ENHANCING SMES ACCESS TO GREEN FINANCE

About the author:

DR. J. VENKATESH
Anna University of Technology Coimbatore,
Tamil Nadu, India.

MS. R. LAVANYA KUMARI
School of Business Management,
JB Institute of Engineering & Technology,
Yenkapally, Moinabad , Andhra Pradesh, India.

Objective:

This paper deals with ENHANCING SMES ACCESS TO GREEN FINANCE.
Introduction:
1. Growth and development of micro and small enterprises in developing countries can increase
poor people's opportunities, security, and empowerment.

2. Small and medium-sized private enterprises are expected to play a major role in creating jobs
and maintaining economic dynamism in any countries.

3. Green Finance is a market-based investing or lending program that factors environmental impact
into risk assessment, or utilizes environmental incentives to drive business decisions


4. In India, SIDBI has taken several initiatives to promote lending for green and energy efficient
technologies in MSME sector. These focused schemes have two pronged approach, i.e.
concessional lending to encourage investment in green or energy efficient technologies and
launching of cluster specific information dissemination.
5. The green finance can be divided into two parts: (1) The finance to supporting green growth and
(2) The finance to prevent environmental costs

INNOVATIVE FINANCING SCHEMES FOR SMEs
1) LEASING
2) FACTORING
3) VENTURE CAPITAL
4) ANGEL INVESTORS
5) INCUBATORS



Data used: Data collected from F.I, NBFC, venture capital companies and SIDBI.
Sampling: COMMON EFFLUENT TREATMENT PLANT (CETP)
1.SIDBI has entered into arrangements with Mumbai Taxmen's Association / Union and Maruti
Suzuki Ltd. for providing assistance to taxi drivers.More than 700 Micro entrepreneurs have so
far been provided finance under this arrangement.

2.600 CNG fitted Auto Rickshaws were provided assistance in Chandigarh by Delhi Finance
Corporation (DFC). SIDBI provided refinance to DFC for this clean energy initiative.

3.Friends of Women's World Banking (FWWB), a MFI was sanctioned assistance of Rs.10 crore
for providing assistance to micro entrepreneurs for acquiring Solar Lanterns of 2 watts each. 50,
000 micro entrepreneurs are proposed to be covered under the assistance.
4.Under multi-activity-multi agency MSME Financing and Development Project (MSMEFDP)
being implemented by SIDBI. Credit facility (CF) has been channelized to over 2050 MSMEs
spread across major cluster centers across the country.

5. Ministry of MSME varies between 30-80% of the total project in case of hard intervention, but
in the case of clusters owned and managed by women entrepreneurs, contribution of the M/o
MSME could be up to 90% of the project cost.

Conclusion: Development of Goals with overall emphasis on three Ps of People, Planet and
Profit.
2. A thriving SME sector is critical to inclusive economic growth and job creation.
3.The green economy is the way of the future, and our SMEs are the innovators that will bring
forward the innovative products and technologies that drive green growth.



Key points:
GREEN FINANCE: Since the global financial crisis and economic recession, green growth has been
drawing global attention as one of the new economic growth engines, which can achieve both
environmental protection and economic development.
GREEN PRODUCTS AND SERVICES: In order to qualify as a green product or service, the item must
offer the customer a transparent option to reduce the indirect impacts of their banking activities,
reduce negative environmental impacts or provide environmental benefits.
(1) RETAIL BANKING : the most popular green products in retail banking sector include
loans and mortgages, debit and credit card services, and insurance, among others.
(2) ENERGY-EFFICIENT MORTGAGES : it offer for the lower interest rate for customers
who purchase new energy efficient houses or invest in green power.
(3) GREEN CREDIT CARDS: to provide discounts and grant low borrowing rates to
customers who purchase green products and services.

ENHANCING SMES ACCESS TO GREEN FINANCE: Enhancing SMEs access to finance has
to deal with both the demand (borrower) side and the supply (lender) side.

1.On the demand side, SMEs should prepare themselves to be more eligible for bank loans by better
keeping and disclosing business records and by presenting better business plans.
2. On the supply side, there are alternative ways of evaluating loan applicants. Larger banks might
utilize credit scores for potential borrowers supplied by outside agencies or internally.




