The Government of India has now requested the World Bank to extend further support to the SME sector in the wake of the global financial crisis and the ensuing slowdown in credit growth. Even working capital finance, which is otherwise relatively easier to access, has been difficult for SMEs to obtain, thereby aggravating their problems in managing longer inventory cycles.
Additional World Bank financing of $400 million to SIDBI will therefore help facilitate an increased flow of working capital and term lending to the SME sector. New geographical areas will also be covered, possibly including India’s low-growth states, thereby promoting inclusive growth.
“My first loan from SIDBI, for just Rs. 4 lakhs ($8,000) helped me break into the export market,”
I C Agarwal, engineer-turned-entrepreneur, Delhi
Ten years ago, I C Agarwal, an engineer-turned-entrepreneur, had an export order from Japan, but no funds to complete it. That was when he took his first loan from SIDBI. And he hasn’t looked back since. Agarwal is the only Indian manufacturer from the small scale sector to supply precision auto ancillaries to world-renowned firms such as Caterpillar in the US, as well as to Japan, Europe, and China.
Today, more than 400 people work in his unit. A commitment to quality and intellectual investment in the skills of his workers are his top priorities. “The customers are constantly upgrading their technology, so we have to keep pace too,” he says, proud of his product, his workforce, as well as his strict adherence to his clients’ tight delivery schedules.
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"My company’s turnover doubled from Rs. 17 crores in 2005 to Rs. 34 crores in 2007”
Umesh Mahajan
Umesh Mahajan left a lucrative career in banking to set up a garment manufacturing unit in Delhi in 1996. In Sept 2005, he took his first loan from SIDBI of Rs. 2.25 crores ($450,000) to help him expand. He now manufactures garments only for export, sending his goods mainly to the US and the UK.
Since the time he began, his workforce has almost doubled, providing employment to people in Gurgaon, the area around the factory. “SIDBI’s lower rates of interest compared to commercial banks, shorter loan processing times– 2 to 2.5 weeks - and transparent systems have made it attractive to borrow from them. The growth of my company can be linked directly to the loan from SIDBI," he said.
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“SIDBI is a cheaper source of finance, has transparent systems, and faster and practical approach to loan sanctioning.”
Estel Technologies, Delhi
V K Hajela and his son Raj started out in 1998 by manufacturing pagers on a small scale. The story of their growth began in 2005, when they took their first loan from SIDBI. The Rs. 2 cr. ($400,000) loan helped them to expand into the software business where they began providing turnkey software solutions to telecom operators.
Since then, the firm has expanded to ‘m-commerce’ which involves electronic recharge services with a focus on mobile banking. Their clients include leading telecom operators such as Airtel, Tata Cellular, and BSNL and they have now set up offices in Sri Lanka, the Middle East and Africa. Their enterprise has recently been ranked among the top 200 IT companies in the SME segment by Dun & Bradstreet.
RSS