The Small and Medium Enterprise (SME) sector has been playing a key role in the emergence of India as one of the leading economies of the world. The sector is fomenting inclusive growth of our country by creating employment opportunities through industrialisation in the rural and semi-urban areas of the country.

As per the new wave Indian MSME Report 2015, the sector’s contribution to GDP is likely to increase from 8 per cent in 2015 to 15% by 2020. It has the potential to spread industrial growth across the country, if the positive business environment and finance options are made available to SMEs. Improved access to finance will also help them invest in upgrading the skill sets of workers and buying capital equipment.

Acknowledging the challenges faced by the SME sector, government has come-up with progressive policy initiatives like Start-up India, Stand Up India’ which will help in the gradual improvement of the business environment for the sector. Financing is a major challenge for the SME sector and is one of the prime reasons for SMEs to go out of business. This is an area where other stakeholders notably, NBFCs and private banks must play an expanded role if the vision of creating a vibrant and progressive SME sector is to be realized.

To bridge the funding gap in the SME sector, NBFCs are growing their SME lending portfolio through customer centric products and service innovations, aimed at driving customer satisfaction, profitability and sustainability. Under SME financing, NBFCs provide loans to SMEs engaged in wholesale, retail, manufacturing and services. These loans are backed by property (residential, commercial and industrial) as the main security. These firms also provide unsecured business loans to SMEs that need short term working capital loans for plant and machinery to manufacturing units and medical equipment loans to doctors, hospitals etc.

Some of the key offerings of NBFCs to the SME sector include:

Property Term Loans – To meet all business expansion and working capital requirements backed by residential commercial or industrial property as collateral

Plant and Machinery Loans – To meet fund requirements for the purchase of Plant & Machinery

Medical Equipment Loans – To meet fund requirements for Medical Equipment

Business Loans – Unsecured loans to meet working capital requirements

NBFCs in their pursuit to offer financial support to the SME industry are hiring professionals who are well versed with the nuances of the industry. These firms have a management team dedicated to the SME business for excellent operations management and quicker turnaround of customer’s concerns.

With ever-increasing reach of NBFCs in the country, Small and Medium enterprises today has the support of a strong marketing and distribution network of NBFCs spread across India. NBFCs have also set-up dedicated processing centres for greater efficiency and risk management besides an in-house credit and legal team for appraising each application as well as an in-house team of civil engineers for technical evaluation.

Realising the importance of customer service for the health of their business, most of the NBFCs have set-up a strong CRM department to address customer queries and collect EMIs mainly through ECS/Post-dated cheques. These firms are giving priority to building an in-house team of sales professionals across locations to reach out to right kind of customers and give them a better experience. This is further reducing their turnaround time on loan applications and cutting intermediary costs which are passed on to SME customers in the form of lower rates.

These firms are also offering innovative and customer-friendly financial solutions to SMEs in their endeavour to serve the SME sector effectively. These firms are investing in developing digital channels so that customers can directly access the firm’s lending services without having to come to a branch.

With the growing demand for finance from SME sector, NBFCs are fast emerging as a one stop shop for all its SME customer’s financial needs. Their growing ability to address the evolving financial needs of the sector will enable SMEs to focus on their core competencies and together they can make for a great success story.

(the author, Harshil Mehta is CEO, DHFL)

Source: bwdisrupt.businessworld.in