This is a slideshow presentation made for a competition. This covers Germany's cluster based financing, Thailand's SME bond project, and factoring by Mexican central bank, Nafinsa.

1. MSME FINANCING
CHALLENGE
Team Strategem
Devansh Doshi
Nikhil Indla
IIFT Delhi

2. MSMEs Requirement
Wholesale Products
Working Capital
Delivered Retail Style
Simple, Standardized
Terms
& Conditions
Capital Machinery Finance
Quick Delivery
Business Expansion
Finance
Short Term and Festival
Working Capital Loans
Flexible Repayment
Structure – Matched to
Cash Flow

3. The Challenge
To develop a non-transactional relationship-based
approach that
can be applied across a large enough segment of the
market.
generates enough volume to be sustainable
One possible solution is the Cluster
Based Approach

4. Defining Clusters
UNIDO defines clusters as sectorial and geographical
concentrations of enterprises that produce and sell a range of
related or complementary products and, thus, face common
challenges and opportunities
External
Economies
A pool of Sectorspecific Skills
Development of
Specialized
Services
India has 388 clusters spread
over 21 states in various parts of
the country

5. Financing Advantages
Monitoring by
the lending
institutions
Dealing
with welldefined and
recognized
groups
Availability
of
appropriate
information
for risk
assessment
Reduction in
costs

6. Thailand’s MSME Definition
Small
Medium
Capital
Capital
Type
Employees (million Employees (million
baht)
baht)
Not more Not more
Production
51-200
51-200
than 50
than 50
Not more Not more
Service
51-200
51-200
than 50
than 50
Not more Not more
Wholesale
26-50
51-100
than 25
than 50
Not more Not more
Retail
16-30
31-60
than 15
than 50
Trade
Sector
Redefinition needed to have better development of financing

7. Germany’s Cluster Financing Approach
Funding of
Existing
Clusters
• Focus on funding the existing
clusters rather than developing
infrastructure for a new cluster
• India has 388 clusters
Towards
Project Based
Financing
• Current focus on financing the
entire institution
• Need to analyse only the viability of
the project
Financing
Addition of
New Services
• Need for expansion capital
• Lower risk than funding a start up

8. Mexican Development Bank Nafinsa’s
Electronic Bill Factoring Exchanges
MSMEs sell products to big companies in bulk
They typically have to wait for 90 to 120 days for the
payment
This reduces their working capital that is the prime need of
a MSME
Banks charge an interest rate in the range of 10% -12%
MSME bills can be auctioned on an electronic platform
CCIL, BSE, and NSE as the prime platforms

9. Thailand’s SME Bond Market
Thai Bond
Market
Association
Thai
Chamber of
Commerce
Federation
of Thai
Industries
TRIS
Rating Co.
Ltd
SME
Bond
Project
Thai Listed
Companies
Association
Fitch Ratings
(Thailand)
Co., Ltd
Bond
Electronic
Exchange

10. Conclusion
Redefinition of MSMEs
Project based financing
Expansion based financing
Electronic bill factoring exchanges
MSME bond market

11. Thank You!