Govt's five major schemes push for SME growth

Micro small and medium-sized enterprises (MSMEs) play a vital role in the growth of a nation. It is often said that small units are highly responsible for driving innovation and competition in various economies. Presently, the sector is accounted for 17 per cent in Indian GDP, which is expected to grow to 22 per cent by 2012.

Indian economy gets 45 per cent of manufacturing output and 40 per cent of exports from the SMEs as per the ministry estimates. Not only this, the sector employs 60 million people, creates 1.3 million jobs every year and caters to both national and international markets with the production of more than 8000 quality products.

Having been the key growth driver of the country economy, the MSME sector lacks the required cooperation from the government which in turn confines the growth of the sector in the domestic and global markets.

However, there is a slew of government schemes and sops offering enhancement and support to the business activities of the small units, but a majority of small traders fail to avail them due to lack of mindfulness and awareness about the schemes.

Here are five key financial assistance schemes being offered by the government to intensify the growth of the small scale units.

1. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE)

The Ministry of MSME and Small Industries Development Bank of India (SIDBI) have instituted a trust named Credit Guarantee Fund Trust Micro and Small Enterprises (CGTMSE) for the implementation of Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE), which was formally launched on 30th August, 2000 and became operational from 1st January, 2000.

The scheme is aimed at providing collateral-free credit to both existing and new micro and small enterprise (MSE). The plan covers term loans and working capital facilities of up to Rs 100 lakh per borrowing unit and can be prolonged without any collateral security or third party guarantee to a new or existing MSE.

In case those units covered under this scheme go sick due to the factors beyond their control, the scheme also allows the lender to stretch the rehabilitation assistance. If the credit facility surpasses Rs 50 lakh, it may still be covered, but the guarantee cover will be extended for credit assistance of Rs 50 lakh only.

2. Credit Link Capital Subsidy Scheme for Technology Upgradation

Credit Linked Capital Subsidy Scheme (CLCSS) provides technology upgradation assistance to the SMEs primarily in the small scale industries (SSI). All entities, including sole proprietorship, partnership, cooperative, private and public limited companies, are eligible for the scheme.

The maximum limit of eligible loan for SMEs under the scheme is Rs 1 crore. It comprises a subsidy rate of 15 per cent.

The scheme was first launched in October, 2000 and was revised in September 2005. Under the revised scheme, the admissible capital subsidy is calculated with reference to purchase price of the plant and machinery.

3. Mini tools room and training centre scheme

In an endeavour to assist the manufacturing sector, the Government of India provides assistance to the state governments in setting up the tool room facilities, the backbone of the manufacturing sector as they create dies, tools, moulds, jigs, fixtures, gauges and precision components which are the essential elements for the operations of the production units.

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Finance for the SME: Government Funding and Schemes

Every SME requires a continuous flow of funds not only in the initial start-up phases, but also for ensuring successful operational efficiency.

Raising funds for the SME: various ways:
There are multiple ways for SMEs today to raise funds. Also there are multiple factors which the SMEs need to consider while raising funds. At various stages of business the requirement of funds are different. They could range from setting up a new business vertical, to scaling up in terms of human resources to expanding geographically.

Some of the popular existant ways to raise funds for the SME are:

1. Angel Funding
2. Venture Capital
3. Private Equity
4. Government Schemes
5. Banks

Focus: Government supported schemes!
There are many ways to meet financial requirement for the SMEs, the Government (both at the Central and State level) has taken several steps like formulating various policies and schemes, setting up of banks and financial institutions; etc.

This clearly shows the focus of the government towards emerging realization of the power of the growing and emerging SME segment in India. All such measures are focused towards helping the SMEs scale to the next level and play an empowered role towards nation building.

Banks:
The public sector banks are the major source of financial assistance to the SMEs. They extend credit support to the firms in the form of loans, advances, discounting bills, project financing, term loans, export finance, etc. Some of the active banks extending schemes for the SME are:

• State Bank of India (SBI)
• Bank of Baroda
• Andhra Bank
• IDBI Bank

Policies and Schemes for the SMEs by the Government:

Finance for the SME is a continuous need, basis the business. Recognising the need for a focused financial assistance to such industries, the Government of India, along with State Governments, has formulated several policy packages including schemes and funds to fuel the growth and development for the SME. Most of these programs of the Central Government are implemented through two principal organisations:-

National Small Industries Corporation Ltd (NSIC): has been established with the objective of promoting, aiding and fostering the growth of small scale industries in the country. NSIC has been assisting emerging enterprises through a set of specially tailored schemes which facilitate marketing, credit, technology and other supporting services.


Small Industries Development Organisation (SIDO) : is an apex body for promotion and development of small scale industries in the country. The major activities it undertakes are:-

• Conducting periodical census/survey of the small scale industry and generating data/reports on various important parameters/indicators of growth of the SME sector.
• Maintaining close liaison with other Central Ministries, Planning Commission, State Governments, Financial Institutions concerned with the development of small-scale industries.
• Advising the Government on formulation of policies and programmes for the small-scale industries.
• Facilitating the development of human resources by creating the necessary infrastructure for enabling skill upgradation through training.

At the State level, various State Financial Corporations (SFCs): have been set up by the respective State Governments for providing financial assistance to the industrial units. These local financial corporations emerge out as a close window of opportunity for emerging companies across India.