R&D institutes and
support to various R&D activities relating to development of product, process and packaging
with special emphasis on traditional technologies.

●● Human resource development both for entrepreneurs as well as workers engaged in the food
processing industry by up gradation of their skills.

●● Assistance for setting up analytical and testing laboratories, active participation in the laying
down of food standards as well as their harmonization with international standards.

■■ Promotional Support

●● Assistance for organization of workshops, seminars, exhibitions and fairs etc.

●● Assistance for studies / surveys etc.

●● Publications and films.

■■ Regulatory Support

●● Implementation of Fruit Products Order (FPO).

Ministry of Commerce and Industry

The Department of Industrial Policy & Promotion (DIPP) was established in 1995 under the Ministry of
Commerce is responsible for formulation and implementation of promotional and developmental measures
for growth of the industrial sector, keeping in view the national priorities and socio-economic objectives.
The major roles and functions of the Department of Industrial Policy and Promotion include:

●● Formulation and implementation of industrial policy and strategies for industrial development in
conformity with the development needs and national objectives;

●● Monitoring the industrial growth, in general, and performance of industries specifically assigned
to it, in particular, including advice on all industrial and technical matters;

●● Formulation of Foreign Direct Investment (FDI) Policy and promotion, approval and facilitation of
FDI;

●● Encouragement to foreign technology collaborations at enterprise level and formulating policy

parameters for the same;

●● Formulation of policies relating to Intellectual Property Rights in the fields of Patents, Trademarks,
Industrial Designs and Geographical Indications of Goods and administration of regulations, rules
made there under;

●● Administration of Industries (Development & Regulation) Act, 1951

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 Institutional Support to MSMEs in India

●● Promoting industrial development of industrially backward areas and the North Eastern Region
including International Cooperation for industrial partnerships and

●● Promotion of productivity, quality and technical cooperation

Industrial Policy: Objectives of the Industrial Policy of the Government are:

●● To maintain a sustained growth in productivity;

●● To enhance gainful employment;

●● To achieve optimal utilization of human resources;

●● To attain international competitiveness and

●● To transform India into a major partner and player in the global arena.

The focus is on:

●● Deregulating Indian industry;

●● Allowing the industry freedom and flexibility in responding to market forces and

●● Providing a policy regime that facilitates and fosters growth of Indian industry

Other Policy Changes for the MSME Sector

National Manufacturing Policy

The Government of India has announced a national manufacturing policy with the objective of enhancing
the share of manufacturing in GDP to 25% by 2022 and creating 10 crore jobs. It also seeks to empower
rural youth by imparting necessary skill sets to make them employable. Sustainable development is
integral to the spirit of the policy and technological value addition in manufacturing has received special
focus. The share of manufacturing in India’s GDP has stagnated at 15-16%, while the share in comparable
economies in Asia is much higher at 25% to 34%. Recognizing that the manufacturing sector has a
multiplier effect on the creation of jobs, even in allied sectors, the Government has brought out this policy
which is based on the principle of industrial growth in partnership with the States. The Central Government
will create the enabling policy frame work, provide incentives for infrastructure development on a Public
Private Partnership (PPP) basis through appropriate financing instruments, and State Governments will be
encouraged to adopt the instrumentalities provided in the policy. The proposals in the policy are generally
sector neutral, location neutral and technology neutral except incentivization of green technology. While
the National Investment and Manufacturing Zones (NIMZs) are an important instrumentality, the proposals
contained in the Policy apply to manufacturing industry throughout the country including wherever industry
is able to organize itself into clusters and adopt a model of self-regulation.

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National Skill Development Corporation (NSDC)

NSDC is a first-of-its-kind Public Private Partnership (PPP) in India set up to facilitate the development
and upgrading of the skills of the growing Indian workforce through skill training programs. A large part
of the organization’s efforts are directed at the private sector and towards developing the skills in the
unorganized sector in India. NSDC supports skill development efforts, especially in the unorganized sector
in India by funding skill training and development programmes. It is also engaged in advocacy and training
programmes, in-depth research to discover skill gaps in the Indian workforce, and developing accreditation
norms. The objective of NSDC is to contribute significantly (about 30%) to the overall target of skilling / up
skilling 50 crore people in India by 2022, mainly by fostering private sector initiatives in skill development
programmes and providing viability gap funding.

2.3.2 Financial Support Institutions

India has a vast formal network of institutions consisting of Scheduled Commercial Banks (Public Sector
Banks, Private Sector Banks and Foreign Banks) including Regional Rural Banks, Cooperative Banks
(Particularly Urban Cooperative Banks), State Financial Corporations, Small Industries Development Bank
of India (SIDBI) and National Bank for Agriculture and Rural Development (NABARD) to provide Financial
support to Micro, Small and Medium Enterprises (MSME) and other Non-farm sector enterprises. The

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overall regulation of the monetary policy which includes credit to MSME sector is in the hands of the
Reserve Bank of India (RBI).

► Financing Institutions

National Level Banking Institutions

Commercial Banks

The commercial banks with about 87,000 branches have been playing an important role in financing
the working capital and term loan requirements of micro, small and medium enterprise sector. Besides
providing short-term and long-term assistance to MSM enterprises, these banks also support non-farm
enterprises, through loans for Industrial estates, small road and water transport operators, Retail trade,
Small business, Housing loans, Advances to self-help groups, etc. under their priority sector lending
programme.

Regional Rural Banks (RRBs)

RRBs were created jointly by a group of public sector commercial banks, to promote agriculture, trade,
commerce and industry in rural areas and thereby to improve the rural economy. With around 15000
branches, they also support micro / tiny, and artisan-based units and village industries located in the
rural areas. Most of the NABARD’s schemes for nonfarm unorganized enterprises are operated through
RRBs. These banks function like local banks and there is a strong case to strengthen them and increase
their number in many parts of the country.

Urban Cooperative Banks

The Urban Cooperative Banks (UCBs) finance, apart from agriculture and related primary sector activities
handlooms, power looms, coir and village industries as many of them function on a cooperative basis.
There are 1,853 branches of UCBs which play an important role in meeting the working capital needs
of the cottage and tiny industries.

Small Industries Development Bank of India

Small Industries Development Bank of India (SIDBI) started functioning from April 02, 1990 as the
principal financial institution for the promotion, financing and development of the MSME sector and to
coordinate the functions of other institutions engaged in similar activities. The details of SIDBI and its
operations have been given in a separate chapter.

National Bank for Agriculture and Rural Development

Established on July 12, 1982, National Bank for Agriculture and Rural Development (NABARD) is an
apex institution accredited with all matters concerning policy, planning and operations in the field of
credit for agriculture and other economic activities in rural areas. It provides investment and production
credit for promoting the various developmental activities in rural areas.

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SIDBI Report on MSME Sector 2011

Private Financial Institutions

Micro Finance Institutions

Micro Finance Institutions (MFIs) have emerged as important players in the microfinance space in India.
MFIs differ from one another in terms of lending model, loan repayment structure, mode of interest rate
calculation, product offerings, and legal structure. MFIs are dependent on borrowings from banks and
FIs and do not raise debt from the capital market. Banks categorize their lending to MFIs as priority
sector advances which has helped MFIs raise timely resources. The large and mid-sized MFIs and
NBFCs primarily borrow from public, private and foreign banks, while the smaller MFIs borrow mainly
from private banks and apex lenders.

Non-Banking Financial Companies

In India, there are two broad categories of Non-Banking Financial Companies (NBFCs), viz., Non-
Banking Financial Company – Deposit Taking (NBFC-D) and Non-Banking Financial Company – Non-
Deposit Taking (NBFC-ND). The NBFCs provide lending to MSMEs and also provide them training,
advisory and other ancillary services. NBFCs have strong channels, efficient recovery, good risk
management systems, dedicated infrastructure and fast collection systems. They also work in clusters.

Government Finance Institutions

KVIC and NSIC

Already covered in above sections

State Financial Corporations

The State Financial Corporation’s (SFCs), set up under the SFC Act 1951, have the main objective of
promoting regional growth in the country through the development of MSMEs. The 18 SFCs across the
country provide financial assistance by way of term loans to MSMEs at reasonable rates for their capital
expenditure. The working and operations details and support from SIDBI is covered in separate chapter
on Credit dispensation to MSME sector.

State Industrial Development Corporations

State Industrial Development Corporations (SIDCs) were set up under the Companies Act, 1956 as
wholly owned undertakings of the State Governments to act as catalyst for industrial development
in their respective States. At present, there are 28 SIDCs in the country, of which 11 also function as
Twin-Function IDCs which also act as SFCs in their respective State and are, therefore, termed as
Twin-Function IDCs. SIDCs develop land and provide the entire necessary industrial infrastructure, with
roads, power, water supply, drainage and other amenities. Set up primarily for assistance to medium
and large industries, SIDCs also extend assistance to the Micro and Small Enterprises by way of term
loans, bridge loans, equipment loans, etc.

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 Institutional Support to MSMEs in India

► Support Institutions
Credit Information Companies (CICs)
CICs are repository of information which has been pooled in by all Banks and lending Institutions
operating in India. With focus on the need of Credit Information to facilitate access to credit, GoI has
taken steps - RBI has given license to other Credit Information Companies (CICs) viz. Experian, Equifax
and Highmark besides CIBIL. However, CIBIL which is considered to be the first Credit Bureau in India
has become generic to Credit Information Company. Presently CIBIL have a database size of over
17 crore consumer records and 75.9 lakh company records contributed by our over 500 Members.
CIBIL’s aim is to fulfill the need of credit granting institutions for comprehensive credit information by
collecting, collating and disseminating credit information pertaining to both commercial and consumer
borrowers, to a closed user group of Members. Banks, Financial Institutions, NBFCs, PFIs, Housing
Finance Companies and Credit Card Companies use CIBIL’s services. Data sharing is based on the
Principle of Reciprocity, which means that only Members who have submitted all their credit data,
may access Credit Information Reports from CIBIL. The relationship between CIBIL and its Members
is that of close interdependence. The establishment of CIBIL is an effort made by the Government of
India and the Reserve Bank of India to improve the functionality and stability of the Indian financial
system by containing Non Performing Assets (NPAs) while improving credit grantors’ portfolio quality.
CIBIL provides a vital service, which allows its Members to make informed, objective and faster credit
decisions.

SME Rating Agency of India Ltd. (SMERA)

SME Rating Agency of India Limited (SMERA) was incorporated on August 26, 2005 with the objective
of providing independent professional and comprehensive Risk Rating exclusively of the MSME sector
so as to provide credit decision support system for the bankers. SMERA is a joint initiative of SIDBI, Dun
& Bradstreet Information Services India Private Limited (D&B) and certain public, private and foreign
sector banks. The details of the SMERA are given in Chapter on SIDBI.

Credit Guarantee Fund Trust for Micro & Small Enterprises (CGTMSE)
CGTMSE operates the Credit Guarantee Scheme (CGS) for Micro and Small Enterprises (MSEs) which
guarantees credit facilities upto ` 100 lakh extended by Member Lending Institutions (MLIs) to those
loans, which are not backed by collateral security and / or third party guarantees. Ministry of Micro,
Small and Medium Enterprises (MSME), Government of India and SIDBI contributed to the corpus of
CGTMSE and taken the present corpus level to ` 2,156.57 crore.

The details of the Credit Guarantee Scheme have already covered in previous section.

Private Sector Providers

These are institutions and individuals who provide services on a fee basis operating at various levels,
usually called the business development service (BDS) providers. The type of services range includes
marketing, accounting, audit and technology sourcing, etc.

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SIDBI Report on MSME Sector 2011

Civil Society Institutions

Civil Society Institutions, of the MSMEs at the Cluster, State and National levels. These are primary
stakeholder (MSMEs) owned and managed organizations. Most of these are associations with
membership by various MSMEs in a particular cluster or sector.

Donor Support Institutions

Donor Institutions, mainly bilateral and multilateral agencies, who provide funding and technical
support for the development of MSME in the country. These include the World Bank, German Technical
Cooperation, UNIDO, etc.

2.4 Institutional Support System from the MSME Entrepreneurs’ Lens

Flowing from the previous section, an attempt is made here to look at the institutional support system
existing in the country from the point of view of the MSME entrepreneur. Need for various services for
MSMEs are captured through the ‘Enterprise Development Cycle’, with the services needed for each
stage. Post this, the type of institutions available in the country for accessing that service is given in the
following Chart.

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 Institutional Support to MSMEs in India

Enterprises typically go through stages of scoping, feasibility, planning, establishment, operations and
review for scale up or consolidation. At each stage, various types of services are required to establish
efficient, competitive and viable enterprises. Every entrepreneur has many questions for which support is
required. The following table captures these questions, the solutions/ services that are required to answer
these questions, and the kind of institutional support available. Private BDS providers at various levels
(and therefore not repeated for each question) provide facilitation and support services through various
engagement models.

NO. QUESTION SERVICES PROVIDER

1. WANT TO KNOW ► COUNSELING SERVICES TO BUDDING ► NATIONAL INSTITUTE FOR

WHAT I CAN DO? ENTREPRENEURS. ENTREPRENEURSHIP AND SMALL BUSINESS
DEVELOPMENT (NIESBUD)
► ASSISTANCE / CONSULTANCY
TO PROSPECTIVE AND EXISTING ► INDIAN INSTITUTE OF ENTREPRENEURSHIP
ENTREPRENEURS
► MSME DEVELOPMENT INSTITUTES

2. I WANT EDP ► EDP TRAINING PROGRAMS ► NATIONAL INSTITUTE FOR

TRAINING ENTREPRENEURSHIP AND SMALL BUSINESS
DEVELOPMENT

► INDIAN INSTITUTE OF ENTREPRENEURSHIP

► MSME DEVELOPMENT INSTITUTES

3. I WANT SKILL ► TO IDENTIFY , DESIGN AND CONDUCT ► INDIAN INSTITUTE OF ENTREPRENEURSHIP

TRAINING TRAINING PROGRAMMERS FOR
► MSME DEVELOPMENT INSTITUTES
EXISTING ENTREPRENEURS

► ORGANIZING ENTREPRENEURSHIP,
MANAGEMENT AND SKILL
DEVELOPMENT PROGRAMMES

4. I WANT TO KNOW ► TO EVOLVE STRATEGIES & ► INDIAN INSTITUTE OF ENTREPRENEURSHIP

WHERE TO SET METHODOLOGIES FOR DIFFERENT
► STATE INDUSTRIAL DEVELOPMENT
UP THE UNIT? TARGET GROUPS & LOCATIONS &
CORPORATIONS
CONDUCT FIELD TESTS.

► SIDCS DEVELOP LAND AND PROVIDE

THE ENTIRE NECESSARY INDUSTRIAL
INFRASTRUCTURE, WITH ROADS,
POWER, WATER SUPPLY, DRAINAGE
AND OTHER AMENITIES

5. I WANT A ► FORMULATING PROJECT PROFILES OF ► MSME DEVELOPMENT INSTITUTES

BUSINESS PLAN PRODUCTS / INDUSTRIES SUITABLE
AND FEASIBLE IN THE MSME SECTOR

6. I WANT ► INFORMATION AND FEASIBILITY ► MSME DEVELOPMENT INSTITUTES

TECHNOLOGY ASSESSMENT OF TECHNOLOGIES
► PRIVATE CONSULTANTS/ BDS PROVIDERS
SUPPORT
► FACILITATING BUYING

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SIDBI Report on MSME Sector 2011

NO. QUESTION SERVICES PROVIDER

7. I WANT RAW ► INFORMATION AND NEGOTIATION ► MSME TECH DEVELOPMENT CENTERS (MSME
MATERIAL SERVICES TDCS)
SUPPORT
► FACILITATING LINKAGES ► ASSOCIATIONS

► BULK PURCHASES IF POSSIBLE

8. I WANT HUMAN ► IDENTIFYING, RECRUITMENT ► LOCAL BDS PROVIDERS/ PLACEMENT

RESOURCES SERVICES

9. I NEED ► MANAGEMENT TRAINING PROGRAMS ► MSME DEVELOPMENT INSTITUTES

MANAGERIAL
► CONSULTING SERVICES ► PRIVATE SERVICE PROVIDERS, WHO PROVIDE
SUPPORT
SERVICES ON A FEE BASIS OPERATING AT
VARIOUS LEVELS, USUALLY CALLED THE
BUSINESS DEVELOPMENT SERVICE (BDS)
PROVIDERS. THE TYPE OF SERVICES RANGE
FROM MARKETING, ACCOUNTING, AUDIT,
TECHNOLOGY SOURCING, ETC.

10. I WANT MENTOR ► MENTORING AND ADVISORY SUPPORT ► MSME ASSOCIATIONS

SUPPORT
► PRIVATE BDS PROVIDE

11. I NEED VENTURE ► INFORMATION ON VCS ► SIDBI

CAPITAL
► BUSINESS PLANS ► PRIVATE VENTURE CAPITAL INSTITUTIONS

► FACILITATING VC SERVICES

12. I NEED CREDIT ► INFORMATION ON VARIOUS CREDIT ► BANKS – COMMERCIAL BANKS, REGIONAL
- CAPITAL, INSTITUTIONS RURAL BANKS URBAN COOPERATIVE BANKS
WORKING
► BUSINESS PLANS ► PRIVATE FINANCIAL INSTITUTIONS, SUCH
CAPITAL
AS MICRO FINANCE INSTITUTIONS, NON-
► FACILITATING CREDIT SERVICES
BANKING FINANCIAL COMPANIES, VENTURE
CAPITALS, ETC.

► CREDIT BUREAU

► CREDIT RATING AGENCIES

► STATE FINANCE CORPORATIONS

13. DO I GET ► INFORMATION ON SUBSIDIES ► GOVERNMENT SECTORAL FINANCIAL

SUBSIDY? SUPPORT INSTITUTIONS SUCH AS KVIC, NSC
► FACILITATION SERVICES FOR SUBSIDY

14. I WANT TO TEST ► MAKING AVAILABLE COMMON ► MSME DEVELOPMENT INSTITUTES

MY PRODUCT FACILITY SERVICES IN WORKSHOP/
► MSME TESTING CENTERS AND MSME TESTING
LABORATORIES
STATIONS

15. I WANT ► MARKET INFORMATION ► EXPORT PROMOTION COUNCILS

MARKETING
► MARKET LINKAGES – DOMESTIC/ ► BDS PROVIDERS
SUPPORT
EXPORT

► EXHIBITION/ EXCHANGES

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 Institutional Support to MSMEs in India

NO. QUESTION SERVICES PROVIDER

16. I NEED SUPPORT ► TECH DEVELOPMENT CENTERS (TDCS) ► MSME TECH DEVELOPMENT CENTERS (MSME
TO UPGRADE TO DEVELOP HUMAN RESOURCES TDCS)
TECHNOLOGY? FOR MEETING THE REQUIREMENTS
FOR TRANSFER OF TECHNOLOGY IN
DIFFERENT FIELDS, VIZ. ELECTRONIC
ITEMS, INSTRUMENTATION
INDUSTRIES, SPORT GOODS; TO
PROMOTE AND MODERNIZE THE GLASS
INDUSTRY, FOUNDRY AND FORGE
INDUSTRIES AND TECHNOLOGICAL
UPGRADATION OF ESSENTIAL OILS,
AROMA CHEMICALS, FRAGRANCE AND
FLAVOUR INDUSTRY IN THE COUNTRY.

► MSME-TRS ASSIST MSMEs IN

TECHNICAL UPGRADATION AND
PROVIDE GOOD QUALITY TOOLING ► MSME TOOL ROOMS (MSME-TR)
THROUGH DESIGNING AND
PRODUCING TOOLS, MOULDS, JIGS &
FIXTURES, COMPONENTS, ETC.

17. I WANT MY HUMAN ► CONDUCT SPECIALIZED HUMAN ► MAHATMA GANDHI INSTITUTE FOR RURAL
RESOURCES TO RESOURCE DEVELOPMENT INDUSTRIALIZATION (MGIRI):
BE TRAINED? PROGRAMMES IN GENERIC
AREAS SUCH AS TOTAL QUALITY
MANAGEMENT, CREATIVITY AND
INNOVATION BESIDES, RURAL
► CENTRAL FOOTWEAR TRAINING INSTITUTES,
ENTREPRENEURSHIP DEVELOPMENT.
MSME-TICFTI
► FOR MANPOWER IN FOOTWEAR
INDUSTRY

18. I WANT TO GET ► UNDERTAKING RESEARCH AND ► NATIONAL INSTITUTE FOR

ABREAST WITH EXCHANGE EXPERIENCES GLOBALLY ENTREPRENEURSHIP AND SMALL BUSINESS
LATEST IN MY IN DEVELOPMENT AND GROWTH OF DEVELOPMENT
FIELD
ENTREPRENEURSHIP.
► INDIAN INSTITUTE OF ENTREPRENEURSHIP
► TO ORGANIZE SEMINARS, WORKSHOPS
► MEME ASSOCIATIONS
AND CONFER CONFERENCES
FOR PROVIDING A FORUM FOR
INTERACTION AND EXCHANGE OF
VIEWS BY VARIOUS AGENCIES AND
ENTREPRENEURS
19. I WANT TO ► INFORMATION ► PRIVATE SERVICE PROVIDERS
PARTICIPATE IN
EXHIBITIONS ► FINANCIAL SUPPORT ► CONCERNED DEPARTMENTS

► COUNSELING SERVICES ON
PROMOTING PRODUCTS

► DEVELOPING PROMOTIONAL
MATERIALS
20. I WANT TO START ► ASSISTING ANCILLARY DEVELOPMENT ► MSME DEVELOPMENT INSTITUTES
ANCILLARY
INDUSTRIES

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SIDBI Report on MSME Sector 2011

NO. QUESTION SERVICES PROVIDER

21. I WANT TO GO ► INFORMATION, PROCEDURES ► PRIVATE SERVICE PROVIDERS
PUBLIC
► PLANS DEVELOPMENT

► FACILITATING SERVICES

22. MY VENTURE ► INFORMATION, PROCEDURES ► PRIVATE SERVICE PROVIDERS

IS SICK AND IS
THERE A WAY ► PLANS DEVELOPMENT
OUT?
► FACILITATING SERVICES

► LAW, AUDIT

As can be seen, every MSME needs multiple services and the providers are multi-disciplinary and in
different locations, it is important to provide a mechanism in which these are facilitated and integrated
so that MSME entrepreneurs can access these easily. Cluster development interventions are one of the
initiatives which work with all institutions.

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 CLUSTER DEVELOPMENT
INITIATIVES

MSMEs largely depend on local resources for their operation. MSME operations are generally family run
enterprises with limited capital, instead of large-scale, factory production.

Business clusters have the potential to effect competition in three ways:

●● By increasing the productivity of the enterprises in the cluster.

●● By driving innovation in various fields.

●● By stimulating new businesses in the field.

Worldwide creation of MSME clusters (focused cluster approach) has helped the sector in big way through:

●● Promoting linkages among inter-firms and intra-firms (forward and backward linkages).

●● Fostering the implementation of socially and environmentally responsible business practices.

●● Developing Public-Private Partnership.

●● Infrastructure Development.

●● Access to larger market.

●● Emerging clusters attract more firms for input.

●● Helps in negotiation with lenders and agencies.

●● Sustained competitiveness and co-operation among MSMEs in cluster.

●● Cluster of same industry can attract large export order and achieve economies of scale and Scope.

●● Attract Government, non-Government, international agencies to organize several workshops,

awareness campaign, introduction of new schemes, etc.

●● Clusters of same products can market their products through same agency to reduce transaction
cost.
SIDBI Report on MSME Sector 2011

●● Clusters requiring similar technology can rent each other’s machineries on idle time to enhance
productivity and efficiency and thus reduces cost of operations.

MSME clustering is common in many developed countries, such as, Italy, Germany, the USA, and Japan.
It has been practiced also in some developing countries, such as, India, China, Brazil, Korea, Indonesia,
Malaysia, Mexico, etc.

●● Success of any cluster depends upon involvement of individual MSMEs, Government, Association,
Institutional support, linkages between all stakeholders, through linkages between educational
institutions and entrepreneurs for promotion of innovation and technology, etc.

●● Through focused cluster approach, MSMEs can integrate themselves and their counterparts in other
clusters in national as well as international level to adopt each other’s best practices.

●● Various Governments have been increasingly adopting cluster based approach in policy making,
providing adequate infrastructure facilities to cluster, create enabling macroeconomic environment
through facilitating the competitiveness and co-operation in sync, decentralization of policy making,
strengthen tangible and non-tangible location advantages of the respective clusters, etc.

●● Associations have shown initialization to provide the cohesiveness of MSMEs and communicate
them the advantages of being in cluster instead of individual approach.

●● Institutions working for the development of the sector are attempting to promote the linkages between
each other to achieve the better results, such as, lending agencies-association linkages, international
development agencies-lenders linkages, educational institutions (developing technologies and new
generation entrepreneurs), incubators, innovation centers linkages, etc.

●● These linkages will surely results in the followings:

►► New technologies flow from incubates to testing centers to entrepreneurs.

►► Information about global best practices (viz. Energy Efficiency, Corporate Social Responsibility,
ISO standards, Collateral free lending, Ratings, new technologies, innovative financing model,
any new development in supply or value chain or any other new concept developed anywhere
in the world) will flow to the cluster through international developing agency.

►► Setting up of common facilities (viz. testing facilities, tool rooms, technology parks, innovation
centers etc.), which otherwise not possible individually.

►► Favourable trade terms while exporting products and services and importing machineries, etc.

►► Negotiate favourable lending terms with lenders.

►► Attract exhibitions, trade fairs in the location, etc.

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 Cluster Development Initiatives

3.1 MSME Cluster Development in India

Indian MSME sector is highly diversified in terms of industry segments and geographical terrain. A large
segment of MSMEs operates in clusters which have developed at certain geographical locations due to
various factors like historical availability of certain skill craftsmanship in the location, proximity to raw material
or customer, etc. MSMEs located in clusters have similar characteristics and face similar challenges.

The problems faced by MSMEs (access to bank credit, access to capital, technology, skill, market, etc.)
are quite unique to the nature of the sector /clusters. These are the concerns of several institutions
and departments of the Government. The concentration of largely homogenous enterprises within a
relatively limited geographical area facilitates the intervention because of their similarity of needs and
support requirements, speeds up the dissemination of best practices because of the pervasiveness of
demonstration effects, and allows for a distribution of the fixed costs of interventions among a large number
of beneficiaries. Around 650 SME (industrial) and 6,000 Artisan /Micro Enterprises clusters are estimated
to exist in India.

Cluster approach is one of the key drivers of economic growth. Various Ministries under Government of
India, institutions like NABARD, SIDBI, etc., international organizations like UNIDO, ILO have adopted
cluster based approach for development of MSMEs.

The Ministry of MSME, Government of India initiated selected interventions in industrial clusters first in
1998, later on, it has broadbased its MSE Cluster Development Programme through interventions, such as,
capacity building, marketing development, export promotion, skill development, technology upgradation,
exposure visits and setting up of common facilities centers, etc. The Ministry is also promoting new
innovative technologies for lean manufacturing process (include Total Productive Maintenance (TPM),
5S, Visual Control, Standard Operation Procedures, Just in Time, Kanban System, Cellular Layout, Poka
Yoke), usage of energy efficient technologies to reduce emissions of Green House Gases, adoption of
other technologies mandated as per the global standards to improve their quality and reduce cost of
production, awareness campaign about IPRs and ICTs, setting up of testing centers and tool rooms, etc.
in select clusters to make them globally competitive.

Objectives of the cluster based approach

♦♦ To support the sustainability and growth of MSMEs by addressing common issues, such as,
improvement of technology, skills and quality, market access, access to capital, etc.

♦♦ To build capacity of MSEs for common supportive action through formation of self-help groups,
consortia, upgradation of associations, etc.

♦♦ To create/upgrade infrastructural facilities in the new/existing industrial areas/ clusters of

MSMEs.

♦♦ To set up common facility centers (for testing, training centre, raw material depot, effluent
treatment, complementing production processes, etc).
♦♦ Network Development among cluster stakeholders.
♦♦ Development of Service Ecosystem in the clusters.

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Broad Expectations of Clusters

♦♦ Diagnostic Study - Map pressure points and attending them.
♦♦ Soft and Hard Infrastructure support.
♦♦ Resourcing of Technology.
♦♦ Facilitating the transfer of technology from producer to end-user.
♦♦ Setting up of Common Facility Centers (CFCs).
♦♦ R&D needs.
♦♦ Organizing workshops, Seminars, Training and Study visits for quicker diffusion of technology
across the cluster of small enterprises.

Infrastructure Development
For setting up of industrial estates and to develop infrastructure facilities like power distribution network,
water, telecommunication, drainage and pollution control facilities, roads, banks, raw materials, storage
and marketing outlets, common service facilities and technological back up services, etc., for MSMEs,
the Integrated Infrastructural Development (IID) Scheme was launched in 1994. The scheme covers rural
as well as urban areas with a provision of 50% reservation for rural areas and 50% industrial plots are to
be reserved for the Micro Enterprises. The scheme also provides for upgradation / strengthening of the
infrastructural facilities in the existing industrial estates. Central Government provides 40% in case of
general States and up to 80% for North East Region (including Sikkim), J&K, H.P. and Uttarakhand, as
grant and remaining amount could be loan from SIDBI/Banks/Financial Institutions or the State Funds.
The IID Scheme has been subsumed under the Micro and Small Enterprise Cluster Development Program
(MSECDP). All the features of the IID Scheme have been retained and will be covered as “New Clusters”
under MSECDP.

Micro and Small Enterprises Cluster Development Programme (MSECDP)

Ministry of MSME has adopted the concept of cluster development to enhance the productivity and
competitiveness of the micro and small enterprises situated in clusters and designed a special programme
named Micro and Small Enterprises Cluster Development Programme. The objective of the programme
is to support the sustainability and growth of MSEs by addressing common issues, such as, improvement
of technology, skills and quality, market access, access to capital etc., to create/upgrade infrastructural
facilities in the new/existing industrial areas/clusters of MSEs, to set up Common Facility Centers (CFC)
etc.

The programme provides assistance for soft and hard interventions. Soft interventions pertain to activities
aimed at capacity building of the enterprises, whereas hard interventions are primarily aimed at creating
permanent assets, such as, Common Facility Centers (CFCs) for various purposes.

The modified guidelines of the programme are as follows:

●● Soft interventions - Under the soft intervention, the maximum limit for project cost would be ` 25
lakh per cluster. GoI grant will be 75% if the project cost (90% in case of micro/ village, women

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 Cluster Development Initiatives

owned, SC/ST units etc.). Soft Intervention may inter-alia include:

1. Seminars/Workshop/Study tours

2. External consultants

3. Publications

4. Trainings

5. Costs of implementing agency

6. Technical equipments for demonstration

●● Hard Interventions (setting up of common facility centers) - Under the hard interventions,
financial assistance is provided upto 70% of the Project cost (90% for North Eastern Region/ Micro/
women owned /SC, STs etc.) with a ceiling of ` 15 crore per project, depending upon the category of
the CFC. The grant is restricted to 60% of the cost of the project of ` 10 crore (80% for North Eastern
Region/ Micro/Women owned /SC/STs etc.) in case of infrastructure development.

a) Cost of land, building and other physical infrastructure, equipments, preliminary and pre-
operative expenses are included in the project cost.

b) Dovetailing of funds from other Schemes of the Ministry of MSME and of other Ministries/
Departments or State Governments is permissible. However, beneficiaries must contribute at
least 10% of the Project cost.

c) Though Government assistance is provided as percentage of the Project cost, Government

assistance is only to be utilized towards the exact cost of plant & machinery only.

d) Land and building is to be provided by beneficiary/State Government.

3.2 Scheme by Ministry of Textiles, GOI

♦♦ The Integrated Handlooms Development Scheme (IHDS) - has been launched with a view to
develop holistically and comprehensively the weavers’ clusters throughout the country. Under this
scheme, Handloom clusters have been given the financial assistance for the various components
like skill upgradation, awareness programme, formation of consortium, etc.

♦♦ Scheme for Integrated Textile Parks (SITP) - The ‘Scheme for Integrated Textile Parks (SITP)’
is being implemented to facilitate setting up of textile units with appropriate support infrastructure.
Industry Associations / Group of Entrepreneurs are the main promoters of the Integrated Textiles
Park (ITP). The scheme targets industrial clusters/locations with high growth potential, which require
strategic interventions by way of providing world-class infrastructure support. The project cost covers
common infrastructure and buildings for production/support activities, depending on the needs of
the ITP. The Scheme provides financial support to the tune of 40% (not exceeding ` 40 crore) of
the project cost for development of the common infrastructure in a green field textile park to the
implementing SPVs.

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SIDBI Report on MSME Sector 2011

♦♦ Apparel Park for Exports Scheme (APES) - With the objective of imparting a focused thrust to
set up apparel units of international standards and to give a fillip to exports, the Government had
launched the Apparel Park for Exports Scheme (APES), a centrally sponsored scheme.

♦♦ Integrated Skill Development Scheme for the Textiles & Apparel Sector, Including Jute &
Handicrafts - The Scheme would work on the basic principle of leveraging on existing resources
and infrastructure as advised by the Planning Commission. Further, private sector participation
would also be encouraged.

◘◘ The Scheme would target to train approximately 2.56 lakh persons during 2010-11 and
2011-12.

◘◘ It would cover all segments under the ambit of the Ministry, viz. i) Textiles and Apparel ii)
Handicrafts iii) Handlooms iv) Jute v) Sericulture vi) Technical Textiles.

◘◘ All facets of skill development will be covered viz. Basic Training, Skill upgradation, Advanced
Training in emerging technologies, Training of Trainers, orientation towards modern
technology, retraining, skill upgradation, managerial skill, entrepreneurship development etc.

♦♦ Integrated Scheme for Powerloom Sector Development - In order to achieve the overall
development of the powerloom sector, Govt. has announced the Integrated Scheme for Powerloom
Sector Development during 2007-08. The scheme has got the following components :

1) Marketing Development programme for Powerloom Sector

2) Exposure visit of Powerloom Weavers to other Clusters

3) Survey of the Powerloom Sector

4) Powerloom Cluster Development

♦♦ National Program for Capacity Building of Textile MSMEs through Cluster based Approach
(Reference: http://textilescommittee.nic.in/npcapacity.htm) - The objective of this program is capacity
building of MSMEs, through a cluster based approach, by way of fostering the collective efficiency
of MSMEs and improving the support systems, so that the emerging opportunities on account
of globalization and liberalization are exploited. Under the programme, 23 major clusters having
concentration of MSMEs and where the Textiles Committee has presence has been identified for
intervention. A Diagnostic Study will be conducted in these clusters to identify the gaps and support
initiatives required to be provided by various organizations including Central /State Governments,
Industry Associations and the MSMEs. An Action Plan will be drawn up based on such Diagnostic
Study, to fill the identified gaps, for 3 year period from 2002-03 to 2004-05 which include the actions
to be taken by the MSMEs, their enterprise partners, the associations and the support service
institutions with the objective of improving business processes like modernization of technology,
quality up-gradation, product innovation and diversification, marketing, skill acquisition, infrastructure

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etc. Textiles Committee, which has transformed itself from regulation to facilitation, will act as
coordination agency in implementation of this program. The services of various support institutions
will be roped in to implement the plan. While the regional offices of the Textiles Committee will act
as nodal offices for the concerned clusters, an experienced officer within the concerned office is
designated as Cluster Development Agent (CDA) exclusively, for implementation of the program.
The CDAs will be provided adequate training by UNIDO and other institutions of repute. The local
industry and the Support Service Institutions will be involved in the form of networking through Cluster
Co-ordination Development Group (CCDG). The entire program is envisaged to be financially self-
sustaining without dependence on any funding from the Government. The impact of the program will
be assessed periodically by adopting scientific methodology.

♦♦ National Resource Centre under Integrated Handloom Cluster Development Program - To

co-ordinate, monitor and handhold support of cluster development interventions at 20 locations in
the country with the following objectives:

◘◘ Co-ordinate cluster development activities all across the 20 clusters identified by the ministry
at National Level.

◘◘ Provide monitoring and support services to ensure holistic development of Handloom clusters.

◘◘ Facilitate cluster activity network by dissemination of information on various aspects of cluster

development.

◘◘ Establish a documentation centre in order to facilitate mutual learning. The documentation of

‘best practices’ in one cluster can foster demonstration effect in others.

◘◘ Provide an interactive forum for CDEs, Govt. organizations, implementing agencies by

organizing meetings/ workshops whenever required.

◘◘ Enable clusters to take advantage of globalization by providing customized intervention in

critical business areas.

◘◘ Sensitize policy makers about the requirements of Handloom clusters.

3.3 Schemes implemented by Department for Industrial Policy and Promotion

(DIPP), Ministry of Commerce, GOI
♦♦ Industrial Infrastructure Upgradation Scheme (IIUS) - This scheme was launched in December,
2003 as a Central Sector Scheme. The objective of the scheme is to enhance competitiveness of
the industry by providing quality infrastructure to existing industrial clusters through Public-Private
Partnership mode (PPP). Under the schemes, a cluster is identified by a product or similar products
manufactured mostly by a large number of Small and Medium Enterprises that are located in specific
geographical region. The Scheme targets existing industrial clusters with high growth potential
requiring assistance for upgradation of infrastructure to world class standards. The eligible activities
under the scheme includes physical infrastructure activities like Transport, Road, Water Supply,

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Common captive power generating units, Transmission and distribution infrastructure, Common fuel/
gas supply system, Common effluent treatment plant, Solid waste management facilities, Information
and Communications Technology (ICT) Infrastructure, ICT-induction and Management Consultancy
Service Centre and Common Facilities Centre. (Such as: Tool Room, Display Centre, Testing
Centre, Training Centre etc.), Quality Certification & Benchmarking Centre and R&D Infrastructure.
The central grant Up to 75% of the project cost with a ceiling of ` 60 crore with a condition of 15%
contribution by industries.

♦♦ Integrated Development of Leather Sector (IDLS) - The scheme is aimed at enabling existing
tanneries, footwear, footwear components and leather products units to upgrade leading to
productivity gains, right-sizing of capacity, cost cutting, design and development, simultaneously
encouraging entrepreneurs to diversify and set up new units in the areas. The scheme targets
creation of positive ambience for technology upgradation, modernization and capacity creation for
attaining global competitiveness through productivity gains, minimization of wastages, right sizing
of capacity, cost cutting, design and development, etc. The financial assistance under the Scheme
will be investment grant to the extent of 30% of cost of plant and machinery for SSI and 20% of cost
of plant and machinery for other units (i.e. non small scale units) subject to ceiling of ` 50 lakh for
technology up gradation /modernization and/or expansion and setting up a new unit. The rate of
assistance would be @ 20% for all units (both SSI and Non-SSI) above ` 50 lakh subject to ceiling
of ` 2 crore. The disbursement above ` 25 lakh would be released in four equal annual installments.
Investment grant would also be available to units investing their own resources. For the purpose of
this Scheme, the definition of small-scale industry would be the same as notified by the Government
on the date of sanction of the project.

3.4 Schemes Implemented by Ministry of Food Processing Industries

Scheme for Infrastructure Development by Ministry of Food Processing Industries

The Scheme for Infrastructure Development to be implemented during 11th Five Year Plan period
comprises four components, namely, (1) setting up of Mega Food Parks, (2) Cold Chain and Preservation
Infrastructure, Strategic Distribution Centers and (3) Modernization of Abattoirs.

♦♦ Mega Food Parks

The scheme is project oriented and aims to provide a mechanism to bring together farmers, processors
and retailers and link agricultural production to the market so as to ensure maximization of value
addition, minimization of wastages and improving farmers’ income. Mega Food Park envisages a
well-defined agriculture /horticultural processing zone containing state-of-the-art processing facilities
with support infrastructure and well established supply chain. The primary objective of the scheme
is to facilitate establishment of an integrated value chain, with processing at the core and supported
by requisite forward and backward linkages. Under the scheme, financial assistance in the form of

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grant-in-aid up to 50% of the project cost in general areas and up to 75% of the project cost in special
category states subject to a maximum of ` 50 crore or the cost of approved facilities, whichever is
lower, has been envisaged for all implementing agencies.

The scheme provides for creating infrastructure for farm level primary processing centre-cum-
cold chain in identified clusters, processing of intermediate products, collection centre cum cold
chains, centralized infrastructure to take care of processing activities, which require cutting edge
technologies, testing facilities, besides the basic infrastructure of water supply, power, environmental
protection systems, communication, etc. The supply chain will establish on-Farm Primary Processing
Centre cum cold chain facilities for aggregation of the produce at village level, which will be linked,
to the retail outlets/processing parks through appropriate produce aggregation facility and collection
centre cum cold chain and Reefer van transportation net works. The scheme is proposed to be
entrepreneur driven to be implemented on a PPP basis.

The scheme envisages technical and managerial assistance to the potential stakeholders, through
a professional Project Management Agency (PMA) which would assist the Ministry as well as
the industry from concept to commissioning. The (PMA) is an independent professional agency
with multi disciplinary skill set and is positioned for developing the projects under the scheme and
hand-holding them through the entire life cycle, i.e. from “concept to commissioning”. The primary
role of PMA is to assist the MFPI in effective implementation of the scheme.

♦♦ Integrated Cold Chain and Preservation Infrastructure, Strategic Distribution Centers

The components of the integrated cold chain facilities proposed to be assisted are: a) Minimal
Processing Centers, b) Reefer Vans etc, and c) Strategic Distribution Centers with CA cold storage,
IQF and Irradiation Facilities. Proposed level of assistance is 50% the total cost of plant and machinery
and technical civil works in General areas and 75% for NE region and difficult areas subject to a
maximum of ` 10 crore.

♦♦ Modernization of existing Abattoirs/ Setting up of Modern Abattoirs

The scheme aims at modernization of abattoirs in the country by providing facilities for scientific and
less painful slaughtering, chilling, effluent treatment plant, drainage, by-product utilization, water and
power with required Sanitary /Phyto sanitary conditions for modernization of abattoirs. Modernization
of abattoirs will also augment essential supply base of hygienic raw material to the meat processing
industry, both for domestic consumption and exports, besides discouraging unauthorized slaughtering.
Projects based on sound and viable Business Models for Setting-up/Modernization of Abattoirs are
proposed to be identified with definite measurable outputs. The level of assistance proposed under
this component is 50% of the total cost of plant & Machineries & TCW subject to a maximum of ` 15
crore (75% in NE and difficult areas).

