This document provides an overview of SIDBI's cluster development approach and its partnership with GTZ under the MSME Finance and Development Program (MSMEFDP). It discusses key achievements of the program including improving competitiveness through business development services, institutional capacity building, skill development, and promoting energy efficiency. It highlights innovative tools developed through the program and experiential lessons learned around ensuring sustainability, customizing support to cluster needs, and facilitating ownership of cluster actors. The document also outlines priority areas for the next phase of the partnership like scaling up innovative financing models, advancing sector-specific strategies, and leveraging international partnerships and best practices.

1. 1
Dr R K Singh, DGM, SIDBI
Amit Kumar, Sr Technical Expert , GtZ
New Delhi, India
We Empower MSMEs

2. Presentation Structure
v SIDBI- Empowering Indian MSMEs
v CLUSTERING AND SIDBI
¨ Approach
¨MSMEFDP -Key Achievements
¨GTZ : experience and learning
¨Experiential Learning
¨Looking Ahead

4. 4
Cluster as Focal point for us - Why
§ Broad convas- MSME Focus- 290 lakh
enterprises, 95% ME, 660 lakh employment,
8000 products
§ Multiplier benefits- Replication of interventions in other
clusters became easier, Harmonisation with other
programmes / schemes of other agencies turned
simple.
§ Leverage the strength of clustering –
§ Through Networks
§ Lead Nodal Agency of several schemes GOI
§ Effective Outreach – faster credit delivery ,
create examples for fellow institutions

5. Developmental
–activity based
Financial –
business
driven
Hybrid –
competitive
advantages

6. DEVELOPMENTAL
(A)
FINANCIAL
(B)
} multi agency , multi
program, nation wide
1. Cluster support
programs –75
clusters
2. Thrust on
unserved/underserve
d areas – RIP/NER
3. Capacity building
4. Synergy with
Support Institutions –
UNIDO etc.
5. Skill Development-
STUP etc.
n Provision of efficient
financial services with
focus on business goals
1.New Products - Green
Loan Scheme
2. New Channels –
SEFCs 214 Clusters,
WC, BMO route
3.New Tools- CART

7. n Financing & Promotional role to be played
simultaneously to enhance competitiveness.
n Fostering Green Agenda through
international partnerships ( UNIDO,
WorldBank, GtZ, DFID, KfW, JICA, AFD, ADB,
) “ Green Loan Scheme”, Green Ratings,
MOU with BEE , WB GEF project
nMSMEFDP

9. MSMEFDP and Clustering
n Making Market Work for MSMEs – Participative and market
driven ,
n Experimenting( internal expert and FA, simultaneous
implementation across clusters with subsectors)
§ Piloting ( 3 clusters) and Scaling up (16 clusters)
§ Partnering key players – FMC (UNIDO experience and
expertise) – as Independent reviewer, M&E and Strategic
Inputs
§ Outreach of the adopted clusters -Some like Knitwear
Ludhiana, leather-Chennai/Kolkata account for more than 80%
of India’s total production output in selected products
§ Value for Money

10. GTZ partnership with SIDBI under MSMEFDP
§ 4 Regions
§ Subsectors of Pharma, Apparel, Engineering,
Leather Toys , Handloom
§ Financial Services
§ Business Development Services

11. BDS Market Development
n Objective: Systemic Change
n Approach:
ü Developing and Strengthening systems of service
delivery;
Whole system and framework conditions in which a market for service
delivery can develop (supply and demand side measures)
ü Using BDS to promote responsible
competitiveness

12. Improving
BDS Market
Eco
Systems
BDS Supplier
MSME Units
Lack of awareness
Inappropriate service offerings
Because of limited understanding of SMEs
12
Non existance coordination
amongst Public Service providers
and institutions
Access to information
i.e issue of transparency
BMO not ready/competent to engage
In service provisioning /facilitation
Cluster driven govt support
programmes
Costly offer by estbl SP
Low capacity to solve SME prob
Doesn’t value SME as a profitable
client thus don’t take the efforts to
market their services,
Inappropriate products ,
limited reach
Lack of knowledge and
information
Attitude & willingness to
pay
No long term planning &
vision
Ability and willingness to pay
1
2
3
4
5
6
7
BDS Market Eco Systems

13. Challenges
n Enabling MSME Demand for services
Detailed Performance and Need Assessment , www.b-smartonline.com
n Information gap between service providers & MSMEs
Focused issue based linkages workshops and tool,
www.consultwho.com
n High cost of client acquisition
Consortia of service providers CAPSULE
n MSME not convinced with the likely benefits & finds the
cost too high
Facilitate demand aggregation & assist with pilot , Breaking the service package
into module
n Ensuring sustainability
Cost of consumption not supported , capacity development of Lead firms and local
training institutes

14. CAPSULE
§ Consortium of Service Providers for developing and
strengthening whole systems of service delivery
§ Pooling up of resources to minimise the cost of client
acquisition
§ Cross selling /references
§ Advantage MSMEs: access of different services from
single platform
§ Started with 20 Service Providers in Hyderabad
§ Being replicated in other clusters Chennai,Coimbatore,
Tirupur

