Journal of Small Business and Enterprise - March, 2013 - CII

FinanceMSME Business March 201316Small Sector to get InclusiveInnovation FundThe fund will be capitalised to an eventual target size of Rs 5,000 crore in phases.Initially, it is pegged at Rs 500 crore with an investment of Rs 100 crore by theGovernment of IndiaThe Government of India is inthe process of establishingan Inclusive Innovation Fundto build an ecosystem ofenterprises, entrepreneurship,and venture capital that promotes thedevelopment of innovative solutionstargeted at the bottom of the pyramid.The Inclusive Innovation Fund will bebased on the premise that innovativeenterprises can be profitable and scalableand can competitively engage people atthe bottom of the economic pyramid.The fund will be capitalised to aneventual target size of Rs 5,000 crore inphases. Initially, the fund is pegged at Rs500 crore and to kick-start investment aseed money of Rs 100 crore will providedby the Government of India. Eventually,80% of its capital will be sourced fromprivate investors, philanthropists, andbilateral and multilateral institutions whoshare the objectives of the fund and theremaining 20% will be provided by theGovernment of India.The life of the fund has been proposedat 10 years, extendable by up to 3 years. Itwill be managed by a highly professionalmanagement team. The team will guidethe fund, and its investee companies, toachieving its target returns.``The challenge is not in creating fundsand various financial schemes, ratherthe challenge lies in creating conduciveoperating environment and businessecosystem for sustainable development.And the MSME needs protection from theclutches of the creditors by developinginnovative financial products,'' saidMr Vivek Rae, former Secretary, Ministryof MSME at a conclave, organized byConfederation of Indian Industry (CII)on Credit and Finance for MSMEs:Securing Credit and Finance for MSMEsand Entrepreneurs.Mr Rae said MSME sector suffers fromfinancial exclusion and lending banks andthe RBI should be held responsible forthis. There is no mechanism to enforcethe accountability on lending banks forachieving the target of reaching to thefinancially excluded small units. The targetis meaningless if the there no penaltyclause for achieving the target.He said that larger enterprises shouldplay a more enlightened leadership forvendor development and in integratingsmall sector units into the entirebusiness ecosystem. On the issue ofease of doing business in the country,he candidly admitted that the countryis placed far below global ranking.He said many of the south Asian andAsian counterparts have better rankingin ease of doing business in a country.Poor credit and financial availability isdue to the procedural complexities ofbusiness and governance mechanism.Many of the foreign investors shy awayMr CK Mishra,Joint Secretary,Ministry of MSMEs,Government of IndiaMSMEs need better technology and fundsThe two major issues that are prevailing inthe sector are lack of technology and funds.Better technology will lead to better products,which lead to better pricing, subsequently betterprofitability. The technology is expensive andyou need funds for buying better technology.Ideally the technology should be made availableby financial institutions. However, the risk is toohigh. A new strategy needs to be developedwhere the sector can convince the financialinstitutions that the funds that are invested forbetter technology will have good returns. Thereis no dearth of government schemes and tailormadefinancial products specifically designed forthe MSME sector by lending banks. However, thesector is still reeling under the financial crisis. Itis important to make the sector more investorfriendly and attractive.