Contents. Micro and Small Enterprises (MSEs). MSEs – Key Challenges.
Access to Finance: A key Challenge. Financial Education Needs. Barriers to
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Girraj Prasad Garg NISM
Contents Micro and Small Enterprises (MSEs) MSEs – Key Challenges Access to Finance: A key Challenge Financial Education Needs Barriers to Education Overcoming Barriers A Financial Education Delivery Model for MSEs
Recent initiatives by SEBI - NISM
Financial Education for All Students – catch them early Households Young Executives Retirees/Soon to be retirees Entrepreneurs etc.
Definition of MSEs Defined
differently based on the turnover, capital employed, employment of people, profit generated, investment in fixed capital etc. In India the MSMED (Micro, Small and Medium Enterprises) Act 2006 has defined a Micro Enterprises as one with investment in capital assets up to Rs 25 lakhs in manufacturing industries and up to Rs 10 lakhs in service industries. In respect of Small Industries, those industries with capital investment up to Rs 5 crores in manufacturing industries and Rs 2 crores in service industries are classified as Small industries.
MSMEs: Growth Engine of the Indian Economy SME sector generates employment opportunities Contributes 45% of industrial production Contributes 17% of GDP Employs 60 million people There are 30 million MSME units in India
Source: CII-PWC “The Next Decade – How Financial Institutions can help the East grow”, October 2011
Characteristics High labour capital ratio Shorter Gestation period Low investment requirements Concentrated in smaller markets Key suppliers of raw materials/ components to large
industries
Key Challenges faced by MSEs • Lack of availability of adequate and timely credit • High cost of credit • Collateral requirements • Limited access to equity capital • Procurement of raw materials at a competitive cost • Problems of storage, designing, packaging and product display • Lack of access to global market • Inadequate infrastructure facilities, including power, water, roads, etc • Low technology levels and lack of access to modern technology • Lack of skilled manpower for manufacturing, services, marketing, etc • Multiplicity of labour laws and complicated procedures associated with compliance of such laws etc...
Restricted access to finance: A key constraint to growth and survival Absence of reliable information Weak accounting and unreliable statements Lack of sufficient market credibility Poor historical performance High Transaction costs for lenders High risk perception
Improving Access to Finance Improving Access to finance requires: Favorable Regulatory environment IT and other infrastructure Development Programs Credit support Literacy and Business Education Financial Education is critical to improving access to finance and hence growth and sustainability of an MSE Today our focus is on Financial Education Needs
Financial Education Needs of MSE Entrepreneur Consumer
financial literacy: the individual entrepreneur / manager’s ability to manage with confidence his/ her personal financial decisions such as: Personal Budgeting Personal Financial Planning Personal Financial Products Consumer Rights and Redressal
Financial Education needs for the MSE organization MSME Access to Funds Types of funding (credit products; equity: Public/ Private) Sources of funding; Institutional requirements to get access to products and services; Other types of financial products, such as savings options for businesses (e.g. Current accounts, money market accounts, mutual fund schemes etc), transactional products (e.g. business credit cards, Foreign Currency accounts; Leasing etc Risk management, including insuring stock and business
premises, and assuring the life of the MSME owner/manager; Formalizing a business (different legal structures, pros and cons, how to go about it), and the impact on financing options Taxation issues
Other Financial Education needs to manage and strengthen the business Financial management and accounting knowledge
such as for : Development of income forecasts,
Making financial statements, Cash flow management Book keeping and accounting.
Barriers to education Numerous enterprises Widely distributed among rural, semi urban and
urban centers Numerous regional languages Varying levels of literacy among entrepreneurs Varying educational needs Varying cultures and business customs
Overcoming Barriers: Targeting MSEs Size Micro Small Medium • Location/ Accessibility Rural Semi Urban Urban Language Literacy levels
Delivering Financial Education SEBI - NISM Model Develop simple and targeted content for each defined
segment Deliver through Partnerships Collaborating with relevant institutions/ organizations
Training and continuing support to those who are in
touch with the MSME entrepreneurs Providing focused educational material to target segments through these partners Training some of these partners as Financial Education Resource Persons (FERPs)
Delivering Financial Education SEBI - NISM Model… Deliver through direct interaction Conducting face to face educational programs through trained FERPs Logistics support/ coordination through partners Using technology Web technologies to support FERP training Web repository of all educational materials Web repository of all educational programs available through partners
Delivering Financial Education SEBI - NISM Model… Using Research to improve content and delivery Benchmarking studies Training Needs Analysis studies Periodic evaluation studies
Recent initiatives by SEBI - NISM Targeted material developed for various segments MSEs Self-Help groups FERPs have been trained and certified FERPs organize programs For target segments Time of Choice Place of Choice Language of Choice Standardized resources Material Presentations Question & Answers 15/8/2012
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Recent initiatives by SEBI - NISM Contd… Dedicated investor education website - www.investor.sebi.gov.in Toll free helpline in 14 languages - 1800227575, 18002667575 Ask SEBI Media campaign
Database of all participants who attended programs For newsletters For future programs
15/8/2012
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