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3.5 State Govt. initiatives on MSMEs

State Governments also take interest in the cluster development, to showcase the same; few illustrative
examples are placed below:

Gujarat
♦♦ Cluster Development in PPP Mode
Anchor units, nodal institutions and /or industry associations will be associated in PPP mode in a
program of cluster development. Comprehensive support extended to strengthen cluster units in a
program covering product design and technology, quality improvement, energy & water conservation,
common branding and marketing facilities, hiring of an expert /cluster development agent, setting
up of demonstration plant, common facilities, incubation centre, CFC, ITI extension centre and other
need based facilities.
Assistance @ 80% (including assistance from GoI) in the proposed cost of programme with a ceiling
of ` 10 crore per cluster for a period of 3 to 5 years.
Clusters will be eligible for partial financial assistance as available under the Scheme of Critical
Infrastructure. Assistance will be subject to preparation, by the project owners, of a Comprehensive
Development Plan of the cluster for 5 years.

Kerala
♦♦ Margin Money Loan (MML) for Cluster Development Activities
Cluster Development involves the creation of Common Corporate entities, which serve the needs
of cluster and are owned by them. Such entities can take up activities like sourcing of raw material,
mutual credit guarantee for sourcing loans, common brand creation, marketing, setting of common
Facility Service Centers, Quality testing facilities etc. For these activities, fixed assets and working
capital are required. Margin money loan @ 20% as applicable under this scheme for cluster
development activities subject to a maximum of ` 5 lakh.

Madhya Pradesh
♦♦ Integrated Cluster Development Program (Traditional products of Khadi & Village Industries,
sericulture and crafts & handloom products)

The Department of Rural Industry, Government of Madhya Pradesh, under this scheme, aims to
conserve and develop the traditional, non-traditional and heritage art and crafts of the State providing
sustainable employment opportunities to rural communities, especially the disadvantaged sections
comprising scheduled castes & tribes, backward & minority sections and women. It comprises
departments, directorates and federations of handloom and handicrafts, sericulture, Khadi and
Village Industries, and state industrial federation. The Department of Rural Industries has devised
cutting edge programme for integrated cluster development, support to SMEs, SHGs, voluntary
organizations, marketing support and partnership strategies. It has formal systems for marketing
assessment, training and evaluation. The Department welcomes fresh initiatives to supplement

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its design development, technology transfer, skill-upgradation, networking with stakeholders, and
marketing strategies, both domestic and export-oriented. Training programmes drawing upon
management techniques, best practices and awareness of global issues impacting the Sector
underpin the Department’s efforts to refine and strengthen its delivery system towards the pursuit of
Millennium Development Goals (MDG) in the rural livelihoods sector.

(Reference: http://www.mpruralindustries.gov.in/RuralIndustry/aboutus.aspx)

Rajasthan

♦♦ The Rajasthan MSME Development Assistance Scheme, 2008

With a view to strengthening the institutional framework, improving quality of MSME’s products
through research and development and compatibility with the environmental bottlenecks, this
scheme was introduced. Concessions provided in this scheme are – 50% of the capital cost for
establishment of Common Effluent Treatment Plant/ Facilities by industries associations; 50% of
the capital cost for establishment of Common Effluent Treatment Plant/ Facilities by MSMEs if
they use 80% of recycled water; reimbursement of expenses related to obtaining patent or ISO
certification to an extent of ` 2 lakh or 10 times the fee whichever is lower; part of the capital for
setting up regional offices or branch of national laboratories; or testing laboratories; or training
institutes. It also provides exemption of 75% from electricity duty for MSMEs.

(Reference: http://rajcluster.com/Pdf/Msme.pdf)

Other Institutions
♦♦ State Bank of India ‘Uptech’ Program

Project Uptech is a State Bank of India (SBI) and United Nations Industrial Development Organization
(UNIDO) facilitated project to form clusters within the small and tiny sector coir industry. The theme
of Project Uptech is ‘co-optition’. All members of the cluster were given training in management
systems and practices and educated about the concept of ‘co-optition’. A common management
centre is set up for each consortium with the entrepreneurs themselves taking up marketing and
financial managerial roles. One of the great advantages of the cluster is the setting up of a common
raw material bank. According to the needs of each consortium, all the members are required to
contribute an equal amount varying from ` 1,000 to ` 3,300. The rest of the amount required is raised
by loans from Small Industries Development Bank of India (SIDBI) and Khadi and Village Industries
Corporation (KVIC).

♦♦ National Bank for Agriculture and Rural Development (NABARD)

- Uttarakhand Regional Economic Development (RED) Programme - RED is a joint venture of

GIZ, Germany & NABARD for the economic development of Uttarakhand state through development
of certain pre-selected value chains in agro based sectors, improvement in business and investment
opportunities for the private sector and promotion of rural MSMEs in the state in Specific Agro–
Based Industries.

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- The National Programme for Rural Industrialisation (NPRI) - was proposed by the Union Finance
Minister in his budget speech for the financial year 1999-2000, with a mission to set up 100 rural
clusters every year for the next five years to, gives a boost to rural industrialization. NABARD follows
two models of cluster development:

●● Participatory model of cluster development: Under participatory cluster, the approach would
be to coordinate the efforts of all the agencies involved in carrying out the action plan prepared
for the cluster development. NABARD would be the main promoter and involve its resources
wherever assistance is not forthcoming from other agencies/ the other agencies do not have
provision for support. In this mode of Cluster Development, the intervention budget would be
limited to ` 15 lakh per cluster over a period of 3 years.

●● Intensive Development model of cluster development: Under Intensive Development,

NABARD would primarily be the source for meeting the resource requirements to fund the
planned promotional interventions. Support from other agencies wherever forthcoming would be
utilized. The implementation period for the intensive cluster development would be a maximum of
5 years with an outlay not exceeding ` 1 crore. The objectives of the scheme is to strengthen the
existing clusters, and development of new clusters in exceptional cases, and towards sustainable
competitive advantage through technology upgradation & transfer, raw material access, skill
development, managerial inputs, credit support and marketing assistance. As on 30 June 2011,
116 clusters have been adopted by NABARD for implementation. Purpose wise classification is
- 57 Handloom; 39 handicraft ; 7 Food Processing ; 6 Rural Tourism; 1 Bee Keeping ; 2 Leather
Work ; 2 Black-smithy; 1 Marketing; and 1 Rural Tourism cum handicraft cluster.

♦♦ Khadi and Village Industries Corporation (KVIC)

- Scheme of Fund for Regeneration of Traditional Industries (SFURTI) – Implemented by Coir
Board & KVIC under Ministry of MSME.The objective of SFURTI is to establish a regenerated,
holistic, sustainable and replicable model of integrated cluster-based development of traditional
industries in KVI and coir sectors. This primarily means:
●● More competitive traditional industries which are market-driven, productive, profitable and provide
sustained employment for the participants;
●● Strengthened local socio-economic governance system of the industry clusters, with the active
participation by the local stakeholders that can help continuous undertaking of development
initiatives by themselves;
●● Building up innovative and traditional skills, improved technologies, advanced processes, market
intelligence and new models of public-private partnerships, so as to gradually replicate elsewhere
similar models of cluster-based regenerated traditional industries.

The following support measures are planned to be taken up in the selected clusters:

●● Replacement of charkhas and looms in Khadi sector.

●● Setting up of Common Facility Centers (CFCs).

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●● Development of new products, new designs for various Khadi and village industry (VI) products,
new/improved packaging, etc.
●● Market promotion activities.
●● Capacity building activities, such as, exposure visits to other clusters and institutions, need-
based training, support for establishment of cluster level networks (industry associations) and
other need based support.
(Reference: http://msme.gov.in/Chapter%2010-Eng_200708.pdf and http://www.kvic.org.in/kv/sfurti. pdf)

Programme for promotion of V.I Cluster- Rural Industry Service Centre (RISC) for Khadi
and V.I. Activity Program
The objective of the programme is to provide backward and forward linkages to Khadi & Village industries
activities in a cluster, and to provide services like raw material support, skill up-gradation, training, Quality
Control, Testing facilities, marketing promotion, design & product development in order to strengthen the
rural clusters.

Various other institutions like Bureau of Energy Efficiency (BEE), PCRA and other ministries also adopt
clustering approach to reach to targeted audience.

(Reference: http://www.kvic.org.in/index.php?option=com_content&view=article&id=302&Itemid=32)

3.6 Cluster based approach in MSME lending

Cluster based approach for financing MSMEs is expected to result in less transaction costs, and risk
mitigation, besides providing an appropriate scale for improvement in infrastructure. RBI has advised
banks that a full-service approach to cater to the diverse needs of the MSE sector may be achieved
through extending banking services to recognized MSE clusters by adopting a 4-C approach namely,
Customer focus, Cost control, Cross sell and Contain risk. A cluster based approach to lending may be
more beneficial:

●● In dealing with well-defined and recognized groups.

●● Availability of appropriate information for risk assessment.
●● Monitoring by the lending institutions.

The recently constituted PM’s Task Force for MSME has also recommended that “Each lead bank of a
district may adopt at least one MSE cluster and banks should open more MSE focused branch offices at
different MSE clusters which can also act as Counselling Centers for MSEs.” The benefits by banks to
offer cluster based financing approach include lower transaction and monitoring costs through reduction in
costs of data, standardization and reduction of documentation; identification of common risk elements and
their mitigation; better inter-firm comparison; improved outreach; and design of cluster specific products/
interventions. Unlike the conventional financial based lending model, the cluster approach captures a 360
degree view of the MSME, bringing out the strengths in terms of its manufacturing capabilities, marketing
strengths, position vis-à-vis competitors and other strengths. This gives a true understanding of the

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MSMEs potential and the banks are in a better position to take credit views beyond just financial
parameters.

3.7 SIDBI – Cluster Approach in MSME Sector Development

SIDBI, being the Principal Financial Institution for the MSMEs in India, looks at Promotion (entrepreneurship
promotion), Financing for entire value chain and Development (facilitating growth) of the MSME sector. The
Bank is committed to provide solutions to MSMEs through constant innovation leading to robust framework
for access to financial and non - financial services. SIDBI provides financial and non-financial support to
MSMEs through indirect and direct finance, which is channelized through 103 branches all over India
catering to more than 600 MSME clusters. In fact, SIDBI has always incorporated cluster based approach
in its opening of the branches. SIDBI’s credit linked interventions involve providing financial assistance to
MSME units in clusters through special dispensations using customized products and processes keeping
in view their needs and requirements.

♦♦ SIDBI has made developmental intervention in about 300 clusters, both by way of financial and
promotional support:

●● In the area of Energy Efficiency financing and promotion, SIDBI is intervening in 75 clusters.

●● In association with Ministry of MSME and BEE (70 Clusters).

●● Under WB-GEF (5 Clusters) - Foundry cluster at Kolhapur, Forging at Pune, Limekilns at

Tirunelveli, gas / electricity at Chemical at Ankleshwar and mixed at Faridabad.

♦♦ In the area of promotional and developmental non-credit intervention, SIDBI has supported:

●● Micro Enterprise Promotion Programme (MEPP) (in 120 rural clusters / districts) - The MEPP
aims at creation of employment through enterprise promotion in rural and semi-urban areas
and addressing problems such as rural unemployment, urban migration, under-utilization of
know-how and latent rural resources.

●● Cluster Development Programmes - 75 in the areas marketing linkages, skill upgradation, etc.

●● Cluster development by promoting private sector Business development Services (BDS)

providers in 25 clusters in the areas new technologies, use of IT, skill development, energy
efficiency, marketing, etc. under the World Bank-led MSME Financing & Development project
(MSMEFDP).

SIDBI and its associate concerns have adopted cluster based approach for providing credit and non-credit
support to the MSME sector which includes, rendering technical services for technology transfer, providing
financial support including promotion of clean production, energy efficiency measures, organizing cluster
development programme under its Promotional and Development activities, etc. SIDBI has also taken
some measures to address the issues and concern of climate change in MSME clusters by reducing
Green House Gases from the MSMEs and ultimately, improving their productivity including Growth. In so
many ways, SIDBI endeavours to address the gaps in MSME eco-system at cluster level.

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 CREDIT DISPENSATION TO MSMEs IN INDIA

Finance is one of the critical inputs to ensure growth, competitiveness and viability of the MSMEs. MSMEs
depend primarily on the bank finance to address various financial needs of their enterprises, i.e. purchase of
land, building, plant and machinery and working capital. New instruments of finance have been introduced
to help MSMEs, such as, credit guarantee, credit rating, risk capital, venture capital, micro finance, etc. The
following diagram tries to bring
together the financial sector
landscape for MSME in India.

As can be seen from the diagram,

there are many stakeholders who
provide various services relate to
credit dispensation for MSMEs
in the country. There are equity
and debt providers operating at
various levels, in different legal
forms and with varying sizes
and scales; and also supporting
institutions that provide key
services, such as, information,
rating and guarantee to facilitate
easy flow of credit to MSMEs.
Details of these institutions have
been provided under the Section
– Institutional Framework for
MSMEs in the country.
SIDBI Report on MSME Sector 2011

4.1 Credit Gap in MSME sector

♦♦ As per the 4th Census on MSMEs for reference year 2006-07, only 5.2% (13.5 lakh units) of total
enterprises (261 lakh units) availed credit from banks, financial institutions, NBFCs, etc.

♦♦ According to the Report on Creation of a National Fund for the Unorganized Sector by National
Commission on Enterprises in the Unorganised Sector (NCEUS) (November 2007), the credit gap
for the micro enterprises in the unorganised sector was estimated at ` 6.01 lakh crore (75%) as
at end March 2011, with the caveat that the number of such unorganized micro enterprises was
estimated at 6.8 crore with an average credit off take of ` 1.18 lakh per enterprise.

♦♦ The Sub-Group Report on Flow of Private Sector Investments for SME and Agriculture Sector for the
12th Plan* has estimated credit supply for the MSME sector, separately for term loans and working
capital through various methodologies. The results for total MSME credit Supply are given in the
Table.

Table No. 4.1: Estimated Outstanding Credit Supply of MSMEs (` Crore)

As at end Projected Supply of Credit Flow to MSME Sector

Working Capital Term Loan Total Supply
2010-11 504492 232669 737161
2011-12 600255 274227 874482
2012-13 716139 322810 1038948
2013-14 856783 380756 1237539
2014-15 1028000 449928 1477928
2015-16 1237094 532566 1769659
2016-17 1493278 631365 2124644

♦♦ The Sub-Group explored the possibility of further enhancing the credit supply to MSME sector by
enhancing the credit growth to MSE sector and Medium Enterprises by SCBs and all other sources
by minimum 22% Y-o-Y Credit Growth for FY 2012-14 and 25% for FY 2014-17 and found that the
credit supply would further increase to ` 25,42,145 crore as at end March 2017.

Table No. 4.2: Estimated increase in credit supply with 22% Y-o-Y Credit
Growth for FY 2012-14 and 25% for FY 2014-17 (` Crore)

As at end 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Credit 737161 874482 1066868 1301578 1626973 2033716 2542145
Supply

*prepared by SIDBI and NABARD and submitted to Dr. Subir Gokarn, Deputy Governor, RBI, Chairman of Working Group on Saving

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 Credit Dispensation to MSMEs in India

4.2 Status of Credit Flow to the MSME sector

The MSMEs primarily rely on bank finance for their operations and as such ensuring timely and adequate
flow of credit to the sector has been an overriding public policy objective. It is observed that the credit to
MSE sector from Scheduled Commercial Banks (SCBs) has been showing a healthy growth rate in the
last three years. The credit flow to MSEs by SCBs has increased from ` 2.14 lakh crore in March 2008
to ` 4.79 lakh crore in March, 2011. The details of MSE credit outstanding for the Scheduled Commercial
Banks from FY 2008 onwards are given in Table below.

Outstanding MSE Credit by SCBs

(No. of A/cs in Lakh) (Amount ` in Crore)

Year Public Sector Banks Private Sector Banks Foreign Banks All Scheduled
Commercial Banks
No: Of Amt. O/s No: Of Amt. O/s No: Of Amt. O/s No: Of Amt. O/s
A/Cs A/Cs A/Cs A/Cs
March 2008* 39.67 151137.48 8.19 46911.87 0.65 15489.25 48.51 213538.61
March 2009 41.15 191408.32 6.78 46656.33 0.58 18063.42 48.51 256128.07
(3.73%) (26.64%) (-17.21%) (0.54%) (-10.78%) (16.61%) (No (19.94%)
change)
March 2010# 72.17 276318.97 11.31 64824.72 1.57 21147.05 85.05 362290.74
(75.38%) (44.36%) (66.81%) (38.94%) (170.69%) (17.07%) (75.32%) (41.44%)
March 2011 73.98 369430 17.18 88116 1.86 20981 93.02 478527
(Provisional) (2.51%) (33.7%) (51.9%) (35.9%) (18.47%) (-0.78%) (9.37%) (32.08%)

* Change in definition of the sector as per the MSMED Act 2006 advised to banks in 2007
# Retail trade included in service sector
Note: Figures in parentheses indicates Y-o-Y % growth/decline

Source: Reserve Bank of India

In the recent past, Reserve Bank of India has announced some important credit related policy
measures for MSME sector as given below:

●● All scheduled commercial banks should achieve a 20% year-on-year growth in credit to micro
and small enterprises to ensure enhanced credit flow;

◘◘ The outstanding credit to MSEs as at end March 2011 increased by 32.08% to ` 4,78,527
crore.

●● The allocation of 60% of the micro and small enterprises (MSEs) advances to the micro
enterprises to be achieved in stages, viz., 50% in the year 2010-11, 55% in the year 2011-12
and 60% in the year 2012-13.

●● All scheduled commercial banks should achieve a 10% annual growth in the number of micro
enterprise accounts.

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SIDBI Report on MSME Sector 2011

●● Enhancement of the collateral-free loan limit for MSEs from ` 5 lakh to ` 10 lakh.

◘◘ Based on this recommendation, RBI has mandated banks not to accept collateral security
in the case of loans upto ` 10 lakh extended to units in the MSE sector. Banks, in turn,
can take cover for the collateral free credit facilities under CGS.

Government of India operates various subsidy schemes to promote investment in technological

modernization in the MSME sector, which among others include:

♦♦ Credit Linked Capital Subsidy Scheme (CLCSS) [Ministry of MSME] - Capital subsidy
of 15% is being provided to the units going for capital expansion with a ceiling of sanction of
loan upto ` 100 lakh. As at end December 2010, cumulative subsidy of ` 523 crore has been
sanctioned to 11,114 units.

♦♦ Technology Upgradation Fund Scheme for Textile Industry (TUFS) [Ministry of Textiles]
- Subsidy under the Scheme is being given in form of 5% interest reimbursement (4% i/r/o
Spinning Machinery on standalone basis) OR Foreign exchange rate fluctuations up to 5%
p.a. (4% i/r/o Spinning Machinery on standalone basis). OR 15% Margin Money subsidy for
SSI units. OR 20% Margin Money subsidy for power looms & independent preparatory units.
OR 25% Margin Money subsidy for new machinery for pre-looms and post-looms operations,
handlooms, testing and quality control equipments for handloom units including silk sector. OR
10% Capital subsidy + 5% interest reimbursement for specified processing, garmenting and
technical textiles machineries, and new shuttle less looms. Cumulative subsidy of ` 850 crore
has been sanctioned to 28,302 units.

♦♦ Integrated Development of Leather Sector Scheme (IDLSS) [Ministry of Commerce &

Industry] - The Scheme provides investment subsidy to the extent of 30% of cost of plant &
machinery for MSE and 20% of cost of plant & machinery for other units (i.e. non-MSE units),
subject to a ceiling of subsidy of ` 50 lakh for technology upgradation /modernization and/or
expansion and setting up a new unit. The subsidy amount would be @ 20% for all units (both
SSI and non-SSI) for subsidy above ` 50 lakh, subject to a ceiling of ` 2 crore. Investment
subsidy would also be available to units investing their own resources. Cumulative subsidy of
` 170 crore has been released to 1283 units.

♦♦ Scheme of Technology Upgradation / Setting up / Modernization / Expansion of Food

Processing Industries (FPTUFS) [Ministry of Food Processing Industries] - The Scheme
provides 25% of the cost of plant & machinery and technical civil works subject to a maximum
of ` 50 lakh in general areas and 33% up to ` 75 lakh in difficult areas (Jammu & Kashmir,
Himachal Pradesh, Uttarakhand, Sikkim, North-Eastern States, Andaman & Nicobar Islands,
Lakshadweep and Integrated Tribal Development Project (ITDP) areas). Only new Plant &
Machinery are eligible.

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 Credit Dispensation to MSMEs in India

♦♦ Scheme for Technology and Quality Upgradation Programme (TEQUP) of Ministry

of MSME - This scheme is one of the ten components of the National Manufacturing
Competitiveness Programme (NMCP). The objective of the scheme is for capacity building
of MSME Clusters for Energy Efficiency/Clean Development Interventions, implementation of
Energy Efficient Technologies (EET) in MSME units, etc. Under the scheme, MSMEs will be
assisted in implementation of the projects through loans from SIDBI/banks/financial institutions
for which subsidy upto 25% of the cost of the project. This subsidy will be subject to a certificate
from competent agency/Energy Auditor certifying that the new machinery and equipment
installed are capable of giving 15% energy savings.

4.3 Emerging Sources of Finance for MSMEs

Faced with increased competition on account of globalization, MSMEs are beginning to move from bank
credit to a variety of other specialized financial services and options. In recent years, the sector has
witnessed increased flow of capital in the form of primary/ secondary securities market, venture capital
and private equity, external commercial borrowings, factoring services etc. More advanced MSMEs have
started realizing the importance of these alternative sources of funding to raise resources and the need for
adopting better governance norms to take advantage of these funding sources.

Factoring in MSME sector

Factoring has started gaining ground in the Indian system in the recent years. As per the data available
for the year 2008, factoring turnover reached ` 48,500 crore which constituted about 2% of total bank
credit. Indian factoring companies have specialized products catering to the needs of clients offering a
host of choices including with recourse/ without recourse factoring, domestic/ international factoring and
disclosed/undisclosed factoring.

Domestic transactions constitute more than 90% of the factoring done in India. Textiles, Iron & Steel,
Chemicals, Pharmaceuticals and Electrical Engineering are amongst the key industries that are active in
factoring business in India. Factoring organizations not only provide MSMEs with finance, but also offer
other services, among other, like Sales Ledger Administration, Debt collection and Credit insurance.

The share of Indian Factoring is less than 1% of the total volumes generated in the world. The reasons for
the slow growth are several like inadequacies in the legal framework and ad valorem stamp duty on the
assignment of debts. A comprehensive legislation to address the legal hurdles affecting the growth of the
factoring industry has been passed by Government of India and is in the process of implementation. In
the recent years, factoring products have gained popularity with the SMEs, more particularly auto ancillary
industry, component manufacturers for engineering companies, etc. A number of such units are dealing
satisfactorily with us and with revival of economy and auto industries, in particular, the factoring can record
a good growth in near future.

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SIDBI Report on MSME Sector 2011

Securitization

Securitization of debt by MSMEs makes the debt instruments more liquid and brings down the cost of
lending. As per the data available, total securitization market through asset backed, residential mortgage
backed and collateralized loan obligations structured financial market stood at ` 42,590 crore as on March
31, 2010, out of which ` 20.970 crore securitization were done through Asset Backed Securitization, which
also includes around 4% for MSMEs i.e., approx ` 500 crore.

Venture Capital

Venture capital is the money provided by investors to start-up firms and small businesses with perceived
long-term growth potential. This is a very important source of funding for startups that do not have access
to capital markets. It typically entails high risk for the investor, but it has the potential for above-average
returns. SIDBI Venture Capital Limited (SVCL) is a wholly owned subsidiary of SIDBI, incorporated in July
1999 to provide venture capital to emerging sectors, such as, life sciences, biotechnology, pharmaceuticals,
engineering and information technology. As on date, SVCL has committed ` 550 crore to these innovative
enterprises. SIDBI is in the process of setting up of two Venture Funds - India Opportunity Fund and Social
Venture Fund. The details functions of SVCL are given in the SIDBI chapter.

Risk Capital

In order to help MSMEs to grow by increasing their equity base, there is a need to provide risk capital
to the sector. Risk capital is provided on the backing of cash flows from the business rather than asset
cover/ collateral security as against normal bank advances. Risk capital is offered in a flexible manner with
respect to the structuring of returns and repayments to the risk capital provider, thereby ensuring greater
chances of success of the ventures. MSMEs can avail risk capital for multiple requirements including
bridging the gap in the means of finance for a project, margin money for working capital, non-asset creating
investments viz marketing, brand building, creating distribution network, technical know-how, software
purchase, investment in energy efficiency and quality improvement equipments, R&D, etc. There are
various delivery channels like Banks, VC Funds etc. which are used for providing risk capital to MSMEs.

Besides, world over MSMEs are seen as crucibles for innovation where most of technologies and products
for future are born and see commercial reality for first time. Besides needing appropriate risk capital in
the form of angel funding or risk capital at such stage, they also require quick infusion of further capital
to mature the product and upscale when the idea succeeds and business rushes in, failing which the
opportunity may be lost forever.

Internationally, it is proven that geographies where eco-system of risk capital (involving technology and
business incubators, seed-stage funding, venture capital, angel funding, business mentoring, private
equity and various other structures around these) has developed well, such as, in the US and Israel, large
base of innovation led businesses have flourished, giving the countries lead in technology-led and new
business areas. The business of risk capital is generally founded on high-risk high-returns assumption as
against normal banking dictum of limiting the risk in individual business to low levels.

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 ROLE OF SIDBI
MISSION STATEMENT
“To empower the Micro, Small and Medium Enterprises (MSMEs) sector with a view to
contributing to the process of economic growth, employment generation and balanced regional
development.”

VISION STATEMENT
“To emerge as a single window for meeting the financial and developmental needs of the
MSME sector to make it strong, vibrant and globally competitive, to position SIDBI brand as
the preferred and customer friendly institution and for enhancement of shareholder wealth and
highest corporate values through modern technology platform”.

Small Industries Development Bank of India

Box 5.1 : SIDBI - Highlights
(SIDBI), set up on April 2, 1990 under an
Act of Indian Parliament, is the Principal ♦♦ Established on April 02, 1990.
Financial Institution for the Promotion, ♦♦ Subsequent to the amendment in SIDBI Act.,delinked
Financing and Development of the Micro, from IDBI w.e.f. March 27, 2000.

Small and Medium Enterprise (MSME) ♦♦ Authorised Capital ` 1,000 crore.

sector and for Co-ordination of the functions ♦♦ Paid-up capital ` 450 crore held by 33 financial
institutions/public sector banks / insurance companies
of the institutions engaged in similar
owned or controlled by Government of India.
activities. Financial support is provided
♦♦ Serves as Principal Financial Institution for
by way of (a) refinance to eligible Primary
●● Promotion
Lending Institutions (PLIs), such as, banks,
●● Financing
State Financial Corporations (SFCs), Micro
●● Development of Industries in Micro, Small and
Finance Institutions (MFIs) for onward Medium Enterprises sector, and
lending to MSMEs and (b) direct assistance ●● Co-ordinating the functions of institutions engaged
to MSMEs. Highlights are given in Box 5.1. in similar activities.
SIDBI Report on MSME Sector 2011

Since its inception, SIDBI has made a historical journey of 21 years, which are replete with many
milestones. In its continual strive towards meeting the diverse and developmental needs of the MSME
sector, the Bank has been offering services on emergent thematic aspects. SIDBI, apart from attending
various financial and non-financial services, has also institutionalized various concerns and expectations
through its subsidiaries / associate concerns, viz. SIDBI Venture Capital Ltd. (for venture capital), Credit
Guarantee Fund Trust for Micro and Small Enterprises (for credit guarantee), SME Rating Agency of India
Ltd. (for credit rating), India SME Technology Services Ltd. (for technology transfer) and India SME Asset
Reconstruction Ltd. (for asset reconstruction).

SIDBI is committed to the overall development of the MSME Sector by meeting the various credit and non-
credit needs of the sector. SIDBI has cumulatively disbursed ` 2,03,126 crore to the MSME sector, as on
March 31, 2011, benefitting more than 320 lakh persons, mostly women. Some of the noteworthy initiatives
/ achievements of SIDBI are given in Box 5.2.

Box 5.2 : SIDBI’s Journey of 21 Years

Financial
Major Milestone
Year
FY 1991 ●● Small Industries Development Bank of India (SIDBI), set up on April 2, 1990.

●● Introduced (Bills Discounting) of MSE Vendors

FY 1992 ●● Co-promoted two national level factoring companies viz. SBI factors and Commercial Services Pvt. Ltd. and Canbank
Factors Ltd.

FY 1993 ●● Initiated measures to boost the process of Ancillarisation.

FY 1994 ●● Started providing foreign currency and equity support schemes.

FY 1995 ●● Launched Micro Credit Scheme.

●● Set up Technology Bureau for Small Enterprises to encourage transfer of technologies to MSME sector.

●● Outstanding portfolio crossed ` 10,000 crore for the first time.

FY 1996
●● Introduced Technology Development and Marketing support schemes.

FY 1997 ●● Initiated Vendor Development support.

FY 1998 ●● Undertaken major modifications / expansion of Schemes.

●● SIDBI Foundation for Micro Credit launched in January 1999.

FY 1999
●● SIDBI received the coveted ‘Asian Banking Awards 1999’ by ADFIAP for its Micro Credit Scheme.

●● SIDBI attains autonomy through amendment of SIDBI Act.

●● SIDBI Venture Capital Limited – Set up in July 1999 to provide venture capital support to MSMEs.
FY 2000 ●● Authorised capital increased from ` 500 crore to ` 1000 crore.

●● GoI’s Technology Upgradation Fund Scheme for Textile Industry launched in April 1999 with SIDBI as the Nodal
Agency.

●● Set up Credit Guarantee Fund Trust for Small Industries in July, 2000 to provide guarantee for collateral- free loans
FY 2001 to MSMEs since restructured as Credit Guarantee Fund Trust for Micro and Small Enterprises.

●● SIDBI designated as Nodal Agency for Government of India scheme Credit Linked Capital Subsidy Scheme.

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 Role of SIDBI

FY 2002 ●● Launching of Fast Track Financing Scheme and customised products for financing services sector.

FY 2003 ●● Rural Industries Programme bagged “ADFIAP Development Award 2003”.

FY 2004 ●● SME Fund of ` 10,000 crore launched to provide assistance to the MSME sector.

●● MoUs with select SFCs for transformation.

FY 2005 ●● Launched one of the world’s largest MSME sector development project (MSMEFDP) in partnership with World Bank,
DFID, UK; KfW and GIZ, Germany. Department of Financial Services, Ministry of Finance, Government of India is the
Nodal Agency of the Project.

●● Set up SME Rating Agency of India Ltd. in September 2005, as an exclusive MSME dedicated third-party rating
agency to provide comprehensive, transparent and reliable rating agency and risk profiling.

●● Set up India SME Technology Services Limited in November 2005 to function as a technology bank for MSMEs in
FY 2006
India.

●● SIDBI designated as Nodal Agency for Government of India scheme Integrated Development of Leather Sector
Scheme (IDLSS).

●● Started direct working capital facility through IDBI Bank technology platform.
FY 2007 ●● Bagged ADFIAP Award for project on “SME Rating” under ADFIAP’s Institutional Outstanding Development Project
Category on SMEs – 2007.

●● Set up Cell for Development of North-Eastern Region (Doner Cell).

●● Outstanding portfolio crossed ` 20,000 crore mark for the first time.
FY 2008
●● Received the “Plaque of Merit” for “Establishment of Role Model Fund for Equity Assistance to SMEs in the area of
Software and Information Technology by ADFIAP.

●● Set up in April 2008, Indian SME Asset Reconstruction Company Ltd. as the country’s first MSME focused Asset
Reconstruction Company.

FY 2009 ●● Received ADFIAP award for Best Website -2009.

●● SIDBI’s initiative towards setting up of India SME Asset Reconstruction Company Limited - 2009.

●● Established “SIDBI Foundation for Risk Capital”.

●● Set up Micro & Small Enterprises Rural Self Employment Training Institute at Jangipur, West Bengal.

●● Announced commitment to sustainability and Corporate Social Responsibility by framing for the first time a CSR
FY 2010 Policy and Publishing its first CSR Report.

●● Launched an e-discounting platform of bills of exchange called ‘NTREES’ (NSE Trade Receivables Engine for
E-discounting in association with SIDBI).

●● Merit Award on “MSME Financing & Development Project” (MSMEFDP) and Special Award in the category of “Best
FY 2010
in Membership Recruitment” by ADFIAP.

●● Setting up of TIFAC (Technology Information, Forecasting and Assessment Council)-SIDBI Revolving Fund
forTechnology Innovation (Fund) of ` 30 crore for demonstrating and scaling up (commercialization) of technology
innovations in products and process by MSMEs and launching new scheme ‘SRIJAN’ under the Fund.

●● Launching of www.indiaventureboard.com in collaboration with National Stock Exchange, Indian Private Equity and
FY 2011 India Venture Capital Association and leading angel networks in India for primary / secondary venture capital and
private equity deal flow in unlisted companies in India.

●● Launching of Energy Efficiency in MSME clusters under World Bank-Global Environment Facility Project.

●● ADFIAP Award for “MSME Financing & Development Project (MSMEFDP)” under Local Economic Development
Category for “Making Markets Work for MSMEs”.

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SIDBI Report on MSME Sector 2011

5.1 REFINANCE

Through Refinance, SIDBI reaches out to the MSME sector by working with and through the banks/FIs
leveraging their vast banking infrastructure of more than 87,000 branches. In order to help the MSME sector
to tide over the liquidity crunch which emanated from the global economic crisis in 2008, Government of
India has provided refinance support of `23,600 crore to SIDBI during FY 2009 to FY 2012, to be given
to banks/FIs, wherein SIDBI acts as the pass-through institution. A large part of this refinance support to
banks is for the micro enterprises at concessional rates.

5.2 DIRECT FINANCE

SIDBI started providing direct credit to MSMEs to fill the credit gaps and for supplementing and
complementing lending by banks, SIDBI developed niche financial products to meet varied fund and non-
fund based credit needs of the MSME sector, viz. financial products for promoting energy efficiency, risk
capital products (equity, optionally convertible preference capital / debentures / debt, subordinated debt
etc.), receivable finance scheme to address the issue of delayed payment to MSMEs by large corporates,
structured finance products through MSME associations for MSME clusters, specialized schemes, viz.
Micro Enterprises Loans for ‘Missing Middle’, Flexible Assistance for Capital Expenditure (FACE), Growth
Capital and Equity Assistance Scheme for MSMEs (GEMs), credit delivery models for faster credit delivery
viz. Credit Appraisal and Rating Tool (CART which helps in appraising and rating the proposal in 3 to 4
days) etc. Over the years, SIDBI has evolved itself to meet the various types of credit requirements of the
MSME sector by offering bouquet of tailor-made fund and non-fund based financial products and services.
Some of the major schemes of SIDBI under Direct Finance are:

♦♦ Term Lending: Term loans are provided for i) Setting up of new projects and for technology
upgradation / modernisation, diversification, expansion, rehabilitation, energy efficiency, adoption
of clean production technologies, etc. of existing MSMEs, (ii) Service sector entities and (iii)
Infrastructure development and upgradation.

♦♦ Sustainable Finance: As a part of its ‘Greening MSME’ agenda, SIDBI has formulated certain
specialized loan schemes to promote energy efficiency, environment protection and improving social
standards in the MSME sector. With a view to promoting energy saving and facilitate adoption of clean
production technologies in MSMEs, SIDBI has devised special schemes for providing assistance for
investment in Energy Efficiency Projects and Cleaner Production Options to MSMEs, under which
assistance is provided at concessional terms.

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 Role of SIDBI

♦♦ Addressing Delayed Payments: In order to help the MSMEs for quicker realization of their
receivables, SIDBI fixes limits to well-performing purchaser companies and discounts usance bills of
MSMEs / eligible service sector units supplying components, parts, sub-assemblies, services, etc.
so that the MSME / service sector units realise their sale proceeds quickly. SIDBI also offers invoice
discounting facilities to the MSME suppliers of purchaser companies.

NTREES: SIDBI, along with National Stock Exchange, took the initiative to set up an electronic
platform for discounting of trade receivables. The e-platform is named as NTREES (NSE Trade
Receivables Engine for E-discounting in association with SIDBI). Operations on the platform are
on Real Time Gross Settlement (RTGS) basis, which helps MSMEs to realize their receivables
quickly as against the earlier paper-based payments system which used to take 3 or 4 days for
sales realization. This is unique price discovery mechanism which after successful pilot testing in
SIDBI, shall be opened up for other players.

♦♦ Working Capital Assistance: SIDBI has being utilizing the IT platform of IDBI Bank and offering
working capital facilities to SIDBI customers.

♦♦ Venture Capital: SIDBI’s wholly owned subsidiary SIDBI Venture Capital Ltd (SVCL) is providing
venture capital to emerging sectors, such as, life sciences, biotechnology, pharmaceuticals,
engineering and information technology.

♦♦ Growth Capital and Equity Assistance Scheme for MSMEs (GEMs): Under the scheme, SIDBI
offers special financial assistance to bridge the gap between the two chief sources of finance, viz.
bank loans (senior debt) and promoter’s capital. SIDBI offers this assistance in the form of mezzanine/
convertible instruments, subordinated debt and equity (in deserving cases). This quasi-assistance is
collateral free, has higher moratorium on repayment and a flexible structuring.

♦♦ Flexible Assistance for Capital Expenditure [FACE]: Under the scheme, SIDBI provides need
-based assistance to eligible borrowers in both manufacturing and service sectors to meet their
project specific investment plans with varying terms for creation of different types of assets, viz.
land & building (immovable assets), plant & machinery and other assets for which separate term
loans would be extended respectively. While the term loan for land & building would have longer
moratorium and repayment period, the component for plant & machinery and other assets would
have normal moratorium and repayment period under the scheme.

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SIDBI Report on MSME Sector 2011

Box 7.3 : Evolution of Various Schemes of Assistance

1990-91 2004-05
• Marketing Infrastructure Scheme • Scheme of “Incentive to Accommodation
• Direct Discounting of Bills (Equipment) Scheme Infrastrcture”
• Direct Discounting of Bills (Component) Scheme • Scheme for Small Enterprises Financial Centres
• Infrastructure Development • Cluster Development
1991-92 • Channel Arrangements
• Integrated Development of Leather Sector
• Scheme for Ancillarisation
Scheme
• Resource Support to Factoring Companies
• MSME Financing and Development Project
1992-93 2005-06
• Equipment Finance Scheme • Short term Resource Support to SME intermediaries
• Project Finance Scheme • Inland Letter of Credit Scheme
• Venture Capital Scheme • Vendor Development Scheme
1993-94 • Privileged Customer Scheme
• Integrated Infrastructural Development Scheme • Small Loans in North East Region
• Foreign Currency Term Loan • SME IT Loans
• Direct Equity • Working Capital Arrangement with IDBI
1994-95 • Scheme for Small Enterprises Financial Centres
• Pre-shipment Credit in Foreign Currency (PCFC) • Cluster Development
Scheme • Channel Arrangements
• Equity Assistance Scheme • Integrated Development of Leather Sector Scheme
• ISO-9000 Certification Scheme • Assistance under World Bank Line of Credit (MSEs
• Micro Credit Scheme adhering to Environmental & Social Standards)
1995-96
• Marketing Scheme 2006-07
• TDMF Scheme • Invoice Discounting Scheme
• Equity Support
1996-97
• Customised products relating to franchisee
• Vendor Development Scheme
assistance, rental/cash flow discounting and
• Credit Rating for SSIs
pre-shipment fundings
1997-98 • Co-branding arrangements with NBFCs
• Direct Factoring Services
• Line of Credit for Marketing 2007-08
• Export Bills Financing • Fostering Risk Capital by setting up of SIDBI
• Pre and Post-shipment Credit in Rupees Foundation for Risk Capital for MSMEs
• Bills Rediscounting against Inland Supply
bills of SSIs 2008-09
1998-99 • Ad-hoc assistance Scheme for existing MSME
• Financial Support (Short Term Loan) to Banks customers.
1999-2000 • One-time liquidity support
• Technology Upgradation Fund Scheme for • Additional limit under Receivable Finance
Textile Industries Scheme
• Scheme of Short Term Loans to State Electricity • Restructuring
Board and Power Sector Corporations/ Companies. • DG Set Financing Scheme
• Tannery Modernisation Scheme • Scheme for Energy Saving Projects in MSME
Sector
2000-01
• Structured Credit arrangements – Industry
• Credit Linked Capital Subsidy Scheme for
Association, Mumbai Taxi Associations
Technology Upgradation of SSIs.
• Credit delivery arrangement with OEMs
• Refinance Scheme for term loans granted by
State Financial Corporations / State Industrial FY 2009-10
Development Corporations to industrial • Assistance for Clean Production Options
concerns other than in the small scale sector • Assistance to Mumbai Taxi
2001-02 • Auto Rickshaw Financing
• Fast Track Financing Scheme • Assistance to micro entrepreneurs in Manipur and
• Financing Service Sector other North Eastern States for purchasing Solar
Lanterns.
2002-03
FY 2010-11
• Micro Ventures Innovation Fund
2003-04 • SRIJAN – Scheme for supporting technology
• Small and Medium Enterprises Fund innovations
• SIDBI Growth Fund • Refinance Scheme for Energy Efficiency
• Portfolio Risk Fund • Structured Financing
• Portfolio Purchase Scheme

88
 Role of SIDBI

Greening MSMEs
Realising the fact of rising environmental issues all over the globe, Small Industries Development Bank of India (SIDBI), the principal
financial institution for lending Micro Small & Medium Scale Enterprises (MSMEs) in India has undertaken several initiatives, both
financial and non-financial, to promote lending for clean, green and energy efficient technologies in the MSME sector. In fact Greening
MSMEs is now an avowed agenda. SIDBI is partnering with various national and international agencies to implement the agenda of
greening Indian MSMEs.

