Expanding its area of operations beyond financing to micro, small and medium enterprises (MSMEs) in the country, Small Industries Development Bank of India (SIDBI) is now looking at factoring services or receivable management for MSMEs in India.
The factoring services are considered crucial for MSME units in the manufacturing sector, which faces issues such as delayed payments and weak receivable management system. SIDBI is eyeing to assist these SMEs in their reveivable management and provide them finance against the receivables factored.
"There is huge scope in India for factoring services. Globally, the total size of the factoring services is estimated at around Rs 140 lakh crore (approx. Euro 2000 billion), of which Asian countries hold 25 per cent share. India has a small share of 0.6 per cent of the Asian market. Therefore we are looking at a huge potential in this services," said N K Maini, dy managing director, SIDBI.
According to Maini, currently there are few players, who provide factoring services in India. Some of the leading three players include Canbank Factors, a subsidiary of Canara Bank, SBI arm SBI Factors and IFCI Factors.
It may be noted here that SIDBI (amendment) Bill, 2012, has been tabled in the parliament. The amendment is aimed at empowering SIDBI to provide financial assistance to MSMEs in the form of risk capital, factoring and discounting, venture capital besides loans.
"We are repositioning SIDBI and as a result, equity and quasi equity financing are some of the areas where we would like to work. An estimate shows India's MSMEs need equity and venture finance to the tune of Rs 2.5 lakh crore. Currently, it is roughly around Rs 3000 crore," said Maini.
Besides providing direct finance through its venture financing arm, SIDBI Venture Capital Ltd, SIDBI is also looking to operate as a fund of funds to pool finances for MSMEs. SIDBI will have equity exposure of up to 20 per cent in the start-up firms and growth-stage firms across the sectors.
Commenting on the expansion plans in Gujarat, Maini informed that SIDBI will open an office at Kadi near Mehsana besides having five in different locations in the state. "We have our offices located nearby industrial clusters in Gujarat. The growth of our Gujarat operations is about 25 per cent, which is more than the national growth rate of about 17 per cent," he said.
The lender is also looking to open credit facilitation centres across industrial clusters in the country. About five such are being planned in Gujarat with two in Ahmedabad each at Gujarat Chamber of Commerce and Industry and Gujarat State Small Industries Federation.
SIDBI's outstanding loan portfolio in Gujarat stands at around Rs 1280 crore as on March 31, 2012. In the first quarter of the current fiscal, SIDBI has disbursed about Rs 222 crore to the units in the state.
Nationally, outstanding credit to MSMEs stood at Rs 53,785 crore for March 2012 with cumulative disbursements crossing Rs 2.45 lakh crore since the inception of SIDBI in 1990.