SME Financing
SME Financing
SME Financing
SME Financing
Group Assignment
Submitted to
Dr.Kavita Chavali
Submitted by
Group 7
Anup Kumar Rathi
Hema Prabha.S
Himani Sharma
Manish Gupta
Shivam Rastogi
Shruti Shrinivas
Vijayendra Rao
Vishal Singh
SME
2
Financing
This article focuses on the benefits in store for MSME’s if they do business
with the Government. Government is the biggest buyer of the country. By
dealing with MSME’s, they can effectively contribute to the growth of small
scale industries. The article states that the Ministry of MSME recommended
that atleast 20% of public procurement by Government organizations should
be from MSMEs. The level of preparedness of these industries to meet such
large order is a debatable issue. No doubt it would involve a lot of financial
constraints for these industries but they are ready to invest in expansion
provided that there is assured business for them. They would also be willing
to undertake more risks. The article also talks about the various hiccups
associated with such a regulation. It may be beneficial in the long run but in
the short run, MSMEs will have to face various problems.
Some of the problems that a few industry experts have highlighted are as
follows:
The article also looks at the Government’s stand on this. The Government
feels that imposing such eligibility criteria is absolutely necessary in order to
weed out those companies that do not provide quality materials. The
imposition of such a regulation would help in bringing about more
transparency in the procurement process and the key concerns associated
with small suppliers. The article also gives insights regarding the future
plans of the Government which involves the implementation of E-
procurement schemes.
The case has thrown light on two important issues relevant to MSME
financing i.e. working capital issues and term loan for increasing capacity
and R&D activity to improve quality work.
Some of the issues and the needs concerned to the SME financing and credit
policies with regards to the government are as follows:
Anil Bhardwaj, Secretary General of FISME has mentioned that the public
procurement mechanism has the potential of generating a huge demand of
goods and services produced by MSMEs. However, to realize the potential it
is essential that steps are taken in the following areas:
• Small enterprises in the country have been hit badly by the global as
well as domestic demand slowdown
• Risk aversion of banks tends to rise during such periods and MSMEs
bear the brunt of banks’ cautiousness in terms of lending.
• With orders in hand, MSMEs take the risk of expanding their capacities
and invest more in their companies.
References
http://www.financialexpress.com/news/govt-mulls-mandatory-20-purchases-from-
msmes/432262/0
http://smetimes.tradeindia.com/smetimes/news/top-stories/2009/Jun/26/public-
procurement-must-for-msmes-growth-fisme9087.html
http://www.imsme.org/Uploads/MediaTypes/Documents/Four_shtr_MSME_Agenda.pd
f
http://economictimes.indiatimes.com/Opinion/India-Emerging/Government-procurement-pie-Windfall-for-
MSMEs/articleshow/5053280.cms?curpg=2