FINANCIAL
♦♦ On the demand side, SIDBI contracted Lines of Credit (LoC) with World Bank for Environment and Social (E&S) Risk framework-
aligned lending which also tracks the procurement practices of MSMEs, Japan International Cooperation Agency (JICA); Kreditanstalt
fur Wiederaufbau (KfW), Germany; and Agence Francaise De Development (AFD), France for promoting thematic agenda of
environment and Energy Efficiency [EE] projects in MSME sector. These focused schemes have two pronged approach, i.e.
concessional lending to encourage investment in green, energy efficient technologies and launching of cluster specific information
dissemination.
♦♦ JICA credit line was launched during the FY 2008-09 with an objective to reduce energy consumption, enhance energy efficiency,
reduce CO2 emissions and improve the profitability of the Indian MSMEs in their long run. More than 2700 projects have been
assisted under the said line aggregating to an estimated reduction of 3,13,600 tons of CO2.
♦♦ Under the KfW EE-LoC which is operational at present, SIDBI aims to reduce atleast 80,000 tons of CO2 emission/annum by the
way of investment in the EE equipments. SIDBI has also been running KfW Environmental/Cleaner production LoC wherein the
investment under this credit line mainly focuses on the clean/green investment in the MSME sector.
♦♦ Under AFD LoC, a total of 661 cases have been sanctioned. The total loan amount of ` 436 crore disbursed till date carry ultimate
objective to reduce the fossil fuel energy consumption of the MSME sector and to reinforce its resilience to a new energy context,
characterized by increasing energy prices and higher constraints on CO2 emissions..
♦♦ SIDBI has provided collateral free loans to 950 taxi drivers in Mumbai to phase out their old taxis which were running in petrol
and to procure new Compressed Natural gas (CNG) taxis. SIDBI has also provided assistance 600 CNG fitted auto rickshaws in
Chandigarh through Delhi Finance Corporation (DFC). SIDBI assisted 50,000 solar lanterns in Manipur by the way of micro loan
to the end beneficiaries.
♦♦ It has launched SRIJAN (in association with TIFAC) for assisting commercialisation of innovations.

NON FINANCIAL
♦♦ Bank has also taken up promotional activities to showcase the advantages of EE investments in the high energy intensive MSME
sector. On the supply side [under BDS Programme of MSME Financing and Development Project (MSMEFDP)], SIDBI has
organized several awareness programmes, workshops, brought out sectoral EE booklets, etc., which have motivated MSMEs on
the aspect of energy efficiency and cleaner production, while going for technological advancement.
♦♦ SIDBI alongwith Bureau of Energy Efficiency (BEE) is implementing a World Bank-GEF (WB-GEF) project on Financing Energy
Efficiency for MSMEs in five clusters in India with an objective to increase EE awareness, Capacity Building of Industry Associations
and knowledge management activities in the MSME clusters.
♦♦ SIDBI is also implementing a project focusing Environmental and Energy Efficiency improvements in MSME units in Steel Re-rolling
clusters under Programmatic Clean Development Mechanism (pCDM) with a view to enhance the sustainable development and
additional benefit of carbon credits to these MSMEs in future.
♦♦ Bank with the help of technical experts mapped high energy intensive MSME clusters, prepared cluster profiles, suggested EE
investments suitable to the clusters, conducted several awareness campaigns and focused group meetings in various MSME
clusters across the country for information dissemination. A list of over 600 energy efficient equipments in various industrial
segments was circulated to MSME industry associations for information dissemination.
♦♦ It has strengthened its internal cadre as also MSMEs and fellow bankers. Bank has also provided training to credit officers of SIDBI
and SFCs to improve their skills to assess E&S (140 credit officers), national / international compliances energy efficiency lending
proposals.
♦♦ Under its international partnership project, it has handholded its associate SMERA to launch (first time in India) green ratings. Its
e-initiatives called NTREES has brought in a paperless solution towards discounting of MSME bills.
♦♦ It has worked extensively on developing a cadre of business development services in 19 clusters aimed at energy efficiency/
environment, and so on. In adopted clusters, it has built the capacity of industry associations so that they attend the environmental
agenda on sustainable basis.
♦♦ As a responsive institution, even in Micro finance and ME funding, SIDBI has structured a LoC from ADB wherein the E&S
framework has been adopted.
♦♦ SIDBI has set up a dedicated Energy Efficiency Centre (EEC) in New Delhi to coordinate and collaborate with like minded players
and take forward the agenda.
♦♦ SIDBI piloted Environment and Social (E&S) Risk Management based credit to MSMEs (8000 MSMEs covered through direct and
Indirect lendings) which accepted the same. Now Banks/Other FIs/ NBFCs started taking refinance on E&S LoC which could not
happen earlier. Later project adopted tracking of Procurement Practices of MSMEs and instilling best practices.
♦♦ All these endeavours are founded on the belief that clean and energy efficient processes will make Indian MSMEs more competitive
and resilient to shifts in policy changes arising out of environment action plans.

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5.3 NODAL / IMPLEMENTING AGENCY FOR GOVERNMENT SCHEMES

SIDBI is the Nodal Agency for implementation of some of the schemes of the Government of India (GoI)
for encouraging implementation of technology upgradation and modernisation in the MSME sector.
SIDBI provides Nodal Agency services for implementation of Credit Linked Capital Subsidy Scheme
(Ministry of MSME), Technology Upgradation Fund Scheme for Textile Industry (TUFS) (Ministry of
Textiles), Integrated Development of Leather Sector Scheme (IDLSS) (Ministry of Commerce & Industry)
and Scheme of Technology Upgradation of Food Processing Industries (Ministry of Food Processing
Industries).

5.4 RESPONSIBLE MICRO FINANCE

SIDBI’s micro finance serves as a potent tool of inclusive growth and attainment of Millennium Development
Goals as also national priorities of poverty alleviation, employment generation and so on. In that respect,
SIDBI works with and through a large number of Micro Finance Institutions (MFIs) who have been nurtured,
incubated and strengthened through a comprehensive range of financial and non-financial assistance.
SIDBI is committed to attain the national goal of a broad-based equitable and inclusive growth by providing
micro credit through MFIs for on-lending to the bottom-of-the-pyramid segment of the society, with special
thrust on unserved and under-served regions of the country. Responsible lending has been one of the
top priorities of the Bank. As part of its responsible micro finance initiative, SIDBI has created a Lenders’
Forum comprising key MFI Funders with a view to promote cooperation among MFI lenders for leveraging
support to MFIs. SIDBI has been actively involved in development of a Code of Conduct Assessment Tool,
which applies to providing credit services, recovery of credit, collection of thrift etc, for MFIs to assess their
degree of adherence to the voluntary microfinance Code of Conduct formulated by the MFIs. SIDBI is in
the process of developing the India Microfinance Platform (IMFP) - to provide and disseminate valuable
information on the Indian MFIs. SIDBI has partnered with ACCION International and is supporting the
Smart Campaign, which is a global effort to embed a set of Client Protection Principles (CPPs) amongst
MFIs. The cumulative assistance disbursed under SIDBI’s micro finance initiatives upto August 31, 2011
aggregated ` 6,700 crore which has benefited more than 30 Million disadvantaged people, mostly women.

Addressing the Missing Middle: In order to address the credit needs of very small micro
enterprises which constitute the ‘Missing Middle’ segment [loan assistance between ` 50,000
to `10 lakh], SIDBI has opened experimental branches to finance micro enterprises. It has also
structured a LoC and TA from ADB and Japanese Fund for Poverty Reduction (JFPR) to attend to
missing middle segment in underserved states.

5.5 PROMOTIONAL & DEVELOPMENTAL SUPPORT

The Promotional & Developmental (P&D) activities of SIDBI are designed to achieve the twin objectives
of national importance, viz. (a) Promotional - enterprise promotion resulting in setting up new units and
creation of additional employment through its select programmes, such as, Micro Enterprises Promotion
Programme (MEPP) (formerly called Rural Industries Programme), Entrepreneurship Development
Programme (EDP) and Vocational Training Programme, etc. and (b) Developmental - enterprise
strengthening to enable MSMEs to face the emerging challenges of globalization and growing competition
through select interventions, such as, Skill-cum-Technology Upgradation Programme (STUP), Small

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Industries Management Programme (SIMAP), Cluster Development Programme (CDP) and Marketing
Assistance. Highlights of key programmes are given below:

Micro Enterprises Promotion Programme aims at promoting viable rural enterprises leading to
employment generation in rural areas and use of local resources. The programme addresses problems
of rural unemployment, urban migration, under-utilization of know-how and latent rural resources and
marketing of rural products. The MEPP has been implemented in more than 120 districts in 24 States over
the years. More than 37,000 enterprises have been grounded so far, with investments of over ` 100 crore,
apart from employment generation of more than 1 lakh persons. Modified-RIP (MRIP) as aligned to BDS
was piloted in 2 states (Orissa & Rajasthan). This aimed at instilling sustainability by promoting service
markets (to come up at local / rural level) and grounding rural enterprises and setting up of PPP to ensure
sustainablity.

Entrepreneurship Development: Entrepreneurship Development Programme (EDP) aims at promotion

of self-employed ventures capable of generating employment opportunities, especially targeting less
privileged sections of the society like women, Scheduled Castes / Scheduled Tribes, minorities and rural
poor. The total number of EDPs supported by the Bank since inception for various target groups was 2,830
benefiting about 70,000 participants.

Skill-cum-Technology Upgradation: With a view to strengthening the technical and managerial

capacities of the MSME entrepreneurs, the Bank supports reputed management / technology institutions
to offer certain structured management / skill development programmes, viz. Skill-cum-Technology
Upgradation Programme [STUP] and Small Industries Management Programme [SIMAP]. STUP aims at
enhancing technology profile of MSME units and SIMAP targets qualified unemployed as well as industry-
sponsored candidates, with the overall objective of providing competent managers to the MSME sector.
The total number of STUPs and SIMAPs reached 1,490 and 290 benefiting more than 39,000 participants.

MSME Financing and Development Project: SIDBI is implementing a multi-agency/multi-activity

MSME Financing and Development Project (MSMEFDP). The Department of Financial Services, Ministry
of Finance, Government of India is the Nodal Agency for the Project. The World Bank; Department for
International Development (DFID), UK; KfW and GIZ, Germany are the international partners in the
Project. The primary objective of the Project is to meet both the demand and supply side concerns of
MSMEs through a judicious blend of financial and non-financial services. The project has contributed to
the emergence of enabling eco-system through systemic change. It has so far reached out to around 1 lakh
beneficiaries comprising MSMEs, bankers and other stakeholders. The Project has received Association
of Development Financing Institutions in Asia and the Pacific (ADFIAP) Award in 2011 for “Making Markets
Work” for Indian MSMEs. In year 2011, it had fetched ADFIAP award for “Local Economic Development”.

SIDBI’S SUPPORT TO NORTH EASTERN REGION (NER): The Bank accords special and focused
attention to the development of North Eastern Region (NER) in terms of micro finance, rural Industrialization,
handicraft cluster development, entrepreneurship development, marketing support, etc. Total disbursement
of ` 440 crore was extended under various schemes for the North Eastern Region. The Bank has supported
39 clusters under Cluster Development Programme in different States of NER covering activities like
bamboo mat weaving, carpet weaving, handicrafts, handloom weaving, etc. These cluster development
initiatives benefitted about 5,600 artisans. 22 districts in NER are covered under MEPP. A Counseling

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Centre for micro & small enterprises was set up in FY 2010 jointly by SIDBI and United Bank of India for
providing counseling services to potential entrepreneurs. The Counseling Centre has provided counseling
services to more than 1200 prospective entrepreneurs till December 31, 2011.

5.6 ASSOCIATES /SUBSIDIARIES

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): The Ministry of Micro,
Small and Medium Enterprises, Govt. of India, and Small Industries Development Bank of India (SIDBI),
set up CGTMSE to implement the Credit Guarantee Scheme (CGS) and launched the scheme formally
on August 2000. Under the scheme, credit facilities upto ` 100 lakh, extended by eligible lending banks/
Financial Institutions without collaterals or third party guarantee, are covered under the CGS.

SIDBI Venture Capital Limited : SIDBI Venture Capital Ltd. (SVCL), a subsidiary of SIDBI set up in
July,1999, is an asset management company, presently managing two venture capital funds, viz. the
National Venture Fund for Software and Information Technology Industry (NFSIT) and the SME Growth
Fund (SGF) for providing venture capital assistance to knowledge based MSMEs, especially in the
areas of life sciences, clean technologies, information technology, bio-technology, etc. Till December 31,
2011, a total of ` 551 crore has been disbursed under the two funds.

SVCL has launched its third fund viz., “India Opportunities Fund” (IOF) in 2010. IOF has so far received
aggregate commitments of around ` 625 crore. Inspite of highly competitive fund raising environment,
SVCL with SIDBI as an anchor investor, has been able to mobilise commitments from major domestic
institutional investors, viz. LIC of India, State Bank of India, Canara Bank, IDBI Bank, Bank of Baroda,
Syndicate Bank, Punjab National Bank and Technology Development Board. The first closure of IOF is
expected shortly and thereafter it would commence operations. IOF shall be sector agnostic and shall
focus on making early and growth stage investments.

SME Rating Agency of India Ltd. (SMERA): SIDBI, along with Dun & Bradstreet (D&B) and several
Public and Private Sector banks, set up SME Rating Agency of India Ltd. (SMERA) in September 2005, as
an MSME dedicated third-party rating agency to provide comprehensive, transparent ratings to MSMEs.
SMERA has achieved market leadership position in MSME ratings and as on December 31, 2011 has
rated more than 14,000 MSMEs out of which micro and small enterprises constitute 98%. SMERA has
also launched variants, such as; Green Field & Brown Field Ratings, Micro Finance Institutions’ Ratings,
Maritime Institutions Grading, Educational Institutes Grading and Risk Model Mapping / Validation. To
promote green rating in MSME sector, SIDBI, in association with SME Rating Agency of India Limited
(SMERA), launched a pilot scheme called Green Rating for the first time in the country, to encourage
MSMEs to get their manufacturing facilities rated on environmentally sustainable parameters.

India SME Technology Services Ltd. (ISTSL): ISTSL, set up in November 2005, provides a platform for
MSMEs to tap opportunities at the global level for acquisition of modern technologies. ISTSL continues
to pursue its strategy of rendering technical services for technology transfer and promotion of energy
efficient, environment friendly technologies in the MSME sector. ISTSL has identified Clean Development
Mechanism and carbon credits as its thrust areas and has been working actively in MSME clusters by
organizing awareness campaigns, seminars and guiding MSMEs to take advantage of the opportunities
existing in the carbon credit market.

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India SME Asset Reconstruction Company Ltd. (ISARC): ISARC is the country’s first MSME focused
Asset Reconstruction Company striving for speedier resolution of non-performing assets (NPA) by
unlocking the idle NPAs for productive purposes which would facilitate greater flow of credit from the
banking sector to the MSMEs. Set up in April 2008, ISARC’s objective is to acquire non-performing assets
(NPAs) and to resolve them, through its innovative mechanisms, with a special focus on the NPAs of
MSME sector. As on December 31, 2011, ISARC undertook due diligence in respect of 201 accounts and
has assets under management of approx. ` 350 crore.

5.7 CO-ORDINATION ROLE

With the objective of all-round development of the MSME sector, SIDBI coordinates with a number of
accredited technical and management institutions to synergise their services with MSME sector. Under
its P&D initiatives, SIDBI has on-going collaborations with NGOs, Consultancy Organizations, Industry
Associations and other national level organizations. The Bank also co-ordinates with various Ministries of
Government of India, Government Committees, Planning Commission, Reserve Bank of India, Industry
Associations, etc. for the promotion and development of the MSME sector in India. At the international level,
SIDBI has entered into partnership with World Bank Group, Asian Development Bank, Japan International
Cooperation Agency (JICA), Japan; Department for International Development (DFID), U.K; International
Fund for Agriculture Development (IFAD), Rome; Kreditanstalt fur Wiederaufbau (KfW), Germany, GIZ,
Germany, AFD France and soon, for increasing its financial and promotional support to the sector.

5.8 POLICY ADVOCACY ROLE

SIDBI plays a significant role in attending the key policy issues that are critical in establishing a facilitating
framework for the holistic development of the Indian MSME sector. The Policy role under the MSMEFDP
covers various issues and concerns of the MSME sector in the areas of credit, sustainability, infrastructure/
technology/skill development, etc. SIDBI endeavors to attend to macro level policy issues through synergy
and coordination with various Ministries of Government of India, Planning Commission, Reserve Bank
of India, and other institutions including International Organizations like World Bank; ADB; JICA, Japan;
IFAD, Rome; KfW and GIZ, Germany; AFD, France, etc.

Overall Operations
The details of the Bank’s operational and financial performance are given in the Table 5.1 and Graph 5.1
and 5.2.
Table 5.1 : SIDBI – Financials (` crore)
FY Income Profit Net Worth
1990-91 426 36 480
1991-92 506 72 540
1992-93 675 108 611
1993-94 852 135 703
1994-95 1000 191 846
1995-96 1135 261 1026
1996-97 1291 316 1249
1997-98 1409 405 2029
1998-99 1579 450 2359
1999-00 1598 459 2686

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FY Income Profit Net Worth

2000-01 1619 477 3771
2001-02 1560 282 3951
2002-03 1405 207 3934
2003-04 1151 243 4071
2004-05 948 225 4119
2005-06 964 270 4268
2006-07 1187 298 4436
2007-08 1638 198 4713
2008-09 2082 299 5342
2009-10 2540 421 5612
2010-11 3433 514 5979

Graph 5.1 : SIDBI - Outstanding Portfolio (as at end - March)

Graph 5.2 : SIDBI Financials

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 MSME FINANCING AND DEVELOPMENT PROJECT
SIDBI is the Implementing Agency for the “MSME Financing and Development Project (MSME - FDP)”
involving the World Bank, DFID, UK and KFW & GIZ, Germany as partners. The Department of Financial
Services, Ministry of Finance, Government of India is the Nodal Agency for the Project. The Project
attends to demand and supply side needs of MSMEs through judicious provision of financial and non-
financial services. Project has adopted an innovative approach (caters to target population which spans
across stakeholders of MSME domain) to attend to poverty alleviation through enterprise development in
MSME domain. The grounding of enterprises and instilling competiveness in them contributes to National
development as also the Millennium Development Goals.

The Project objective was to “improve MSME access to finance (including term finance) and business
development services, thereby fostering MSME growth, competitiveness and employment creation”. This
was to be achieved by focusing on:

► Enabling framework for MSME financing by banks.

► Helping banks to gain better access to longer term financing for lending to the MSME sector.

► Mitigating banks risks related to MSME lending and reducing transactions costs of such lending
while, at the same time, ensuring the banks enhance quality of their MSME loan portfolios.

► Strengthening Business Development Services (BDS) and market linkage programs for MSMEs.

►► Other ‘ENABLERS’ of MSME eco-system.

6.1 Project Framework and Theory of Change

In order to achieve its aims, the Project, besides upgrading direct flow of credit to MSMEs, addresses
demand side issues of credit and streamlining access to qualitative financial and non-financial enterprise
oriented services. This is being done with support of Technical Assistance utilized for strengthening
the credit information system, credit rating, credit scoring, structuring of innovative products, capacity
building of the participating banks, policy and regulatory issues and promotion of market oriented business
development services for the sector.
SIDBI Report on MSME Sector 2011

Components
The Project has three major components:
●● Credit facility (CF) from the World Bank (WB) and KfW Germany
●● Risk Sharing Facility (RSF)
●● Technical Assistance from DFID, UK, KFW & GIZ, Germany

Lending Partner Purpose Tenor / Utilization Period

International Bank for Reconstruction and Credit Facility I 15 Years
Development (IBRD)
Addl. Credit Facility 15 years (utilisation period is up to
June 2012)
Kreditanstalt fur Wiederaufbau (KfW), Credit Facility 12 Years
Germany
Kreditanstalt fur Wiederaufbau (KfW), Technical Assistance (TA) 5 years
Germany
Department for International Development Technical Assistance (TA) 7 Years*
(DFID), UK
Deutsche Gesellschaft fuer Internationale Technical Assistance (TA) Phase I (3 Years - till March, 2010)
Zusammenarbeit (GIZ), GmbH Phase II (April 2010-March 2014)

*Effective 6 Years

6.1.1 FRAMEWORK

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6.1.2 FULCRUM

Along with attending to soft infrastructural (non financial aspects) as also some pilot attendance to the
financial aspects in clusters, the project kept its focus on access to financial services, based on three
pillars: Credit Dispensation, Credit Supplementation & Credit Enhancement. For Credit Dispensation, it
has channelized over USD 444 Million to 7500 plus MSMEs through Environment and Social Risk (E&S)
aligned facilities for which 140 plus Credit Officials, Internal /External Auditors, etc. have been trained.
For Credit Supplementation, Project has supported piloting of Risk Sharing Facility (aimed at mitigating
risks of moral hazard and adverse selection, sharing risks on 50:50 basis for loans between ` 50 lakh
to ` 100 lakh through CGTMSE, which has since been institutionalised and scaled up version in offing),
setting up of SME Commercial Bureau in CIBIL (by establishing database of entities more so of MSMEs
at lower segment which has increased their bankability - database has grown from 6.7 lakh to 75.9 lakh
with more than 5 lakh reports accessed till Oct 2011), setting up of SME Rating Agency of India Ltd.
(SMERA) - Capacity Building support towards its establishment and making it sustainable, evolve efficient
independent rating mechanism (it has established its efficacy through 14000 plus ratings), launch variants
as per emergent market conditions viz. Green Ratings, MFI Ratings, etc. and Launching an innovative
tool - Credit Appraisal and Rating Tool - CART (a system driven robust and validated tool which has
led to reduced Turn Around Time in credit availability). For Credit Enhancement, the project built-up the
capacity of several bankers, Micro Finance Institutions (MFIs), Non-Banking Finance Companies (NBFCs)
& State Financial Corporations (soft infrastructure and training). Supporting strategic institutions dealing

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with thematic issues of Risk Capital (for enabling the evolving of robust Risk Capital eco-system thus
enabling MSMEs access equity and quasi equity easily), Technology Access, Unlocking Capital etc. were
its mainstays.

Under Non Financial Services, project developed and implemented a new way of cluster development
which has evolved as ‘Making Market Work for MSMEs’ (MMWM) which is rendering new dimensions to
cluster development. The Business Development Services (BDS) interventions in 19 clusters (targeted
at 7 sub sectors - Leather, Engineering, Pharma, Knitted Apparel, Fruit and Vegetable Processing, Floor
Covering and Dyes & Chemicals) were focused towards market development such that the tools and
models continue on sustainable basis as also these as ‘role models’. By piloting launch in 3 clusters in 2006
and imbibing the learnings, it integrated the experiences and scaled it up in total 19 clusters. The Project
has acted as a catalyst by developing sustainable and technically competent - locally relevant experts
(450 empanelled BDS - both Individual/ Institutional - in area of Skill Development, Technology, Quality,
Marketing, Finance and so on), enabled National /International compliances by over 1950 MSMEs in

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clusters - achieved through 1100 activities - cumulatively from 2007, over 2,100 transactions (with /without
voucher support), Credit Linkages (Reference over ` 435 crore), MSME Mentoring (www.msmementor.
in), BDS aligned Rural Industrialization Programme in 2 pilot locations (in underserved regions), foster
entrepreneurship within Micro Enterprises (MEs) of underserved regions (developing a cadre of BDS
providers for counseling /handholding of MEs in NE region - more than 1200 prospective entrepreneurs
counseled).

Simultaneously, project worked for contributing to enabling eco system through Policy Advocacy component
which attended to information asymmetry by creating a robust knowledge bank (www.msmefdp.net), series
of policy papers / publications / knowledge documents / tool kits (more than 20 nos.). These have been
widely disseminated and appreciated by the stakeholders and policy makers. For private sector advocacy,
the project launched “Advocacy Challenge Fund”. It is understood to be the first such enterprise oriented
fund in India. The project developed a single source information channel for new and existing enterprises
which is being launched soon. Project, through SIDBI, advocates MSME policies and conveys the best
practices through various committees, meetings, discussions etc.

Differentiators
The project has led to market functionality now visible in the 19 clusters, which is a systemic change as
against earlier transaction led actions. The project which took off in 2006 has so far reached out to around 1 lakh
beneficiaries (MSMEs and stakeholders with multiplier possibilities) as against about 13,000 beneficiaries in March
2010 indicating substantial jump in scale. The beneficiaries include:
- MSMEs through LoCs – 8117 (Direct Finance + through Refinance)
- Clusters (Both Direct and Indirect) - Approx. 46954
- Bank Officials - 2200
- Service Providers - Approx. 1000
- Capacity Building of Bank Officials (Indirect through CIBIL) – 17000+
- Sensitization / Awareness through workshops & events (Direct - 500+ & Indirect – 3230+)
- MSMEs rated by SMERA - 14,000+
- Government, MSMEs & Stakeholders (under information dissemination)
a) Project gets visible through more than 300 media coverage in over 19 clusters (newspaper, magazine
etc.), more than 25 lakh website hits (through 20 websites).
b) As per the records the project website (www.msmefdp.net) has registered average 1508 unique visitors
during last six months (total 9050 unique visitors and 11396 hits during May-Oct, 2011) which indicate its
receptivity. Besides India, the visitor’s are from countries such as: Germany, Russian Federation, China
Finland etc.
c) Project has created a knowledge respository on www.msmefdp.net & www.sidbi.in. The various
publications and research reports developed under the project are freely accessible.
d) More than 30 reports / booklets/ policy series developed directly under the project (besides developed by
cluster agencies, GiZ etc.) are widely disseminated among MSMEs, Govt. and concerning stakeholders.
e) Under GIZ TA - 15,000+ (MSMEs, stakeholders, Bank Official, etc.)

Note:
Direct : Undertaken by project team
Indirect : Through outsourced agency, beneficiary etc.

MSMEFDP received several recognition and awards at international level. In the year 2010 it won
award on ‘Local Economic Development’ and in 2011 it won the international ADFIAP
Award 2011 with the agenda of “Making Markets Work for Indian MSMEs”

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6.1.3 Monitoring and Evaluation (M&E)

♦♦ The project laid down a robust system of regular monitoring and evaluation of progress and followed
it diligently. A Logical Framework (LFA) for each component under the project has been established
tracking the Goal, Purpose, Outputs and Impact through Objectively Verifiable Indicators (OVIs).

♦♦ The project emphasized on the LFA to ensure project implementation followed the right track. Also
Project Management Division (PMD) helped the other project beneficiaries (received funding from the
project) to draft their own LF - these were nested LFs (branching out of project’s LF). This helped
PMD as well to be able to monitor and report progress back to the donors. Besides Logical Framework
Assessment (LFA) system the overall framework had three tier systems:

►► Project Review Committee (PRC) is the overall Governing and monitoring body for the project –
Apex level monitoring and review committee that offered guidance and suggested corrective actions.

►► Policy Advisory Group (PAG) committee provided guidance on Policy Advocacy.

►► Project Management Division (PMD): Implementation Team acted as an SPV within the organization
which had its own delegation for decisions, procurement guidelines based on international best
practices, staff from SIDBI as well as on contracts. This structure has resulted in lower implementation
costs on salaries, establishment expenditure and at the same time enabled continuous availability
of support from senior management of SIDBI Partners. This structure has brought in project
management skills and managing consultants from demand side. Project Advisory Committees
(PAC) and PRC guided the implementation of the project, advised PMD on innovativeness of new
concepts / approaches and take mid-course correction, wherever felt necessary.

►► Review Missions (generally annually) with external experts forming the team.

►► PAC for assessing, advising and guiding the various Capacity Building support initiatives extended
to Banks, Credit Information & Credit Rating, Policy Advocacy etc.

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►► Cluster Coordination Committee to instill ownership among key cluster actors from very beginning
and devising/ revisiting action plans as per their demand and expectations.

►► Regular meeting and discussions, Monthly /Quarterly Progress Reporting System and Roping in
External Agencies on M&E at Macro Level, for BDS at Micro Level, Auditors (internal and external)
and procurement audit made the system more robust.

►► Time to time management audit was undertaken from a specialised SIDBI division which tracked
the quality aspects and adherence to standards, procedures and interaction with partners. This led
to more effectiveness in project handling.

6.1.4 Key Enablers To Eco System

► Attending to Information Asymmetry

IT based Platform - Under MSMEFDP 19 Cluster websites (providing sectoral information including
database of strategic service providers), 16 websites of MSME Association, 25 Websites of MSMEs
(facilitating their brand promotion and marketing niche, E-Marketing etc.) and around 46 MSMEs for
acquiring customized ERP solutions have been supported.

Micro Enterprises Business Information Counsellors (MEBIC) - In order to foster entrepreneurship

and remove information asymmetry within micro enterprises of underserved regions, the Project took an
initiative for developing a cadre of BDS providers for counselling, initial handholding and development
of micro enterprises in North-Eastern region as Micro Enterprise Business Information Counsellors
(MEBIC). More than 1200 prospective entrepreneurs have been provided counselling services which
included mentoring / handholding till March, 2011.

►► Innovative Tools

The Project has adopted many International Best Practices which have demonstrated scalability and
replicability attributes. These are:

♦♦ Adoption & replication of Environment and Social (E&S) Risk Framework in Lending and tracking
of procurement practices of MSMEs

♦♦ Risk Sharing Facility (through CGTMSE) which has since been institutionalized & scaling up is in
offing.

♦♦ Advocacy Challenge Fund (a first time enterprise oriented fund support mechanism in India which
had action research grant as also in-built incentive mechanism enabling NGOs /BMOs to concretise
their ideas into action research project (Challenge was to implement their own ideas for which project
supported it) .

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♦♦ Making Market Work for MSMEs (through BDS

Revitalisers – Attending to Bottom of
market development in 19 Indian clusters). Key Pyramid
innovative tools/ model for BDS delivery viz.
Swasreya Coir Development Society has 40
SHGs of 10 members each. The Society was
●● Voucher Support - Subsidizing by the project
linked to M/s R.G. Consultancy, a Business
towards initial payout by MSMEs to BDS on Development Service Provider (BDSP) for
tapering basis through a tripartite arrangement marketing in October 2008. As a part of their
between BDS, MSME and Facilitating Agency marketing strategy to increase visibility the
project also introduced a BDS for website
(FAs) - where FAs role has been to oversee
and catalogue development. Through his
successful transaction completion. efforts the unit got its first domestic order in
March 2009. The society had also developed
●● BDS Clinic - A one point solution and matchmaking a new product called the Comfort mat but
platform bringing MSMEs/ BDS together for on the were not making much headway in marketing
spot viable solutions. it. The BDS provider hand hold for linkage
to market in sectors (such as IT) where the
●● BDS on Wheels - A vehicle carrying BDS to cater product would have most relevance and easy
acceptance. The BDS provider is in process
to MSMEs service requirements at the place of
of building a marketing department within the
MSMEs (with thrust on MEs) unit and training the personnel to enable it to
undertake own marketing.
●● BDS Panel - Created Panel of > 450 empanelled
BDS who have successfully rendered services to
MSMEs thus giving the needed trust (it includes a pool of FAs - with more than 110 personnel
in team), BDS Consortia (pooling BDS of different specialization under one umbrella to offer
advantages of collaboration), nineteen virtual BDS (each cluster has a website which have acted
as knowledge repository), benchmarking of costs leads to reduction in fee etc.

●● Value chain mapping - Every cluster underwent Diagnostic Study which mapped critical pressure
points which were attended throughout project intervention. The emergent scenario post
implementation was compared to pre-launch situation as mapped by diagnostic study.

●● Who-Does-Who-Pays (WDWP) Matrix - The tool has been adopted to map the availability of BDS
and their existing users including paying pattern in the clusters. This was tracked for pre and post
situation.

●● Cluster Coordination Committee - This instilled ownership among key cluster actors towards
project initiatives right from inception (diagnostic) till exit (handing over to exit vehicles). It vetted,
validated, monitored and guided the initiatives.

●● Cross Learning’s & Exposure Visits - For learning’s from successes and failures in other clusters,
Project organized cross learning workshops on regular basis (national / regional level which has
evolved as an institutionalized learning mechanism). More than 16 such learnshops upgraded the
capacity of FAs.

●● Skill Development Models (with MFI, BMO led, Corporate Houses, Academia-Industry Partnership
etc.) were tested and validated institutional BDS.

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►► National Level Mentoring to MSMEs

Capacity Building Assistance was extended for development of a portal www.msmementor.in which is
an online platform enabling identification, availability and matchmaking of right Professionals / Service
Providers in a simple, cost-effective and time-efficient manner for Indian MSMEs. This website is a
jointly supported initiative of SIDBI and NSE. Presently this service is being provided free of charge for
both Professionals / BDS Providers (to enrol) and for MSMEs (to search).

►► Modified Rural Industries Programme

SIDBI has been fostering rural industrialisation for many years. In order to make it more sustainable, the
project supported the modified version of Rural Industrialisation Programme (RIP) in 2 Pilot locations
(Sawai Madhopur, Rajasthan and Nayagarh, Orissa) with a focus on instilling supply side sustainability
i.e. availability of local BDS.

►► Knowledge Access mechanism - For attending to key challenges of the domain including information
asymmetry and contribute to enabling policy environment, project has created

●● Project Website (www.msmefdp.net) - A robust knowledge bank provides free access to toolkits,
knowledge series and policy documents.

●● Knowledge Series / Policy Papers / Tool Kits - Several policy papers / publications (e.g. Factoring
- brought out in 2010 has contributed to legislation in December 2011), Global Best Banking
Practices in MSME Financing and Development (practices with customization possibilities for
India – references from which have been drawn for the Plan Document – 12th Five Year Plan),
Toolkits (e.g. Walk-in-Kit for Corporatization of MSMEs - fostering corporatization so as to enable
95% non-corporate MSMEs to slowly adopt it for growth and rise up the value chain, web enabled
MSME Kit etc.), Series on Risk Capital for MSMEs, Feasibility of Credit Card for MSMEs ) etc.

6.2 Achievement, Learning and Impact of MSME-FDP

6.2.1 Summary of Project Achievements and Replicable Learning
The project has contributed to increased percentage of outstanding MSE Credit to Net Bank Credit through
channelising of line of credits which were aligned to Environment and Social Risk framework. Capacity
Building of MSME Support Institutions like CIBIL, SMERA etc. contributed towards Credit Supplementation
and Credit Enhancement to MSMEs, which is visible in the growth trend within the Sector. The project
has attracted stream of BDS providers in the 19 clusters (adopted by it - Annexure III) who have depicted
higher level of engagement with MSMEs leading to increased turnover (for both BDSPs and MSMEs)
and profitability. Overall cluster intervention has fostered competitiveness by enabling ‘Markets to Work
for MSMEs’. It has also steered institutionalization of cluster support mechanisms and therefore has
developed a large scale replicable model of BDS market development in clusters.

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The summary of project strategies, achievements, outcomes, impact and lessons is captured in the
diagram below:

As highlighted above, Cluster Development vs. BDS Market Development was the key understanding
required among the facilitating Agencies (FAs). Those focussing on Cluster Development worked directly
with MSMEs and those focussed on BDS Market Development worked with BDS providers and created
interfaces of them with the MSMEs. The later approach was more successful. MSMEFDP’s thrust on
ownership and participation of cluster actors/stakeholders was major factor for success and replicable
traits. It may be mentioned that unique interventions such as Green revolution or spread of mobile in nooks
and corners of the country has been sucessful due to public participation. Cluster movement can have
larger impact once ownership is instilled from very beginning. PMD and nimble cluster agencies therefore
was a major factor of success of the MSMEFDP.

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The Project has adopted many international best practices which have demonstrated scalability and
replicability attributes. These are summarized below:

ACCESS TO FINANCE

A. CREDIT DISPENSATION
CREDIT FACILITY
The project has done very well on first count as both the World Bank(WB) Tranches and one Tranche of
KfW have been well utilized for Credit Dispensation. On the second count, in terms of integration of BDS
interventions with access to finance in the 19 clusters, the picture is mixed, with some successes.

The first Line of Credit by World Bank for USD 120 Million has reached to 927 MSMEs in 13 locations.
The Line of Credit (LoC) was utilized in 18 months compared to target of 36 months. This appeared as
improved MSME access to finance (including term finance). The additional Line of Credit by World Bank
was provided for USD 400 Million in June 2009. Out of this, USD 324 Million (81%) have been dispensed by
October 31st, 2011. With this line of credit, project has covered 6823 MSMEs through SIDBI, Participating
Financial Institution (PFI) and Non-Banking Financial Company (NBFC). The LoC was channelized in
45 locations across the country, which includes underserved regions like North East and Uttar Pradesh,
Madhya Pradesh etc. The additional line enhanced its geographical coverage, supported Innovative
MSMEs loan products (Terms Loans, Working Capital Term Loan, Working Capital Limits, Bill Discounting
etc.) as also reaped benefits of downscaling (doing small loans profitably). MSMEFDP has also linked its
BDS initiative with access to finance and in 19 clusters over 874 enquires for amount over ` 393.51 crore
were generated and over 335 MSMEs were linked to credit / financial institutions for assistance worth `
241.89 crore. The Line of credit from KfW for Euro 43.5 million has also been fully utilized. It has reached
to 367 MSMEs in 11 states. This was utilized in 15 months compared to target of 36 months.

Downscale to Upscale
Au Financiers (India) Private Limited (AUFIPL), an NBFC, which started from Rajasthan (now it operates
in four states) has been a Small Road Transport Operator (SRTO) centric financer. AUFIPL is a frontrunner
in the state of Rajasthan for phasing out old three wheelers operating on Diesel and Petrol engines and
introducing newer CNG/ LPG based vehicles. IFC invested in the equity of the NBFC. In order to enable it
to move to MSE domain (which was started in May, 2009 on pilot basis & has since taken a share of 9%
of portfolio and further which is projected to grow up to 15% by FY 2012), SIDBI extended funding of ` 40
crore to it (under World Bank LoC support), which has since reached out to 1800 plus loans extended for
energy efficient vehicle finance and MSEs loans (mostly ` 10 lakh and below to micro startups). In order
to enable the integration of Environmental and Social Framework (E&S) in its lending mechanism, project
has sensitized the key Credit Officers (including CEO) of Au Financiers on Environmental and Social
framework. This shall enable it to be more responsive to sustainable agenda.

Responsible Financing

Recognition of Environment and Social (E&S) Risk in Lending and Associated Risk Mitigation

♦♦ The long term financing is a critical input for supporting capital formation and technological up-
gradation. Looking beyond traditional approaches, the Project facilitated MSME growth for survival

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and sustainability by providing Environment and Social Risk Framework aligned Credit Facility. With
World Bank support, SIDBI adopted global best practices and piloted Environment and Social (E&S)
Risk framework aligned credit to MSMEs. This started with first LoC in year 2005. After successful
implementation, the project has sensitized and influenced Banks and Govt. of India on E&S Framework
through Regional and National Workshops.

♦♦ In the beginning while adopting and extending the E&S Framework linked Credit Facility directly to
MSMEs, it was found that its receptivity was low. Based on the perception and feedback of the credit
officers, the project shifted its strategy towards supply side and trained a batch of 50 Credit Officers
(emerged as nodal officers as also facilitation officers) capturing and guiding the mind share of MSMEs
in a facilitation manner. This worked and it channelized USD 115 Million (in 1 ½ Years as against 3
Years availment period allowed by WB) to reach out to around 1000 enterprises.

♦♦ Later, it was realized that Internal and External Auditors as also Central Loan Processing Cells (with
sectoral expertise) need to be trained. With a pool of more than 140 Credit Officials (including Internal
and External Auditors, NBFCs etc.) on E&S, SIDBI spearheaded the agenda of ‘greening MSMEs’.
A sensitization programme for Banks /NBFC officials on E&S at regional and national level was also
held.

♦♦ Under WB support SIDBI further adopted tracking of Procurement Practices of MSMEs and instilling
best practices of transparent procurement, offering value for money.

♦♦ On non-financial side SIDBI has instilled functionality in BDS market by working extensively on developing
a cadre of business development services in 19 clusters aimed at energy efficiency/ environment. In
adopted clusters it has built the capacity of BMOs so that they attend to the environmental agenda on
sustainable basis.

Tracking Evolution of Environment & Social Risk Framework

Implementation Achievement through E&S Framework Becoming more Environmental
and Social Responsive
SIDBI has adopted an ◘◘ Credit line reaching to Underserved states ◘◘ Case Studies on E&S
Environment and Social viz Uttar Pradesh, Madhya Pradesh, Bihar, (status, achievements etc.)
Management Framework into Jharkhand, North East, West Bengal etc. have been documented for
its lending operations. Various dissemination.
◘◘ A Regional Workshop at New Delhi (at-
initiatives were taken to create
tended by 25 Bankers) followed by National ◘◘ E&S Framework revisited
environmental awareness
Workshop on “Sustainable Financing and by a specialized agency
amongst MSME units such as
Non-Financial Risk Reporting” was organ- for updating various legal
awareness campaigns and
ized in June 2011 under GIZ TA inaugurated aspects, incorporate field
cleaner production workshops. It
by Deputy Governor of RBI and participated level feedbacks etc.
adopted World Bank’s safeguard
policies and international by more than 25 banks and stakeholders. ◘◘ Credit line reaching to the
standards/guidelines to assist ◘◘ Leveraged E&S Framework for developing clusters adopted by the
the MSME sector in improving niche in energy efficiency try it in Micro project and financial linkages
their environmental and social Enterprise (Missing Middle), and adopt EE through BDS took off.
performance. agenda in clusters where it is utilizing the
experience of FAs who worked in cluster
programme helped in leveraging FAs
experience.

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Sustainability Reporting

Project supported Coporate Social Responsibility (CSR) Report of SIDBI - the first such report by Indian
Financial Institutions which was later hosted on Global Reporting Initiative (GRI) website (a repository of
sustainability reports). Based on that a Model CSR Framework was also developed (2010) for Banking
& Financial Institutions which evinced appreciation from Reserve Bank of India and other stakeholders.
Some banks have started following the preparation of CSR report as per the suggested CSR Model under
the Project. Project has also supported in organizing the stakeholders consultation workshops of SIDBI
Employees/Bankers under MSMEFDP-GIZ, wherein the sustainability related issues pertaining to Banking
Sector and MSME Sector were discussed and prioritization has been done. These consultations have
helped Bankers to understand how to identify the sustainability related issues and attend the same.