15. Overall
Competitiv
- eness of
the units
Inconsistency
in
conformance
of quality
Too focussed
on US and
Europe Mrkt
Availability
and Quality
of Fabric
Fabric Mills Fabric Processing
Marketing /Sales
Low productivity
Lack of knowledge on
Improvement potential and
various tools
15
High cost of quality coz of improper
quality control system
High labour turnover Lack of skilled workforce
Inefficient supply chain
for outsourcing work
e.g fabrication , embroidery
limited usage of ICT, Lack of design
capability , Market intelligence input
Access of quality finance
e.g electrical
supply, long
transportaion,
condition of roads
,ports
Infrastructural Weakness
Apparel Sector NCR: Factors affecting competitiveness

16. Increasing
Awareness
amongst
units
GTZ
GTZ
Documentation and
publications of findings
for knowledge
dissemination
GTZ
Linking Apparel Trade Magazine
GTZ
Performance
Assessment &
Training Need
Analysis conducted
in 10 firms
BDS-provider
assist in formu-
lation of
Assessment
GTZ
Overall strategy implementation plan
for creating awareness on
improvement potentials and process
and tools
Facilitation of strategy
building process
between main players
(BMOs, Service
Providers)
Improved awareness
Amongst
participating units
and other members
of BMO
Organize sensitization
events and short knowledge-
building seminars
Process and Tools for
Enhancing Competitiveness
16
BMO convinces its
members and get
their buy in to do a
pilot Assessment
Initiate the thinking
process and facilitate
consensus
GTZ
Part Financial
support and
facilitation
Dissemination of
publication amongst all
stakeholders (More
than 5000)
Facilitating linkages with
AEPC and their support
for publication
and knowledge
dissemination
Impact
BMO initiated
cutting room
improvement
programme
Impact
Some units have
appreciated the
findings and have
shown there
willingness to
initiate the
process

17. §innovative financial models, instruments and services/
products;
§Capacity Development of SIDBI & partner Banks
§Micro Enterprise Finance;
§Development of sector /sub sector specific BDS market
development methods, quality assessment and
standardization tools;
§Capacity development (networks, organizations, human
resources) of Industry Associations;
§Policy analysis and advocacy;
§Sourcing and sharing of International best practices
Next Phase till 2014 with SIDBI

18. Glimpse of Important initiatives
Overall - •Outreach 30000 plus
•International Merit Award by ADFIAP for LED
•BDS-outreach over 22000 MSMEs, women 2226
• 400 plus BDSPs services used, mainly in flagship areas (
22% skill, 14% quality, 12% energy,14% marketing and 5%
in finance)
Innovative
Tools-
Voucher , BDS clinic , BDS Bazaar , BDS on Wheel,
BDS Consortium, MSME Mentor,
Upstream •Ganjam: 2 SHGs wages has increased from Rs 50 to
Rs 80 per women. being up-scaled to 14 more SHGs
•Ludhiana: 568 unskilled workers get trained which
increases their efficiency by 10-15%.
Knowledge
Manage
ment
• Mother and each cluster website, 2.5 Million hits
• Sectoral guidebooks/Posters/do’s and Don’ts ,
• CB of FAs (National workshops, learnshops)
• CB of BMOs- World SME Expo

19. Glimpse of Important initiatives
Institutional
support-
• BD Centre Alleppey, NAFARI , JFOA,FSIA
• Mobile testing Laboratory in Pune
• CB through ACF – Green Dhabha, Solution Centre
Skill
Develop
ment
1. Integrating BMO- Leverage Social Capital
• First SD centre – PPP mode, Baseline-BPL-Avg age 22
yrs-tracking, Over 2500 trained, over 90% placements
• Replication to 5 more centres in the cluster
• Govt. Initiated prog with same agency to train 25000
people
2. 37 Skill Development Centres (12 established, 21 linked
up 4 in pipeline)
3. MRIP
Energy
Efficiency
Ø Four Dos and Donts/tip sheet/ posters
Ø Conducted 108 walk through audits and 25 detailed
audits first Yr. Estimated saving of Rs. 55 mio/year
approx captured.
Ø ESMF 110 Credit officers trained

20. 20
1. 2500 brass units,
employment 2.15 lakh(
D+I)
2. JFOA - Viability gap
funding
3. CFC setup under PPP
mode, Target 3000 MSMEs
4. Till date over 10000
samples of 1050 MSMEs
directly benefitted,income
Rs 17 lakh
5. Helped JFOA to leverage
Govt support amounting
to Rs. 17 Lakh
6. Enabled Market
corrections

21. 21
Cluster
Development
Programme
1. NAFARI – Testing Lab setup on
PPP mode in UNIDO
intervention
2. After project intervention
Bus.plan/website- turned profit
( loss in 2007, 2008 profit),
FY2010 Rev. 47lakh/consl. 20
lakh
3. Extended its services from
mere testing lab - Diversified as
trainer /knowledge Net worker
4. Emerging as Natural FA
in the cluster - Vision
document
HIGH PREMIUM ON EFFECTIVENESS

