MUMBAI: SIDBI, which finances the micro, small and medium enterprise (MSMEs) sector in India, has urged credit rating agencies (CRAs) to customise products to make MSMEs "ratings ready".
Addressing ASSOCHAM's national conference on credit ratings, SIDBI's chairman and managing director S Muhnot said his organisation has partnered with CRAs to assess such loan proposals.
"CRAs should develop specific grading standards for MSMEs and move away from modules that are devised for large corporates. SIDBI is working with agencies through its loan syndication services. Here, accredited consultants prepare a project report which is then assessed by the rating agency. Once the investment grade is received, it is forwarded to banks for financing," he said.
Since the MSME sector needs both debt and equity to grow, Muhnot said CRAs can diversify into assessment of proposals for venture capital, subordinate debt and other risk capital proposals. The government has recently created a Rs 5,000 crore India Opportunities Venture Fund (IOVF) with SIDBI for this purpose.
The MSME sector has 35 million units providing employment to around 75 million people. It contributes 40% to India's exports and 45% to the manufacturing sector. The sector has grown at 11.5% per annum over the last five years, which is higher than the GDP or IIP growth rates, added Muhnot.