Green Rating

SIDBI, hand-holded its associate SMERA to launch a first time in India ‘Green Rating’ for Enterprises. It is
encouraging MSMEs to get their manufacturing facilities rated on environmentally sustainable parameters.
The rating establishes compatibility of an industrial unit in adhering to manufacturing process resulting in
efficient use of resources with minimum environmental damage. Green rating parameters are determined
for each industry based on base level technologies and commercially viable clean technology available
for the sector. It also takes into account compliance of a unit’s environmental regulatory norms. Under the
pilot arrangement, 80% of the actual cost of Green Rating subject to a maximum of ` 45000 per unit was
borne by SIDBI. To enable initial buy in, during the pilot, SIDBI extended the rebate on interest rate to the
units rated “Green Rating-3” and above under “Green Rating”. To provide impetus to one of its unique
kind of initiative in World, SIDBIs international partner - KfW, Germany agreed to support the cost of pilot
green ratings.

Promotion of Micro enterprise Finance through working with Micro Finance Institutions (MFIs)

Under MSMEFDP- GIZ, project promoted institutional lending to micro enterprises through “credit up-
scaling activity”. A micro enterprise loan product and a risk assessment tool have been developed together
with Sa-Dhan, an association of micro finance institutions and its knowledge partner (M2i). A benchmarking
exercise organized to identify MFIs that have the capacity to diversify into the Micro Enterprise Finance
segment. Thereafter a consultative meeting with key stakeholders to disseminate information about the
product was organized.

Promotion of “Green Finance”

Under MSMEFDP- GIZ, Project supported the Indian banking sector with the development and introduction
of innovative financial products in the area of “Green Finance”. After a Knowledge Mapping on successful
loan schemes and an analysis of international good practices in the area of energy efficiency financing for
MSME in October 2010, a special loan product for purchasing energy efficient machinery and equipment
in MSME has been developed by Frankfurt School of Finance and Management. After a workshop in

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November 2010 to disseminate the knowledge, feedback was received from Indian banks. The product
is being piloted with State Bank of India in the light engineering cluster in Ludhiana- Mandi Govind Garh,
which includes around 10,000 units. A baseline study has been completed, providing information of different
units’ financing needs. Pilot of EE loan product will be carried out in 2012 and after positive evaluation of
a pilot, the product will be rolled out nationally.

Sustainable Banking

Under MSMEFDP- GIZ, project offered strategic advisory services for assisting banks in their development
of their Sustainability or Green Finance Strategy. Jointly with other GIZ-initiatives and in collaboration
with the Global Reporting Initiative, the project organized a multi-stakeholder dialogue and conference
on “Mainstreaming Environmental and Social Aspects in Financial Markets” in January 2011, targeting
about 150 delegates from financial institutions, financial consulting firms, academia and government
departments. Awareness was created on the business case of integration of environmental and social
concerns in business practices and corporate management. A status quo analysis for stocktaking of
existing practices with regard to integration of environmental and social concerns in banks’ operations
was conducted and practices of SIDBI, YES Bank and ICICI were analyzed more in depth. A National
Conference jointly organized under MSMEFDP by GIZ and SIDBI on “Non-Financial Reporting and Risk
Assessment in Banks and Financial Institutions in India” on June 6th, 2011 in Mumbai offered a platform for
more than 80 participants from 25 banks to discuss how to integrate environmental and social concerns in
the banking sector and in lending procedures. The TC-measure aims to bring the discussion on integration
of sustainability concerns in the financial sector to the policy level. As a result of the conference, in which
the Deputy Governor of the Reserve Bank of India was guest of honour, first steps to engage with the
Indian central bank on banks’ responsibility to lend to MSME were explored.

CREDIT LINKAGES
♦♦ Cluster Intervention
By achieving integration of BDS Market Development with ‘Access to Finance’ initiatives, a greater
multiplier effect has been unleashed. Every cluster has different financial needs. The banking industry
generally provides similar financial products across the clusters with similar kind of conditions and
compliance requirements. Leather and Pharma cluster firms, for example, need financial products that
can cater well to the needs of the firm there. The terms and conditions of granting loans need to be
suitably amended as well depending on the profile of cluster firms. Replicable attempts regarding this
were done in the clusters. Access to finance can leapfrog with specific efforts by the cluster agency
and specific financial products by the banking and MFI sector.

Clusters have seen efforts for facilitating linkages of MSMEs with SIDBI and other bank branches.
Many SPVs {like Rourkela Techno-Park Self Helf Co-operative Ltd. (RTPSHCL) for relocation of firm in
Rourkela cluster} and consortia’s (like Ahemdabad Dyechem manufacturers Cluster Ltd.) established

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to ease the access to finance to MSMEs. Participating Bank officials sensitised towards MSME
lending with better tools to lower transaction costs. In some cases like in Faridabad, BMOs have been
capacitated to support MSMEs in accessing finance. A business correspondent model has also been
devised and implemented for the purpose.
Few such credit linkage facilitation is depicted in the chart. In Indore cluster, diagnostics identified the
bankers’ reluctance to provide funds to MSMEs for the working capital. The cluster agency organized
2 Bankers meeting with SIDBI and other 4 financial Organizations. Another workshop with Cluster
firms was organised
to strengthen their
Business Profile. Due to
these efforts industry-
financial institutional
linkages improved in
the cluster.

In Coimbatore cluster,
four interaction meets
were organised with
Financial Institutions,
nearly 200 cluster
firms attended in
the program. As a
consequence, many
firms have obtained loans from TIIC, and Banks and SIDBI. Coimbatore association evinced keen
interest in replicating Faridabad financial model for the benefit of MSMEs. In the pilot, 27 cluster firms
got financial support.
Differentiators - Making things happen
Wherever required, financial linkages have been enabled
Being dispersed, MSE units find it difficult to by roping in the financial BDS providers. While attending
send sample to public laboratories on a regular to this crucial agenda through downscaling 412 MSMEs
basis. Even courier companies do not accept have been finance with overall credit requirement of over
perishable and liquid samples. Alternatively, ` 241.89 crore with project support in 19 clusters.
there are very few private laboratories in the
Pune F&V cluster that provide full range of Under MSMEFDP-GIZ, project build strategic partnership
testing services. The cost of testing was also with SIDBI, State Bank of India, State Bank of Indore, Bank
beyond reach as the benefits were still not very of India, IDBI, ICICI, Narmada Malwa Grameen Bank, MFIs
clear. To solve the problem of sending samples to enhance Credit Flow through Credit Linkages, Credit
to laboratories for testing, a mobile testing van Up-scaling, Industry Specific Loan Products on GMP and
equipped with necessary equipments required ICT etc. Around 324 enterprises employing 33,124 persons
for regular testing has been put to service by linked with banks through Credit Linkages (aggregate credit
MAARC Lab. The van also carries the sample
of ` 806.52 crore extended). A pool of financial experts
to the laboratory.
were linked to MSEs through voucher support.

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B. CREDIT SUPPLEMENTATION
Information asymmetry restricts Banks/ FIs to purvey adequate, timely and cost effective credit to MSME.
This sub-component aimed at collating credit history data of MSMEs with a view to strengthening credit
information building and dissemination. In addition to these, facilitating Credit Rating and creation of credit
scoring products was also encouraged. In terms of improving Credit Information flow and supporting
development of credit scoring/ rating mechanism, the project has supported following measures:

♦♦ Credit Information Building

With the objectives of enhancing the Credit Information System through Credit Information Building
(MSME Credit Histories) and create a framework that encourages Banks/ FIs to make use of information
for quick and informed decisions for lending to MSMEs, CB support was extended to Credit Information
Bureau (India) Ltd. (CIBIL) from 2006 till 2011. The Project has helped CIBIL:

■■ In establishing the first SME Commercial Bureau in India (in 2006)

CIBIL, leveraging project support, successfully added Commercial Database wing to its repository
of information and become the first and only operating Commercial Bureau with largest database
size i.e. 75.9 lakh trade records for commercial entities as of October, 2011, (which is a considerable
increase from 6.7 lakh records in March 2007) available from its 139 production members (37 in
March 2007). The significant aspect of emergence of robust database has been that earlier while
CIBIL stocked data information on willful defaulters as per mandate of regulators, however, with
this commercial bureau credit history of all segments enabled inclusivity. This is important as it is
enabling micro and small loans to be swiftly channelized.
The total no. of Credit Information Reports (CIRs) generated has gone up from approx. 2,700 in
2006 (start of support) to around 5 lakh in Oct, 2011 (average more than 17,000 per month) which
indicates its increasing efficacy in credit dispensation.

■■ Integration of Commercial (entity credit history) and Consumer Bureau (individual histories)
Web-based Software (Bureau Analyzer) was developed in 2011. The software can be installed in
the Member’s technical environment that will enable them to access an integrated Consumer and
Commercial Report through this system once installed in their environment. The integration has
since happened and started bearing fruits.

■■ Data Capturing on MSME Categories

The data was not categorized during start of the project. Now, the new format for data capture (on
the basis of categories of tagging) has been released to members. Formal training for bankers
was initiated. CIBIL is geared up to have all systems in place including system changes which will
include the Data Capturing as per categorization.

■■ Unique offerings
Project support has led to improvement in overall System Performance & Turn Around Time.
There is 130% increase in monthly enquiries (Average 17000 per month during FY 2010-11)
over the previous Financial Year. The average enquires per month during FY 2008-09 were
4116. Implementation of multi-channel approach under CB Support has resulted in better data

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quality and in turn better Credit Information Reports (CIR). It has been observed that there has
been significant reduction in rejection and improvement in Data Validation, Name Matching and
Production Upload Process time. A direct result of this has been an improvement in overall system
performance. This has reflected as significant increase in borrower count and credit facilities in the
MSME domain.

Project support also facilitated inclusion of well performing State Financial Corporation’s (SFCs) to
become members of CIBIL. It enabled them to access CIRs at subsidized rates and thus enhance
their outreach to MSMEs.

♦♦ Credit Rating for MSMEs

With the objectives of strengthening Credit Rating Systems for MSMEs and create a framework that
encourages Banks /FIs to make use of information (third party assessment) for quick and informed
decisions on credit dispensation, CB support was extended to SME rating Agency of India Ltd.
(SMERA) from 2006 till 2011. The Project has helped SMERA :

■■ In evolving as dedicated Rating Agency for MSMEs in India (in 2006)

SMERA was set up in September, 2005 (during the start of the project in 2006, it had done only
101 ratings and was in loss) and with project support it has completed more than 14,000 ratings.
It has also achieved financial self-sustainability.

Out of the total SMERA rated MSMEs 95% constitute Micro & Small Enterprises.

■■ To enrich its Product Offerings for MSMEs

SMERA has diversified its basket of products (it had only one product during the start of the
project) and has developed new models (assessing Green Field / Brown Field projects, MFIs,
Green Ratings etc.)

The ‘Green Rating’ Model launched by SMERA on pilot basis. ‘Green Rating’ model is aimed
to encourage MSMEs engaged in industrial activity to adopt better technologies and processes
to prevent un-mitigated environmental damage. It is expected to act as a risk mitigation tool for
MSMEs to reduce risk associated with rapidly changing world of “Environment Governance &
Compliance”, The process of Green Ratings is being piloted in 25 MSMEs in Casting/Foundry &
Re-rolling category of steel sector in Ludhiana/ Faridabad/ Jodhpur/ Rajkot/ Coimbatore region.
During the project support SMERA has conducted 36 Green Ratings. In an effort to enlarge the
scope of its industry categories - from the model build perspective, SMERA has identified Dyeing,
Chemical, Food Processing and Ceramics as potential sectors.

♦♦ Credit Appraisal Tool

With the objectives of strengthening Credit Appraisal Systems of the Banks / FIs to facilitate quick
and informed decisions on credit dispensation, CB support was extended for developing/upgrading
Credit Appraisal and Rating Tool (CART). The CB Support has helped CART an online tool (its

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purview covers presanction documentation & disbursement) as per below :

■■ In Developing CART - Standardize Process and System Driven Approach

- The tool has demonstrated that it helps in a) Increase in number of sanctions b) Reduced turnaround
time c) Lower NPA.

- This leads to quick decision on loan approval. Turnaround time at SIDBI has declined from 26
days (for loan size upto 50 Lakh) and 45 (for loan size above 50 Lakh) days in 2007 to 3-4 days
and 4-5 days as on March 31, 2011 respectively.

- The tool caters to multiple requirements during Loan assessment (composite loan for both existing
/ green-field projects, different parameters for scoring /rating, provisions for Bank Guarantee,
Letter of Credit, Energy Efficiency etc.)

- The tool has helped in the reduction of paper work and to provide hassle free enhanced performance
which in turn decreases operational cost leading to offering of better interest rates to the MSME
borrowers on a broader scale.

■■ Widening outreach
The tool has been acknowledged by RBI (as per RBI Master Circular Banks were advised to
adopt this). The tool has been designed on a IT platform which can be easily integrated with IT
platforms of the other Banks/FIs/SFCs. SIDBI has since shared this tool with 20 Public Sector
Banks and 18 State Financial Corporations. The results so far have been encouraging. IDBI
Bank (the erstwhile apex DFI for
industrial development in India, Change Maker
and which has been considering Electronica Finance Ltd. (EFL) is a focused NBFC, engaged in
financing of Machine Tools to MSME sector, providing finance for
larger loan proposals only in the
purchase of machines (mostly CNC) and equipment to MSME units
past) has adopted this Tool for across India. Project provided support to it towards training of staff
processing smaller loans. Other on Credit appraisal and Sales techniques (32 officials underwent
Banks also have started using training) and capacitating their staffs to offer embedded services
to MSME clients including Sourcing of proposals, Credit Appraisal,
CART to appraise and rate loan Recovery techniques, Sales kit preparation and Marketing etiquettes.
proposals for the MSMEs. This has led to processes in EFL becoming more efficient towards
assessing MSME needs, streamlining credit delivery process,
♦♦ Risk Sharing Facility (RSF) effective sourcing of proposals, etc. An independent study has
RSF is a tool to enable commercial found that EFL has recorded 1% reduction in the transaction costs,
60% increase in the number of Terms Loans Sanctioned to MSMEs,
banks to take up MSE financing
Reduction in the turnaround time for loan sanction, from 10 days to
as a viable and profitable business 8 days and improved management of risks associated with MSME
proposition. By sharing credit risk of lending.
participating banks and other Financial
Institutions (on 50:50 basis), while at
the same time making participation contingent on better credit assessment and risk identification by
banks, the RSF helps the participating banks / Financial Institutions buildup a track record of good
MSE lending. This is expected to encourage banks to scale-up lending to MSEs, and to price these
loans more appropriately, with sector-wide demonstration effects.

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The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE - the collateral free
guarantee institution setup by GOI and SIDBI) has been instrumental in implementing the pilot RSF
Project. Under the scheme it had signed MOUs with eight Member Lending Institutions (SIDBI, UBI,
BOB, BOI, PNB, Canara Bank, United Bank, SBI). Under Pilot 64 proposals amounting to ` 47 crore
were extended to cover loans between ` 50 lakh (USD 0.108 Million) to ` 1 crore (USD 0.216 Million).
Realizing that appetite exist in the segment (` 50 lakh - ` 1 crore) the core products purview was
extended to ` 1 crore and thus institutionalized. A study has been also undertaken on Scaling up RSF
and the new product shall be shortly launched.

C. CREDIT ENHANCEMENT
♦♦ Capacity Building of Participating Banks
Under Capacity Building assistance, MSMEFDP supported banks, financial institutions and other
intermediaries such that they enhance their offerings to MSMEs. It includes support towards Human
Resource Development (through exposure visits and training in the relevant areas such as credit
appraisal, sales techniques, negotiations, legal procedures etc), System & Infrastructure Development
(through adoption of advance software / ICT infrastructure, automation of MIS system etc) and
Institutional and Legal Framework Development. The support has led to strengthening of knowledge,
abilities, skills and behavior of credit officers.

As a part of creating an enabling environment for the promotion of Risk Capital eco system especially
for new ventures, Govt. of India has assigned a “Risk Capital Fund” to SIDBI to channelize this fund.
Project extended CB support for engaging various experts for policy framework, product design,
exposure, knowledge dissemination in the area of risk capital financing. A study was supported on
‘Corporate Governance’ so that MSMEs gear up to the emergent issues. Other FIs like Electronica
Finance Limited, Andhra Pradesh State Financial Cooperation and other SFCs have been supported
on trainings and IT infrastructure.

MSMEFDP- KfW portion contributed with its technical support to strengthen infrastructure, upgrading
sectoral Information system and Human Resource Development. To increase the speed and early
processing of loans / credit support for MSMEs, Video conferencing (VC) equipment were installed
in credit offices of participating financial Institution (PFI). The system has reduced the turnaround
time in financing through quick committee decisions, live interaction with borrowers etc. Indirectly it
has also contributed to reduction of carbon emission due to less travelling for meetings, interviews
etc. In addition support has been extended for subscription of I-Cube software from CMIE which led
to enhancement of the sectoral knowledge and risk assessment capability of credit personnel.

Under Human Resource development, more than 80 officials (with 30 international trainings)
trained in various areas related to the MSME financing. The areas covered various domains
from risk assessment to financing, Customer relationship management (CRM) to assessment of
distressed loans, Follow up & monitoring to legally disposal of loans. Other steps like engagement
of consultant for new software and programme on ‘change management’ (to enable credit officers
embrace change gracefully) have been undertaken to increase the lending capacity of PFI.

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Project is also carrying out an empirical study in India, based mainly on tracing back success stories of
entrepreneurs that grew out of the segment of micro enterprises. It aims at (a) identifying determinants
of firm growth and qualitative upgrading and (b) deriving conclusions for policy-makers. The study is
expected to help know critical competitiveness attributes of Micro, Small and Medium Enterprises,
enable cross learnings and also address the retail lending aspects in a much better way. The study is
part of a comparative research project which also includes entrepreneurial case studies of Philippines
and Egypt.

♦♦ Credit Mapping
Under MSMEFDP-GIZ Portion of Project a Credit Gap assessment (to estimate the existing credit gap
and also to suggest the innovative delivery mechanism and products specific to clusters to reduce the
credit gap) was carried out in 10 clusters, where MSMEFDP had made intensive intervention. Findings
of the report is planned to be shared with policy makers and other banks for necessary actions.

Upscaling Small Loans using Downscaling Technique

After imbibing learnings from international workshop organized by the project on for Upscaling MSME
Credit attended by participants, comprising representatives from GoI/RBI/IBA and Banks/ FIs/ NBFCs,
project adopted the agenda of implementing the pilot in India. The aim was to ensure profitable and
sustainable MSME lending, which is dependent on attaining and balancing three interdependent and
interlinked principles:

1. Minimizing Transaction Costs - The smaller average loan size requires efficient products and
procedures which would allow the Bank to minimize costs of extending MSME loans and achieve
higher volumes.

2. Volume - a higher volume of lending is essential to ensure a sufficiently high income stream to cover
costs and achieve profitability in the MSME lending;

3. Maintaining Portfolio Quality - High level of portfolio quality needs to be achieved as poor portfolio
quality would result in erosion of profitability on the MSME portfolio irrespective of volume and efficiency.
Therefore efficiency needs to be supplemented with strong risk management techniques. Typically
banks participating in these programs in Latin America, CIS region, Eastern Europe reportedly, have
a MSME loan portfolio at risk ratio of below 3%.

Project has attempted to serve profitably the lower end of micro enterprises (the segment of business
requiring loans between ` 0.5 lakh and ` 5 lakh) which was not served effectively by any institution and
thus considered the “Missing Middle”. SIDBI, which had already started one year ago to address this
segment, wanted a sustainable mechanism in MEL scheme such that it is both “affordable and sustainable”
and which would be carried out by a separate business unit. Some of the major lessons learnt by SIDBI
from the segment were as under :

♦♦ Absence of formal financial information like financial statements, etc./information availability affects
decision making.

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♦♦ Need to bring in new assessment techniques.

♦♦ Large numbers need high standardization.
♦♦ Require simplification in procedures (as present guidelines are drawn from those for large loans).
♦♦ Highly manpower intensive & high transaction costs.

With the learning of above lesson, SIDBI decided to draw upon best international experiences in this sector
for increasing credit to micro enterprises and started a ‘Downscaling’ project in October 2010 by roping
in an International Consultant. The Technical Assistance included Development of a new methodology,
an integrated software for appraisal and accounting including operations and training of manpower in the
methodology. The expert agency had implemented similar projects for various banks in Latin America,
Eastern Europe, China, etc. Salient features of ‘downscaling’ approach are as under:

♦♦ Application and appraisal formats are designed to capture and verify cash flows and informal financial
statements of the borrower.
♦♦ Developing a credit rating tool based on existing MEL experience and the Indian context.
♦♦ Simplified documentation by merging various legal documents. Verification with credit bureaus like
CIBIL and other lenders / Risk Management at different levels.
♦♦ CGTMSE Coverage / Seamless IT Backbone / Customized Software.
♦♦ Scalable model with well defined processes, HR modules with defined outputs, Training Kits, etc.
The pilot was launched through 7 Micro Finance Branches of SIDBI and is ready for scale up.

ACCESS TO NON-FINANCIAL SERVICES

A. BDS Intervention
The Project is carrying the mandate of market development of Business Development Services (BDS) so
that these continue or are replicated later on sustainable basis. For ensuring increased access to these
by Indian MSMEs, the project has, in its three years of intervention, performed a journey full of challenges
and opportunities. After assimilating learning’s from pilot in 3 clusters, the initiative was scaled up in 19
MSME clusters (Annexure III). These clusters house about 42,000 MSMEs, with aggregated employed of
about 20 lakh and with over ` 1,23,000 crore of turnover. The profiles of the clusters are given at Appendix
(page no.183).

Overall goal of SIDBI Cluster Development Programme through MSMEFDP - BDS Project is to scale
up MSMEs by increasing their access to improve private and public benefit business development services.
On the long perspective, project took following steps to promote market led BDS in the clusters:

- Identification of both demand & supply side issues in the select clusters through diagnostic study.
- Stimulation/creation of demand for business development services from MSMEs.
- Strengthening the capabilities of supply side (BDS providers).

- Facilitating a sustainable demand-supply nexus of BDS providers and MSMEs.

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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. The BDS field focuses on promoting access to and use of these services by MSMEs. The project
unleashed BDS market development activities across the clusters. The BDS market development believes
in the theory that once BDS are capacitated and are acceptable to market they will kindle appetite of
MSMEs and once profitability of service provider and recipient goes up the value chain imbibes functionality.
The activities were identified systematically through the diagnostic studies. The emphasis was placed
on developing markets for BDS with both demand (sensitization of MSMEs for the BDS) and supply
(improving availability access and quality of BDS in the clusters) side interventions. The focus was also on
value chain interventions with MSMEs to address structural, infrastructural, technological and managerial
bottlenecks that these firms are facing. The interventions were based on the understanding that a positive
spiral of change will ensue due to the interventions at BDS market and directly at MSME level, which will
lead to overall cluster and local economic development (LED). The preliminary indicators of project impact
assessment available from Foundation of MSME Clusters (FMC), cluster agencies and various monitoring
data shows a very significant success of the approach, which is encapsulated in the diagram below :

BDS Project was first of its kind in India in which various innovative methods were used to make it successful
over the existing approach (Hard infrastructure) for cluster development.

- The project was an induction ground for cluster facilitating agencies as many of these agencies got
recognized expertise working on the project. The agencies have leveraged their experiences in MSME
FDP to get other rewarding contracts for cluster development. This is a sectoral contribution of the
project with number of agencies available in India with the necessary skills and perquisites to support
cluster development initiatives and therefore scaling up and replication beyond 19 clusters is that
much easier.

The process and methodology for approaching the BDS market development was kept systematic.
Different templates, guidelines and benchmarked formats were used for conducting Cluster Coordination

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Committees (CCC) diagnostic, action plan implementation, periodical reports/ feedback, viability gap
funding, voucher support etc. Detailed methodology adopted under the project is appended at Annexure VI.

- The summary of project achievements

on key thematic areas, where actions
happened is captured in the graph
shown alongside. The achievements
have also been independently
assessed through a score card
mechanism and impact vis a vis
logframe (Annexure V).

The score card is based on self

assessment of cluster agencies on
before-after situation of various aspects
of BDS market development carried out
in the clusters. The inner circle shows
the baseline while the outer one captures the key improvements that has happened over the baseline
situation. As the graph shows, in most areas, improvement has happened, though at differing scales.
From an overall poor to very poor situation in the clusters (1.8 out of maximum of 5), the status at End of
Project (EOP) is good (4.0 out of maximum of 5). This analysis portrays the situation in the clusters on
various issues highlighted in the web diagram above. The analysis suggest that project very significantly
improved the context of MSMEs in 19 clusters through various interventions. The situation now is more
enabling towards MSME growth and employment. The ratings are just a reflection of the extent to which
the project has influenced the change that has happened in the clusters. The ratings are not done on the
project log frame which as cited by DFID, World Bank and other support partners of the project, has been
largely to completely achieved. Therefore the ratings (which are derived from self assessment data of the
cluster agencies) are a reflection of what changes project has brought in the larger picture of MSMEs in
their working environment and should be viewed as such.

Project Approach for Cluster Intervention

Project took three way approaches which attempted to cater to every segment of the market development.
Project focused on demand side issues through awareness creation / sensitization. On supply side, issues
such as capacity building and handholding of BDS providers in the cluster were taken up. For demand –
supply nexus or match making (i.e. making market work) innovative instruments such as voucher support
were utilised. Virtual market place through a unique cluster portal apart from trying other initiatives like
BDS on wheels, BDS clinics, BDS Bazaar were tried out. Interventions in the first year were concentrated
on trust building, providing training, consulting, strengthening existing institutions/ BDS providers and
other services that address internal constraints faced by the enterprises. In the next two years, horizon
has progressively expanded to include marketing services and information resources that assist small
businesses gain access to services usually enjoyed by larger corporate. In these three years, the Project
has organized more than 1100 activities, participated by more than 46954 stakeholders which include the
MSMEs, BDSPs and so on.

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The project so far has served almost 726 BDSPs in various areas and linked up around 1,032 firms with
BDSPs who have benefited from direct voucher support to avail the services. BDS providers and MSMEs
were hand-holded through structured voucher arrangement which not only ensured quality perspective but
helped in developing trust. Project launched voucher support extensively to kindle appetite of MSMEs and
develop trust towards BDS. Project has witnessed a shift in outlook of both BDS and MSMEs looking for
voucher support. They are transacting on their own. Several transactions are happening without project
support and repeat transactions (over 2,130 transactions in total out of which 48% with project support
and others without project support but with handholding continued) have also been happening. These are
indicative of traits of market functionality which then does not and may not need further support. When
market operates it does not look for handholding. Market making happens through market corrections and
seamless matchmaking between demand and supply.

While FY 2008-09 saw ‘setting up’ of base, FY 2010 witnessed ‘step up’ and FY 2011 has been the year
of ‘consolidation’. A number of initiatives were undertaken on various themes viz. Energy, Technology,
Productivity enhancement, Lean Manufacturing, Market Access, Capacities building of BMOs,
Institutionalization of the initiatives, Skill development etc.

Various initiatives have been used in different clusters to sensitize MSMEs and stimulate demands for
BDS e.g. Voucher Scheme described below. Other mechanisms like Cluster Coordination Committee (for
overall monitoring and to provide guidance to cluster initiatives), BDS clinic (place for MSME and BDS for
solutions), BDS Bazaar (offering matchmaking), BDS on Wheel (reaching out to door step of beneficiary),
BDS consortium (pooling BDS for enabling swift outreach to MSMEs as one stop shoppe), Exposure visits
(for learnings from successes and or failures) etc. stimulated BDS demands in the clusters.

BDS Market Development - Cluster wise Status Report (Annexure VI).

It is pertinent here to describe in detail some of the innovative elements and best practices of the BDS
market development work by the project. The description here below is for the Voucher scheme, BDS
clinic, value chain interventions for micro firms, opening up of export markets through compliance to social
accountability (SA8000) standards, skill upgradation initiatives across the clusters and improving working
conditions of women.
Game Changer

In Alleppey Coir Cluster, Management Gyaanam Mantra, a

Voucher Scheme is an external support
7-day long training program was conducted by Mr.Sasikant of mechanism towards the price based
Marg Atreya, a BDS provider who conducted business renewal services of BDS providers (Consultants,
workshops for 38 societies who participated. The program was
probably the first ever of its kind conducted for cooperative
Service providers) to MSME firms. It
societies. While the participants were appreciative of project, intended to give a fillip to the demand of
the BDS provider was even more enthused. “... the project has BDS providers from the MSMEs (firms)
conditioned the cluster to accept my services. This is great, given
the past history, access to the coir industry has been made easier as an incentive scheme. The whole idea
by the presence of a neutral agency...”. of Voucher Cost rests on the premise that

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instead of being a permanent subsidy based

Confidence is Showing
mechanism, it should be reduced on tapering
Mr.Hashier of Novasoft, a BDS provider involved in web related
services was introduced to the Alleppey Coir cluster through the pattern overtime and finally withdrawn over
first BDS training program. Since then he has been associated the medium run once the BDS services
closely with the project and has signed 4 MOUs with various
begin to be demanded by firms on regular
units. His team has become so confident about the potential
of the market for IT related services that he has come forward basis and such markets between the BDS-
to create and maintain the first coir B2B website, totalcoir.com. Firms appear functioning smoothly within the
cluster. The case for the subsidy rested on
three arguments, as the interim report of Allapuzha cluster says :

♦♦ First-Mover Disadvantage : First-movers face higher risks and often higher costs as a result of being
the first to undertake a new project (or consume a new service). BDS was a largely unknown service
to Coir MSMEs; many of whom were skeptical of its utility. In addition, many BDS providers would
be learning on the job as they delivered services to the coir cluster, imposing hidden costs onto their
clients. Helping MSMEs to off-set some of the risk that they took in consuming an untried, new service
would help stimulate demand and, aside from anything else, just be fair.

♦♦ Cost Substitution : In the absence of a cost-sharing mechanism, the project would have had to
develop substitute means of stimulating demand. This would likely take the place of increased MSME
sensitization about BDS, which would have been costly. Furthermore, the project was regardless
engaging in MSME outreach; more of the same would likely offer diminishing returns.

♦♦ Quality Control : The project wanted to play a quality control role in initiatives undertaken by BDS
providers with coir MSMEs. However, if the project had no active role in the relationship between a
BDS provider and a client MSME beyond the initial match-making, it would not be able to ensure that
the BDS initiatives run as projected. Having some financial involvement - even a nominal amount -
allowed the project to remain involved Accelerators
in different initiatives, and ensure that Tarannum Banu Siddiqui is a Graduate. Drawing is her hobby. A
BDS providers reported on progress to course in vocational education changed her future course of action
the project. decisively. She took a fascination for vocational education as this
can be a possible route for creating job for the needy. She went on
Voucher Scheme operated in a manner to take a one month Footwear Management Technology at local
MSME centre (Kanpur), a one month course in footwear design by
that FA become ‘trust watchers’ during FDDI and on the job training as line-woman at M/s God Sons (a
the transactions between MSMEs & footwear unit). At this stage she was selected as a trainee trainer as
an apprentice with a senior trainer. “I learnt a lot under the guidance
BDS. On confirmation of satisfactory
of Mr Shishir Awasthi and now I am confident”. “It is not easy for
services by MSME, FA, would after a woman to get up to here, but I have proved that one can do it”,
obtaining written confirmation of beams Tarannum. She is in charge of the Unnao training sub-centre
of Superhouse (a large footwear unit). “One day I will promote my
MSME, release project support to BDS.
own training centre”, says Tarannum, as her young eyes light up.
Trannum is not alone. The programme has created a total of 10
such local trainers who are ready to serve and grow.

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BDS Clinics: In the marketing BDS /Market Access area, the Project not only handholded the BDS providers
to fetch initial transactions but also supported / facilitated transactions on pilot basis to demonstrate the
initial success. Virtual market place through a unique cluster portal apart from trying other initiatives like
BDS on wheels, BDS clinics, BDS Bazaar were tried out. BDS clinics, as interim report of Allapuzha cluster
says, is the approach which is less research based, more exploratory, and inherently flexible. It was more
‘market.’ The BDS clinics came to be a major channel for deals for the cost-sharing scheme, and the
source of many of the project’s success stories.

Value Chain Intervention for Micro Firms: Project commenced its interventions through value chain
mapping and identified key pressure points. These were tracked pre and post intervention. An Example
of impact on ‘bottom of pyramid’ is thus. 600 women hunter making artisans in Kanpur prepare whips, an
accessory of saddlery products. Their returns were minimal, estimated at ` 15 to ` 20 per day. With no
other suitable option to work from home, they were also bound to work as job workers for contractors. Soon
it was realized that they are making only the rope part of the whip and hence creating the entire product
on their own will be a difficult proposal. The strategy was thus set as product diversification. However any
product diversification also needed training as their skill set was low. Training-cum-product diversification
workshop was organized with the involvement of skilled designers. 5 BDS providers conducted 15 training
programmes and trained more than 100 women artisans in various skills of beading, weaving, surface
making, macramé and related techniques. 32 new products were also developed including bags, mats,
cushions etc. A mini loom was also designed specifically for the purpose of surface making. 17 women
artisans have executed a trial order of 300 bags valued at ` 34,200 and have received an order for 1,000
bags valued at ` 1,40,000 which is currently being prepared. 40 artisans are working on this order. This
particular initiative enhanced their daily earning by ` 50 to ` 55.

Improving working conditions of women: Under the BDS component of the MSME- FDP, various
initiatives have been taken to improve the working conditions of women in the clusters. Few such examples
are as below :

♦♦ A journey of Rural Tribal Women Wage earners to entrepreneurs in Ganjam

♦♦ Innovation in spinning ‘Ratt’ Development - Alleppy
♦♦ Tapping the Retail chain: M/S Ruchi food Products - Pune
♦♦ From waste to market taste- enabling value add products through waste- Kanpur
♦♦ Bridging the Skill divide: Skill development initiative in Ludhiana

Compliances :

With an objective to create awareness amongst apparel industry regarding the future environmental
challenges, knowledge building and disseminating workshops across other apparel clusters in the country
was organized. 3 workshops on ‘Carbon Responsibility and Mainstreaming Efficiency Options in Apparel
Industry’ were conducted in Tirupur, Ludhiana and Bangalore. Further, a guide book and manual as a
knowledge product with an objective to give apparel units a roadmap on how to adopt energy efficiency
and carbon responsible initiatives was also distributed.

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Opening up export markets through compliance to Social Accountability standards: The project
instilled compliances (both regulatory and as per market expectations) by promoting suitable BDS. The
relatively larger SME footwear units of Kanpur had a focused need for SA 8000 auditor, not easily available
in the cluster. Apart from increase labour welfare, this would give them easier entry to European market.
The BDS provider was identified by the Project, and was finalized with the involvement of the units. The
BDS provider had proven previous record in this field and had the ability to gain the trust of the units. 5
firms have since got SA 8000 certified and 2 more are to get it soon. The process has started in few more
firms.

Apparel Sector: Under MSMEFDP-GIZ portion of Project special focus was laid on apparel industry- the
second largest employment provider in the country, adding significantly to the country’s exports. The project
has assisted the development of targeted service offerings to foster the development of service market,
integration of business responsibility, energy efficiency measures and social standards in this sector.
The Apparel Export Promotion Council (AEPC) is the apex industry body that promotes and nurtures the
apparel export industry and programme cooperate with AEPC’s to initiate action on REACH compliance
management. REACH is important environmental compliance legislation from European Union. Majority
of the Indian MSME apparel exporters are unaware of basic information regarding their obligation and how
they can comply with REACH, if required. The programme is assisting with awareness creation amongst
industry and other stakeholders through training workshops and a web portal (www.reach-apparel.com).
The programme’s support to AEPC would enable greater focus from GOI on up scaling efforts on REACH
compliance. Two online portal www.b-smartonline and www.consultwho.com were also developed in
partnership with AEPC to provide self assessment tool and service linkage platform. This is expected to
enable better functioning service market in apparel sector. This online tool helps apparel manufacturers
measuring their performance indexes and helps in finding areas of improvement in different processes and
departments of their manufacturing units and find appropriate service providers.

Marketing: MSMEFDP targeted at instilling network competencies among MSMEs for Local-Local,
Local-National, National-Global outreach. Under MSMEFDP-GIZ support was extended to identify
market diversification opportunities and future actions for export growth for NCR’s apparel manufacturing
enterprises. Based on findings and insights from this study in July 2010 a national level workshop on
‘Discovering Growth’ was organized to disseminate the findings and best practices in the apparel sector.
The workshop attracted several key stakeholders and nearly 80 delegates participated in this workshop.

Promotion of a mini cluster of textile Zari Workers in Hyderabad: With an aim to develop a mini cluster
with micro and small Zari workers by facilitating necessary business development services, project has
under MSMEFDP-GIZ assisted the promotion of a mini cluster of textile Zari Workers in the old city
of Hyderabad. Profiles of 150 Zari entrepreneurs were collected and 50 of them were scrutinized for mini
cluster promotion. They were organized in common interest groups for providing them a platform to share
their problems, concerns and also hold discussions on designs and marketing plans. In order to enhance
understanding of Zari entrepreneurs about cluster promotion, orientation programme was conducted at two
different locations attracting a total of 80 entrepreneurs. Orientation programme on cooperative promotion
and management was conducted for the Zari entrepreneurs, and a cooperative society was formed.
Manual and automated book keeping system was introduced and software was installed to maintain the
data of the cooperative society.With above support, for the first time, Zari workers were organized to

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provide them with different types business development support. Notably, the mini cluster thus developed
is instrumental in providing business development services such as financial access form banks, product
design and marketing support.

Business Model Development for Successful BDS Service Delivery:

Under GIZ-MSMEFDP, Project is making progress in reaching the objective to strengthen sustainable
business models for market and demand oriented delivery of business development services. Through
an integrated development partnership (iPPP) with the Federation of Indian Chambers of Commerce and
Industry (FICCI), successful models of service delivery systems and business development services are
currently being analyzed and documented, before recommendations are forwarded to the policy level.

Overall Achievements under BDS

♦♦ Systemic change in Cluster development : In India, focus was hard infrastructure centric whereas
project established the significance of Soft infrastructure. Project achievements indicate that when
hard and soft infrastructure complement each other, MSMEs enhanced competitiveness is seen.

♦♦ Paradigm shift in knowledge, responsive, collectiveness and competitiveness of MSMEs : unlike

earlier programmes which targeted at ‘delivering what we have’, project instilled ‘ownership’ from
beginning based on “deliver what MSME/ stakeholders need’. The programme aimed at strengthening
the supply side but with equal thrust on strengthening the demand side. This strategy emerged as an
ENABLER to increase the competitiveness of MSMEs.

♦♦ New models of BDS delivery : several new models viz. BDS on wheels, BDS Clinics, BDS panel ( those
BDS were enlisted undertaking more than 2 successful transaction with MSMEs), Consortia model
(single shoppe of multiple specialists under one umbrella), BDS - BMO membership, institutionalization
of BDS delivery mode, etc. BMO linked model emerged as public good initiative which is replicated by
other clusters at their own.

♦♦ Development of various networks / linkages with Govt. authorties : Project carried out network
promotion in order to create sustainable exit vehicles. The exit vehicles were identified during the walk
in process and were targeted with specific Capacity building support aimed at sustainability such that
once project over, vaccum does not emerge.

♦♦ Assessing Logframe Indicators

- In this 4 years of intervention over 450 new BDS providers in various domains were created as
against the target of 200 BDS providers in 19 clusters.

- Average turnover of BDS providers got increased from ` 8.4 lakh to ` 32.6 lakh as against the
target of ` 14 lakh.

- Over 100 case studies were documented in both short and longitudinal manner, at the end of
project MSMEs have increasingly started (ranging from 14 to 60 %) using strategic BDS services
in various thematic areas as against the target of 10-15%.

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- An independent M&E impact study has found

Ruchi Steps Out
that increase in turnover by 37%, profits by 10%,
Ruchi Food Limited, is now a regular
employment by 13%, productivity per employee supplier of pickles to Food Bazaar under
by 20% when compared with control groups which the brand name of Harshman. The desire
could only record growth of 35%, 7%, 8% and to expand its scale of operation started
11% respectively. This establishes the efficacy and after Mrs Sangita Bagul, the owner of Ruchi
effectiveness of this model. Food attended the awareness workshop on
good hygiene practices in manufacturing,
- BDS Model offered Value for Money (VfM) as by labeling and packaging. During those days
instilling efficiency among BDS and enabling market the products of Ruchi Food were produced
at the corner of her room with 7 other
mechanism to operate the market dynamics lead to
women and sold door to door and through
market corrections, market functionality and set in local shops.
traits of competitiveness.
Post workshop, the owner contacted
♦♦ Professional Development / BDS Agencies for the project to get a brand name for her
products, acquire bar code and expand the
Cluster Development in India
market through linkages and participate
- Knowledge sharing / professional capacity building. in exhibitions. The Project identified
the BDSPs for each service. For brand
- Over 20 Learnshops / exposer visits organized.
registration she had hired the support of
- Capacity building of over 110 cluster development BDS provider Mr A H Kulkarni, for bar code
professionals / experts. registration that of M/s GS1, for bar code
equipment M/s Falcon Exim Private Limited
- 4 national level programmes for cross learning.
and for market linkages that of Food Bazaar.
These have led to institutionalization of learning Apart from identifying the BDS providers,
mechanism and ready expert pool for replication. the Project provided voucher support on
tapering basis for brand registration and
♦♦ Output of Programme bar coding. Later the cost of market linkage
was borne by the firm. Post intervention the
- Empamalled over 450 BDS providers (generally >=2 annual turnover of the firm has increased to
satisfactory transation) in 19 clusters. ` 700,000 from earlier ` 84,000.

