Export Financing in Msme Sector

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EXPORT-IMPORT BANK OF INDIA
OCCASIONAL PAPER NO. 132
MSMEs AND GLOBALISATION:
ANALYSIS OF INSTITUTIONAL
SUPPORT SYSTEMS IN INDIA AND IN
SELECT COUNTRIES
EXIM Bank’s Occasional Paper Series is an attempt to disseminate the findings of research studies carried out in the Bank. The results of research studies can interest exporters, policy makers, industrialists, export promotion agencies as well as researchers. However, views expressed do not necessarily reflect those of the Bank. While reasonable care has been taken to ensure authenticity of information and data, EXIM Bank accepts no responsibility for authenticity, accuracy or completeness of such items.

© Export-Import Bank of India
Published by Quest Publications
June 2009

CONTENTS
Page No.
List of Tables 5
List of Exhibits 7
List of Boxes 7
Executive Summary 9
1. Introduction 25
2. MSMEs: In a Global Context 27
3. Support System for MSMEs in Select Countries 41
4. MSMEs: In Indian Context 70
5. Support System for MSMEs in India 81
6. Global Financial Crisis: Policy Response Supporting 98
MSMEs in Select Countries
7. MSME Sector: Learnings from Experiences 103
3
Project Team:
Mr. S. Prahalathan, General Manager
Mr. Rahul Mazumdar, Manager

List of Tables
Table Title Pg. No.
No.
1 MSME Thresholds 28
2 MSME Thresholds in Various Countries 31
3 Definition of SMEs in Japan 34
4 Definition of SMEs in South Korea 35
5 Definition of MSMEs in Malaysia 36
6 Definition of MSMEs in Hungary 38
7 Definition of MSMEs in Mexico 39
8 Definition of MSMEs in South Africa 39
9 Number of Items De-Reserved in India Since Liberalisation 73 10 List of Items Reserved for Small Scale Sector in India 74 11 Bank Credit to Micro and Small Enterprises by 79
Public Sector Banks
12 The Share of SME Credit in Total Credit (Bank Group-wise) 79 5
Note:
Indian Rupee are referred in crores and lakhs
1 crore : 10 million
1 lakh : 100 thousand

List of Exhibits
No. Title Pg. No.
1 Infrastructure for SME Financing – Consequences 107
7
List of Boxes
No. Title Pg. No.
1 Innofund for SME Technology Based Firms 43
2 Presidential Commission on Small and Medium Business in 48 Korea Republic
3 Special Finance Programmes Instituted by SME Bank to 52
Facilitate the SME Sector
4 Italian Network for Innovation and Technology Transfer to 54 SMEs (RIDITT)
5 Consolidated Project for SME Development in India 63
6 Various Industrial Policy Resolutions in India: References to 72 Small Scale Sector
7 Chronology of Policy for Protection / Reservation to 73
Small-Scale Units
8 Highlights of the RBI Working Group on Rehabilitation of 78 Sick SMEs
9 SME Financing and Development Project 93

9
INTRODUCTION
SMEs are considered to be the engine of economic growth the world over. SMEs stimulate innovative ideas / business methods, and entrepreneurial skills; they are flexible and can adapt quickly to changing market demand and supply situations; help in diversifying economic activity, and make a significant contribution to industrial development and exports. Thus, it is not surprising, that the establishment and promotion of SMEs across the globe has assumed strategic importance. DEFINITION OF MSMEs

Countries across the globe use different definition for classifying their SME sector. The definitions in use depend on the purposes for which they are meant, and are required to serve the policies that govern the SME sector thus defined. Major parameters generally applied in defining SME sector include: capital investment on plant and machinery; number of workers employed; and volume of production or turnover of business. European Union defines SMEs based on the parameters of employment, turnover and asset size. OECD classifies SMEs based on employment and sales turnover. MIGA of World Bank Group defines SMEs based on employment asset size and sales turnover. At country level, some countries have adopted defining a sub-classification of micro enterprises (China, South...
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