CII finance portal raises Rs 85 crore for MSMEs

An online finance facilitation centre set up by the Confederation of Indian Industry (CII) in June to provide advisory and credit facilitation support to micro, small and medium enterprises (MSMEs) has helped the latter raise Rs 85 crore in the July-October period, according to CII sources.

About 20 companies from the manufacturing, infrastructure, IT, energy, textile, agro-processing and e-commerce sectors have raised money during this period.

CII expects to raise over Rs 400 crore by the end of the current fiscal year through the facilitation centre, which will operate as a one-stop shop, aggregating financing options from various major financial institutions.

The centre will match SME financing demand with banks and financial institutions, and project large finance requirements across financial institutions. SME members across India can approach the centre for their credit requirements through an online interface, and the centre facilitates the documentation and preparation of bankable project proposals.

CII has partnered with seven financial institutions across the country in this initiative. The financial institutions are Indian Bank, Indian Overseas Bank, Federal Bank, Muthoot Fincorp Ltd, Religare Finvest, DCB Bank and State Bank of Travancore.

Other facilities offered by the centre include a facility for online training in finance management for SMEs and information about SME schemes of the government and financial institutions.

The overall demand for finance in the MSME sector has been estimated at Rs 32.5 lakh crore by the International Finance Corporation, in a 2012 study titled Micro, Small and Medium Enterprise Finance in India, done in partnership with the Japanese government. It estimated the demand for debt finance at Rs 26 lakh crore, and the average debt-equity ratio at 4:1.

Viable demand from the formal financial sector is an estimated Rs 9.90 lakh crore, with 38 per cent of the overall debt demand being unviable. Ninety per cent of this demand is from unregistered enterprises, and only Rs 1 lakh crore is from registered MSMEs. Working capital demand is estimated to account for approximately 61 per cent of the total demand, the study found.

Of the total overall viable demand from the formal financial sector of Rs 9.90 lakh crore, micro enterprises account for Rs 4.4 lakh crore, small enterprises for Rs 2.9 lakh crore, and the medium enterprise sector for Rs 2.6 lakh crore, according to the study.

The average credit requirement of micro enterprises was estimated at Rs 3-4 lakhs. Seven lakh small enterprises are viable for financing and their needs can be addressed by formal financial institutions. The average credit requirement of small enterprises is estimated to be Rs 40-45 lakh.

The average credit requirement of a medium enterprise is estimated at Rs 4-5.5 crores, and 50,000 medium enterprises can be served by formal financial institutions, the study said.

MSMEs' lack of access to credit remains a major impediment to their growth, the study said. Although more than 100 nationalised, private and foreign banks in India offer MSMEs more than 300 schemes for accessing finance, there still remains a demand-supply gap in the market.

About 32 per cent of the projects submitted by MSMEs do not get cleared by financial institutions for various reasons. Moreover, there is no ecosystem for process facilitation between banks and SMEs, the study pointed out.