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

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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 NISM - Confidential 19

www.nism.ac.in