Instilling Sustainability in Indian Clusters

1. Instilling Sustainability in Indian Clusters We Empower MSMEs Dr R K Singh, DGM, SIDBI Amit Kumar, Sr Technical Expert , GtZ New Delhi, India

2. Presentation Structure • SIDBI- Empowering Indian MSMEs • CLUSTERING AND SIDBI • Approach • MSMEFDP -Key Achievements • GTZ : experience and learning • Experiential Learning • Looking Ahead

4. Cluster as Focal point for us - Why • Broad convas- MSME Focus- 290 lakh enterprises, 95% ME, 660 lakh employment, 8000 products • Multiplier benefits- Replication of interventions in other clusters became easier, Harmonisation with other programmes / schemes of other agencies turned simple. • Leverage the strength of clustering – • Through Networks • Lead Nodal Agency of several schemes GOI • Effective Outreach – faster credit delivery , create examples for fellow institutions 4

5. ABC approach of SIDBI for Cluster Financing & Development

6. DEVELOPMENTAL (A) FINANCIAL (B) • multi agency , multi program, nation wide • Cluster support programs –75 clusters • Thrust on unserved/underserved areas – RIP/NER • Capacity building • Synergy with Support Institutions – UNIDO etc. • Skill Development-STUP etc. • Provision of efficient financial services with focus on business goals • New Products - Green Loan Scheme • New Channels –SEFCs 214 Clusters, WC, BMO route • New Tools- CART

7. A B C (Hybrid Model) • Financing & Promotional role to be played simultaneously to enhance competitiveness. • Fostering Green Agenda through international partnerships ( UNIDO, WorldBank, GtZ, DFID, KfW, JICA, AFD, ADB, ) “ Green Loan Scheme”, Green Ratings, MOU with BEE , WB GEF project • MSMEFDP

9. MSMEFDP and Clustering • Making Market Work for MSMEs – Participative and market driven , • Experimenting( internal expert and FA, simultaneous implementation across clusters with subsectors) • Piloting ( 3 clusters) and Scaling up (16 clusters) • Partnering key players – FMC (UNIDO experience and expertise) – as Independent reviewer, M&E and Strategic Inputs • Outreach of the adopted clusters -Some like Knitwear Ludhiana, leather-Chennai/Kolkata account for more than 80% of India’s total production output in selected products • Value for Money

10. GTZ partnership with SIDBI under MSMEFDP • 4 Regions • Subsectors of Pharma, Apparel, Engineering, Leather Toys , Handloom • Financial Services • Business Development Services

11. BDS Market Development • Objective: Systemic Change • Approach: • Developing and Strengthening systems of service delivery; Whole system and framework conditions in which a market for service delivery can develop (supply and demand side measures) • Using BDS to promote responsible competitiveness

12. BDS Market Eco Systems 3 5 Lack of awareness Cluster driven govt support programmes 7 BMO not ready/competent to engage In service provisioning /facilitation 6 Ability and willingness to pay MSME Units BDS Supplier Costly offer by estbl SP Low capacity to solve SME prob Doesn’t value SME as a profitable client thus don’t take the efforts to market their services, Inappropriate products , limited reach Lack of knowledge and information Attitude & willingness to pay No long term planning & vision Improving BDS Market Eco Systems Non existance coordination amongst Public Service providers and institutions Inappropriate service offerings Because of limited understanding of SMEs 4 1 Access to information i.e issue of transparency 2

13. Challenges Enabling MSME Demand for services Detailed Performance and Need Assessment , www.b-smartonline.com Information gap between service providers & MSMEs Focused issue based linkages workshops and tool, www.consultwho.com High cost of client acquisition Consortia of service providers CAPSULE MSME not convinced with the likely benefits & finds the cost too high Facilitate demand aggregation & assist with pilot , Breaking the service package into module Ensuring sustainability Cost of consumption not supported , capacity development of Lead firms and local training institutes

14. CAPSULE • Consortium of Service Providers for developing and strengthening whole systems of service delivery • Pooling up of resources to minimise the cost of client acquisition • Cross selling /references • Advantage MSMEs: access of different services from single platform • Started with 20 Service Providers in Hyderabad • Being replicated in other clusters Chennai,Coimbatore, Tirupur

15. Apparel Sector NCR: Factors affecting competitiveness High cost of quality coz of improper quality control system Low productivity High labour turnover Lack of skilled workforce Infrastructural Weakness Marketing /Sales Fabric Mills Fabric Processing e.g electrical supply, long transportaion, condition of roads ,ports Too focussed on US and Europe Mrkt Overall Competitiv- eness of the units Inconsistency in conformance of quality Availability and Quality of Fabric Lack of knowledge on Improvement potential and various tools limited usage of ICT, Lack of design capability , Market intelligence input Inefficient supply chain for outsourcing work e.g fabrication , embroidery Access of quality finance