Role of Finance in Project Management

Author: Neelu Tiwari

Objective:

1. Many organizations have to look for short term capital in the way of overdraft or loans
for the acquisition of machinery.

2. Traditional areas of need may be for capital asset acquirement - new machinery or the
construction of a new building or depot.

Statistical tools:
1. Technical Feasibility:
i. Availability of basic infrastructure
ii. Selection of Technology / Technical Process
iii. Availability of Suitable Machinery / Raw Material / Skilled Labor Etc..
2. Managerial Competence:

The promoters of the project have to provide necessary leadership and their
qualification, experience and track record will be closely examined by lending institution.

3. Commercial Viability:

Regression method for estimation of demand are employed which is than to be matched
with the available supply of a particular product.

4. Financial Viability:
Cost of Project: Land Cost, Site Development Cost, Buildings Cost, Plant and
Machinery, Miscellaneous Fixed Assets, Preliminary Expenses, Contingencies, Margin
for Working Capital.
5. Break-Even Point:
The minimum level of production and sales at which the unit will run onno profit
no loss is known as break-even point.
6. Debt Service Coverage Ratio (DSCR) :
Debt Service Coverage Ratio is calculated to find out the capacity of the project
servicing its debt i.e. in repayment of the term loan borrowings and interest.
7. Internal Rate of Return:
The present investment in the cash flow which is assumed to be negative cash
flow and the return (cash inflow) are assumed to be positive cash flows.

Conclusion:

i. The most important thing in any project financing is preparation of Detailed
Project Report (DPR)
ii. 2.It should be made beautifully for getting the project approved from
banks/financial institutions.
iii. After preparation of DPR the proposal is moved to the banks/financial institutions
for processing of the file.




Key points:

1) Working capital is very important to run the business. Lack of working capital may lead a
business to technical insolvency and ultimately to liquidation.
2) the role of borrowings has been dealt with herein, as major share of working capital finance
do come from borrowings.
3) we have analyzed in our study ten years (from 1981 to 1990) balance sheets of 20
companies- 10 from private sector and 10 from public sector. In the process of the study we
have seen that the working capital of each firm is constituted by several types of sources like
bank borrowings, public deposits, trade credit, long-term borrowings and equity capital.
4) Short-term borrowings offer the benefit of reduced cost due to reduction of idle capital, the
use of long-term borrowings has also the necessity on many ground. Long- term borrowings
are less risky than short-term borrowings.
5) The equity capital has also its role to play in the financing of working capital in Indian
corporate sector. At the intitial stage of a firm, fixed assets as well as current assets have to
be financed by this equity capital, since other sources may not be easily available at that time.
6) Bank credit has been working since long as a major source of working capital in India and
abroad.
7) The role of public deposit as a source of working capital in Indian corporate sector.
It is cheaper than bank borrowings and many other sources of finances. Government has
imposed some regulation and as a result the interest of innocent investors has been
protected to an extent and the flow of public deposit has also been restrained in the
interest of planned economy. It is thus expected that the investors will now accept the
offer for public deposit more freely.
8) Long-term borrowings like debenture, institutional loan and government loan have also a
contribution to working capital financing, since, a part of current assets is usually covered by
long-term funds. The corporate practices as to these of different types of long-term sources
reveal that the position of debenture in corporate finance is almost equal to that of
institutional loan.
9) The position of government loan as a source of finance is gradually decreasing even in
government companies. On the other hand the position of debenture is gradually improving
both in private as well as in public sector. Institutional loan exhibits a fluctuating trend
during the decade of eighty, although ultimately its position has improved to an extent.
10) Another viable source of working capital is trade credit, which is considered to be a
formality-free, security-free and interest-free source of finance. Due to the above advantages,
trade credit has been practically a common source of working capital to almost all
enterprises; notwithstanding the fact that there is some implicit cost associated with trade
credit and the explicit cost is also originated when cash discount offered is foregone.
11) The government companies should resort more to short-term and less costly sources like
public deposit. Government being the guarantor, the availability of public deposit may also
be sufficient.