- Over 2,130 (more than 1,030 with direct project

support) BDS transactions recorded support over 1,102 transactions without project support.
- 60 websites created / supported which have emerged as virtual BDS providers / facilitators. All
Cluster Websites have database of local BDS providers and catering the need of clusters as a
knowledge sharing platform.
- Over 40 PPPs for different domains created / supported, 12 Common Facilty Centre (CFCs)
promoted.

- Skill development – over 17,497 persons dierectly trained directly including over 1,100 women,
Several new models for skill development on sustainable basis developed (BMO led, Business
house led, industry-academia partnership, Local Panchayat involvement Model, etc).

- Facilitated Credit linkages for amount of ` 393.51 crore (more than 870 cases).

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- Enhancing Learnings- Cross cluster learning through exposure visits, learn-shops, participation in
trade fairs etc.

♦♦ Other

- Capacity Building of BMO (Jamnagar Factory Owners Association) for Common Testing Facility
centre METALAB, Jamnagar. Tested over 10,000 samples for about 1,100 MSME units. This BMO
participation was supported through viability gap funding. It has led to advantages of VfM as
also market dynamics as private player were forced to revisit their lab testing rates and delivery
mechanisms.

- National Level database of BDS providers (www.msmementor.in) - registered more than 12000
BDSPs after basic due diligence. It is geared now for matching making with MSMEs.

- Micro Enterprises Business Information Counselors (MEBIC) - provided non financial services
(consultancy) to 1100 MSMEs on engagement of financial services.

- Modified RiP (Rural BDS) - pilot phase at 2 locations to improve the livelihood in rural areas-Over
100 awareness camps, 2 SPVs, Bankers meet, reach over 626 MSEs, 212 MEs - credit linkages.

- Supported more than 20 demand based surveys like retail chain study, domestic market
assessment, financial products in the cluster, productivity enhancement etc. in 19 clusters. This
has led to emergence of informed MSMEs.

Thematic Achievements
Enterprise and Skill Development Multipliers - Skill Development

The Project adopted thematic approach which were pursued Skill development is a pressure point in most
an ABC approach format i.e. Activity (being done) Budget clusters. Areas of intervention include up-
scaling availability of existing skill as well
(allocated utilization) and Change (utilization in clusters). The
as promotion of new skills required due to
MSME-FDP has undertaken both systemic (long term) and introduction of new technology or machinery
need based (immediate term) in the adopted clusters. The or product. Approximately 40 institutions
focus was on ‘Employable Skills’, ‘Skill Up-gradation’ and have been strengthened/come up in this
process as BDS providers in this field.
‘Efficient Production’ skills. The interventions led to increased
Here, moving beyond traditional training
employment opportunities for thousands of unemployed youth
institutes, the Project has introduced various
from poor socio-economic background. The intervention also new training models including those led by
led to ‘Better Skilling’ of existing workers of MSMEs in the (a) large firms (Kanpur and Ludhiana), (b)
clusters. More importantly, the interventions led to improved industry associations (Kanpur, Tirupur), (c)
machinery suppliers (Mohali and Panipat),
infrastructure of skill development e.g. 9 skill development
(d) local level elected bodies (Ludhiana),
institutions are available (as against 3 earlier) now in (e) international experts for export oriented
Kanpur cluster with support from Industry and Government product (Kolkata), (f) capacity building of local
sponsored schemes. Overall, the project has also assisted technical institutes (Rourkela), (g) reorienting
government technical institute (Ganjam), (h)
in establishment of 12 Skill Development Centers and linking
business responsibility (Ludhiana), etc.
up / institutionalizing of 21 Skill Development Centers.

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The process of creating and institutionalizing skill development programme has various dimensions.
Needless to say, although the facilitating agencies played an important role in stimulating each step, at
the ground level these initiatives are always led by a typical cluster based institution and simultaneously
supported by a host of related stakeholders, who have also played significant role in implementation.
Successes of such models have also led to spin-offs in the form of cluster based institutions starting similar
programmes (Kanpur, Pune, Rourkela, Ganjam). At times such skill development programmes have also
led to strengthening of networks too.

Identification of the problem and/or propagating the need is mostly the forte of the local association. At
some places it was explicit, while in others, the need arose when benchmarking was done with other
clusters/facilities outside the cluster.

Creation of appropriate course content and duration is a professional exercise which is done by
specialized agencies. Such agencies mostly include local technical institutions. However if such agencies
are not available locally, they need to be hired from outside the cluster. At times, suppliers of machinery
on which the training takes place, play this role. This is more so if the training is to be done on one or
predominantly one single high value machinery.

However, even at this stage, it is found to be always

Inclusivity important to get it vetted with the local industry, if the cluster
In Ludhiana, Kulveer Kaur is fluent in local need is very special. This role is played by leaders in such
language and her graceful conduct makes the thought process from the local association. Course duration,
village elders trust her to allow the females
coverage, timing, etc. are also vetted by them.
to come to the factory. She has successfully
evolved herself as a BDSP and is now working Mobilization of trainees is another key issue. Here, the
as line supervisor as well as mobilization
local institutions having the necessary trust level play
coordinator. This has helped her in generating
additional income and her economic condition an important role. At this place, the role played by the
has improved tremendously. Looking at the institutions like village panchayat (elected body) has proved
success of Kulveer Kaur, one more operator, very substantial, especially when the students are women.
has also worked in some villages in her spare At times local service providers also proved to be handy in
time and has managed to mobilize females
mobilizing such trainees.
from nearby areas. They followed a unique
advertisement model in which announcements Not the least is the process of institutionalization, i.e.
about the project were arranged from village
sustainability. Here the target is to identify training
Gurudwara and a time was announced
when the females could gather at a common ownerships which are naturally sustainable or
meeting point. The candidates were motivated institutionalized by definition. Hence the natural choice is a
and shortlisted. They also met Sar-panch to local training institution. However gestation period of getting
convince them for sending the village females it through is high, especially if it is a government institute
to the firms for training and then job. Sometimes
having statutory responsibilities, with very less room for
after the preliminary discussion the factory
manager visited the villages and talked to the
experimenting. However it has its advantages too, as the
Sar-panch and convinced them regarding the quality is naturally ensured and the value of the certificate
security and safety of the females. Even the is much more cherished. Alternatively machinery suppliers,
factory representatives invited the Sar-phanch large firms and even local associations have turned out to
to visit factory to see the working environment.
be useful means of this.

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Moving beyond traditional institutes, training models was led by large firms (Kanpur and Ludhiana),
industry associations (Kanpur, Tirupur), machinery suppliers (Mohali and Panipat), local bodies
(Ludhiana), international experts for globally competitive product (Kolkata), etc. are also emerging as
important contributors in promoting skill development. These new generation BDS providers have also led
to creation of local BDS providers for sustainability. The skill development initiatives, achievements and
lessons (across the clusters) are summarized in the table below :

Employable Skill Development Initiatives in few Clusters

Cluster Sector Skill Development Initiatives Effectiveness and Impact
Coimbatore Engineering About 500 workers trained in CNC machinery Benefitting the firms with
operations. employable /skilled human
resources.
Mohali- Engineering 30 workers and 60 unemployed youth trained The workers got increased wages
Panchkula- on various operations of CNC machines. Sam’s and unemployed youth got good
Chandigarh Techno School is a unique example of a machine jobs with starting salary of ` 4000-
tools supplier becoming a trainer. 4500.
Kanpur Leather 9 skill development institutions are available (as More than 500 candidates are
against 3 earlier) now with support from Industry being trained every month from
and Government sponsored schemes. these training centres.
Hyderabad Pharmaceutical Imparted training to 200 candidates on employable
and industry acceptable skill sets.
Ganjam Fruit and To meet the demand of skill man power in the cluster, The impact is still to be seen.
and vegetable a Certificate Course (with practical training) for
Ganjpati processing Cashew processing is approved by Government of
ODISHA. The course will develop skilled manpower
as well as trainers in the cluster.
Ludhiana Knitted Apparel 12 BDS have introduced new models of training 25 firms are expected to benefit
to provide need based training - 4 innovative skill with skilling of their people.
development models were formulated and adopted
which lead to operationalization of private sector
BDS in the cluster.

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Since there is always a need of skilled workforce and retaining them (for enhancement of productivity in
the clusters) project has made significant contributions from supply side. Initiatives in Kanpur, Ludhiana,
Bhadohi, Kolkata and Chandigarh involved BMOs, SPVs, and local BDS (individual / institutional) to
sustainably attend to this mandate. A total 95 BDSPs were linked in this area and trained over 24600
people who were successfully absorbed by industry. The project has also assisted in establishment of 12
Skill Development centers and 21 were linked up / institutionalized.

Few illustrations of interventions are :

Training by International BDS: Kolkata is known for industrial gloves. A formal network (M/s United
Creations Pvt. Ltd.) of six industrial gloves manufacturers decided to make a move from industrial to
fashion gloves. This was a new product meant for exports and there was a need for an international expert
who understands the product as well as the market. The Project partially supported hiring the services
of German trainer. He trained 27 workers. Later another 20 persons have been trained by some of the
trainees. The typical leather required was being sourced overseas and is now being sourced from two
local producers. After over six months of trial and error (with the support of the expert), two tanneries
have reached the quality levels needed and the raw material is now being sourced from them. The initial
German buyer of the product was also linked by the BDS provider. Later the network found a buyer each
in Holland and Spain. They are presently completing the last part of orders worth ` 30 lakh and are sure to
cross sales of over ` 1 crore this year and ` 1.5 to ` 2 crore by the year 2011-12.

Skill Development through a Local Intermediary Institution: In Kanpur Cluster, Uttar Pradesh Leather
Industries Association (UPLIA) already had trust with the firms; thereafter a professional course through
a reputed institution and with the involvement of the industry was worked out. The course ensured that
placement takes place post training. UPLIA provided training venue, raw material and machinery. Experts
from Indian Institute of Leather Products (IILP) Chennai prepared the one-month training module for
stitching operators. It was oriented to provide specialized modules for stitching, skiving, and fitting and
folding modules with inputs from UPLIA. The cost per trainee is around ` 17,500. Industry funded around
24% and the Project funded around 11% and rest was given by Ministry of Rural Development. 2,500
persons have been trained and employed leading to an estimated income rise by ` 10,000 to ` 15,000
annually. Interestingly, starting with UPLIA training centre, the Project has increased to 3, with more centers
being started without project support.

‘Skilling’ the Clusters: As technology and regulations are continuously upgrading, the employable
manpower availability for Engineering MSMEs in Coimbatore was a difficult task. To tide over manpower
shortage, many cluster firms are interested to associate with any intervention in manpower training in
technical subjects covering quality assurance, quality control, production etc. The cluster agency facilitated
a process wherein potential fresher’s from educational institutions were identified and trained to cater the
need of Engineering MSMEs.

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BDSPs led Model of Skill

Holistic Approach - Skill Up-gradation and Market linkages-
Development: A model of training for Turning Waste to Market Taste
skill development of unemployed youth, The plight of poor ‘hunter (leather whips) women of Kanpur’ was brought
to light very early in the project. The ‘Hunter Making’ is part of the
which lead to fetch higher wages for
unorganized sector. This sector comprises largely of women where about
them and increase in their efficiency 900 hunter artisan families make leather whips - an accessory of saddlery
was tried out in the Mohili Panchkula products. Therefore, it became critical to take up this issue of skill gap
present in the cluster with specific focus on the actual requirement that
Chandigarh Cluster. This involved would assist these poor women. Therefore, the project needed to bring in
BDSPs, Sams Technical School and some innovative solutions.

industry partnership, Ludhiana and other The project focused on three cross cutting issues,
(a) Diversification of the product
clusters also facilitated the involvement (b) Developing the skills of these women and
of BDSPs for skill development. Thus (c) Establishing ‘market linkages’ to address the issue in a comprehensive
manner.
skill development is one of the best
The pilot programme was discussed with the lead Business Member
ways of cluster Development which organization, UP Leather Industries Association (UPLIA) which was
focuses on ‘bottom up’ approaches and struggling with the skill gap issue. Thus, in collaboration with UPLIA
intervention was initiated to facilitate the growth of the leather industry in
directly benefited the poor. Enterprise the cluster by demonstrating the efficacy of such approach. The pilot also
and skill development initiatives among aimed at fulfilling the existing gaps in operating such training program by
designing short term training curriculum.
various clusters across the country
In the pilot programme, these women workers were counseled and
have, in a way, paved remarkable motivated to enhance their skills beyond knitting of just ‘hunters’ (whips)
avenues for cluster development and which were losing market grip. This required lot of effort and eventually
they were convinced to take up other useful products such as bags, table
help in solving the problem of talent set, wallets, etc.
acquisition for MSME units. It has also Instilling Sustainability
helped in increasing the productivity and Another innovative effort by the project was in convincing the Industry to
enable judicious deployment of ‘scrap waste’. This ‘waste’ in fact was the
improving the quality of the products
key ingredient for the women who would pick these up from the industry
developed by MSME units. waste disposal area and use to knit them into hunters. When these
Industries were sensitized about the project’s efforts (and the plight of
Technology Modernization these women), they agreed to cut their leather pieces in such a manner
that maximum area was available (which were not actually of any use to
At least 7 clusters (out of 19) saw them). This was then provided to these women and it enabled them to
convert these pieces into varied products as against just hunters.
technological /production processes
To highlight, this initiative also reduced environment hazard where most
related interventions. Technology leather waste would just pile up and was not easily disposed off.
initiatives were related to: Reaching Markets
The initiative was appreciated by all the stakeholders and then these
- Technology upgradation women were linked to markets for selling their products. Project assisted
these women to directly set up their stall in Trade Fairs, Delhi Haat etc
- Cleaner /greener production and in their very first attempt found that they were receiving direct orders
technologies from customers and firms (orders worth ` 1.40 Lakh materialized). This
enhanced their confidence. To help them be competitive in the market
- Advanced technologies for further, the project facilitated in linking them with professional designers
processing who developed new attractive/ marketable/ designs for them. The product
made by these women units holders were also displayed in workshops and
- Drudgery reduction technologies programmes organized under the project including national programmes
- Product and design diversifications / workshops. This gave them and product recognition and appreciation
as also business links to customize their final product viz. gift items, office
- Information and Communication desk stationery etc. Later these women have got artisan card thus linking
them to finance, health and inclusive growth.
Technology (ICT)

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Main achievements and lessons from technology modernization are described in details below:

Technological Up-gradation: Improvisation of Tanning Drum in Chennai led to cost reduction.

Upgradation of Coupla in Coimbatore cluster to maximize the use of coal resulted in an estimated saving
of approximately ` 1.12 crore per annum. Similarly in Rourkela, 3 technology demonstration on latest
technologies in automated CNC and welding machines were organized which led to adoption of the
technology.

Cleaner/Greener Production Technologies: Common evaporating unit and treatment plant for hazardous
waste and effluent was successfully done in Ahemdabad Dyes and Chemical cluster. Similarly pollution
reduction equipment (Multiple Effective Evaporator with latest technology) was introduced in Hyderabad
pharma cluster.

Advanced Technology for Processing:

One of the major problems faced by the Technological Change beneffiting Women
Panipat Floor Coverings Cluster is low A small yet significant change was introduced in the coir weaving
productivity (as more than 90% of the sector of Alapuzzha coir cluster, which employs more than 150,000
tufting and composite manufacturing weavers. As many of these looms were situated in the interior
parts of the cluster where power shortage is a problem, a BDS
firms are using manual tufting guns for provider was brought in by the Facilitator Agency, Cluster Pulse,
tufting operations). This is also resulting who suggested that the changes should be non-electrical and
in diminishing repeated orders for small aim at improving productivity. Accordingly, it was suggested that
the heavy wooden frames be replaced by G.I. pipes, ball bearing
tufting and composite firms from exporters
be introduced to make the movement effortless, the final wooden
as they are unable to supply the goods on cylindrical beam which rolled the finished mat be redone with a
time and thereby affecting the entire supply gear arrangement and the frames to be optimally balanced. The
chain. The problem identified was inability changes suggested were to cost between ` 12,000 to ` 15,000
per loom. 30 looms have installed these changes. Currently the
to utilize electrical tufting guns (ETGs) as
changes are being done in 15 more units. One of the owners of
in house mechanics were not properly a beneficiary unit, Mr. Ranjith says, “Newly improvised model
trained in repairing and maintaining the produced an additional yardage of 15 meters per day and that
guns leading to frequent break downs this resulted in a profit of around ` 100 per day per loom”. The
project has trained 5 loom manufacturers from various areas in the
resulting in reluctance of the labour in
cluster so that their reach will be greater and that they will be able
using the guns; and thereby finally leading to provide services in the interior parts of the cluster as well.
to low productivity. Introduction of new
technology when accompanied by the necessary skill development measures is most successful as the
case of Electrical Tufted Guns (ETGs) shows in the Panipat Cluster. The same was also tested succesfully in
Bhadoli Carpet Cluster. Similarly, in Ganjam, under Cashew processing, shifting from ‘Roasting’ technique
to ‘Boiling’ technique decreases the wastage by 30% (which led to saving of approximately ` 9.9 crore per
year for 36 firms).

Drudgery Reduction Technologies e.g. Semi-Automatic Spinning Ratt in Allepuzzha cluster wherein
this shift to small mechanized interventions has provided enormous benefits. Introducing economical semi
mechanized looms have proven to not only reduce human drudgery (for example the women had to walk
10-12 km but now can sit and do retting) but also enhance efficiency.

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Design Diversification: Design innovations ensures sustainability of cluster firms e.g. in Shanitniketan
cluster, 28 new designs (surface and patterns) and 12 mock ups designs were introduced through design
workshop during the course of the project with a high response from the buyers. Similarly Designers’ Club
initiative in Tirupur has given rich dividends. Tirupur, the textile hub is also a hub of potential designers.
But due to lack of knowledge, information, and adequate platform, the designers were unable to release
their talent and needed a platform to hone their skills. Tirupur BDS Project identified this need and founded
a Club for Designers in association with NIFT - TEA. The club is founded with the objective of promoting
designers from the cluster and to build industrial linkages through the experts. Supporting agendas with
inbuilt sustainability traits have been mainstays of project.

Product Diversification: Kolkata is known for

industrial gloves. A formal network (M/s United Low Hanging Fruit: Foundry Unit Improves
Profitability
Creations Pvt. Ltd.) of six industrial gloves
60% of the 250 odd foundries in Coimbatore are small scale
manufacturers decided to make a move from
proprietary concerns with an estimated average annual
industrial to fashion gloves. This was a new turnover of ` 50 lakh. Most of them are equipped with
product meant for exports and there was a need single blast cupola furnaces. They operate with an average
for an international expert who understands profitability of 10%. Although stricter pollution control norms
have led a top few to switch over to induction furnace, but
the product as well as the market. The Project
unstable power supply and strict time limits on the usage
partially supported hiring the services of German of electricity have led to most of the units to continue with
trainer. He trained 27 workers. Later another the traditional coke-based melting technology.
20 persons have been trained by some of the A quick survey under the project by a foundry expert
trainees. The typical leather required was being suggested that uncontrolled flow of air into the cupola is
burning excess coke and controlling air supply will help
sourced from overseas and is now being sourced
in reducing percentage of coke used per melt. The expert
from two local producers. After over six months of suggested that installation of a butterfly valve at the inlet
trial and error with the support of the expert, two pipe from where air flows into the cupola to burn the coke,
tanneries have reached the quality levels needed will provide optimum air supply and reduce usage of coke.
and the raw material is now being sourced from Such controlled flow will reduce percentage of coke usage
by nearly 10%.
them. The initial German buyer of the product
It started with one of the foundry units, M/s Coimbatore
was also linked by the BDS provider. Later the Engineering Corporation (CEC), implementing the
network found a buyer each in Holland and suggestion. The butterfly valve is a custom made product,
Spain. An order worth ` 30 lakh has already been depending on the pipe size, and was fabricated by the
completed. Sales are expected to cross over ` 2 consultancy cell of the local engineering college-PSG
Institute of Technology. This led to an investment of about
crore by the year 2011-12. Clearly many product ` 10,000. Few months into the operation, CEC is able to
(fashion gloves in Kolkata cluster) and design reduce coke metal ratio, i.e. the ratio of weight of coke and
diversification efforts (in Shantiniketan cluster) metal used for burning from 1:9 to approximately 1:10,
also benefitted the MSMEs enormously. leading to reduced coke usage by approximately 10%. It
is estimated that a unit can save up to `10,000 per month.
Information and Communication Technology: Thus the investment can be recouped in a month and
profitability is estimated to increase by ` 1,20,000%. With
Given the criticality of adoption of ICT among
a current estimated profit of ` 5,00,000, it is predicted that
Indian MSMEs, the phenomenon has been a foundry unit can enhance its profitability by 20 to 25% in
effectively leveraged by many discerning small this process. Over 10 MSMEs have adopted the same with
enterprises as a tool for gaining competitive project support and several others without direct project
support in the cluster.
advantage for long term growth. However,

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adoption of ICT by MSMEs poses unique challenges and constraints which can prevent full realization
of potential. Under the project, initiatives were seen in the area of computer aided design and enterprise
resource planning. Most of the ICT/IT adoption was witnessed in the engineering clusters. ICT use can
promote enormous efficiencies and cost savings with current usage at very low levels. MSMEs that are
using ERPs have learnt the benefits of integration of planning, production, inventory, quality control,
financial, depts., and enhancing the efficiency of inventory management, planning, procurement, etc.

The summary of cluster level efforts and impact of technology modernization is captured in the table below:

Technology Modernisation Initiatives in Clusters

Cluster Sector Technology Development, IT /ICT Initiatives Effectiveness and Impact
Pune Fruit and 20 Food Technologist introduced in cluster. 15 more BDSPs introduced in the cluster
vegetable (along with existing 50) to support close to
processing 50% of the units of the cluster on various
technology area like cold storage bar coding,
Product development, packaging etc.
Chennai Leather - Technological up-gradation (improvisation of - Saving of approx. ` 3,65,000 per drum
Tanning Drum) for cost reduction. and recover the cost within one year.
- Cleaner production technologies - The implementation of cleaner production
technologies in one unit is completed and
its benefit have been disseminated in the
workshop wherein the beneficiary MSME
unit have acknowledged, the saving of water
consumption to the extent of 20% and other
benefits are yet to be quantified.
Hyderabad Pharma - One firm adopted Multiple Effective Evaporator MSMEs have realized the importance of
with latest technology. environment and Pollution reduction. 6
- Firms are adopting the ICT /ERP/specific MSMEs have adopted the pollution reduction
software like GMP Pro with support from equipments.
BDSPs.
Ahmedabad Dye and Cleaner production technologies adopted by 10 Establishment of common evaporating unit
Chemicals units. and treatment plant for hazardous waste
and effluent (by 45 units).
Allepey or Coir Developed new semi automatic spinning ratt. Saving electricity, energy and avoid drudgery
Allaphuzha faced by women and increased daily income.
Ganjam and Fruit and During project intervention 38 entrepreneurs The initiatives resulted in converting 36
Gajpati vegetable were exposed to Mangalore and Kollam cluster to units from traditional roasting method to
processing learn best practices and advanced technology for boiling processing and other 20 is in verge
processing. of shifting.
Panipat Floor 52 firms procured 710 Electrical Tufting Guns. Increased productivity levels and increase in
covering Also replicated in Bhadohi. wages of 550 workers by 30%.

Energy Efficiency and Environmental Management

Energy is one of the prime issues for intervention in clusters. The major areas of intervention included
studies, awareness promotion; walk through energy audit, detailed audit and implementation. Energy
Efficiency initiatives in the clusters adopted three pronged strategy:

●● Energy saving through energy audit implementation, subsequent to awareness and sensitization drive
on energy economy

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●● Energy saving through enhanced product efficiency

●● Financing products related to the green and clean investments in technology

Awareness and Sensitization – Energy Economy : The project has conducted around 108 walk-through
audits and 25 detailed audits. As a result of this not only market corrections enabled fee benchmarking
(from a high of ` 1,20,000, this came down to ` 40,000) but also instilled orientation to best practices
as these MSMEs looked forward to detailed audits. Energy Efficiency booklets on four different sectors
have been published in English, Hindi and regional languages. The project has also published Energy
Efficiency tip sheets & Posters which provides common and easy ways of energy savings by adopting
household measures. These have attended to information asymmetry. Now in clusters Energy Auditors
are available and providing their services to MSMEs in the cluster. While ‘Walk through audit’ is a trust
building measure, there is need to convince MSMEs to opt for full package of energy audit and to identify
the triggers which can help in its replication in the clusters. During the first year of implementation in most
of the clusters, as a product, walk through energy audit has taken the prime lead (Hyderabad, Dehradun,
Indore, Coimbatore and Rourkela). However, in
Fostering Sustainable Agenda
some clusters, detailed energy audit has also
In Hyderabad Pharma cluster, project has taken Pilot
picked up (Kanpur, Ludhiana, Mohali). 47 BDS initiative in installing ‘Multiple evaporator system’ for
providers have got involved in this process. Apart addressing the issue of effluent treatment. This initiative
was taken because the social benefits of industrialization
from direct energy savings measures, promotion
of a backward district like Nalgonda could not be
of product efficiency is also promoting energy accrued due to the negative impact of effluents on
savings. Some interventions, which are saving the environment. The units in Nalgonda district are
too scattered to be connected to a common effluent
energy cost on the one hand, do also have
treatment plant (CETP). They set up independent
potential for environmental impact on the other. treatment solutions which do not effectively separate
all the components of the effluents (Light and Heavy
Energy Savings through Energy Audit Organic Components, suspended solids) during the
Implementation: In the Kanpur leather cluster, treatment process. These plants produce treated water
with colour and smell along with COD (Chemical Oxygen
a group meeting was organized first with industry
Demand) far above the set limits and salts with carry
participants where the BDSP was introduced. colour and smell.
The industry was explained about the experience To overcome this, a unique multiple evaporator system
was custom designed by a BDSP. This system not only
of service provider in area of energy efficiency.
overcomes all the above said problems, it also increases
Industry was also explained the detailed recovery of various components in the effluents (steam,
methodology for energy savings and the support salts with little or no coloring and no smell, 60-65% water
recovery). This system ensured that there is no pollution
expected from units during audits. Industry input
due to effluent but also optimally allows re-utilization of
was also taken regarding the critical areas of scarce resource like water. This has been successfully
energy consumption in tanning process. The adopted by several others in the cluster.
selection of the service provider was done after
taking into consideration the service fee being charged and quality of service offered by leading service
providers. An appraisal visit to service provider was organized in tanneries covering small, medium and

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large units. After taking stock of the situation, the service providers assured of potential of at least 10
percent saving of the current bill amount at the present operational set up. 7 units went for the audit and
implementation. The charges were proportional to KVA usage and 50% was paid by the units.

Post implementation, data shows that six units were able to save ` 4,00,000 in one month. Accordingly, it
is estimated that even to start with, estimated annual saving of the seven units will be around ` 60 lakh.
The annual savings are estimated to increase to ` 2 crore as the units pick up the learning and complete
the investment process. A booklet on industry level ‘dos’ and ‘don’ts’ shared by project is expected to lead
to immediate impact even before fully fledged audits are done by the rest of the industry.

Energy Savings through Enhanced Product Efficiency: Rajkot engineering cluster produces 100,000
pumps valued at ` 200 crore. In such pumps, purchase price accounts for 5%, maintenance 20% and energy
costs 75% of its total life cycle cost. Here, going in for appropriate BIS certification and thereafter BEE star
rating has tremendous potential for energy savings during the product life cycle of a pump. An awareness
programme organized saw participation of 45 units and 2 potential BDSPs. Thereafter, project team
identified a local Business Development Service Provider (BDSP) providing consultancy services related
to ISI marking and provided 3-day training by BEE, customized as per the needs of Rajkot manufacturers.
As a result, the BDSP is now able to guide the firms in product improvement, prepare documents and file
online application. The submersible pump was taken for initial intervention. BDSP improved the motor
portion technically. These improvements have increased the cost of production by ` 800 per motor, but
also simultaneously reduced the energy bill by around ` 4,000 per annum. Even if 50% of pumps are
manufactured in this fashion, there is a savings potential of `
Synchronizing Development &
10 crore per year from this one product. 4 local manufacturers
Environment
have already obtained BEE star rating for submersible pump
In Ganjam Fruit & Vegetable Processing
and another 15 units are getting their documents prepared by Cluster, 20 entrepreneurs planted
the BDS Provider for the same. Turnover of the BDS Provider around 5000 trees of 10 varieties
like teak, etc. Entrepreneurs with the
has increased by ` 2,00,000 as he has provided consultancy help of FA contacted horticulture and
services to more than 19 units in the cluster till August 2011 for environmental experts to know the types
BEE star rating. Looking at the increasing demand, the firm has of trees which can give the best result in
terms of oxygen emission. Based on the
trained 1 engineer and planning to train 1 more to in this area experts’ recommendation they identified
of BEE scheme related consultancy. There are 5 more BDSP these 10 varieties and purchased those
from the Forest Department and planted
specializing in BIS certification. Looking at the demand for BEE in their premises and nearby areas. This
certification (triggered by this project) they are also likely to initiative by the entrepreneurs is a step
extend their services in this area. towards mitigating the problems due to
air pollution by their cashew processing
units. This initiative has also motivated
The cluster experiences shows that replication of energy
other entrepreneurs in the cluster. The
efficiency interventions are easier with demonstration effect Cashew processors’ association is also
e.g. in the Coimbatore cluster more than 200 firms adopted the actively involved in the whole process
and made it a part of it’s development
energy efficiency measures. agenda.

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Environmental Management at the Clusters:

Mainstreaming
Environmental management involves use of latest
In Ludhiana Cluster project facilitated Knitwear
technology for waste characterization, modeling, waste Club of Ludhiana to organize training programme
utilization, waste reduction process and waste reduction in jail. 50 jail prisoners were imparted’ linking
machine operator training’. Cluster firms of
materials. This is applicable to specific clusters like leather,
Ludhiana started sending job works to jail and
engineering which have higher pollution emitting firms. the trained prisoners started doing the job
Leather, Engineering, Pharma, Dyes and Chemical clusters works using linking machines installed in the
jail by knitwear Club. Through this initiative the
have taken serious measures to address environmental
prisoners earn money that are being saved
concerns emanating from the nature of operations of the to their accounts and they are getting skill
industries in these clusters. The Kanpur Environment development training and experience on the
area which will give them opportunities to get
Protection association is working on a single but very future employment. This activity not only results
crucial project which is linked with the existence of the into increase in the skilled manpower for the
leather industry in cluster. The project aims at upgrading industry but also turned into a social benefit in
which the jail prisoners got a mean to earn their
and expanding the common effluent treatment system in bread and butter after their prison.
Jajmau (Kanpur) which has been a chronic problem for
pollution to river Ganga. The project cost is about ` 190
Crore and the same has started. Most of the 375 functional tanneries in Jajmau (Kanpur) have committed
to adopt advance technology as per the requirement at individual tannery level.

Overall, the energy efficiency and environmental management initiatives of clusters are significant and
amount to being considered as part of Clean Development Mechanism (CDM). These therefore can become
part of carbon economy and can claim/earn certified emission units through carbon finance mechanisms.
This will be of great significance to the development of MSME Sector as it will play a very important role in
improving the cost effectiveness of the sector, while reducing its carbon footprints.

Technological Mapping of Rice Mills in Murshidabad: In another sector-specific intervention, the

MSMEFDP-GIZ addressed technology mapping of rice industry in West Bengal. It aimed to identify the
gap in existing technologies and suggest measures to improve rice mills. Technology, processes and
management systems were identified as areas for improvement. Project roped in German experts for the
exercise so that the mapping is undertaken keeping the global best practices in view.

♦♦ Institutionalization and Sustainability Vehicles

The project has supported development of cluster owned institution or strengthened the existing cluster
institutions. In the adopted clusters, distinct institutional entities have been established, representing the
broader cluster interest and interest of a group of MSMEs. Special Purpose Vehicle (SPV) is major form of
the institution established in different clusters. The purpose of these SPVs is quite different. The purpose of
two SPVs established in Mohali cluster is to avail of the Lean Manufacturing Competitive Scheme. Rourkela
Techno-Park Self Healf Cooperative Ltd. (RTPSHCL) is SPV for relocation of firms in Rourkela cluster.
In Chennai, Leather cluster, an SPV is formed for common buying of Dyes & Chemicals. All the industry
associations in Kanpur have now come together to form an SPV named as Jajmau Tanneries CETP

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Company Ltd., for the implementation of the up-gradation project and expansion of CETP. In Hyderabad
pharma cluster, 2 SPV are established, one on CETP and another on vocation training. The summary of
actions and learning on sustainability vehicles is given as under:

Institutionalisation as Sustainability Vehicles - Measures taken in the Clusters

Cluster Sector Form and Nature of the Institution Status and Effectiveness
Mohali- Engineering Two SPVs established to avail of the Lean The creation of these SPVs has also resulted in a
Panchkula- Manufacturing Competitive Scheme: namely, revenue generation of ` 50 Lakh.
Chandigarh ‘Mohali Alpha Engineering Cluster’ (10 members)
and ‘Mohali Beta Engineering Cluster’
(8 members).
Rourkela Engineering RTPSHCL is SPV for relocation of firms In the planning stage; CFC in the premises planned.
(5 acre Govt. lands identified).
Chennai Leather SPV for common buying of Dyes & Chemicals. 140 tanneries involved; cost saving of ` 7 to 8 crore
per annum.
Kanpur Leather The Government of Uttar Pradesh has approved There shall be a one-time grant assistance of ` 8 Crores
the establishment of Testing Lab. (80%). Firms shall contribute ` 2 Crore (20%). The land
All the industry associations have now come for the project purpose has been purchased by SPV.
together to form an SPV named as Jajmau
Tanneries CETP company Ltd., for the Implementation stage.
implementation of the up-gradation project and
expansion of CETP.
Allepey Coir BDSP Consortia- Eight created. Each consortia is providing professional services to coir
industry.
Consortia conducted a successful domestic market
survey.
Dehradun Pharma Common Analytical Testing laboratory & Planning stage
training centre with E-library, in the process
of establishment with support from ministry of
MSME.
Hyderabad Pharma 2 SPV established - one on CETP and another Grant is expected to be sanctioned by Ministry of MSME
on vocation training. for establishing Common Effluent Treatment Plant,
vocational training centre with E-library.
Ahmedabad Dyes and A consortium to buy raw material and allied 20 member group produce a variety of products with
Chemicals purchases and also to market the final product, wide product range and will make its presence felt in
jointly - Ahmedabad Dyechem manufacturers domestic and international markets.
Cluster Ltd.
Pune Fruit and Evolved NAFARI as an umbrella BDSP in the BDSP started offering services to industry in different
Vegetable cluster in self sustainable way. areas, increased membership base and now
processing successfully caters to varied needs of the cluster.
Bhadohi Floor covering Three BMOs formed and registered under Society 2 BMOs namely Bhadohi Carpet Designers
Act. Association(BCDA) & Purvanchal Designers Welfare
Association(PDWA) taken up the CAD trainings. Another
BMO called Bhadohi Hastshilp Kaleen Prashikshan
Sewa Sanstha imparting ETG trainings in the cluster,
they have visited Mumbai for promotion of carpet in
domestic market.
Ganjam and Fruit and Veg- Formation of four cluster associations: 2 SPVs will work for CFC and raw material bank in the
Gajpati etable process- - Ganjam Kewda Development Trust (SPV), cluster.
ing Registered under Trust Act. (21 members).
- Gajapati Cashew Processor Association,
Registered under Trust Act. (12 members).
- Tumbeswar Cashew Development Trust,
Registered under Trust Act. (7 members).
- Shree Jagannath Cashew Cluster Pvt. Ltd.
(4 members).
Ludhiana Knitted Apparel The capacity of the existing Federation of Knitwear, FEKTA has also been recognized as an Exit Vehicle for
Textile and Allied Industries Association (FEKTA) the project.
has been build through extending support to the
association who are also members of FEKTA like
Knitwear Club, Ludhiana Dyeing Associations etc.

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In Ahmedabad cluster, another remarkable

Counseling helps – Converting Passionate Ideas into
thing of inter-cluster collaboration (as
Business Reality
clusters are in a macro sense dependent
Success is often achieved when the person is able to go further
on each other) has happened which has than most people, breaking limitations imposed by their own
leveraged inter-cluster dependencies. economic, physical and cultural boundaries. Meena Pathak is
an example of success, as she overcame economic and social
MSME units in the cluster are small and
barriers to become a successful business women in Boragaon,
individually managed. Lot of duplication a small place in periphery of Guwahati. Her entrepreneurship
is happening in production and services. quality with motivation and self confidence found the right source
of guidance from the counselor Mr. Mrinal Baishya of Guwahati
Lack of availability of cheaper sources of
Counseling Centre for MSE financing and the result was seen in
marketing has often taken away the margins the rapid growth of her enterprise in last one year.
to many intermediary agencies. MSME units Meena learnt tailoring from her mother and took it up as a livelihood
were desirous of such cluster approach in option with one stitching machine just after her marriage. She
started a small tailoring shop in 1993 with a capital investment of `
procurement and CFC to be cost effective
1 lakh got under PMRY scheme. Soon after, she hired two workers
in the competitive market. The project and started doing business pretty well. But her thirst did not stop
intervention has brought a sample size of there. She wanted to start a proper factory by installing advanced
stitching machines and also to become a social entrepreneur by
about 15 units together for using cluster
availing skill development training to the unemployed youths in the
benefits in the CFC, procurement and also area. Despite of good repayment record she was refused by her
Inter linkage to the other clusters possible. bank for higher dose of credit. After a few months she got to know
about the Financial counseling centre through a friend. Meena met
A SPV created out of Micro and Small units
the counselor to understand the sources of financial services that
has already started reaping rich benefits of help people like her to grow. After two days of thorough counseling
this coming together approach. Linkages she learned how to make a proper financial plan and take right
with two clusters have been established decision on investment. She also learnt different products offered
by financial agencies and the basic requisite to avail it. Meena
successfully and the initiative can further approached SIDBI with a proper project proposal and got another
linkages with many more clusters. loan of ` 1 lakh and an assurance of getting more than double
the size of credit after completion of the first doze. She used that
Another remarkable achievement /best money and some other savings to buy 4 new stitching machines
practice in creation of sustainability vehicles and 2 automated electric stitching machine and comfortably
started earning a net amount of more than ` 12,000 every month
in the strengthening of meso organisation in after incurring all expenses. Now 12 boys and girls are getting full
Pune cluster. NAFARI has been established time employment in her unit. She is also running a training centre
in the cluster as a Meso-organisation, it offering basic as well as advanced stitching courses to the girls.
She now aspires to buy a computerized machine for designing
has been capacitated so as to carry the and stitching and creating monograms on garments after getting
developmental processes on even after the higher amount of credit from Banks/FIs.
the exit of project in the cluster, with the Entrepreneur is a catalytic agent of change, which generates
establishment of BDS Desk, Regulatory employment opportunities for others and brings prosperity to the
society. Right guidance through proper counseling helps a lot.
Panel and Resource Centre at NAFARI When an enterprise is established, it not only boosts economic
for MSMEs in Cluster. Many training growth, but also has many desirable social outcomes. Meena who
is not only a business entrepreneur but also has turned out to be
programmes, seminars, studies, workshops a social entrepreneur and a community mobilizer now counsels
has been organised during the course of other Self Help Group members and rural women to do regular
saving, investment and take up business activities which suits to
the project in coordination with NAFARI and
the local conditions.
in the premises of NAFARI itself so that it

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remains well acquainted with the project approaches, which will aid it the future activities. Establishing a
Meso-organisation is a unique and strong feature of the project which can be replicated in other areas also.

Another important initiative under the project umbrella was capacity building of Jamnagar Brass Cluster
testing facility where more than 10000 samples from about 1100 MSME units have been tested till date. In
Allepey, a Business Development Centre-Coir Shippers Council was granted viaibility gap support from the
project, which has helped in leveraging support under Industrial Infrastructure Up gradation (IIUF) scheme
of GOI. The first phase of the project has been completed and is sustainable now. The project has also
established Micro Enterprises Business Information Counselors (MEBIC) in collaboration with Rashtriya
Gramin Vikas Nidhi (RGVN). Around 1100 prospective entrepreneurs have been provided counseling
services through project support. The project has supported Faridabad Small Industries Associations
to channelise larger credit flow to MSME members. Till project intervention, financial support has been
disbursed to around 50 MSMEs members. This has led to creation of a new model for credit delivery by
leveraging social capital which has also been replicated in Ahmedabad cluster with demands emanating
from few more clusters. Another innovation was done in Allepey cluster in the form of BDS consortia called
Centre for business research & counseling (CBRC). The consortia undertake multiple BDS transactions in
multi discipline, beyond cluster/ region. Furthermore, the project has established Prime database, which is
a national level database of BDS providers by creating a website (msmementor.net). It contains a pool of
over 12000 professionals enabling matchmaking at national level and has attracted investments from few
other institutions, indicating its value proposition.

Clearly, sustainability of actions is guaranteed wherever an institution has been created and wherever
exit processes have been followed e.g. in Allepey cluster BDS centre is managed by consortia of BDS
providers, supported by CBRC (a company of 8 BDS providers), BDS centre funded by the Government
viability funded by project and CFC scheme by Government. Handover wherever not proper, may not have
seen enough momentum for the mechanisms to continue or strengthen the establishment of the BDS
market. The project model of institutionalization (which is really vast, considering the type and spread of
institutions developed) need to be examined in depth for its effectiveness and impact. This can provide
very useful lessons to all cluster development work in India and elsewhere.

Natural Facilitating Agency

It has been generally observed that the successful performance of a cluster depends on existence of
effective networks of stakeholders like association/ Business Membership Organizations (BMOs) with
targeted vision, committed leadership and technically qualified support staff and also presence of
institutions strongly linked to delivering various business/ support services to the cluster. Such networks/
associations/ institutions work as Natural Facilitating Agencies (NFA) in the cluster providing various critical
services in the areas of infrastructure creation, marketing, financing, technology and human resource
development of the industry. There are many such reasons why the creation of a NFA may be an essential

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component of a broader cluster development initiative.While the broader goal of the project was creation
of a sustainable BDS market, the sustainability could not be ensured without creation of such natural
facilitating agencies(NFA). To ensure this the project initiatives were envisaged to be pursued through
NFAs to the extent feasible and easy up-scaling of the flagship activities. In addition, project also ensured
a robust exit strategy for the cluster envisioning NFAs will continue the need based development work for
the industries.