22. 22
1. 900 Women Engaged in
making Whips out of
scrap earning R 10-15
p/d
2. Helped in product
introductions, new
design development,
skill upgradation,
marketing linkages
3. Income increased by
over by 400%
4. Deptt. of Industries has
linked the initiative with
their prog.
5. Women got artisan card
which facilitates access
to credit, market and
Health insurance
CREATING VALUE-
Waste to Market Taste

23. Experiential Learning
• Cluster Approach Works –
• SIDBI has established edge and example in Greening
clusters - 6000 plus MSMEs reached with
financing,
• Networks imp- Local, National, Global
• Leverage international partnerships
•Addressing Enabling Envtt is important – ACF
•Customising products and services as per uniqueness
of each cluster
• Balanced approach towards financial and non financial
needs is crucial
n Market led eco system - has inherent sustainability
traits
n Access to and Quality of BDS enables quick replication

24. Experiential ….
n Appropriate Mix of Long Term Intervention with Short
Term support also helps
n Regular CB of cluster actors as exit vehicle crucial
n Ownership at each stage important
n Action Plans to be dynamic, identifying flagship areas for
thrust
• Facilitating agencies ( 7 FA & 7 Sub sectors ) have a
tendency to work especially in its area of core
competence . Compatibility/ complementarity among
facilitators must
• Create Knowledge Networks/Pool to Manage Growth-
D3A (Deduce, Document, Disseminate and
Assimilate)

25. 25
• WB GEF Project with BEE in 5 clusters ( Finance-E.E
Linkage)
§ Scaling up equity capital assistance to innovative MSMEs
through risk capital/venture capital products (finance –
technology linkage)
§ Documenting Global best practices for MSMEs (MSME –
International environment linkages)
§ MSME Info Kit ( a complete supporting guide for MSMEs)
(MSME environment linkage)
§ Policy Advocacy to continue.( SIDBI- Government linkage)
§ Taking forward flagship activities under IInd phase of GTZ-
SIDBI under MSMEFDP.
Looking ahead…

26. THANK YOU
For more details, please contact:-
Project Management Division
Small Industries Development Bank of India,
Mail :- pmd_ndho@sidbi.in,
singhrk@sidbi.in, amitkumar@gtz.de
Website : www.msmefdp.net, www.sidbi.in , www.gtz.de

27. 27
Cluster
Number of
Firms
Type of product
Turnover
(Rs. Cr)
Employment
Bhadohi 1820 Carpets - knotted, tufted, shaggy; durries 1480 345000
Panipat 331 Carpets - tufted, shaggy; durries 1010 50000
Dehradun 302 Tablets, capsules, liquid, orals, ointments 3248 18074
Indore 256 Allopathic & ayurvedic formulations 2500 18500
Hyderabad 421 Bulk drugs & formulations 8187 20000
Ludhiana 14000 Knitted wears & grey fabric 5000 400000
Tirupur 2400 Knitwear - cardigans, jersey, nightwear, etc. 11000 408250
Mohali 2410 Engineering cluster 1028 21000
Rajkot 666 Engineering cluster 3000 24700
Rourkella 220 Machining & Fabrication 150 5750
Coimbatore 9704 Pumps and motors and related foundry 2000 129500
Kolkata 4024 Leather, leather goods, hand gloves 4430 62440
Shantiniketan 60 Leather handicraft items 6 1200
Chennai 1150 Leather, footwear, leather and garments 2000 40000
Ganjam 260 Cashew processing and kewda water 240 14650
Ahmedabad 1200 Dye/chemicals & packaging 10150 38000
Pune 550 Fruit & Vegetable Processing Cluster 408 5720
Kanpur 1600 Leather products 2900 100000
Alleppey 950 Coir products 1800 200000
Total 41774 60537 1902784
Macro Data of 19 Clusters Back

28. Value for Money
Estimated
Figures
UNIDO (Pharma,
Ahmedabad)
(1999-2003)
SIDBI (Pharma, Hyderabad)
(2009-11)
Duration 4 years 2.6 years (worked for 15 months)
Personnel CDE, TA, PM CDE, SME, NDE, PM
AP cost at current
prices of the
project
Rs. 4.3 million Rs. 2.4 million
No of activities 69 116
No of activities for
year 1
4 56
Type of activities
in year 1
Trust building Trust Building, Quality Up-gradation,
Training, Marketing
Output after Year
1
None Energy audit (30 firms), Quality audit
(30 firms), Skill development (270),
Financial Linkages (2 firms)
No of BDSPs 10 24 (by year 1)
Major Outcomes Savings (Rs 50 mn),
Turnover (Rs 18 mn)
Quality Up gradation
(60 firms)
Estimated as: Energy savings, Quality
up-gradation, Pollution reduction,
Productivity Improvement
Back
Courtesy : FMC, New Delhi