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Past Issue • Jan-Mar 2012

SME Financing Challenges: Building Alternative Finance Options

A panel discussion on “Alternative Financing Sources for SMEs” was held as part of the symposium on SME Financing Challenges organised by the Centre for Analytical Finance (CAF) at the Indian School of Business (ISB). The panellists included eminent personalities in the financial sector such as Rakesh Kapoor of IFCI Factors, Sucharita Mukherjee of IFMR Capital, Ravi Tyagi of NSE, Chaitanya Pande of ICICI Prudential AMC, SK Das of Bank of Baroda, Amit Shah of Citibank, and the moderator, Professor Sankar De, Executive Director, CAF.

Research carried out by the Centre for Analytical Finance (CAF) has shown that a large chunk of the financing for small and medium enterprises (SMEs), over 50% by some estimates, comes from non-bank, non-market sources. These alternative sources of finance of which receivables financing/trade credit is the primary means are therefore very important for SMEs. The cost of alternative sources of financing also tends to be significantly higher than traditional bank financing. The purpose of the panel was to identify problems facing alternative finance and to propose solutions for the same.

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