Building Social Capital- “I am SME of India”

The Faridabad Small Industries Association (FSIA) has over 800 direct and 1200 indirect (association based)
members. These units produce over 35 different products including foundry, metal cutting, machining, electroplating,
heat treatment, injection or blow moulding etc. Various renowned companies purchase spare parts from the MSME
units in Faridabad. In short FSIA members have the cutting edge benefit of learning and growing continuously with
some of the high profile manufacturing units of the region. In order to keep abreast with the latest technologies
and sudden surge in demand from their valued clients, the firms are often confronted with critical liquidity crunch
and face the result of losing out on sure business. In such situations, financing is required within 15-20 days.
However, the stipulated time required for a bank to provide loan typically varies from 2 to 3 months involving
lengthy procedures and arrangement of collateral.

To address this gap, need for a scheme that would make loan available within 15-20 days’ was realised by FSIA.
SIDBI came forward to address this problem through a unique model of making the association significantly
responsible in this loaning process. While SIDBI made available the loan, FSIA took the responsibility of identifying
responsible loanees from among its members, doing a part of the initial processing and also agreeing to do
necessary follow-up for repayment. MSMEFDP, SIDBI also invested, through grant support, in doing necessary
capacity building of FSIA.

Under MOU with SIDBI & FSIA, SIDBI introduced a special scheme of Collateral-free Equipment Finance up to
` 50 lakh exclusively for FSIA members at an interest rate of PLR less 0.5%. FSIA promoted a Special Purpose
Vehicle (SPV) - ‘Integral Association of Micro, Small and Medium Enterprises of India’ (I-am-SME-of-India) as a
Section 25 Company in January 2009. IamSME acts as the front desk, helps fill up the Application Form, complete
documentation etc. Based upon the evaluation and recommendation of IamSME, suitable CAPEX limit (Line-of-
credit) upto ` 50 lakh is sanctioned by SIDBI. The initiative met with success and 50 cases with sanctioned
amount of ` 9.62 crore (87.5%) and disbursal is around ` 6.5 crore (60%). Many firms have applied for loan under
the scheme for the second time, which reveals the easy and hassle free accessibility of loan for the MSMEs. Iam
SME has subsequently signed MoU with Indian Overseas Bank (IOB) for collateral-free Finance upto ` 1 crore for
Iam SME Members at low interest rates. It has also tied up for insurance to members at better rates. One right step
leads to vibrancy and several sustainable steps.

However, creation and strengthening of such NFAs is not an easy task. The project thus hired external
specialized Facilitation Agencies (FAs) who are otherwise known as Artificial Facilitating Agency to work in
the cluster, identify the needs, bring solutions and work as a catalyst for industrial development by means of
creating a sustainable BDS market for the industries. While these FAs worked directly with the stakeholders,
at the same time they maintained their facilitator role and promoted various associations and institutions as
NFAs to ensure greater sustainability of the interventions.

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However, process of From Lab to multi-domain BDS

identification of NFAs, in
“NAFARI, established since 2002, is an autonomous, not for profit sharing organization,
the initial stage was very registered under Section 25 of the Companies: Act 1956. It is managed by A Governing
difficult as in some of the Council having representation from MCCIA Pune & Region’s Food Industry and Members
may also be nominated by FIs. The Institute has an ISO/ IEC 17025 NABL accredited
clusters there were no
laboratory, equipped with ‘State of the Art Facilities’ for Chemical and Microbiological
effective associations Analysis. However, the facilities of NAFARI were not fully utilized and it was incurring
and in some cases losses. NAFARI has been turned up into a profit making entity after its association with
the project. The total number of clients has increased to over 500 from 350 and sales from
where associations
` 26 lakh to ` 40 lakh. NAFARI is emerging as a prominent Incubation Centre in the Food
were present but they Sector for new product, process and package development along with Training services.
were in dormant stage. With its facilities, skilled staff and increasing acceptance in the cluster, NAFARI took
In addition, most of another step to diversify its activities and play an important role in the development of
Pune F&V processing cluster. A business plan document was prepared for NAFARI with
the clusters were
project support and now NAFARI is in process of implementing the same. This would
characterized by weak also enable NAFARI to raise resources from Govt. and other stakeholders. This initiative
linkages with technical/ shows the transformation of a testing lab which was almost at the verge of closure into a
institutional BDS provider offering vide range of services under one roof.
support institutions.
Where there were no effective associations or institutions, FAs started working with 2/3 leading personalities
of the cluster who had the ability to motivate other cluster members, came together and establish /revive
organizations. This revival strategy proved success in Panipat and Chandigarh cluster. On the other
hand some of the clusters like Kolkata, Tirupur, Chennai Coimbatore and Shantiniketan where strong
associations were already present but they were indorment stage, project gave handholding support for
further growth and development to become NFAs. Similar is the case with institutions becoming NFAs.

Industry Association as NFA : In many clusters the associations of MSMEs suffered from ambiguity
of purpose and a low resource base. With low resource base, lack of revenue model, low memberships,
restricts their ability to work as natural facilitators of change processes. The project has thus focused on
strengthening the associations and creating professional management systems in order to play the role
of NFA and continued facilitating various BDS linkages and even worked as BDS provider for the benefit
of its industries. In Kolkata Leather Cluster ILPA, an association of leather goods manufacturers is giving
training support as well as various design and skill related services to its members through its design
studio- FREYA. FREYA is continuing the project initiated use of design forecast online subscription, use
of audio-visual training tools for skill up gradation of industry workers and many other such services.
Similarly in Chandigarh cluster, the association is leveraging various Government schemes, programmes
and linking it with the cluster units. The association is also rendering various need based services. Some
of such cases of association led NFA are elaborated as below.

International exposure : Project took a delegation of lead national/regional BMOs to participate in Work
SME Expo in 2008. BMOs were introduced to competitive strategies of MSMEs as also how BMO marketed
their value add services to attract memberships. Few BMOs implemented few best practices such as
websites counseling, financial linkages and so on.

Institution as NFA : Presence of institutions strongly linked to delivery various business/ support services
to the cluster have ensured greater sustainability of various cluster initiatives. Here, institutions play the
role of NFA. The case studies that follow illustrate how institutions were capacitated to become NFAs and
become acceptable naturally by the cluster stakeholders.

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Intitutionalising Learnings, Communications and Dissemination

In terms of information and communication channels, project has used multiple strategies:

●●BDS workshops –Regional and national levels

●●Learnshops
●●Management Information system and Quarterly reporting
●●Outsourced Strategic BDS support along with regular M&E
●●Outsourced baseline and impact assessments

BDS Workshops: Project organized four BDS workshops (June 2007, May 2008, April 2009, and
October 2010) at different phases of the project. BDS workshops in a way were crucial milestones in
the project phase and therefore provided an opportunity to learn, strategize and bring stakeholders on
to a common platform and learning. First BDS workshop achieved awareness and sensitization of new
BDS implementing agencies as international and national level consultants shared their experiences
on market linked BDS. Various diagnostic tools like Participative appraisal of Competitive advantage
(PACA), Value Chain Analysis (VCA) were discussed in this workshop. The workshop also helped in
creating a road map for the BDS intervention and discussed establishing an M&E framework for the
facilitator agencies. Second BDS workshop was organized to review the progress of the implementing
agencies working in the three clusters at the pilot phase. The Project brought together implementing
agencies to share their progress, action plan, emergent issues and discuss strategies of intervention in
the clusters. The workshop also comprised of a focused discussion session conducted by Foundation
for MSME Clusters – the knowledge partners and experts. The learning were shared and best practices
were disseminated among the cluster level facilitator agencies. The third BDS workshop was conducted
after successful pilot phase of the Project. It brought together implementing agencies from the pilot
phase as well as from the additional 15 clusters to openly discuss action plans, issues, solutions and
challenges, and workout a common roadmap for further intervention. Fourth BDS workshop focused on
showcasing the interventions and their outcomes in 19 clusters. In addition to the panel discussions,
sessions on communication skills, log frame as a tool for effective monitoring and evaluation, cluster
school and National Level database were also organized.
Learnshops have been institutionalized where in 7 facilitator agencies including over 110 cluster
experts have been trained with cross learnings and experiences,which were replicated. Successes
were leveraged and failures were correctly understood to minimize wastages. During intervention, a
number of workshops (16) has been organized in various clusters which enriched participants with
successful and unsuccessful experiments and achievements.
Overall, the project has enormous learning to offer to the cluster development initiatives in India and
internationally. It may be prudent to organise a national level BDS market development and cluster
development learning workshop involving all cluster organisations, BDS experts and MSMEs together.
This will not only provide physical integration of entire project, but will also be a showcase opportunity
for successful project initiatives. Precursor to that, the project can initiate thematic reviews for depth
understanding of interventions and impact.

More detail on achievements and learnings appended at Annexure VII.

Development of new service offering and capacity development of select target groups:
As per the need identified from stakeholder’s discussion and field level experience, MSMEFDP-GIZ portion
of project is working with identified private service providers to introduce new service offerings which can
be sustainably offered beyond project period.

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♦♦ A two week residential workshop on Export Growth

Cooperation works-
Counseling was conducted with an aim to enable CAPSULE - a BDSPs Network:
BDS providers(BDSPs) to understand the nitty-
With an objective to facilitate BDS market
gritty of import-export, specifically in relation to
development, the BDSPs have been brought
doing business with European Union. BDSPs were
together on one platform, by forming “Consortium
introduced to EU market and they could get access Service Providers for Upgradation of Enterprises”
to reach out to more number of MSMEs through this (CAPSULE) in Hyderabad Pharma Cluster. This is
workshop. Some of the key topics discussed were- an association of MSME services providers’ under
export documentation, banking documentation, one umbrella providing services to MSMEs. To
sustain the activity, for other verticals and regions
logistics, taxation, foreign trade, etc. General
on an ongoing basis, CAPSULE was formed. The
awareness about exporting to EU was also created
ultimate goal of institutionalization of BDSPs is
during the workshop. to enable the MSMEs to improve their business
performance and to achieve sustainable growth.
♦♦ Federation of Andhra Pradesh Chambers of
CAPSULE facilitates this by providing a basket
Commerce and Industry (FAPCCI) was assisted in of varied cost effective services comprising of
developing a centre for E-enabled services which the latest management methods and technology
can provide cost effective, simple, and scalable solutions which in turn helps the MSMEs make the
and proven IT solution for SMEs. Scope of solution best use of available resources.

includes- sales, purchase, inventory, excise, finance, More than 75 BDSPs were introduced to the
planning, production, quality control, maintenance cluster and out of which 23 BDSPs are reached

and payroll. Solution is provided through Software to self sustainable stage. The BDSPs belongs
to cGMP, energy savings, safety management,
as a Service (Saas) model. SMEs can choose the
lean management practices, water management,
required business functionality in order to scale
Information Communication Technology, etc are
up their business. In addition, trained manpower initiated to take membership of the three industry
for training and implementation support is also BMOs to take lead for their business improvement
available with FAPCCI. and also improve the performance of the cluster
firms. CAPSULE is a proactive body and closely
Policy Advocacy working with MSME-DI and industry BMOs for
their support to leverage the NMCP Schemes for
The Project aimed at playing a significant role in competitive advantage of their members firms.
attending to key policy, legal and regulatory issues The leveraging of Government schemes is future
that are critical in establishing a facilitating framework Catalyst for the different type of Services for the

that promotes MSME sector. The Project carried out industries.

a wide range of initiatives, through various forms of

policy advocacy tools. These advocacy tools aimed at
reaching out and deliver message to policy makers to enable them to make an informed policy decision.
Initiatives also involve creation and promotion of information booklets to disseminate information on new
and existing ideas of relevance.

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Project has, under the guidance of apex group - the Policy Advisory Group (comprising of project partners,
top management of SIDBI, senior GOI officials from DFS, MOF and MOMSME) adopted both Top - Down
(i.e. supply side of Institutional Support flowing to MSMEs) as also Bottom- up approach (i.e. demand side
of enlisting the issues emanating from MSME and devising suitable strategy) to attend to these mandates.
With this range of initiatives, the project addressed context related critical issues. The Project influenced
the MSME context for the better in two ways:

a) Improved Policies and Policy Building Environment

b) Attending to the Expectations of MSMEs to their Critical Concerns

SIDBI enormously increased its Policy footprints due to initiatives under the project. Policy influence work
requires persistent agenda and energy. SIDBI has the required calibre and presence at appropriate level
to not only engage but actually influence the shape and size of policy and institutional response that can
spur the growth and competitiveness of MSMEs. The project was a small window which catalyzed the
actions and provided initial results in terms of making the context more enabling to the MSMEs in India.
However all experiences and perspectives of internal and external stakeholders to SIDBI suggest that
what is done and what is achieved is a beginning towards enabling eco system.

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The Project has adopted a systematic approach towards instituting framework and structure for methodical
attendance to Policy Matters. This included:

A. Improved Policies and Policy Building Environment - Creating Policy Support Mechanism

Agenda Purpose Assignments/Activities

Creating a To facilitate the Project carried out a wide range of initiatives, through various forms of policy advocacy
favorable and development tools. These advocacy tools aim at reaching out and deliver message to policy
facilitating and growth of a makers. Initiatives also included creation and promotion of information booklets to
competitive and disseminate information on new and existing ideas of relevance thereby contributing
environment for
vibrant MSME to competitiveness of MSMEs.
MSMEs through sector
advocacy Channel 1 – Information /Communication
on enabling ♦♦ Physical Interaction – Capturing MSME Perception
environment.
●● Organized /supported /sponsored events /workshops /seminars at local,
regional & national level based on various thematic areas.
●● Example of the workshops organized directly by project team:
- Risk Capital for MSMEs (organized in Mar 2008 along with national level
BMO) - Towards creating an enabling eco-system and framework for Risk
Capital for MSMEs.
- Modern Insolvency and Bankruptcy Regime for Indian MSMEs (organized
in Jul 2008 along with national level BMO) – Towards suggesting a modern
Insolvency and Bankruptcy regime based on best practices for MSMEs.
- India MSME Summit (organized by Times of India Group along with
national level BMO in Feb 2009 and supported by project). Conducted in
the backdrop of global economic crises of 2008. It suggested on measures
for MSMEs to sail through the prevailing crises. The deliberations during
the workshop were documented as policy booklets /papers and thereafter
published/ released /disseminated/ hosted on project website.
♦♦ Virtual Interaction - Harnessing IT Platform
Website
●● A separate and dedicated website (www.msmefdp.net) for project developed
and launched in 2008.
●● As per the records the project website has registered average 1508 unique
visitors during last six months (total 9050 unique visitors and 11396 hits during
May-Oct, 2011) indicating its visiblity and efficacy. Visitors’ domain countries
besides India include-Germany, Russian Federation, China Finland etc.
♦♦ Public Good
Knowledge Bank
●● A free access knowledge hub has been created by the project.
a) Project has created a knowledge pool on SIDBI & Project Websites in Oct
2009. This was enriched during the later period and contains all the policy
/ knowledge series/toolkits/papers brought out or supported by the project.
The knowledge pool attends to crucial gap of information asymmetry by
acting as one stop repository of project publications making the website a
dependable tool.
b) A CD on Fostering MSME Competitiveness (released in Apr 2010) – It
contains information on Green Finance, Green Rating, Policy Series /
Reports etc. and was released on SIDBIs 20th foundation day in 2010 by
Honorable FM of India.

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Agenda Purpose Assignments/Activities

Toolkits
●● Developed Online Tool-Kit - A single window information hub on IT platform
to guide an upcoming entrepreneur (in setting-up new enterprise) and existing
entrepreneur (to look up the value chain and improve operational efficiency,
market competitiveness). It’s pilot is operational.
●● Walk-in-Kit on Corporatization - With 95% MSMEs being non corporate en-
tities, growth gets stinted after sometime. The toolkit Provides handholding
thus enabling conversion to corporate entities (released in 2009 and widely
disseminated across MSMEs, stakeholders etc).
●● How to link-up with Retail Chain - enabling local-local, local-national
marketing linkages by providing information to MEs for turning upto the
expectations of retail chains. It shall enable MSMEs to come up to the
standards of big retail chains and be part of their supply chain.
●● MSME Database - A one stop statistical information on Indian MSME domain.
This is unique endeavor for enabling information efficiency.
Channel 2 – Challenge Fund for Advocacy in MSME Sector (Advocacy Chal-
lenge Fund - ACF)
◘◘ On the lines of international best practices, MSMEFDP has set-up( first time
in India) an ACF in Feb 2009. Which aimed to promote ownership through in-
volvement of beneficiaries / stakeholders and funded their ideas to take shape
as an action initiative. It provides advocacy action grant as also CB grant ( as
an incentive after successful implementation of ACF).
◘◘ Details provided in the subsequent sections.
Channel 3 – Developmental and Thematic Policy Aligned Studies
◘◘ The project conducted policy aligned studies for the benefit of MSMEs and to
facilitate policy formulation.
◘◘ Details provided in the subsequent sections.
Channel 4 – Support to Specialized Institutions
Specialized institutions carry the responsibility of advocating / disseminating on the
critical mandate carried forward by them. To make policy framework more focused
and specific decentralization of advocacy initiative through enabled intermediaries,
stakeholders and specialized institutions was framed and implemented.
◘◘ CB Support was extended to India SME Technology Services Limited (India’s
only technology bank, setup in 2005) towards:
a) Sensitization of MSMEs and Stakeholder on CDM, Carbon Trading,
Energy Efficient Technologies etc. Website upgraded as more interactive
and user friendly.
b) Develop Technology Database (Profiling of more than 600 MSME related
technologies was done and these are categorized by tagging as clean
/green , Energy Efficient etc.) Database has also been hosted on the
website. Except the “technology offer” details, the other database is freely
accessible.
◘◘ CB Support was extended to India SME Asset reconstruction Company
towards suggesting strategies and measures for unlocking precious capital
locked in NPAs.

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B. Attending to the Expectations of MSMEs to their Critical Concerns - Thematic Initiatives

Initiative Remarks
Corporatization of MSMEs Based on the outcome of the study project had developed a Walk-in-Kit on Corporatization (2009)
aimed at enabling MSMEs understand the advantages and walk the process. It surveyed few MSMEs
who had corporatized and also presented showcase study for easy replicability.
A Study on Factoring A Report brought out in 2010 (which did extensive discussion with factoring companies/ BMOs and
OPTIMiSM MSMEs) contributed to the new factoring bill for MSMEs(passed by parliament in December 2011).
Prior to this on the basis of the Study, SIDBI, along with National Stock Exchange (NSE), took the
initiative for setting up an electronic platform NTREES for discounting of MSME receivables (facilitated
fast bills payment to MSMEs on the same day as against 3 to 4 days taken earlier. Electronic mode has
reduced paper work and also aims at price discovery).
OPTIMiSM Periodical digest based on thematic areas released by Finance Minister in April 2010. Later periodical
editions were brought out on thematic agendas of competitiveness, Energy Efficiency, etc.
SIDBI MSME Report A one stop repository of information on supporting framework, status of Indian MSME Sector and
emergent areas for planners, overseas/domestic investors and other stakeholders.
The report was released by Finance Minister in April 2010.
The present edition documents the achievements and learning’s of the project from independent
perspective. It attempts to bring in models, case studies for wider dissemination for adoption.
MSME Database A first time single window database on Indian MSME Sector.
The report was released by Finance Minister in April 2010.
It’s being periodically updated.
Feasibility Study on MSME The study analyzed the feasibility and developed alternate CC type product /scheme for Indian
Credit Card (CC) MSMEs.
Hosted on project website under Knowledge Bank.
The Global Best Banking Released in April 2011, the study documents Best Practices prevalent globally and enlists customization
Practices possibilities for Indian MSMEs. The Government is now considering implementation of some of the
innovative financial products and mechanism of Risk Capital /Venture Finance for MSMEs. The study
brings a tip sheet mechanism for ready access to policy makers.
CSR Report & Model CSR SIDBIs CSR report was brought out as also based on it, CSR Model developed. It’s first CSR report by
Framework for Banks / FIs any financial / Banking institution of India. Later hosted by GRI on its global website.
(2010)
This has been highly appreciated by Reserve Bank of India and stakeholders. Some banks have started
following the preparation of CSR report as per the suggested CSR Model under the Project.
Later on an International GRI consultant was roped in through MSMEFDP-GIZ TA portion for
assimilating best practices on CSR Reporting (2011).
As a part of the agenda to benefit larger community( through sensitizing the banking fraternity) a national
level workshop on “Risk Mitigation through Non-financial Measures and reporting” was organized at
Mumbai in 2011 with > 25 bankers/industrialists participating DG, RBI inaugurated the workshop.
Booklet on Carbon Credit Aimed at removing understanding gap on carbon credit.
Widely disseminated among MSMEs/ stakeholders.
Report on NPAs in the Retail Provided status and Suggested Resolution Measures to enable unlocking of locked capital.
and MSME Sector
Report on New RSF Product On the basis of the study on Risk Sharing Facility for CGTMSE, a new model has been developed to
provide credit guarantee to MSE loans in the range beyond ` 100 Lakh as against the existing ceiling
of `100 Lakh.
Report on Skill Development The report captures the status of skill gap in the 8 identified clusters where project had made interventions
in MSME Sector (6 sub-sectors), developed the Training Modules (based on best industry standards), Implementation
and Monitoring Framework.
Technology Vision This maps the technological gaps in 10 clusters and suggests steps to attend to these in future.
Report – 2020
Best MSME Policies in Endeavours to gauge the crisis responsive policies of select countries and draw lessons for India.
Select Countries
To be released soon.
Reports on EE (4 energy - Sectors Covered
intensive clusters) ◘◘ Fruit and Vegetable processing
◘◘ Foundry
◘◘ Ceramics
◘◘ Engineering

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Challenge Fund for Advocacy in MSME Sector (ACF) in India

Introduction
In general terms the Challenge Fund is a support aimed to give impetus to ideas, projects, organizations
that have the potential to conquer a particular challenge.

The history of “Challenge Fund” goes back to 1990s when Ambassador Walter Annenberg announced
a gift of USD 500 Million from Annenberg Foundation to America’s public schools to reinforce existing
reforms and institute new ones. In the year 1995, a group of local community activists and representative
organizations was awarded with a part of the grant which emerged as Chicago Annenberg Challenge1. At
the dawn last century a number Challenge Funds were established in UK under universities to assist the
successful transformation or commercialization of research into business.

The concept was further adopted by foreign aid agencies and during 2004, the Millennium Challenge
Corporation (MCC) a bilateral United States foreign aid agency created by the George W. Bush
administration was authorized, to apply a new philosophy towards foreign aid.

The best example to quote for Challenge Fund for Private Sector Development is the Business Sector
Advocacy Challenge (BUSAC) Fund of Ghana. The BUSAC Fund aims to make an impact by enabling the
private sector, to influence public policy formulation by undertaking appropriate research, developing evidence
based policy positions and advocating those positions with government and other private sector institutions /
organization that may be targeted by the action. The BUSAC was originally launched by DANIDA in 2004 as
part of the broader Business Sector Programme Support but now attracts support from DFID and USAID. The
Business Sector Advocacy Challenge (BUSAC) Fund has won the prestigious award for the “Not for Profit
Making Organization of the Year” for 2010 by the Chartered Institute of Marketing, Ghana (CIMG). The award
is in recognition of the “Fund’s excellence in strategic marketing in the year 2010”.
An other example is the Business Linkages Challenge Fund (BLCF) 2 designed by Department for International
Development (DFID) to engage with the private sector to accelerate growth and poverty reduction in developing
countries. The other main DFID private sector challenge fund is the Financial Deepening Challenge Fund
(FDCF). DFID also finances the Civil Society Challenge Fund, although this does not target the private sector
and has other significant differences.

1 Ref: http://ccsr.uchicago.edu/publications/p0b06.pdf
2 Ref:http://psp.emergingmarketsgroup.com/components/download.aspx?id=2dd6671b-336a-45a3-be75-c48e19acdd40

The extension of grant to a country was based on Competitive selection process (17 indicators and policy
performance), Country-led solutions (priorities for achieving sustainable economic growth and poverty
reduction) and Country-led implementation. Later on the concept gained popularity to aid Civil Societies
and Community led initiatives towards education, medical & health, environment, Business, social cause
etc. to benefit larger community.

About ACF under MSMEFDP

Through Policy and Advocacy component the project aims at playing a significant role in attending to key
policy, legal and regulatory issues that are critical in establishing a facilitating framework that promotes
MSME sector. In this regards the project has carried out a wide range of initiatives, through various
forms of policy advocacy tools. These advocacy tools aim at reaching out and deliver message to policy
makers to enable them to make an informed policy decision. These initiatives also involve creation and
promotion of knowledge series or booklets to disseminate information on new and existing ideas of relevance

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which is aimed at attending to information

asymmetry and contribute to enabling
policy environment. Project has created
a robust knowledge bank available free to
access at www.msmefdp.net. Several policy
papers / publications like Factoring (taking
shape of new legislation), Walk-in-Kit on
Corporatization of MSMEs, Risk Capital,
Global Best Banking Practices in MSME
Financing and Development, CSR Model
have been widely appreciated (Till date
more than 20 policy papers / publications /
knowledge series have been released).

On the lines of international best practices, first time in India MSMEFDP has set up a Challenge Fund
for Advocacy in MSME Sector (ACF) for Enterprise Development. ACF is based on internationally tested
approach to enable actor /agents (Associations, NGOs, and Developmental Organizations, etc.) to
influence another actor / body including policy makers for removing barriers and bottlenecks that hinder
their development. It promotes action based advocacy preferably on initiatives that have either been
trialled or tested or can be tested / scaled-up backed by action oriented research / framework. The pilot
was launched in February 2009 with following objectives :

●● Sectoral engagement of representative organizations in policy formulation.

●● Develop understanding and effective role of private sector in policy advocacy through active and
informed participation.
●● Develop them (private sector representative organizations) as strong delivery channels.

The ACF framework adopted under MSMEFDP has since transformed into an efficient and effective
mechanism through the basic premise is same. A brief on the ACF framework, its evolution in the course of
operation highlights-key features-learning’s-success, project supported under ACF etc. has been provided
below :

1. ACF Framework

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HIGHLIGHTS
♦♦ It enables eligible entities/actors to shape their own action research ideas Implementing it is challenge
for them for which project supported them.
♦♦ Addresses the inadequate delivery capacity, information asymmetry, infrastructure (soft) constraints etc.
of BMOs, NGOs, and other MSME Stakeholders etc. through mentoring and performance incentives.
♦♦ Grant Components :
- Advocacy Action Grant - (To support proposed advocacy action / idea / project).
- Capacity Building Grant - (Provide as performance incentive).
♦♦ Two stages filtering process - Preliminary Selection (based on Concept Note) & Final Selection
(evaluate detailed Proposal).
♦♦ Simplified “Proposal Document” available online with all Forms, Formats & Guidelines.
♦♦ Specified time frame for the implementation of assignment.
♦♦ The mechanisms aimed at infusing sustainability traits in advocacy framework.

2. Evolution to Present Model

Head Pilot (Feb 2009) Present Remarks
Objectives ■■ Sectoral engagement of ■■ Sectoral engagement of Enhanced the scope of
representative organizations in representative organizations in the Advocacy Challenge
policy formulation. policy formulation. Fund.
■■ Active participation of private ■■ Develop understanding and
sector in policy advocacy. effective role of private sector in
policy advocacy through active
and informed participation.
■■ Develop Private Sector
Representative Organizations
as strong delivery channels
Grant ■■ Component I (Advocacy Action ■■ Component I (Advocacy Action Enhanced the value of
Components Grant) - Maximum ` 10 Lakh for Grant) - Maximum ` 12 Lakh for grant to support good
each proposal. each proposal. proposals.
■■ Component II (Capacity Building ■■ Component II (Capacity Building
Grant) - Maximum ` 2.5 Lakh for Grant) - Maximum ` 3 Lakh for
each proposal. each proposal.
Features ■■ Process of invitation of proposal ■■ Wider Information dissemination Enhanced information
through advertisement. among target groups through and encouragement for
mails, CDs etc.(Besides more participation.
advertisement for opening of
call).
■■ Proposals required to be ■■ Online submission of Proposals Reduce time, energy and
submitted in hard copies. overall TAT.
■■ A list of areas was provided as ■■ No such restriction. However, The areas for sectoral
focus areas for the proposals to the chosen area for advocacy articulation towards
be submitted under ACF action to be aligned to project supportive policy for
objectives and in tune with MSMEs were kept open.
Government policies
■■ Selection through competitive ■■ Quality Based Selection (QBS) The proposals found
bidding having two stages method adopted. However, support worthy, on basis
evaluation process (Preliminary the evaluation process kept of quality & eligible criteria
and Detailed) & Competitive. unchanged. were supported with no
restriction on numbers.

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3. Key features-Learning’s-Success

Unique Features

♦♦ Support to “Action” oriented initiatives (that have either been trialled or tested or can be tested /
scaled-up backed by action oriented research / framework).

♦♦ The grantee / awardees must provide from its own resources or mobilized its resources at least
10% in cash or kind of the total cost of the proposed action as part of their participation commitment
to the project.

♦♦ “Transparency” in selection (committee based, scoring system, discussions /PPT by applicant

etc.). Thrust on elements of sustainability, replicability, showcasing, scalability etc.

♦♦ Deliverable based release of grant.

♦♦ Provision of monitoring and handholding mechanism during implementation of the assignment.

Learning’s

♦♦ Except a few national level BMOs, the regional level BMOs are not well versed with advocacy viz.
fundamentals, concepts, types and tools of advocacy etc. and need to be sensitized.

♦♦ Availability of limited resources at BMOs disposals including low levels of skills in documenting
success stories, project outcome etc.

Success

♦♦ Received 22 proposals from 17 organizations.

♦♦ These were submitted by Business Member Organizations (BMOs)-4, NGOs-5, Business

Development Services (BDS) providers -4 and others -4.

♦♦ Out of these 22 proposals, 5 were supported under Advocacy Action Grant.

4. Project supported under ACF

Project Implementing Theme Remarks

Agency

MSME Solutions Industry Association- Business ◘◘ Implemented by a BMO in underserved region.

Centre Industrial Association Development
◘◘ Thrust on retired skilled personnel’s (retired from
of Uttarakhand Services
banks, research institutions, PSUs etc.).
◘◘ Under project period, 8 (+5 events) workshops were
conducted, more than 459 queries received under
“Helpline Service”, database of 350 MSMEs and 30 BDS
providers created and 58 matchmaking interventions
have been made.
◘◘ Today it is doing, on its own, pollution control board
clearances for MSMEs, enabling MSMEs to adopt
discipline and fetch better rates from existing Banks.

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Project Implementing Theme Remarks

Agency

CSR Framework Non-profit Sustainable ◘◘ Developed CSR /ESR Framework for Indian MSMEs
for Indian MSMEs Organization -India Development through best practice mapping of Indian and Chinese
China Economic and Textile cluster.
Cultural Council

MSME BDS - Indicus Information ◘◘ Act as responsible voice for MSMEs by being a regular
Confidence Index Analytics Efficiency feeder on MSME perceptions to policy makers.
◘◘ Two quarterly indexes launched with project support.
Others being done on its own.

Green Dhaba NGO - Research, Green MSMEs ◘◘ In hilly terrain and in a tourist circuit, project impacted
Project Advocacy and & Energy > 30 road side eateries to adopt green agenda (use
Communication in Efficiency local resources, rain water harvesting, Energy efficient
Himalayan Areas equipments, prohibit child labour etc.) and create
(RACHNA) Society awareness on health-safety-hygiene among clients.
◘◘ Achievements indicate high replicability possibility.
Leveraging IT for BDS - Ace Global Sustainable ◘◘ Facilitate E-procurement for MSMEs from paper/
E-Procurement Development chemical wholesalers. It offers value for money by better
information of promoter’s time and financial resources.
Framework developed and tested. It has been validated
by MSME associations.

These are explained in Annexure VIII

6.2.2 Impressions - Project Foot Prints

■■ Besides activities under various components, project has reached out to stakeholders through
publications, thematic programmes as also dissemination through various platforms. In recent
times, support has been extended to Industry Associations like Assocham, AICOSMIA, FASII
etc. The project has also joined Times of India group’s ‘Go Green Campaign’ and a thematic
publication had been supported to include Green financing and development for Indian MSMEs.

■■ The project website www.msmefdp.net is linked to 25 other websites launched by agencies

implementing different initiatives supported under the Project. Cumulative number of hits on these
websites has exceeded 10 lakh.

■■ The Project has been consistently bagging high ratings of partners review missions. It had also
been showcased on World Bank’s South Asia website. Project had received a rating of the 2
(second best) during DFID Review, indicating that project objectives are “Likely to be largely
achieved”. World Bank, India had picked up the project for documenting its approached on
programme effectiveness for replication by other projects.

■■ In the year 2010, SIDBI has been honoured with international Merit Award on implementation of
“MSME Financing & Development project (MSMEFDP)’ by Association of Development Financing

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Institutions in Asia Pacific (ADFIAP) for the project’s developmental impact on the local economic
development. MSMEFDP won the international ADFIAP Award 2011 with the agenda of “Making
Markets Work for Indian MSMEs” for its cluster intervention model.

■■ MSMEFDP has been making good progress and bagging international recognition. The project
has been featured as showcase model in IFC G-20, report of sub-group on SME finance, Oct
2010.

■■ Tableau of Dehradun Pharmaceutical BDS intervention of the project was included in State
Republic day parade and gained appreciation from Chief Minister of uttarakhand and other key
functionaries. Some of the MSMEs facilitated by the project got MSME Award at national level.

■■ Project has been regularly disseminating the cluster soft infrastructure model among various
ministries, Industry associations as also on national and International platforms. In international
TCI conference held for the first time in India, MSMEFDP made presentation and earned
recognition about the model and its achievements.

■■ Project gets visible through more than 300 media coverage in over 19 clusters (newspaper,
magazine etc.), more than 25 lakh website hits (through 20 websites).

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Sources of Information Annexure I

Sources of Information
Websites, Reports, Published Documents of various agencies:
●● Government - Central, State and Autonomous:
- Ministry of MSME
- Development Commissioner, MSME
- Planning Commission
- Dept. of Science & Technology
- PM Task Force Report on MSMEs
- Ministry of Textiles
- Ministry of Commerce and Industry
- State Govt. websites
- DC Handicrafts and DC Handlooms
- SIDBI - MSMEFDP (Project and Clusters)
- Federation of Indian Small and Medium Enterprises
- State Government Websites

●● SIDBI & its Subsidiary/Associates

- SME Rating Agency of India Ltd. (SMERA)
- Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
- India SME Asset Reconstruction Company Ltd. (ISARC)
- SIDBI Venture Capital Ltd.
- India SME Technology Services Ltd. (ISTSL)

●● Institutions - NABARD, KVIC, Coir Board, NSIC, FIEO/Export Promotion Councils

●● International Agencies - World Bank/ IFC, ADB, GIZ, UNIDO, UNDP, EU, DFID, KfW, World
Business Council for Sustainable Development, Association of Development Financing Institutions
in Asia and the Pacific, World Intellectual Property Organisation (WIPO).

●● Trade Associations - Indian Industries Association, FICCI, CII, ASSOCHAM, PHDCCI (Centers of
excellence), etc.

●● Training Institutions - Entrepreneurship Development Institute of India, Indian Institute of

Entrepreneurship, Indian School of Livelihood Promotion, National Institute of Entrepreneurship
and Small Business Development.

●● Documents:
- Fourth All India MSME Census, 2006 - 2007.
- Institutional Mechanisms for SME Promotion: A Comparison of India with International
Practices, German Development Cooperation (GIZ), 2010

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- Nation Building: The SME Route by Indian School of Business

- SIDBI Report on Micro, Small and Medium Enterprises Sector, SIDBI, 2010
- 12th Five year plan –Suggestions by Indian Industries Association
- MSMEFDP Annual Progress Reports, MSMEFDP – Cluster BDS Strategies Document
- Cluster-wise Reports, and their websites, MSMEFDP
- Credit Dispensation Plans of the Banks – SIDBI and SBI
- M/o MSME Strategic Plan
- Cluster level website and interim final reports
- Specific and thematic publications
- Baseline and impact assessment reports
- Advocacy challenge fund –report on the initiatives undertaken
- Reports from Foundation of MSME clusters
- DFID annual review reports, Project memorandum and related documents

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List of stakeholders in the MSME Sector Annexure II

Institutions working for MSME’s in India:
Central Government I State Government I Autonomous institutions I Trade Associations I Training
institutions I International agencies I

Central Government :
●● Ministry of MSME, GOI
●● Reserve Bank of India
●● Dept. of Industrial Policy and Promotion, Ministry of Commerce and Industry, GOI
●● Dept. of Science & Technology, GOI
●● Ministry of Food Processing, GOI
●● Ministry of Textiles (Textiles committee & DC- Handlooms / Handicrafts), GOI

State Government :
●● All State Governments

Autonomous Institutions:
●● Banking system
- Nationalized banks
- Private sector banks
- Regional rural banks
- Co-operative banks
- Non-banking financial companies (NBFCs)

Under each of the above, the following key players operate :

♦♦ Nationalized Banks
●● State Bank of India (Project Uptech)
●● Bank of Baroda
●● Punjab National bank
●● Axis Bank
●● Bank of India
●● Indian Overseas bank and many more

♦♦ SIDBI and its associates/subsidiary

◘◘ SME Rating Agency of India Ltd. (SMERA)
◘◘ Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
◘◘ India SME Asset Reconstruction Company Ltd. (ISARC)
◘◘ SIDBI Venture Capital Ltd. (SVCL)
◘◘ India SME Technology Services Ltd. (ISTSL)

♦♦ Private Sector Banks

●● ICICI Bank
●● HDFC Bank

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●● ING Vysya Bank

●● IndusInd Bank
●● Yes Bank and many more

♦♦ Regional Rural Banks

●● Andhra Pradesh Grameena Vikas Bank
●● Karnataka Vikas Grameena Bank
●● Uttar Pradesh Gramin Bank
●● Bihar Kshetriya Gramin Bank
●● Dena Gujarat Gramin Bank and many more

♦♦ Co-operative banks - many cooperative banks at state and district levels

♦♦ Non-banking financial companies (NBFCs) - various private players

Apart from the above, the following are other institutions that provide credit and other developmental
support MSMEs:
●● National Bank for Agriculture and Rural Development (NABARD)
●● Khadi and Village Industries Corporation (KVIC)
●● Coir Board
●● National Small Industries Corporation (NSIC)
●● Export Import Bank of India (EXIM)
●● FIEO / Export Promotion Councils
●● Indian Banks Association
●● MSME Industry Associations
●● Training Institutions:
◘◘ Entrepreneurship Development Institute of India
◘◘ Indian Institute of Entrepreneurship
◘◘ Indian School of Livelihood Promotion
◘◘ National Institute of Entrepreneurship Small Business Development
●● International Agencies:
◘◘ Multilateral - World Bank, European Union
◘◘ Asian Development Bank, French Development Bank (Afd)
◘◘ Department for International Development (DFID), UK
◘◘ German International Cooperation (GIZ)
◘◘ UN organisations - UNIDO, UNDP
◘◘ World Business Council for sustainable development
◘◘ World Intellectual Property Organisation (WIPO)
◘◘ Japan International Cooperation Agency (JICA)

◘◘ KfW, Germany

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Annexure III

List of Clusters–MSME FDP

Sr.No Cluster Sector Website

1 Ahmedabad Dyes & Chemicals http://www.ahmedabaddyechembds.com

2 Alleppey Coir http://www.alappuzhabds.com

3 Bhadohi Floor Coverings http://www.bhadohibds.com

4 Chennai Leather http://www.chennaileatherbds.com

5 Coimbatore Engineering http://www.coimbatorebds.com

6 Dehradun Pharmaceuticals http://www.dehradunbds.com

7 Ganjam - Gajpati Fruits and Vegetable http://www.ganjamgajapati-bds.org

Processing

8 Hyderabad Pharmaceuticals http://www.hyderabadbds.com

9 Indore Pharmaceuticals http://www.indorebds.com

10 Kanpur Leather http://www.kanpurbds.com

11 Kolkata Leather http://www.kolkataleatherbds.com

12 Ludhiana Knitted Apparel http://www.ludhianabds.com

13 Mohali-Panchkula- Engineering http://www.chandigarhbds.com

Chandigarh

14 Panipat Floor Coverings http://www.panipatbds.com

15 Pune Fruits and Vegetable http://www.punebds.com

Processing

16 Rajkot Engineering http://www.rajkotbds.com

17 Rourkela Engineering http://www.rourkelabds.com

18 Shantiniketan Leather http://santiniketanleatherbds.com

19 Tirupur Knitted Apparel http://www.tirupurbds.com

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BDS Market Development Annexure IV

‘Making Market Work for MSMEs’-Enabling paradigm shift

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. BDS can be transactional (basic), strategic and embedded (viz. machine suppliers
offering training). The BDS field focuses on promoting access to and use of these services by MSMEs.

Overall goal of SIDBI Cluster Development Programme through MSMEFDP - BDS Project has been to
instilling competitiveness in MSMEs by increasing their access to improved private and public benefit
business development services.

Approach
It is known that MSMEs do not involve BDS Providers (BDSPs) as (a) they are not sure about their
credentials (trust factor) b) the BDS products are not tailor made to suit their need and (c) they are not sure
about the returns to such investment. The BDS market development believes in the theory that once BDS
are capacitated and are
successful in satisfying
the appetite of MSMEs,
the market rejuvenates.
By using services,
MSMEs get growth
impetus and subsequent
profit. They seek more
services of BDS and as
profitability of service
provider goes up, it
attracts other players.
The market attributes
get imbibed in form of
a self sustaining loop
(exhibited below –
courtesy OTF USA and
Cluster Pulse) which
brings in innovation, cooperation and competition.

