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
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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
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