16. Process and Tools for Enhancing Competitiveness Initiate the thinking process and facilitate consensus Organize sensitization events and short knowledge-building seminars Part Financial support and facilitation Impact BMO initiated cutting room improvement programme BMO convinces its members and get their buy in to do a pilot Assessment Improved awareness Amongst participating units and other members of BMO BDS-provider assist in formu-lation of Assessment Performance Assessment & Training Need Analysis conducted in 10 firms Overall strategy implementation plan for creating awareness on improvement potentials and process and tools Increasing Awareness amongst units GTZ GTZ GTZ GTZ GTZ GTZ Facilitation of strategy building process between main players (BMOs, Service Providers) Dissemination of publication amongst all stakeholders (More than 5000) Linking Apparel Trade Magazine Impact Some units have appreciated the findings and have shown there willingness to initiate the process Facilitating linkages with AEPC and their support for publication and knowledge dissemination Documentation and publications of findings for knowledge dissemination

17. Next Phase till 2014 with SIDBI • innovative financial models, instruments and services/ products; • Capacity Development of SIDBI & partner Banks • Micro Enterprise Finance; • Development of sector /sub sector specific BDS market development methods, quality assessment and standardization tools; • Capacity development (networks, organizations, human resources) of Industry Associations; • Policy analysis and advocacy; • Sourcing and sharing of International best practices

18. Glimpse of Important initiatives

19. Glimpse of Important initiatives

20. 2500 brass units, employment 2.15 lakh( D+I) JFOA - Viability gap funding CFC setup under PPP mode, Target 3000 MSMEs Till date over 10000 samples of 1050 MSMEs directly benefitted,income Rs 17 lakh Helped JFOA to leverage Govt support amounting to Rs. 17 Lakh Enabled Market corrections

21. HIGH PREMIUM ON EFFECTIVENESS NAFARI – Testing Lab setup on PPP mode in UNIDO intervention After project intervention Bus.plan/website- turned profit ( loss in 2007, 2008 profit), FY2010 Rev. 47lakh/consl. 20 lakh Extended its services from mere testing lab - Diversified as trainer /knowledge Net worker Emerging as Natural FA in the cluster - Vision document Cluster Development Programme

22. CREATING VALUE- Waste to Market Taste 900 Women Engaged in making Whips out of scrap earning R 10-15 p/d Helped in product introductions, new design development, skill upgradation, marketing linkages Income increased by over by 400% Deptt. of Industries has linked the initiative with their prog. Women got artisan card which facilitates access to credit, market and Health insurance

23. Experiential Learning • Cluster Approach Works – • SIDBI has established edge and example in Greening clusters - 6000 plus MSMEs reached with financing, • Networks imp- Local, National, Global • Leverage international partnerships • Addressing Enabling Envtt is important – ACF • Customising products and services as per uniqueness of each cluster • Balanced approach towards financial and non financial needs is crucial • Market led eco system - has inherent sustainability traits • Access to and Quality of BDS enables quick replication

24. Experiential …. • Appropriate Mix of Long Term Intervention with Short Term support also helps • Regular CB of cluster actors as exit vehicle crucial • Ownership at each stage important • Action Plans to be dynamic, identifying flagship areas for thrust • Facilitating agencies ( 7 FA & 7 Sub sectors ) have a tendency to work especially in its area of core competence . Compatibility/complementarity among facilitators must • Create Knowledge Networks/Pool to Manage Growth- D3A (Deduce, Document, Disseminate and Assimilate)

25. Looking ahead… • WB GEF Project with BEE in 5 clusters ( Finance-E.E Linkage) • Scaling up equity capital assistance to innovative MSMEs through risk capital/venture capital products (finance – technology linkage) • Documenting Global best practices for MSMEs (MSME – International environment linkages) • MSME Info Kit ( a complete supporting guide for MSMEs) (MSME environment linkage) • Policy Advocacy to continue.( SIDBI- Government linkage) • Taking forward flagship activities under IInd phase of GTZ-SIDBI under MSMEFDP. 25

26. THANK YOU For more details, please contact:- Project Management Division Small Industries Development Bank of India, Mail :- pmd_ndho@sidbi.in, singhrk@sidbi.in, amitkumar@gtz.de Website : www.msmefdp.net, www.sidbi.in , www.gtz.de

27. Macro Data of 19 Clusters Back

28. Back Value for Money Courtesy : FMC, New Delhi