Rajen Kumar

Things seem to be in place for the SME Exchange to become a reality. SEBI is all set to give final guidelines soon as we understand. Merely starting the Exchange is unlikely to solve problems of the SMEs sector. How soon and how far the Exchange will become viable before it starts attracting investments is a big question.

Certain merchant bankers are likely to discharge their duty as market makers' for the SME Exchange for a limited period of three years which seems too meager a period for making a workable case for the small and medium enterprises. We have apprehensions on the role of merchant bankers as these are the very banks who have been desisting from affording credits to the SMEs for various reasons. Apparently the market making efforts will be limited to only the chosen few. It will be a long and cumbersome process for the merchant bankers as it would require solid confident building measures to build up a case for a particular SME. To make the SME Exchange a worthwhile exercise, there should be a continuous effort in market making for the overall growth of the sector. As things are, SME Exchange is likely to benefit only the creamy layer of the sector and a large number of entrepreneurs genuinely in need of investments may be left high and dry.

A few years ago, there was an attempt to aid smaller enterprises by starting OTC (Over the Counter) Exchange of India which folded up soon when it failed to meet its purpose. The prime reasons cited are non participation of SEBI and the poor management. While in the proposed SME Exchange SEBI is the main regulator, fool-proof management has to be ensured to make the Exchange successful.

The MSMEs is likely to get a shot in the arm when the Public Procurement Policy is implemented. In order to participate in the government buying process, more and more enterprises will try to be organized and excel in performance to meet the requirements of the government department. Performance and track record of the particular enterprise is going to be main criteria to win the investor's mind. It is time more and more SMEs become alive to the needs of the future and brace up to meet the challenge of funding.