By fostering Business Development Services (BDS) in 19 clusters (4 Leather, 4 Engineering, 3 Pharma,

2 Knitted Apparel, 2 Fruit and Vegetable Processing, 2 Floor Covering, 1 Coir, 1 Dyes and Chemicals),
project targeted at soft infrastructure with both long term (3-4.5 Years) and short term intervention. These
19 clusters had over 42,000 Principal MSMEs, cumulative turnover of over ` 62,000 crore and provided
Direct / Indirect employment to over 20 lakh people on the long perspective, project took following steps to

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promote market led BDS in the clusters:

♦♦ Identification of both demand & supply side issues in the select clusters through diagnostic study.
♦♦ Stimulation/creation of demand for business development services from MSMEs.
♦♦ Strengthening the capabilities of supply side (BDS providers).
♦♦ Facilitating a sustainable demand-supply matchmaking of BDS providers and MSMEs.
Project focused on demand side issues through awareness creation / sensitization. On supply side, issues
such as capacity building and handholding of BDS providers in the cluster were taken up. For demand
– supply match making (i.e. making market work) innovative instruments such as voucher support were
supported. Virtual market place through a unique cluster portal for each cluster which acted as referential
point, Project also laid thrust on other tools like BDS on wheels, BDS clinics, BDS Bazaar which played
role in evolving BDS market.

Broadly the project adopted following approach:

♦♦ Managed by Dedicated Outfit - Project Management Division (PMD) with internal experts from SIDBI
and outsourced expert.
♦♦ Emphasis on Micro Enterprises (MEs) and instilling competitiveness driven by participative &
market driven thrust.
♦♦ Ownership - Involving cluster stakeholder from very beginning through formation of Cluster
Coordination Committee (CCC) which vetted and validated each step whether diagnostics, action plan
implementation, M&E or at exit stage. Ensuring participation at thinking and transaction stages kept
MSMEs and stakeholders not only involved but own the initiatives.
♦♦ Experimenting
- Project piloted an Internal Experts model under MSMEFDP GIZ TA (at four regions) which operated
from own establishment and internal experts. Here mostly interventions were standalone. Project
then adopted an outsourced and programmatic model wherein it roped 7 Facilitator Agencies
(FAs) for 7 sub-sectors. FA approach showed good results. FA had setup their offices and instead
of doing, they facilitated evolving of BDS market and did everything for that unique expertise of
FAs in specific fields (marketing, entrepreneurship, infrastructure, IT, Energy Efficiency, Rural / ME
Industrialization) were encashed by each other.

- Combination of Long term and short term interventions. Short term for “quick wins” and establishing
that “it works”. Long term interventions took form of pilot in 3 clusters, imbibing learnings / revisit
strategy and scaling up for simultaneous implementation across 16 clusters in 7 subsectors.

- Trying different models, cross learnings and replicating success and minimising failures.

♦♦ Developing Local Expertise for Sustainability - The thrust has been on developing technically
competent - locally relevant experts (both individual and institution), infusing sub sectoral niche,
enabling national/international compliances by MSMEs etc. Wherever local experts were not available,
experts from outside, hand holded / mentored potential local experts.

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♦♦ Partnering Key Players - Foundation for MSME cluster (previous UNIDO experience and expertise)
brought in as an Independent reviewer, micro monitoring and evaluation ( M&E) and for strategic Input
support to PMD.

♦♦ Knowledge Management - 19 cluster websites attached to mother website (msmefdp.net), bringing

out tool kits / knowledge series / useful booklets and ensuring wide circulation.

♦♦ Synergy with available government schemes for leveraging remained a thrust area. It may be mentioned
that 8 clusters (Indore, Ganjam, Ahemadabad, Bhadohi, Rajkot, Shantiniketan, Coimbatore, Ludhiana)
adopted by the project were those adopted by Ministry of Micro, Small and Medium Enterprises
(MoMSME).

♦♦ Thematic Approach - Project identified cross cutting as also flagship themes in each cluster. As
implementation went ahead some of the themes such Energy efficiency were tapped for intervention.
A number of initiatives were undertaken on various themes (viz. Energy, Technology, Productivity
enhancement, Lean Manufacturing, Market Access, Capacity building of BMOs, Institutionalization of
the initiatives, Skill development, use of IT, finance etc.) in clusters.

The process and methodology for approaching the BDS market development (see below) was kept
systematic. Different templates, guidelines and benchmarked formats were used for conducting CCC,
diagnostic, action plan implementation, periodical reports/ feedback, viability gap funding, voucher support
etc.

Process Adopted

SIDBI commissioned an independent study to identify the most suitable clusters and sub-sectors for
intervention based on buckets of poverty, export centricity and sub sectoral approach. Out of over 50
clusters proposed, SIDBI chose the following as the first phase pilots:

Sub sector Cluster location

Fruit & Vegetable processing Pune
Carpet and Floor covering Alleppey
Leather Kanpur

Based on the lessons from these three clusters, the project embarked upon Phase II where a further 16
clusters were taken up for project implementation. These were:

Sub Sectors Cluster locations

Pharmaceuticals Indore, Dehradun, Hyderabad
Knitted Apparel Tirupur, Ludhiana
Engineering Coimbatore, Rourkela, Rajkot, Mohali-Panchkula-Chandigarh
Dyes and chemicals Ahmedabad
Fruits and Vegetables processing Ganjam - Gajapati (Orissa)
Leather Kolkata - Shantineketan, Chennai
Floor Coverings Bhadohi, Panipat

Besides strengthening internal value chain in adopted clusters, the Dyes and Chemical sub-sector was

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chosen to strengthen the external value chain (Chemicals and Dyes are consumed by leather, floor
coverings, Knitted Apparel etc.). In addition to the above clusters, the project also implemented short-term
projects in Morbi, Ludhiana, Guwahati and Jamnagar.

Methodology
With a view to address structural, infrastructural, technological and managerial bottlenecks that these firms
are facing, the focus was kept on value chain interventions with MSMEs. The interventions were based on
the understanding that a positive spiral of change will ensue due to the interventions at BDS market and
directly at MSME level, which will lead to overall cluster and local economic development. SIDBI engaged
expert Facilitating Agencies (FAs) to roll-out the project at the select cluster locations. They had clear
mandate of not doing things on own (except if very critical or to set examples) but nurture and nourish BDS
(existing/ potential) to perform services.

■■ Mapping of select clusters : The FAs carried out the mapping of the cluster / sub-sector and
the major players / actors by using value chain assesment using PACA methodology. It mapped
the key pressure points of the cluster. The FAs then carried out the analysis of various Business
Development Services (BDS) available in the cluster using tools such as ‘Who does-Who
pays(WDWP) matrix’ etc. The FAs then prioritized the critical areas of intervention and accordingly
developed an action framework (action plan was kept dynamic), which identified the activities /
programmes that were be pursued along with rationale for the proposed line of activities. This
framework specified areas for intervention in alignment with timelines, the likely target group, the
number of beneficiaries, the likely multiplier effect and the sustainability of the intervention over a
period of time. The value chain map and WDWP was tracked for change brought in pre and post
intervention levels.

■■ Development of a Prioritized Action Plan : The FAs developed detailed Action Plans for
respective cluster(s) giving overall direction to the component becoming itself sustaining and
growth-oriented in the long run. The FAs also defined long-term and short-term goals and
objectives attuned to overall project objectives as indicated in Logframe and provided operational
and financial benchmarks.

■■ Focus on International Best Practices : Designing the interventions was, from the beginning,
focused on bringing in international best practices and approaches in development of BDS
markets. Learning’s from successful cluster / sub-sector level programmes in India and from other
emerging economies was factored in the plans. Successful instruments tried out at other locations
were tailored to fit local conditions and drawn up keeping in view the needs and aspirations of local
industry.

■■ Exit Strategy : The thrust of project has been to ensure that it walks with the stakeholders of the
clusters (both BDS and MSMEs) from begining so that they emerge as natural facilitators, after
exit of the project. The identified exit vehicles were strengthened through various capacity building
support tools. Project continues to lay thrust on these under MSMEFDP-GIZ which shall run up to
March 2014.

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SIDBI Report on MSME Sector 2011

■■ Monitoring: It adopted a comprehensive methodology which included baseline and impact

evaluation of indicators aimed at strengthening the supply side i.e. BDS. Tracking the growth
of BDS providers (in terms of widening of client base and product offerings thus indicating
acceptability by MSEs), their profitability (indicating sustainability) and their ability to take the
same forward on their own (demonstrating that market works) were pursued diligently. Few tools
included tacking the achievements of indicators in project Logframe, nested Logframe in
each cluster, differentiation brought about in Value Chain Map/WDWP as also ABC (Activity,
Budget and Change) remained the key pillars. The diagrammatic presentation of a BDS
Model programme (based on our experience), which should be typically for a five year span
is thus:

Innovative Tools/ Best Practices

The Project has successfully tried and replicated various innovative tools / model for BDS delivery viz.
Voucher support (subsidizing by the project towards initial payout by MSMEs to BDS on tapering down
basis through a tripartite arrangement between BDS, MSME and FA where, FA role has been to oversee
successful transaction completion), BDS Clinic (an one point solution and matchmaking platform bringing
MSMEs/ BDS together), BDS on Wheels (a vehicle carrying BDS to cater to MSMEs service requirements
at the place of MSMEs), BDS Panel (created panel of > 450 empanelled BDS who have successfully
rendered services to MSMEs thus giving the needed trust), Nineteen virtual BDS (each cluster has a
website which have acted as knowledge repository), BDS Consortia (pooling BDS of different specialization
under one umbrella to offer advantages of collaboration), Who Does Who Pays Matrix (to map the
players in clusters), Cluster Coordination Committee (for overall monitoring and to provide guidance
to cluster initiatives), Exposure visits (for learnings from successes in other clusters), strengthening

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the pool of FAs (7 with more than 110 personnel in Project Snapshot - Under BDS Intervention
team), cross learning workshops (more than 4 at
- SIDBI clusters 19
four regions including two national level workshops),
- Facilitating Agencies involved 7
skill development models (with MFI, BMO led,
- Awareness Programme conducted >1100
corporate houses, academia-industry partnership),
- Participation >46000
Benchmarking of costs leads to reduction in fee and
- Women Participation >2200
so on.
- Firms benefited through voucher support >1000
Achievements - Firms without project voucher support >1100

MSMEFDP has given new dimensions to cluster - BDS providers introduced >400

development by acting as ‘Market Enabler’. - No of trainings programmes >330

- Skill development/ upgradation >17440
During its implementation MSMEFDP has overall
- Employment >16400
outreach of around 1 lakh stakeholders which
included extending financial and non financial
offerings.

Under Business Development Services (BDS) interventions in 19 clusters it had outreach of around 46954
stakeholders. It has, through seven FAs, developed sustainable & locally relevant experts (450 BDS -
both individual/ Institutional), enabled national /international compliances by over 2000 MSMEs in clusters
(achieved through 1100 activities-cumulatively from 2007), over 2100 transactions (with / without voucher
support), enabling Credit linkages etc. While project hand-hold the initial transactions between MSMEs
and BDS through Voucher support, almost 1100 plus transactions have happened on their own indicating
market functionality. The initiative has led to market functionality now visible in these clusters, which is
a systemic change as against earlier transaction led standalone actions. MSMEFDP has won two
international awards for the cluster interventions.

The BDS providers brought in, were in areas like energy, technology, Finance, marketing etc. Among
various types of Strategic BDS, the highest usage reported is for Quality related Technical Services (60%
of the MSMEs). The other popular services offered by external BDS providers, used by MSMEs are for
obtaining Market Information (32%) and for Marketing of their products (29%). Industry Associations (IAs)
being integral part of the programme, were handholded to emerge as natural facilitators after Project exit.
The support has enabled 49 BMOs to cater to members with revenue models such as accessing finance,
move ahead to float Public Private Partnerships (PPPs - to pilot nearly 22 such initiatives), leverage
common procurement / marketing etc. The project has through Learn-shops and regular interactions,
strengthened the capacity of the 7 FAs (through cross learning forums nurturing over 100 experts) who are
ready to take forward the initiative.

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Decoding BDS Approach

Only growth in total factor productivity and not capital Investment, leads to long term prosperity-Paul
Krugman
●● Subsectoral approach attending to internal and external value chain is critical .
●● Participation and ownership has to be embedded in BDS development.
●● Quick wins very important for Trust building – form Cluster Coordination Committees are very beginning.
●● Facilitator Agency (FA) – not to be tempted as an BDS provider but act as Facilitator.
●● Market Development – Should have judicious blend of Supply side thrust and demand articulation.
●● Stress on Strategic services is good but (due emphasis on transactional/embedded BDS) also be supplemented/
complemented taking into account the maturity and receptivity of the cluster.
●● Knowledge Pool – Each cluster to have a website.
●● Policy alignment/ enabling environment is integral- Advocacy challenge funds acted as diffrentiator.
●● Logframe based monitoring including value chain mapping and Who does who pays matrix helps.
●● Learnshops / Workshops / Bulletins are critical for institutionalising and replicabilty.
●● Invest in MSMEs by offering value adds – reap benefits later.
●● Attending to non financial side ultimately leads to hunger appetite being kindled which offers ‘growth impetus’.
●● Exit cannot be timed but has to be well planned from beginning for escaping vacuum.

The BDS demand-supply match making is ensured in all the clusters. Let’s take example of 6 clusters
which provide an understanding of the achievements in this area. As the table below shows, 350 BDSPs
linkages were facilitated with 2375 MSMEs in these 6 clusters (picked for the illustration).

Table 4: BDS Demand Supply Matrix

BDS DEMAND-SUPPLY NEXUS AS FACILITATED BY MSME-FDP
Cluster Sector Access to HR Design/ ICT /IPR Marketing / Skill EE /Climatic Inventory
Finance Production/ Market Access Development / Adaptations Mangt. /
Technology/ BMOs Infrastructure
Quality
BDSPs MSMEs BDSPs MSMEs BDSPs MSMEs BDSPs MSMEs BDSPs MSMEs BDSPs MSMEs BDSPs MSMEs BDSPs MSMEs
Coimbatore Engineering 8 22 5 350 17 100 6 20 5 25 6 35
Hyderabad Pharmaceu-
15 248 5 9 5 25 12 71 3 200
ticals
Indore Pharmaceu-
14 35 5 25 2 8 5 15 5 25 3
ticals
Ludhiana Knitted
21 15 69 900 7 130 12 25 8 30
Apparel
Tirupur Knitted
13 30 36 18 4
Apparel
Rourkela Engineering 4 11 3 34 2 6 2 6 1 5
Total in 6 Clusters 12 33 42 399 147 1289 46 34 17 164 28 95 49 161 10 200

BDSPs 351 2375

Projected 1053 9500

The table above shows that significant area of impact was design, production and technology as in here
147 BDS providers worked with 1289 MSMEs. Similarly energy efficiency, skill development interventions
were well catalyzed by the project. This shows that project managed to bring in both transaction and
strategic BDS interventions in the clusters.

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The programme has also affected the micro enterprises in systematic manner to improve their
competitiveness.

Essentially it led to a two way impact :

- Realization of the value of BDS by MSMEs
- Realization of the value of MSME market in the clusters by BDSPs

Further on, it led to clarity between MSME and BDS providers on mutual beneficial engagement and
from that BDS business expansions from a product to other products, within a cluster and also migration
of BDSPs beyond the clusters (geographical expansion of their business) happened. BDS transactions
in the clusters have increased many folds which is a clear reflection of realization of the needs for BDS
by MSMEs, for example, in Alleppey, the cluster agency connected 43 BDS providers with coir MSMEs
and generated total business worth ` 1.16 crore for BDS providers. 10+BDS providers in the cluster have
shown business growth rate at 50% in span of one year.

Project tracked the progress in clusters through value chain map and differentiation brought out in it both
at inception and at the end of the project.

Sectoral Contribution: The project has provided inputs to cluster policies of several ministries. Few of
project FAs have landed up with assignments in clusters in ME domain.The project was an induction ground
for cluster FAs as many of these agencies got recognized expertise working on the project. The agencies
have leveraged their experiences in MSMEFDP to get other rewarding contracts for cluster development.
This is a sectoral contribution of the project by building capacity of number of agencies available in India
(which was scarce) with the necessary skills and perquisites to support sustainable cluster development
initiatives and therefore scaling up and replication beyond 19 clusters is that much easier. MMWM has
inherent advantages of sharpening the resilience, deepening the vibrancy and positively impacting topline
and bottomline of MSMEs who emerge more competitive.

Addressing the issues raised by the Prime Minister’s Task Force (PMTF) : The major issues raised
by the PMTF include credit, raw material, promotion, market, skill, infrastructure, governance, etc. and
achievements of the Project in addressing these issues appear as APPENDIX. This indicates the thrust
project laid on addressing relevent and emerging issues which concern stakeholders.

Support to Micro Enterprises: In its attempt to address the BDS issue at the bottom of pyramid, the
Project also worked intensively with the micro enterprises and poverty intensive entrepreneurs, especially
the weavers in the clusters of Bhadohi and Panipat, the artisans of Kanpur and Shantiniketan, enterprises
of Kolkata, the women SHGs of Ganjam, the tier 3 enterprises of Rourkela, the Weavers in Alleppey, The
agropecessers in Pune and so on.

It impacted a significant portion of MEs by involving MFIs/SHGs/NBFCs and associations. It reflects that,
if attended to, Market work for MEs as well. The model can be a success for attending to ‘Missing Middle’
segment thereby enabling these unorganized microfinance beneficiaries looking up the value chain to join
organized domain of MEs. The Project has presented the model in national conference on microfinance
organized by NABARD at Lucknow and it evinced enthusiasm and receptivity. Project has, as a change
agent, attended to national priorities and Millennium Development goals (MDGs) especially that of poverty
reduction through enterprises development, which is significant.

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Cluster Development – Self-Assessment of Changes Due to the MSME-FDP Annexure V

CLUSTER DEVELOPMENT /BDS MARKET FACILITATION - DIAGNOSTICS & CHANGES DUE TO PROJECT INTERVENTIONS
Cluster Sector Access to HR & Mgt. BDS BDS Marketing Techno- Energy Collective Remarks
Finance / systems demand Supply /Market logical / Efficiency operations
infrastruc- / Skill Access production /Envir. /institu-
ture Develop- processes Mgt. tionalisa-
ment tion
Be- After Be- After Be- After Be- After Be- After Be- After Be- After Be- After
fore fore fore fore fore fore fore fore

Ahmedabad Dyes & Cleaner Production

1 2 2 3 2 3 2 4 1 4 1 4 1 4
Chemicals

Alleppey Coir Domestic and International

2 4 2 5 1 5 1 5 1 5 3 4 2 4
Market Linkage

Bhadohi Floor Skill Development of Weavers,

1 2 2 3 1 4 1 4 1 4 1 3 1 3
Coverings Marketing Consortia etc.

Chennai Leather Common Effluent Treatment

Plants are difficult to establish
1 4 3 4 1 3 1 3 1 2 1 2 1 3
(require very strong policy sup-
port and cluster level facilitation)

Coimbatore Engineering Energy efficiency, technological

improvements are significant
changes; Common procurement
1 3 1 4 3 4 3 4 1 4 1 4 1 3 yet to taken off; HR, access to
finance and production costs
related issues are partially ad-
dressed

Dehradun Pharmaceu- Procurement of raw mate-

ticals rial, packaging material, certified
1 4 3 4 3 4 1 4 1 4 1 4 quality compliance, skilled man-
power, waste management and
energy management

Ganjam - Fruits and Quality, testing facility,

Gajpati Vegetable 2 3 2 4 1 3 1 3 3 4 1 4 product range, technology
Processing

Hyderabad Pharmaceu- Adoption of GMP Practices

3 4 1 4 1 3 1 4 1 4 1 3
ticals

Indore Pharmaceu- Quality raw material, quality

ticals compliance, institutional
2 3 1 4 1 3 1 4 1 3 1 3 2 4
exports, skill building,
financial products, EE

Kanpur Leather All the industry associations

have now come together to form
1 3 1 3 1 3 1 4 1 3 1 4 an SPV named as Jajmau Tan-
neries CETP company Ltd., for
effluent treatment

Kolkata Leather CETP upgradation

1 4 1 4 1 3 1 4 1 3 accomplished; testing
lab as embedded BDS;

Ludhiana Knitted Inventory mgt, ICT,

Apparel 1 2 1 3 1 4 2 2 3 4 3 4 technology, product
diversification, marketing

Mohali- Engineering Domestic and foreign markets

Panchkula- and brand building work still
Chandigarh 1 3 1 4 3 5 3 5 1 3 1 4 3 4 needs to be further carried on;
portable testing facilities is un-
der construction.

Panipat Floor Skilled workers scarcity is re-

Coverings solved to great extent; Market
access /penetration, quality con-
1 4 2 4 2 4 3 3 1 3 1 3 trol in production is addressed
to limited extent; pollution levels
in dye houses need concerted
steps

Pune Fruits and Marketing, skilled HR,

Vegetable 2 4 2 4 1 3 1 5 1 4 1 4 financial linkages
Processing

Rajkot Engineering Marketing remains a crucial

impediment. Inefficient produc-
1 3 1 3 3 4 3 4 1 3 1 4 1 4 3 4 tions make it more challenging
complex. Testing facilities need
encouragement

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 MSME Financing and Development Project

Cluster Sector Access to HR & Mgt. BDS BDS Marketing Techno- Energy Collective Remarks
Finance / systems demand Supply /Market logical / Efficiency operations
infrastruc- / Skill Access production /Envir. /institu-
ture Develop- processes Mgt. tionalisa-
ment tion
Be- After Be- After Be- After Be- After Be- After Be- After Be- After Be- After
fore fore fore fore fore fore fore fore

Rourkela Engineering Common marketing consortium

1 4 3 4 3 4 3 4 3 4 3 4 3 4
approach is working well;

Shantini- Leather Raw material bank, design

ketan interventions, access to
1 3 4 3 4 3 4 3 4 3 4 3 4
finance and HR interventions
are successfully done

Tirupur Knitted
1 3 3 4 3 4 3 4 3 4 3 4 3 4
Apparel

OVERALL 1.4 3.3 1.6 3.7 1.8 3.6 1.8 4.0 1.8 3.5 1.6 3.6 1.3 3.7 2.1 3.8

Notations: On a scale of 1 to 5; 1 being

very poor, 3 reasonable and 5 very good
Critical issue / Scale of 1 or 2
continues to be
critical
Semi critical / Scale of 3
Addressed to some
extent
Important but not Scale of 4 or 5
critical /Addressed to
a great extent

A score card was constructed based on the data provided in interim final reports by the cluster agencies.
The analysis of achievements and lessons is derived from the synthetic review of project documents,
summary of which is captured in the table below:

Study on Achievements and Learning of MSMEFDP at the Cluster Level

Score Card
No. Areas of 2008/09 EOP- Key Achievements Key Lessons
Assess- 2011
ment
1. Access to Clusters have seen efforts for facilitating By achieving integration of BDS market
finance /in- linkages of MSMEs with SIDBI and other bank development with ‘access to finance’ ini-
frastructure branches. As per one estimates, due to the tiatives, a greater multiplier effect can be
project, more than `393.5 crore enquiries have unleashed.
been generated and MSMEs linked for ` 242
Every cluster has different financial needs.
crore. Many SPVs (like RTPSHCL for relocation
The banking industry generally provides
of firm in Rourkela cluster) and consortia’s
similar financial products across the clus-
(like Ahmedabad Dyechem manufacturers
ters with similar kind of conditions and
Cluster Ltd.) established to ease the access to
compliance requirements. Leather and
finance to MSMEs. Participating Bank officials
1.4 3.3 Pharma cluster firms, for example, need
sensitised towards MSME lending with better
financial products that can cater well to
tools to lower transaction costs. In some
the needs of the firm there. The terms and
cases like in Faridabad, BMOs have been
conditions of granting loans need to be
capacitated to support MSMEs in accessing
suitably amended as well depending on
finance. A business correspondent model has
the profile of cluster firms. Few attempts
also been devised for the purpose.
regarding this were done in the clusters.
Access to finance can leapfrog with spe-
cific efforts by the cluster agency and spe-
cific financial products by the banking and
MFI sector.

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SIDBI Report on MSME Sector 2011

Score Card
No. Areas of 2008/09 EOP- Key Achievements Key Lessons
Assess- 2011
ment
2. HR and Mgt. Both systemic (long term) and need based Moving beyond traditional institutes,
system /Skill (immediate term) interventions were carried training models led by large firms (Kanpur
Develop- out in the clusters. The focus was on and Ludhiana), industry associations
ment ‘employable skills’, ‘skill updgradation’ and (Kanpur, Tirupur), machinery suppliers
‘efficient production’ skills. The interventions (Mohali and Panipat), local bodies
led to increased employment opportunities (Ludhiana), international experts for
for thousands of unemployed youth from poor globally competitive product (Kolkata),
socio-economic background. The intervention industry-academia (Ganjam) etc. are
also led to ‘better skilling’ of existing workers also emerging as important contributors
1.7 3.7 of MSMEs in the clusters. More importantly, in promoting skill development. These
the interventions led to improved infrastructure new generation BDS providers have also
of skill development e.g. 9 skill development led to creation of local BDS providers for
institutions are available (as against 3 sustainability.
earlier) now in Kanpur cluster with support
from Industry and Government sponsored
schemes. Overall, the project has also assisted
in establishment of 12 Skill Development
Centers and linking up / institutionalising of 21
Skill Development Centres.

3. BDS BDS transactions in the clusters have BDS demand generation requires
Demand increased many folds which is a clear reflection initiation of link between BDS provider
of realisation of the needs for BDS by MSMEs. and MSME along with demonstration of
Various initiatives have been used in different mutual benefit from that linkage. Project
clusters to sensitise MSMEs and stimulate did that effectively in different clusters.
demands for BDS e.g. Voucher Scheme is BDS providers were supported by the
an external support mechanism towards price project to fetch initial transactions and
based services of BDS providers (Consultants, then their transactions were supported
Service providers) to MSME firms. It is through vouchers and other methods to
intended to give a fillip to the demand of demonstrate the initial success.
BDS providers from the MSMEs (firms) as Earlier only the medium and large units
2.2 4.2 an incentive scheme. Other mechanisms like were paying for the services of the BDS
Cluster Coordination Committee (for overall providers and now after the project
monitoring and to provide guidance to cluster intervention, micro and small units have
initiatives), BDS clinic (place for msme and also started paying for the same. Further
bds for solutions), BDS Bazaar (offering MSMEs have started paying higher
matchmaking) , BDS on Wheel (reaching out contribution than what was initially paid
to door step of beneficiary), BDS consortium by them. For example, in Chennai cluster,
(pooling BDS for enabling swift outreach to initially MSMEs were paying about 30%
MSMEs as one stop shoppe), Exposure visits of the cost of BDS services for energy
(for learnings from successes) etc. stimulated but, now they are paying almost 50% of
BDS demands in the clusters. the cost of BDS services and the need of
energy efficiency measure is increasing.
4. BDS Supply Project facilitated BDS supply in need Some BDS was transactional in nature
based areas identified through diagnostic while other was strategic. Energy
studies. The areas were access to finance, efficiency, quality, skill development, clean
infrastructure, marketing, technological and technologies, safety are strategic issues
production processes, energy efficiency, while HR/finance may be termed as
environmental management, Design, Quality, transactional. Strategic services improve
ICT/IPR and HR/Skill development. Different the competitiveness of these industries.
2.2 4.1 clusters received differential attention on The BDS needs of MSMEs were generally
these areas based on prioritisation by cluster of both transactional and strategic nature.
agencies. The project succeeded in turning Therefore cluster facilitator ensured
360 passive BDS providers into active mode services of both kinds of BDS providers
and further introduced another 818 vibrant to the cluster firms to achieve the desired
BDS providers to the cluster firms. This data purpose.
is for 14 out of 19 clusters (actual numbers
therefore will be more).

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 MSME Financing and Development Project

Score Card
No. Areas of 2008/09 EOP- Key Achievements Key Lessons
Assess- 2011
ment
5 Marketing / Focused brand building, marketing promotion Market access and marketing based cluster
Market Ac- were done in many cluster especially the development approach can lead to a great
cess leather clusters. Marketing consortium of degree of growth of cluster firms, which is
cluster firms have worked very well in number well demonstrated in Allapuzha and other
of clusters e.g. in Rourkela, common marketing cluster. In Allapuzha, close to ` 42.5 crore
consortia, with linkages with NSIC bid for (as per project’s own estimations) worth
tenders from HEC, Ranchi and got the order of benefits were generated to MSMEs
worth ` 5.72 crore. In Coir cluster in Allepey, during the project period itself. The cluster
a Federation of coir exporters association was developments which specifically focuses
established which played lead role in state on market access and marketing aspects
1.8 3.5 & central govt. policy issues related to coir is a potentially successful approach as is
sector. 8 WHO GMP firms in Indore cluster proven from the project experiences.
have taken membership in Pharma Export The initiative of Common brand portal for
Council for getting export marketing services. Ludhiana knitwear cluster, KNITMARK as
Very effective domestic market interventions a quality mark suggest that cluster level
happened in Allepey, Shantiniketan and other initiatives like this can be successful when
cluster through marketing BDSPs. Further the cluster firms see the utilitarian value in
market access was consciously done through it. Developing the perception of this value
design and product diversification in Kolkata require strong facilitation from the cluster
and other clusters. agency which was done well, in this case.
6. Techno- At least 7 clusters (out of 19) saw significant Introduction of new technology when
logical / technological /production processes related accompanied by the necessary skill
Production interventions. Technology initiatives were development measures is most successful
processes related to Technological up-gradation (e.g. as the case of Electrical Tufted Guns
improvisation of Tanning Drum in Chennai) for (ETGs) shows in the Panipat Cluster.
cost reduction, cleaner production technologies
Design innovations ensures sustainability
(e.g. common evaporating unit and treatment
of cluster firms e.g. in Shanitniketan
plant for hazardous waste and effluent in
cluster, 28 new designs (surface and
Ahmedabad Dyes and Chemical cluster), patterns) and 12 mock ups designs were
pollution reduction equipment (e.g. Multiple introduced through design workshop
Effective Evaporator with latest technology during the course of the project with a high
in Hyderabad Pharma cluster), advanced response from the buyers.
technology for processing (e.g. cashew
processing in Ganjam and Gajpati cluster),
productivity enhancement technologies (e.g.
1.6 3.6
Electrical Tufting Guns in Panipat cluster),
drudgery reduction technologies (e.g. semi
automatic spinning ratt in Allapuzha cluster)
etc. Many product (fashion gloves in Kolkata
cluster) and design diversification efforts (in
Shantiniketan cluster) also benefitted the
MSMEs enormously. Upgradation of Coupla
in Coimbatore cluster to maximize the use
of coal resulted in an estimated saving of
approximately ` 112 lakh per annum. Similarly,
in Ganjam, under Cashew processing, shifting
from ‘Roasting’ technique to ‘Boiling’ technique
decreases the wastage by 30% (which leads
to saving of approximately ` 990 lakh per year
for 36 firms).
7. Energy Energy is one of the flagship area in the clusters Replications of energy efficiency
Efficiency / under which project has conducted around 108 interventions is easier with demonstration
Environ- walk-through audits and 25 detailed audits. effect; in the Coimbatore cluster, for
mental Mgt Now in clusters Energy Auditors are available example, more than 200 firms adopted the
and providing their services to MSMEs in energy efficiency measures.
the cluster. The project brought out series of
Booklet on Energy Efficiency in Clusters (Fruit
1.3 3.7 and Vegetable Processing, Ceramics, Foundry
and Engineering). Energy efficiency measures
were also undertaken through enhanced
product efficiency e.g. In Rajkot engineering
clusters, BIS certification and BEE star ratings
initiative for submersible pump improved
energy savings from the product with reduced
maintenance costs.

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SIDBI Report on MSME Sector 2011

Score Card
No. Areas of 2008/09 EOP- Key Achievements Key Lessons
Assess- 2011
ment
8. Collectivisa- The project has supported development of Sustainability of actions is guaranteed
tion /Institu- cluster owned institution or strengthened the wherever an institution has been created
tionalisation existing cluster institutions. In at least 12 (out and wherever exit processes have been
of 19) clusters, distinct institutional entities followed e.g. in Allepey cluster BDS centre
have been established, representing the is managed by consortia of BDS providers,
broader cluster interest and interest of a group supported by CBRC a company of 8 BDS
of MSMEs. Special Purpose Vehicle (SPV) providers, supported by a CBRC company
is major form of the institution established in of 8 BDS providers. BDS centre funded
different clusters. The purpose of these SPVs is by the Govt., viability funded by project,
quite different. Two SPVs established in Mohali and CFC scheme by Govt. Handover,
cluster to avail of the Lean Manufacturing wherever not proper, may not have seen
Competitive Scheme. RTPSHCL is SPV for enough momentum for the mechanisms to
2.1 3.8 relocation of firms in Rourkela cluster. In continue or strengthen the establishment
Chennai, Leather cluster, an SPV is formed of the BDS market.
for common buying of Dyes & Chemicals. The project model of institutionalisation
All the industry associations in Kanpur have (which is really vast, considering the type
now come together to form an SPV named and spread of institutions developed)
as Jajmau Tanneries CETP company Ltd., for need to be examined in depth for its
the implementation of the up-gradation project effectiveness and impact. This can
and expansion of CETP. In Hyderabad pharma provide very useful lessons to all cluster
cluster, 2 SPV are established - one on CETP development work in India and elsewhere.
and another on vocational training.
National database of MSMEs and BDS
providers established (msmementor.in)

OVERALL The MSMEFDP has seen success on many The MSMEFDP is landmark project
fronts. The project has addressed critical in this space in India. It has done
issues of financial and non financial services, exceedingly well, in not only scaling up
being faced in each of the 19 clusters and the cluster interventions to 19 clusters
thus MSME domain The project regularly (4 Leather, 4 Engineering, 3 Pharma, 2
conducted policy aligned studies for the Knitted Apparel, 2 Fruit and vegetable
benefit of MSMEs. A knowledge pool has been processing, 2 floor covering, 1 coir, 1
created on the project (as also SIDBI website), Dyes and Chemicals) but also played
where all the publications are freely accessible significant role in other critical areas. The
to the users. project has enormous learning to offer
The project has brought in international best to the cluster development initiatives in
1.8 4.0 India and internationally especially in
practices into the clusters (vouchers and other
mechanisms). The project has developed soft infrastructure development. Project
financing product related to the green and has launched and validated several
clean investments in technology as also international best practices as customised
green rating. The project supported national/ to Indian domain. These are expected to
International compliances viz. adoption of serve the entire MSME ecosystem.
social accountability standards (SA8000)
by cluster firms. The project reached out to
enterprises at the bottom of pyramid. It has
significantly contributed to credit dispensation,
credit supplementation and enhancement.

Scoring Scale
1. Very Poor
2. Poor
3. Reasonable
4. Good
5. Very good

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BDS Market Development – Cluster Wise Status Report Annexure VI

BDS Market Development - Status Report

Cluster Sector BDSP BDS providers No of MSMEs MSMEs
linked (Individual/ benefitted benefitted from
Institutional) through Voucher replication
brought by the support
project

Dehradun Pharmaceuticals 40 40 83 23

Indore Pharmaceuticals 35 32 88 4

Bhadohi Floor Covering 23 148 34 5

Coimbatore Engineering 38 35 61 27

Hyderabad Pharmaceuticals 32 76 52 24

Rourkela Engineering 39 25 24 50

Panipat Floor Covering 19 46 35 5

Ganjam Fruit & Vegitable 30 51 6 0

Ludhiana Knitted Apparel 48 63 34 20

Tirupur Knitted Apparel 34 12 33 25

Pune Fruit & Vegitable 56 25 123 110

Alapuzzha Floor Covering 43 41 75 105

Ahmedabad Dyes & Chemical 38 24 35 85

Chennai Leather 41 41 63 0

Kolkata Leather 35 33 85 500

Shantiniketan Leather 36 39 5 9

Kanpur Leather 42 10 43 0

MPC Engineering 59 59 67 36

Rajkot Engineering 38 18 86 74

Total 726 818 1032 1102

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Achievements and Learning Annexure VII

Engineering Clusters
The MSME-FDP was implemented in four engineering clusters. The
facilitation agencies for BDS market development and cluster development
are TERI and APITCO. Review of achievements and learning by sectors
provide interesting opportunity to understand the similarities and
differences in approaches of cluster development and in benchmarking
the achievements and best practices. As is expected, the BDS emphasis
in engineering clusters is on production efficiencies and technologies
(lean manufacturing), energy efficiency, environmental standards and
skill development. These four are strategic BDS areas in engineering clusters with heavy potential to
generate multiplier effect throughout the cluster. The summary of achievements and learning from these
four clusters is captured as under:

Achievements and Learnings from Engineering Clusters - Snapshot Analysis

Cluster Main Achievements Main Lessons
Coimbatore ◘◘ Energy saving measures implemented in 10 Foundries (savings worth ◘◘ Initial transactions of BDSPs
more than ` 25 lakh). needs to be supported /
◘◘ 16 firms Certified with BEE Certification, as a result more than 5% sales facilitated which can generate
increased. positive momentum in demand-
supply nexus.
◘◘ Credit linkages: 6 firms got SIDBI loans.
◘◘ Strengthening of 25 BDSP (marketing and management) and BMOs ◘◘ Replication of energy efficiency
(accounts and HR). interventions are easier with
demonstration effect; in the
◘◘ 13 industries got BIS certifications due to the project support.
cluster more than 200 firms
◘◘ About 500 workers trained in CNC machiner operations, benefitting the adopted the EE measures.
firms with employable /skilled human resources.
Mohali- ◘◘ 30 workers and 60 unemployed youth trained on various operations of ◘◘ Capacity building process
Panchkula- CNC machines. The workers got increased wages and unemployed to both BMOs and firms can
Chandigarh youth got goods jobs with starting salary of ` 4000-4500. sensitise and move these
◘◘ Sam’s Techno School is a unique example of a machine tools supplier institutions towards self-
becoming a trainer. catalysed actions e.g. formation
of SPVs happened due to
◘◘ Panchkula an SPV “Panchkula auto Parts Pvt Ltd” established with 23
capacity enhancement.
members.
◘◘ Two SPVs established to avail of the Lean Manufacturing Competitive ◘◘ Vendor development
Scheme: namely, ‘Mohali Alpha Engineering Cluster’ (10 members) and programmes for OEM is an
‘Mohali Beta Engineering Cluster’ (8 members). The creation of these effective strategy of embedded
SPVs has also resulted in a revenue generation of ` 50 Lakh". BDS.

Rajkot ◘◘ BDSPs were either not available or only public sector BDS was available. ◘◘ Market can start functioning
Project groomed BDS providers from various domains. on its own once a threshold is
◘◘ Market for EE services have taken a shape. ensured i.e. when BDSP from
◘◘ Energy efficient Divided Blast Cupola (DBC) - project supported 4 local both private and public sector
fabricators to develop DBC. DBC have resulted in savings on many fronts are readily available and when
viz. reduction in coke consumption, reduction in rejection rate, increase demand for BDS become felt
in metal temperature by 50 degree centigrade- Net savings ` 8850/mt of needs.
liquid metal.

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Cluster Main Achievements Main Lessons

Rourkela ◘◘ Common marketing consortia in Rourkela cluster, linkages with NSIC, ◘◘ Consortia approach whether
consortia participated in tenders of RSP and HEC, Ranchi and Received in marketing or in relocation
Tender value is ` 5.72 Crores. of firms works well, under
◘◘ Linkage among Tier 1 and Tier 2 firms was strengthened. facilitation of an external
agency, especially when initial
◘◘ 37 Micro Firms are in the process of financial linkages to SBI, SIDBI &
demonstration of benefits of
local MFI (Sambandh).
working together are shown to
◘◘ Linkages established with private skill development centre. cluster participants.
◘◘ RTPSHCL is SPV for relocation of firms (5 acre Govt. lands identified);
CFC in the premises planned".

Energy efficiency measures in Coimbatore cluster started with the four awareness programmes which led
to a gap analysis survey by PSG Institute of Technology. A BDS consultant from Ahmedabad was brought
in to know where exactly the interventions can be made for low cost improvements in foundry industries.
Based on a pilot with few foundries, now the energy efficiency through technological improvements has
been replicated with about 100 foundries. The approach adopted in MPC cluster was one of energy audit,
leading to implementation of identified actions. This has been done with 52 units leading to estimated
savings of `12 lakhs per annum. In Rajkot cluster, the focus has been on energy savings through
technology up-gradation for the foundry industries for the cluster. Foundries in the Rajkot cluster use the
conventional design Cupola furnace for melting iron. The project promoted the energy efficient Divided
Blast Cupola (DBC) design in the cluster. The DBC has potential energy savings of around 30 to 35%
during melting operation. Besides energy saving it gives 50 to 100 degree temperatures higher than the
conventional cupola. Furthermore it has also provided around 33% production increase. Earlier there were
several fabricators fabricating the conventional design; however none were equipped to fabricate the DBC.
Training was given to 4 local fabricators on fabricating, installing and commissioning of the DBC. So far the
trained BDSp have completed fabrication of DBC’s for six foundries and three others are under fabrication.

In Rajkot Cluster, though several BDS providers were offering services for BIS certification of pumps but
there were no BDS providers rendering support in obtaining BEE star rating. Mr. Shailesh Goswami, a
local BDS provider was invited to BEE in New Delhi and trained in various technical issues and e-filling
of applications for BEE labeling. Today he has benefited more than 15 units who have obtained BEE star
rating for over 200 pump models and another 200 models are under the process. The BDS has managed
to open a new office and has now trained another BDS under him. BDS star labeling was supported for
12 models in the cluster - today over 200 models have received star labeling and another 200 are in the
pipeline.

There was only one NSIC lab (not NABL) in Rajkot before the project started. However, facilities for
conducting a number of important tests such as metallurgical microstructure analysis, NDT (non-destructive
testing) analysis such as magnetic particle testing, X-ray and Radiography) and so on were not available.
This resulted in MSMEs sending their samples to Ahmedabad for testing, leading to delays in supplies and
additional cost burdens. The project assisted in uniting the pump manufacturers association by apprising
them off the potential benefits of setting up a common testing center in Rajkot and initiated formation of
an industry lead SPV as a first step towards establishment of the Common Facility Centre (CFC) “Rajkot
Engineering Testing & Research Center”. The project has now registered the SPV under the companies

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act and REA has agreed to allocate land for the premises of the CFC. 4 BDSP are involved in undertaking
this activity.

Rourkela cluster is different from other engineering cluster in that there is no specific product and it is
treated as one of highly matured cluster. As the Engineering Sector is growing significantly, the focus is
more on brand image and export development of their products. More Number of BDS are required in the
area of Marketing than on production and technology as was the case with other engineering clusters. In
Rourkela, there is heavy demand and need to concentrate on developing infrastructure facilities to attract
the major clients within India and abroad. Overall growth of the Cluster turnover can be enhanced based
on two functional BDS areas i.e. Marketing and Technology.

Leather Clusters
The MSME-FDP was implemented in four leather clusters. The facilitation
agencies for BDS market development and cluster development are IL&FS
Cluster Development Initiative Limited and EDII. Review of achievements and
learning by sectors provide interesting opportunity to understand the similarities
and differences in approaches of cluster development and in benchmarking the
achievements and best practices. As is expected, the BDS emphasis in leather
clusters is on social and environmental challenges, in addition to production and institutional challenges. 5
BDS providers were introduced in Chennai cluster in the area of SA-8000 which is most widely recognized
global standard for managing human rights in the work place. With the intervention, the unit has become
socially accountable and is in a position to reduce accident and improve the cleanliness. This new
intervention has helped to enhance the export business and helped in getting more enquiries from new
buyers. To address the environmental challenge, all the industry associations came together in Kanpur
cluster to form an SPV named as Jajmau Tanneries CETP company Ltd. for the implementation of the
up-gradation project and expansion of Common Effluent Treatment Plant (CETP). Similarly in Kolkata,
upgradation of CETP indirectly benefitted 300 tanneries from the intervention. Skill development is another
area crippling the growth of these clusters. For this purpose, in Kanpur cluster, 9 skill development institutions
are available (as against 3 earlier) now with support from Industry and Government sponsored schemes.
More than 500 candidates are being trained every month from these training centers. Similar, though at a
low scale, initiatives are seen in Kolkata and Shantiniketan clusters. The summary of achievements and
learning from leather clusters under MSME-FDP are given as under:

Achievements and Learnings from Pharmaceutical Clusters - Snapshot Analysis

Cluster Main Achievements Main Lessons
Chennai ◘◘ 37 BDS providers introduced for the first time. ◘◘ Leather clusters face social, environmental
◘◘ SPV for common buying of Dyes & Chemicals (140 tanneries; challenges in addition to economic and
cost saving of ` 7 to 8 crore per annum). institutional challenges like in other
clusters. Therefore implementation of social
◘◘ Energy efficiency led to increase in profitability (5 to 10%) of
accountability standards and environmental
15 MSMEs.
management norms acquire added importance
◘◘ Technological up-gradation (improvisation of Tanning Drum) in leather cluster. With these interventions, the
for cost reduction. profile and profitability of firms in the clusters get
◘◘ Promotion of cleaner production technologies (CPT) for raised enormously and they are able to access
compliance to statutory requirements. global and premium markets.

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Cluster Main Achievements Main Lessons

◘◘ 5 BDS providers introduced in the area of SA-8000 which is
most widely recognized global standard for managing human
rights in the work place. With the intervention, the unit has
become socially accountable and is in a position to reduce
accident and improve the cleanliness. This new intervention
has helped to enhance the export business and helped in
getting more enquiries from new buyers.
Kanpur ◘◘ All the industry associations have now come together to form ◘◘ Access to finance to leather industries, being
an SPV named as Jajmau Tanneries CETP company Ltd., for seen as polluting industry is relatively weak.
the implementation of the up-gradation project and expansion Access to working capital finance is difficult for
of CETP. these firms and therefore cost of capital is high.
◘◘ 9 skill development institutions are available (as against 3 Better compliances can potentially reduce this
earlier) now with support from Industry and Government currently unfavourable situation.
sponsored schemes. More than 500 candidates are being
trained every month from these training centres.
◘◘ Product development and diversification with unorganised
sector artisans.
◘◘ Most of the 375 functional tanneries in Jajmau have committed
to adopt advance technology as per the requirement at
individual tannery level.
◘◘ The Government of Uttar Pradesh has approved the
establishment of Testing Lab in Kanpur. There shall be a
one-time grant assistance of ` 8 crore (80%). Industrial shall
contribute ` 2 crore (20%). The land for the project purpose
has been purchased by SPV.
Kolkata ◘◘ Focussed market promotion, brand building and value ◘◘ International brand building through systematic
addition in the MIPEL fair at Italy. planning and participation in an international
◘◘ Diversification into fashionable gloves, benefiting MSMEs fair and exposure to best practices in the field
worth ` 47 lakhs…more will follow. can generate benefits both at the level of the
firm and at the cluster. This provides the cluster
◘◘ Design development training of trainers - 16 designers.
firms added opportunities to leverage their
◘◘ A co-operative society by the name ‘Janbazar Leather Artisans
strength, improve their confidence, diversify
Industrial Co-operative Society Ltd’ (registered) has been
their markets and increase their profits. This
formed with 30 members.
also improve cluster image and provide
increased opportunities to youth to become
better designers, workers and employees in the
cluster firms.
Shantini- ◘◘ Institutionalising SDP/ASDP and Design Development. ◘◘ Design innovations ensures sustainability of
ketan ◘◘ Domestic marketing and developing marketing BDSPs. cluster firms. 28 new designs (surface and
patterns) and 12 mock ups designs were
◘◘ GI promotion and brand building.
introduced through design workshop during
◘◘ Making CFC functional. the course of the project with a high response
◘◘ Productivity, quality, raw material bank and technical support. from the buyers. ToT on design conducted to
emphasis grooming the MCM of the cluster on
design. This is a much replicable model.

One of the remarkable achievements of the leather clusters is the institutionalisation or establishment of
cluster organisations. In the Chennai cluster, 2 BMOs were introduced namely; Pallavaram Tannery Cluster
Company Pvt. Ltd.(PTCCPL) an SPV to procure bulk qualities of Dyes, Chemicals and Farmic acid and
an Association of Footwear Components, Accessories Machinery Manufacturers of India (AFCAMMI) to fill

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the gap among the leather products units in South India. A Special Purpose Vehicle (SPV) was established
in Kanpur and corpus for 50 lakh was constituted through contribution from industry. The SPV was named
as Kanpur-Unnao Leather Cluster Development Company Ltd (KLC). The SPV identified establishment
of a Multi-Skilled Development Center, establishment of a Testing Lab facility, Feasibility study for under
taking upgradation/expansion of CETP at Jajmau as the priority areas.

Pharmaceutical Clusters
The MSME-FDP was implemented in three pharma clusters. The facilitation
agency for the Pharma clusters was APITCO Ltd. Review of achievements and
learning by sectors provide interesting opportunity to understand the similarities
and differences in approaches of cluster development and in benchmarking the
achievements and best practices. The BDS emphasis in Pharma clusters is
placed on quality compliance (GMP-WHO), export marketing, clean technologies
for pollution and waste management. In Hyderabad cluster, solvent extraction and best waste management
technologies were examined with a pre-audits in 10 firms on water management & water cycles. Based on
the recommendation of the pre-audit M/s Archimedes labs Pvt Ltd, Choutuppal, Nalgonda District came
forward and implemented the technology by establishing Multiple Effective Evaporator (MEE) by spending
around ` 70 Lakh from their own funds. Facilitating agency organised BDS Clinic and disseminated the
information and sensitised on recovery, results which were duly approved and appreciated by Pollution
Control Board. Till date, 10 firms have adopted the same green and clean technology due to which
processing cost per liter of effluent reduced from ` 11 to ` 4 with no end effluent. Furthermore salt recovered
from waste will generate additional income as a byproduct to the pesticide manufacturing firms. Summary
of pharma clusters achievements and lessons are given as under:

Achievements and Learnings from Pharmaceutical Clusters - Snapshot Analysis

Cluster Main Achievements Main Lessons
Dehradun ◘◘ 30 New BDSPs improved their network with BMOs / MSMEs. ◘◘ MSME that uses ERPs have learnt the benefits
BDSPs are providing services directly to MSMEs without project of integration of planning, production, inventory,
support. quality control, financial, depts., and enhancing
◘◘ MSMEs realised the importance of Energy efficiency for the efficiency of inventory management,
economics of scale. Planning, Procurement, etc.
◘◘ WHO GMP firms (22 Units) taken membership in PHARMEXCIL ◘◘ Quality compliance is a key issue in the pharma
and availing their services in export marketing : 25% of the units sector as it impact the health and well being of
enhanced their GMP compliance levels. the people. Cluster development /BDS market
◘◘ Common Analytical Testing laboratory& training centre with E development therefore need to address issues
library, in the process of establishment with support from MSME related to quality compliance.
ministry.
Hyderabad ◘◘ More than 243 MSMEs (about 15%) realized the importance of ◘◘ Pharma cluster firms have to be highly quality
GMP BDSPs, fresh graduate trained. conscious and at the same time ensure
◘◘ 6 MSMEs are adopting pollution reduction equipment. environmental compliances like pollution and
◘◘ 75 New BDSPs improved their network with BMOs / MSMEs. safety norms. With the BDS provisions, the
cluster firms were able to look at solution like
◘◘ Technical skills of the existing personnel (343) has been enhanced
“Primary Treatment Plant” (PTP) to tackle the
through trainings resulted in improved product quality, decline in
pollution related issues which were hampering
rejection rate besides obtaining more business.
the growth of MSMEs adversely.
◘◘ One firm adopted Multiple Effective Evaporator with latest
technology: A downscaled version of a pilot for solvent extraction
has proved successful.

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Cluster Main Achievements Main Lessons

Indore ◘◘ 8 WHO GMP firms taken membership in PHARMEXCIL and ◘◘ Pharma sector needs appropriate financial
getting export marketing services (2 firms achieved COPP-WHO; product for GMP, GLP and export marketing.
18 are under implementation).
◘◘ Quality & Skill development in GMP, Marketing, Lean
manufacturing.
◘◘ Energy saving Assessments on regular basis.
◘◘ 15 Units got membership in Pharma Export Promotion Council
(Pharmaexcil).

Another strategic BDS issue in pharma clusters was poor adherence to quality compliance norms. In
Indore cluster, 20 firms improved their cGMP Compliance level. 3 firms Improved their compliance level
as per WHO-GMP and 15 firms improved their compliance level as per cGMP. 2 firms achieved WHO-
GMP certification by self support. The cluster agency improved the linkage among Quality BDSP (14) with
Cluster Firms (80). The Excellent Services of BDS Provider increase the Compliance as well as product
Quality which led to the Business Growth of Pharmaceutical Units. Similarly in Dehradun, this exercise
took about 6-8 months and ultimately 4 enterprises achieved ‘fully GMP compliant’ status by mid 2011.
WHO GMP compliance measures have been completed in 8 enterprises and the process of certification
will be taken up shortly.

Another aspect of BDS market development was low level of exports, Low institutional marketing, & Limited
local market. In Indore cluster, through awareness and capacity building workshops, 10 new cluster Firms
started Exporting through Merchant Exporter or directly. The firms were motivated to become part of
Pharma Export Council (Pharmexcil), MITCON, and Other Marketing BDSPs. Similarly in Dehradun, WHO
GMP firms (22 Units) taken membership in PHARMEXCIL and availing their services in export marketing.

Other Clusters

The MSME-FDP was implemented in eight other clusters. These were knitted apparel (Tirupur and
Ludhiana), floor coverings (Panipat and Bhadohi), Fruits and Vegetables (Pune and Ganjam), Coir (Allepey),
Dyes and Chemicals (Ahemedabad). The cluster facilitation agencies were Cluster Pulse, EDII, APITCO,
APEX and ACCESS. Review of achievements and learning by sectors provide interesting opportunity to
understand the similarities and differences in approaches of cluster development and in benchmarking
the achievements and best practices. Marketing is the common denominator across these clusters. So
the cluster agencies focused on various ways of linking marketing, marketing BDSPs with the cluster
firms. In Allepey, for example, international market development support through website development and
brochure development was provided to 10 MSMEs which helped them beg export order worth ` 1.5 crore.
Market access and marketing based cluster development approach can lead to a great degree of growth
of cluster firms, which is well demonstrated in Allepey and other cluster. In Allepey, close to ` 42.5 crore
(as per project’s own estimations) worth of benefits were generated to MSMEs during the project period
itself. Common branding and marketing approach as KNITMARK was adopted by the Ludhiana cluster. In
Pune, linking of micro firms from the cluster with known retail chains has been a successful activity. This

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has given the micro firms an exposure and safe customers. The cluster development which specifically
focuses on market access and marketing aspects is a potentially successful approach as is proven from
the project experiences.

The summary of achievements and learning in these clusters are given as under:

Achievements and Learnings from other Clusters - Snapshot Analysis

Cluster Sector Main Achievements Main Lessons
Ahmedabad Dyes & ◘◘ Upgradation of Primary Treatment Plant as per the effluent Integration with other clusters
Chemicals norms of CETP; for on a pilot scale with 5 firms to create was well achieved. Cluster inter-
the demonstration effect in the cluster. dependencies shall be explored as
mutually beneficial relationships
◘◘ Cleaner production in the cluster adopted by 10 units.
can be established. Ahmedabad
◘◘ Establishment of common evaporating unit and treatment cluster worked with Ludhiana,
plant for hazardous waste and effluent (45 units)". Kanpur, Chennai and other cluster
to bring technology and more
business to the cluster firms.

Alleppey Coir ◘◘ 43 BDS providers actively engage the coir cluster in Market access and marketing
Alappuzha. based cluster development
◘◘ Created linkages for coir MSMEs with local and approach can lead to a great degree
international buyers. of growth of cluster firms, which is
◘◘ Trained 39 MSMEs on domestic market promotion. well demonstrated in Allepey and
other cluster. In Allepey, close to
◘◘ Developed Mobile VAN for promotion of coir products in
` 42.5 crore (as per project's own
domestic market.
estimations) worth of benefits were
◘◘ International market development support through
generated to MSMEs during the
website development and brochure development-10
project period itself. The cluster
MSMEs received export order worth ` 1.5 crore.
development which specifically
◘◘ Training on Coir mats and matting export to Turkey: Export focus on market access and
order worth ` 15 Lakh.
marketing aspects is a potentially
◘◘ World’s Longest Door Mat: (Branding Initiative). successful approach as is proven
◘◘ Developed new semi automatic spinning ratt which can from the project experiences.
save electricity, energy and avoid drudgery faced by
women and increased daily income.
◘◘ Over ` 5 crore business generated by first B2B portal
www.totalcoir.com".

Bhadohi Floor ◘◘ Three BMOs formed and registered under Society Act. Artisan cluster needs are very
Coverings ◘◘ 5 MMFs upgraded from usage of manual to electrical different than the conventional SME
tufting guns. cluster. Here weavers and vendor
firms are operating in unorganised
◘◘ 3 BDSPs got an order of 100 ETG worth of ` 8 lakh.
mode and serving micro and
◘◘ 10 MMFs adopted modern latexing practices.
small units. Collectivisation and
◘◘ 10 New BDSPs improved their network with BMOs / institutionalisation in artisan
MSMEs related to ICT, HRD and Marketing. clusters is much more needed and
beneficial as that can effectively
bring in collective strength of
decision making and support to
each other besides providing
economies of scale.

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Cluster Sector Main Achievements Main Lessons

Ganjam - Fruits and ◘◘ During project intervention 38 entrepreneurs were ◘◘ Membership based Trust can be
Gajpati Vegetable exposed to Mangalore and Kollam cluster to learn best more effective form of collectivisation
Processing practices and advanced technology for processing. The as like minded individual and firms
(cashew and initiatives resulted in converting 36 units from traditional can come together and serve
Kewada) roasting method to boiling processing and other 20 is in common interests for mutual benefit.
verge of shifting. It might be difficult to organise all or
◘◘ The growth of business of BDSPs: Financial advisers, many of cluster firms within a single
Tax consultants & other technical service providers also umbrella and therefore small trusts
earned around ` 10 lakh from the cluster. become a useful via media towards
bringing growth and competitiveness
◘◘ Unit linked with the financial institutions".
to the MSME cluster.
Ludhiana Knitted ◘◘ Common branding and marketing approach adopted by ◘◘ The initiative of Common brand
Apparel cluster. portal for Ludhiana knitwear cluster,
◘◘ Widespread Energy efficiency exercises and abundant KNITMARK as a quality mark
BDS for the same in cluster, with involvement of large suggest that cluster level initiatives
number of BDSPs. like this can be successful when the
cluster firms see the utilitarian value
◘◘ Improved designing capabilities of cluster firms
in it. Developing the perception of
◘◘ 12 BDS have introduced new models of training to provide this value require strong facilitation
need based training. from the cluster agency which was
done well, in this case.
Panipat Floor ◘◘ Services of Indian Institute of Carpet Technology (IICT) ◘◘ Introduction of new technology when
Coverings initiated in the cluster. accompanied by the necessary skill
◘◘ 52 firms procured 710 Electrical Tufting Guns and increase development measures is most
in wages of 550 workers by 30%. successful as the case of Electrical
Tufted Guns (ETGs) shows in the
◘◘ 19 new BDSPs introduced in the areas of technology,
Panipat Cluster.
quality, process improvement, finance and HRD.
◘◘ One Designer consortia formed with 11 designers namely
“The Designer Group.
◘◘ 8 firms linked with banks / FIs for financial assistance (out
of 8, 6 firms linked with SIDBI).
Pune Fruits and ◘◘ Introduction of Mobile Testing Facility (Mobile Van) in the ◘◘ Institutions within a cluster if revived
Vegetable cluster. or strengthened can become
Processing ◘◘ skill upgradation in cluster with introduction of QA., QC sustainable vehicles of BDS delivery
level course, some started own testing facilities in the as the case of NAFARI shows.
cluster. ◘◘ Regulatory panel is important for
◘◘ Technology Support through CFTRI and AFSTI . fruit and vegetable clusters and food
processesing regulations are critical
◘◘ Connected micro firms with retail chains with brand
to adhere to for survival and growth
facilitation.
of the industry.
◘◘ Evolved NAFARI as an umbrella BDSP in the cluster in
self sustainable way".
Tirupur Knitted ◘◘ Productivity improvement trainings. ◘◘ Women are main workers in
Apparel ◘◘ Entrepreneurs clubs. the garment industry. Their
personal advancement and career
◘◘ Design development through international designers
enhancement therefore is a major
support.
responsibility.
◘◘ Energy audits and savings: huge response from the
MSMEs.
◘◘ Training programmes for women".

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Appendix
Issues raised by PM Task Force and Project contribution for addressing the same
AAPROACH OF MSMEFDP TO ATTEND THESE THROUGH CLUSTER INTERVENTION
S. Issues identified by North Zone East Zone South Zone West Zone
No. PM’s Task Force
1. Lack of availability of 79 units were assisted through 180 firms got 73 firms 347 firms sanctioned
adequate and timely loan amount of ` 8.01 crore. loan worth ` 28 availed ` 64.3 loan worth ` 119 crore.
credit, collateral crore including crore from
requirement and high 19 Women banks through
cost SHGs. TL and Work-
ing capital
loan.
A pool of BDS providers were strengthened. Capacity Building of SMERA/CIBIL/CGTMSE
for credit supplementation was supported. Industry association (FSIA, Faridabad) model was
promoted extending link to 50 MSMEs for over ` 17 crore. Being replicated in Gujarat. SPVs
(in Rourkela) and Consortia model in Ahmadabad for access. A MFI in NCR was handholded/
mentored for reaching out to 60 MEs (impacting lives of 12000 persons). Downscaling (doing
small loans profitably) piloted by SIDBI MF branches.
2. Procurement of The firms started 22 units esti- SPV formed and
raw materials at a procurement of material mated savings registered - Common
competitive cost from M/s. Ahmedabad Dyes of 30-40 % purchase to begin
& Chemicals Company, through SPV
a network created in formation
Ahmedabad for common
procurement
of environ-
ment friendly
chemicals
from ahemde-
bad.
3. Problems of storage, 150 household units in the Benefited 210 42 firms ben- Benefited 31units
designing, packaging unorganized sector through units efited through through training and
and product display designs impacting 900 women designers club introduction of new
artisans. and product
116 new designs received associations
during design competition
participated by 30 designers.
In addition to this 150 designs
and samples developed
by 8 firms with the support
of 5 designers. Designers
consortia was formed in the
name of “Designer Group” to
cater to the design needs of
cluster
2 designers’ association
Bhadohi designers association
and Khamaria designers
association with 40 and 60
members respectively and 8 of
them have undergone training
and recruitment. Association
has its own infrastructure for
future training activities

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AAPROACH OF MSMEFDP TO ATTEND THESE THROUGH CLUSTER INTERVENTION

S. Issues identified by North Zone East Zone South Zone West Zone
No. PM’s Task Force
4. Lack of access to Market Survey done for 185 firms 30 units got 195 firms through
(global) markets national market and market exposed to benefited marketing linkages and
potential assessed. international through SA generated business of
76 micro firms provided markets and certification ` 2 crore so far.
marketing linkages. created business and other
of ` 14.1 crore. business
2 market consortiums of firms
portals and
formed.
created
22 firms trained on Export business of
marketing procedures. worth ` 5.5
2 firms initiated exports by crore.
registering with Carpet Export
Promotion Council (CEPC).
60 websites of MSMEs supported. A study how to link with retail chains conducted. World longest
coir mat placing coir on world map as a natural fiber was experimented successfully. BDS Van
was used for BDS and MSME product marketing.
5. Inadequate ` 15 crore mobilized for 2 Benefited 30 Feasibility re- 272 units were benefited
infrastructure infrastructure projects-namely units. port prepared through NAFARI and
facilities, including Multi skill development centre for Green mobile testing Van.
3 SPV formed for
power, water, roads, and Testing Laboratory. Tirupur move-
CFC formed and
etc. ment (GTM) CFC for testing -SPV
4 training centers created- 2 registered.
for developing formed.
by two designer association
ETP for dying
for designs and 2 by two local
units.
firms for ETG.
1 Business
SPV created and registered
Development
for a testing Laboratory-DPR
Centre
submitted to State Govt.
created.
6. Low technology Energy Savings-115 firms Benefited 305 Benefited 106 The project
levels and lack of have estimated savings of ` firms through through energy commissioned 10
access to modern 10 crore p.a. through energy adoption of audits and models of DBC. Coke
technology (including audits and process audits. energy audits saving of ` saved in these units is
energy savings, and trainings and 13.5 crore per 450 tons P.A.
SA 8000 Certification
quality, certification, saved ` 64 lakh annum through
7 have already been certified
measures). per annum. energy audits, 330 pump design models
and 5 are under process.
quality up are under BIS approval.
ERPs-19 units gradation etc
Adoption of lean manufacturing 216 models got BEE Star
and vendor development Quality rating which is now a
programme. upgradation standard practice in the
done through cluster.
25 Units-benefits accrued- ISI & BEE
` 76 lakh 50-80%. certification Quality (GMP) – 20
CGMP Compliance through done for 50 ERP – 8 firms.
Project in 7 units and 5 Units firms. 1 model
go for WHO GMP Compliance of pump design Energy Saving in 13
through Project Supports. standardized. firms for ` 18 lakh P.A.

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AAPROACH OF MSMEFDP TO ATTEND THESE THROUGH CLUSTER INTERVENTION

S. Issues identified by North Zone East Zone South Zone West Zone
No. PM’s Task Force
Bar coding implemented
for 3 units and Testing
became a standard
practice for 111 units

50 units were benefited

through implementation
of Primary treatment
plants and Cleaner
production accruing
benefit of ` 1.15 crore
per annum.

7. Lack of skilled 7000 persons received 1600 persons 1910 persons 615 persons were
manpower training for various activity received train- were trained. trained.
Increase in employment and ing including
productivity – 20-30%. women and BPL
category.
17 BDSPs have been
introduced.

8. Corporate 7 Training centers created 170 firms

governance and with private sector lead out benefited
management skills which 4 were supported by through training
to handle business the project. and
strategy programmes
1016 weavers’ family
covered under medi-claim
insurance.
A Network of Haryana Carpet
Manufacturers Association
linked with MSME-DI, DC-
Handicrafts, DIC, NABARD,
SIDBI and banks to continue
the various activities
initiated.
Bhadohi Hasth Shilp Kaleen
Vikas Sanstha and Bhadohi
designers association
and Khamaria designers
association created

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 MSME Financing and Development Project

CLUSTER PROFILES - BDS CLUSTERS

Cluster Sector Facilitator Spread of Total Aggregated Esti- Products Major Major BDS Providers
Agency the Cluster Units Employment mated Stakeholders
(No’s) Turnover
(Rs. In
crore)

Ahmedabad Dyes & EDII Municipal 1200 40000 10000 There are more ACTI, ATIRA, Financial and Legal
Chemicals Corporation than 1200 different CIPET, IGTR, BIS, consultants, Patents
limits of the dyestuffs (colouring GPCB, ITI, GITCO, and Trademark, Quality,
City of matters) derived NSIC, CETPs, Designers, Export
Ahmedabad from a vast variety Central Excise, Consultant, Technical
in the central of chemicals. The Sales Tax Consultant, Testing Lab,
region of chemicals have a wide Environmental Auditor
Gujarat in the range from organic to
GOLDEN inorganic substances.
corridor

Alleppey Coir Cluster Alleppey 400 200000 1800 Coir products TCMMMA, A:Existing Earlier:
pulse ICA, CSC Finance, Production,
& ICEC etc Business organization,
Market access
B:Introduced by
Project: Marketing,
Mechanisation, Quality,
Technology up-gradation,
ISO Certification

Bhadohi Floor APITCO Bhadohi and 1820 300,000 1,500 Knotted Carpets, Skill, Technology,
Coverings Mirzapur Tufted Carpets, Marketing
Shaggy Durries and
Nepali & Pit Loom
Durries

Chennai Leather EDII Chennai 1150 40000 2000 Semi finished & AISHTMA, IFLMEA, Taxation and audit,
including Finished leather, TANSTIA, ILPA etc. Finance (access to
nearby Men’s foot-wear, Conventional institutional
districts Leather Goods credit), Legal services
in the State (gloves, belts, ladies related to labour
of Tamil hand-bags, travel (through BMOs)
Nadu goods, etc.), Leather
Garments (jackets,
sports-wear,
fashion-wear)

Coimbatore Engineer- APITCO Coimbatore 9704 129500 2000 Multi sectoral cluster There are several Auditing Firms, Technical
ing with large number of stakeholders like Institutes, Training
pumps & motors CII,ICCI, Institutes, Foundry
manufacturing units SIEMA etc Consultants, Designers,
and light engineering Labour contractors,
enterprises, in addition Rating agencies, Raw
to the large number of material suppliers etc
foundries

Dehradun Pharma- APITCO Dehradun, 302 18074 3248 Tablets, Manufacturers, Testing Labs, Financial
ceuticals Limited Haridwar, capsules, liquid, Government & consultants, CGMP
Roorkee orals, ointments support auditors, Technical
& injectables Institutions, Raw Institutes etc
material suppliers,
M/C suppliers,
Support Firms, Fi-
nancial Institutions
and bankers
Ganjam - Fruits and Access Ganjam and 260 12650 240 Cashew & Kewda Producers, aggre- A. Existing BDSPs:
Gajpati Vegetable Develop- Gajapati gators, processors, Transporters, Traders,
Process- ment Govt. agencies, Equipment Suppliers,
ing Services NGOs Raw Material Suppliers
B. BDSPs: Marketing,
Technology
Information & Communi-
cation, Quality, Finance,
Legal

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CLUSTER PROFILES - BDS CLUSTERS

Cluster Sector Facilitator Spread of Total Aggregated Esti- Products Major Major BDS Providers
Agency the Cluster Units Employment mated Stakeholders
(No’s) Turnover
(Rs. In
crore)

Hyderabad Pharma- APITCO Hyderabad, 391 18500 2500 Bulk drugs & Bulk Drug GMP Consultants,
ceuticals Nalgonda, formulations Manufacturers, Technology Consultants,
Rangareddy Formulations Transporters, Energy and
& Medak Dist Manufacturers, environment
Government & consultants, Lean
support Consultants, ICT
Institutions, Raw consultants, Safety
material suppliers, Consultants, IICT,
M/C suppliers, Testing Labs,
Support, Firms & CCMB, NIPER,
Financial HCU etc.
Institutions and
bankers

Indore Pharma- APITCO Indore, 256 14000 2500 Tablets, Capsules, Manufacturers, Testing Labs, Financial
ceuticals Limited Dewas, Syrup, I.V.Fluid, Government & consultants, CGMP
Ujjain, Ointment, Eye drops support auditors, Technical
Pithampur Institutions, Raw Institutes etc
(Dhar) material suppliers,
M/C suppliers,
Support Firms,
Financial
Institutions and
bankers

Kanpur Leather IL&FS This cluster 1600 125000 42000 Tanneries, Footwear - Central Leather A. Existing Earlier : 1.
Cluster includes & components, Research Few CAs in areas of
Develop- geographical Saddalary, Leather Institute (CLRI) and taxation, audit and loan
ment boundaries gloves, Council for Leather syndication 2. Suppliers
Initiative of district Garments & Exports (CLE); of chemicals/machines
Limited Kanpur Leather goods Harcourt Butler and buyers 3. Few
(urban) and Technological government support
Unnao town Institute (HBTI), institutions
and Banthar Government B. Introduced by Project:
leather Leather Institute 1. Marketing 2. Skill
complex (GLI) and IISTEM, development 3. Energy
situated IIT, 10 engineering 4. Productivity 5. Social
in Unnao & mgt colleges and Compliance
district. management 6. Infrastructure and IT
7. ISO certification
8. Design inputs
9. Brand promotion

Kolkata Leather Entrepre- Geo 4024 62440 4430 Finished leather, CLE, ITPO, CLRI, Existing Earlier: Machine
neurship boundaries Leather goods like WBPCB, GCELT, suppliers, CFTC (Central
Develop- of Kolkata bags, wallets & cases, NIFT, FREYA Footwear Training
ment as well as Footwear (closed Design Studio etc. Centre)
Institute of the Calcutta & open), Industrial Project Introduced:
India Leather gloves; The cluster Marketing, Testing,
Complex includes the Training, Environmental
situated geographical Compliance,
at Bantala boundaries of Kolkata Infrastructure,
(majority as well as the Calcutta Financial Assistance
situated Leather Complex
there). Kas- situated at Bantala.
ba, Topsia Majority of the
and Tangra tanneries are located
are the focal at the newly
points for the developed Calcutta
leather goods Leather Complex.
manufactur-
ing units.

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 MSME Financing and Development Project

Cluster Sector Facilitator Spread of Total Aggregated Esti- Products Major Major BDS Providers
Agency the Cluster Units Employment mated Stakeholders
(No’s) Turnover
(Rs. In
crore)

Ludhiana Knitted APEX Two major 14000 400000 5000 Knitted wears BDS providers like train-
Apparel industrial & grey fabric ing Institutes, Marketing
belts of agencies, Software
Punjab, viz., vendors, Financial Institu-
Ludhiana-Ja- tions & banks, certificate
landhar and agencies, market and
Ludhiana- branding agencies,
Amritsar technology consultants,
Quality and management
consultants etc and many
more exist in cluster

Mohali- Engineer- TERI Mohali- 2410 21000 1028 Chandigarh has two Chandigarh It includes several Private
ing
Panchkula- Panchkula- industrial estates, Industrial and Tour- and public BDS provider
Chandigarh Chandigarh Phase-I and Phase-II, ism Development
separated by a com- Corporation Limited
mon road. Nearly 2950 (CITCO),Industry
SME units, of which associations, Voca-
about 40% are ancil- tional and technical
lary units producing training institutes,
components for the Central tool room
tractor industry. etc.

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CLUSTER PROFILES - BDS CLUSTERS

Cluster Sector Facilitator Spread of Total Aggregated Esti- Products Major Major BDS Providers
Agency the Cluster Units Employ- mated Stakeholders
(No’s) ment Turno-
ver
(Rs. In
crore)
Panipat Floor APITCO Panipat & 331 50000 1010 Carpets - tufted, Export Manufactur- WSC,S GS, Trace Mak-
Coverings Karnal distt. shaggy; durries ers, Composite ers, Banks & FIs, NITRA,
Manufacturers, CAD/ CAM Firms, NIFT/
Tufting Firms, Skilled NID, IICT,ITI, PIET, Private
and Semi-skilled Training Institutions, Textile
workers, Committee, NGOs, IT firms,
Government & Transporters, Shipping
support Institutions, agents etc
Raw material
suppliers, Machinery
suppliers, Support
Firms & Financial
Institutions and
bankers
Pune Fruits and APEX Pune/ 550 13000 800 Fruit & Vegetable Includes 7 banks, Existing Earlier: Market-
Vegetable Panch- Processing Cluster 17 firms and ing, Training, Advisory and
Processing gani- Ma- 25 BDS legal services B: Project
habaleshwar Introduced: NAFARI, Packag-
(District ing material and suppliers,
Satara) Training
institute, Marketing consult-
ant agencies, Transporters,
Testing and analysis lab,
Software vendors
Rajkot Engineering TERI Vasahat, 666 24700 3000 The geographical There are about 500 a.) Finance and loan
Bhaktinagar spread of the cluster foundry units in the services b.) Technical service
Industrial Area, includes Aji Vasahat, cluster out of which providers
Mavdi Plot, Bhaktinagar Industrial 125 are members c.) Quality certification and
Samrat Indus- Area, Mavdi Plot, Sam- of IIF (Institute of registration service
trial Area and rat Industrial Area and Indian Foundry men) providers d.) Environment
Atika Industrial Atika Industrial Area and about 400 are and energy related service
Area areas in areas in Rajkot. Based member of REA providers e.) Administrative
Rajkot on focused discussions (Rajkot Engineering and regulatory services
with stakeholders, two Association). f.) Marketing service
sectors have been providers
selected for BDS inter- g.) Testing laboratories
ventions in the Rajkot h.) Research and Develop-
cluster: (1) foundries ment i.) Training and skill
and (2) pump sets. development
Rourkela Engineering APITCO Rourkela 220 5750 150 Machining & Fabrica- Orissa Young i) Government support
(Machining tion Entrepreneurs institution
& Fabrica- Association, Orissa ii) Industries association
tion Units) Assembly of Small iii) Private agencies/
and Kalunga and Medium Enter- individuals.
(Fabrication prise, District Small
Units) Scale Industries
Association and
Rourkela Chamber
of Commerce
Shantiniketan Leather Entrepre- Birbhum 60 1200 5.5 - Bags like shop- CLE, ITPO, CLRI, A. Existing Earlier: a. Cas
neurship district of West per’s bag, clutch bag, WBPCB, GCELT, b. Cost accounts c. Tax con-
Develop- Bengal - 150 umbrella bag, pouch NIFT, FREYA sultants d. Few public BDS
ment kms from bag etc. Design Studio e.NGOs
Institute Kolkata - Small leather goods etc. B: Introduced by Project:
of India like wallet, coin pocket, 1. Marketing 2.Testing 3.
purse, mobile cover Promotion of Handicrafts 4.
etc. Training 5. Finance 6. MSME
3.Pasted items like support services like training,
ornament box, pencil incubation, fair participation
box, photo frame etc. and handholding

Tirupur Knitted Apex 2000 300000 40000 Bleaching unit, around 700 active
Apparel compacting and exporters and 1700
calendering units, domestic garment
Dyeing units, suppliers at Tirupur
Embroidery units,
Fabric printing, knitting
units

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 MSME Financing and Development Project

Briefs on Projects under Advocacy Challenge Funds Annexure VIII

On the lines of international best practices, MSMEFDP has set up a Challenge Fund for Advocacy in MSME
Sector (ACF) which aims to promote ownership through involvement of beneficiaries / stakeholders. Under
ACF, support is extended towards action oriented research based initiatives that have tested or can be
tested / scaled up (backed by lesson learned / research findings). Under MSMEFDP supported following
initiatives:

MSME Solutions Centre

Highlights
●●Implemented by a BMO- Industries Association of Uttarakhand (IAU) in underserved region.
●●Thrust on retired skilled personnel’s (retired from banks, research institutions, PSUs etc.)
●●A separate website www.msmesolutions.org was launched and a dedicated “helpline service” was
introduced.

In order to channelize the talent of many Retired /

Senior Citizens / VRS experts in the state and help to
bridge the demand supply gap of BDS for MSMEs in
the state, ‘MSME Solutions Centre’ was established
by IAU with support from ACF. The centre provided
a platform to help match these experts with
assignments from small business that need short-
term consultants (Business Development Service
providers).

Success
●● During project support period, 8(+5 events) workshops were conducted, more than 459 queries received
under “Helpline Service”, database of 350 MSMEs and 30 BDS providers created and 58 matchmaking
interventions were made.

●● The project implemented by IAU a state level BMO leveraged qualitative benefits in terms of visibility
among Government, Policy Makers and other stakeholders.

●● The Chief Minister of State participated in one of the programme conducted under the project and
appreciated the initiative. The project has enabled the association to create visibility and leverage it for
few unique initiatives such as:

◘◘ Design Clinic under MoMSME-NMCP Programme.

◘◘ FINANCIAL linkage model (placing a financial consultant) wherein new/existing units (around 60)
fetched better terms from banks.

◘◘ Free EDPs for potential entrepreneurs

◘◘ Enabling MSMEs to file Pollution Control Board forms online. They have outsourced a consultant
who sits every week in association office to help them do this filing.

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SIDBI Report on MSME Sector 2011

MSME Business Confidence Index

Highlights
●● MSME focused Micro and Macro Parameters, sample survey of more than 650 enterprises constructed
across 7 industry sectors across 4 zones based on 11 indicators (classified as “Present Situation” and
“Future Expectation”), capturing responses on continuous basis.

●● Results dissemination through online platform on which various indicators may be searched and
analyzed individually.

●● Capture trends on employment, business growth, profitability, credit growth etc. as also on MSME
initiative on emerging areas viz. CSR, Energy Efficiency etc.

The MSME Business Confidence Index is created by Indicus

Analytics Pvt. Ltd. and as such fulfills the objective of
developing a sustainable framework - a real time micro level
monitoring system on capturing MSMEs performance and
expectation.

The project envisaged helping the policy makers respond

with facilatating policy measures and ultimately help MSMEs
respond faster to market conditions as follows:

◘◘ Credit Agencies such as Banks, FIs, RBI, etc. are able to obtain the latest insights on developments
in the MSME sector, ahead of the monetary policy formulation.

◘◘ The MoMSME obtains timely Qualitative/Quantitative data.

◘◘ The MoF, GoI obtains robust data on the MSMEs to aid it in its fiscal policy making.

◘◘ It enabled Advocacy groups to make their case with credible data backing their arguments. It facilitated
to instilling a more reasonable and guided private advocacy.

Success
●● Focused on MSMEs only whereas other indices survey capture data on overall private and public
companies. This feature would enable policy makers to formulate focused policies for MSMEs and take
appropriate actions on the basis of the expectations of the MSME sector.

●● In depth analysis and ease in navigation i.e. segregation of output / result quarterly, sectorally and
geographically. This feature allows key insights into the performances of the MSME sector across
regions and industries as well on a pan India basis.

●● Query enabled web based system to monitor micro level results of the policy interventions in a timely
manner. Three quarter’s results have been released. While two quarters results being part of the
Advocacy Action assignment released through the project support, the results for Q3 (Apr – Jun, 2011)
were released by M/s. Indicus from its own resources.

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 MSME Financing and Development Project

Green Dhaba Project

Highlights
●● Promotion of eco-friendly, energy efficient and hygienic eateries in the underserved region in Uttarakhand.

●● Target 40-60 road-side eateries on Badrinath / Gangotri highway. The 30 selected dhabas implemented
Green Dhaba framework on “Responsive Dhaba Green Commitment” towards waste management,
use of local resources, water conservation etc. to create awareness on Environment Protection, Energy
Conservation etc.

- Encourging Green Dhabas on adoption of energy efficiency measures, use of renewal energy etc. and
develop them as environmentally and socially responsible and sustainable ventures.

- Establishing a hygienic and environment friendly chain of restaurant serving quality food.

- Facilitating integration of financial and non-financial assistance viz. linking MSMEs with Banks / FIs.

Success
●● A lead TV group captured this as a story for one of its documentary feature.

●● The project creates a sustainable framework for scale-up and replication to other areas of the country.

●● Encourage agenda of Green Commitment.

●●

●●

●●

●●

●●

●●

●●

●●

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SIDBI Report on MSME Sector 2011

Developing CSR Framework for Indian MSMEs

Highlights
●●Analyzing CSR policies /practices followed by Chinese textile industry vis-à-vis Indian Textile Industries.
●●Based on learning’s and feedback develop a framework for replicating the model CSR in India.
The project was implemented by India China Economic and Cultural Council (ICEC). The idea is to
promote CSR in Indian Textile Industry based on best international CSR /ESR practices to make them
more competitive ane responsible business ventures.

Success
●●A Model CSR Framework for Indian Textile MSMEs was developed.

E-Procurement
Highlights
●● Pilot was aimed for linking MSMEs with paper and chemical wholesalers in NCR such that they achieve
value for money and get price quotes/match make their deals through server emanated SMS and
responses.
●● IT (Mobile/Cell Phone) based low cost model.
●●Transparent (no involvement of third party) & Real Time.
●●The platform is based on the adaptation of already available, proven and scalable technologies.
●●Up-scaling the pilot model into a full scale sustainable digital market platform for the cluster.
Leveraging IT platform as a potential marketing access tool for e-procurement for MSMEs and “tapping
markets and customers in the most cost-effective manner” was intended. It aimed to address one of the
key challenges faced by MSMEs. The uniqueness of the initiative lied in enabling assorted micro and small
entrepreneurs to access and widen to reach to newer arena both in terms of market and procurement by
using simple IT, through their mobiles and internet.

Success
●● Pilot Testing was done successfully for paper wholesaler and MSMEs in NCR, but the roll out plans
were differed due to the provisions of new TRAI Regulation which came into force with effect from Sep
27th 2011. However, Ace Global has based on inquisitive response of MSMEs plans to take this agenda
forward in future for both paper and chemical wholesaler.

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Small Industries Development Bank of India
E-1, Ground Floor, Videocon Tower, Rani Jhansi Road,
Jhandewalan Extension, New Delhi - 110 055