Foreword

Dear Readers,

The 30th of August is celebrated as the annual Small Industries (SSI) day in India with awards of recognition to outstanding performers in the sector. It is also time for annual stock taking as well as for gearing up for future challenges. More and more, there is a recognition of the fact that an innovative and integrated strategy involving the various stake holders is the need of the hour in the development of small industry. After all, the problems facing all SMEs are likely to be similar but the success of the SMEs depends on the efficiency and speed with which these issues are tackled. The platform of naturally evolved SME clusters, of which there are around 350 in India, offers a fertile ground for innovation and collective efficiency to face common challenges like availability of institutional credit, access to expert services for quality related solutions, technology upgradation or capacity to acquire larger market share at home and abroad.

We hope to bring to you actual case studies of how SMEs solved common problems through joint initiatives. In this issue we bring to you the case of the Mutual Credit Guarantee Fund Scheme, an innovative intervention which has made credit available for the grass-root level producers.

You suggestions are invited,

Anita Das
Editor

Coming up...

25 Cluster Development Executives to be trained by NISIET

The Ministry of SSI, Government of India, is launching its Small Industry Cluster Development Programme in 21 SSI clusters to begin with. A Training Programme at the National Institute for Small Industry Extension and Training (NISIET) based on the UNIDO Cluster Development approach, will commence on 15^th September at Hyderabad. It will train 25 officials from the Small Industries Development Organisation (SIDO) as Cluster Development Executives.

For more information, contact Amir Subhani, Joint Development Commissioner at asubhani@nb.nic.in

Seminars on Packaging for Export

The direct contribution of the SSI sector in total exports from the country is estimated to be at 35%. Recognising the importance of packaging in present day export marketing, the Office of DC (SSI) has been organising training programmes on “Packaging for Exports” in collaboration with the Indian Institute of Packaging (IIP). This facility would be extended to cover SME clusters associated with UNIDO.

Vibrant Gujarat Global Investors' Summit

From the 28^th until 30 of September, a business conference and industrial exhibition will be held in Ahmedabad providing a platform for one-to-one interaction, facilitating technology transfer and joint ventures. It is supported by more than 100 project proposals in the seven sectors: Ports and Roads Infrastructure; Oil, Gas and Energy Infrastructure; Agro & Food Processing; Biotechnology, Healthcare & Pharmaceuticals; Minerals & Mining; Tourism Related Infrastructure.

Registration form and project profiles are at the summit site www.vibrantgujarat.com/

Innovative Clusters, Conference, Sweden

The Competitiveness Institute's global conference is in Gothenburg, Sweden over September 17-19. With Michael Porter, Michael Enright, the World Bank, UNIDO and others 20+ countries participating, the theme "Innovative Clusters - A New Challenge" will be well explored. This will be major "clustering of clusterers" this year.

For more, visit www.competitiveness.org

News in Brief

Textiles Committee blazes a trail on Cluster Development

The Textiles Committee has undertaken development initiatives in 23 clusters. At the organisation level, cluster development agents have been empowered to take up decision-making and to draw activity planning in their respective clusters thus going beyond their traditional technical assignments. Workshops are organised regularly where the CDAs share their experiences and learnings while a second tier is being trained to provide them with coordination assistance. At national level, linkages have been forged with SIDBI and NABARD to make interventions more effective. At the international level, the Textiles Committee has developed relations with the International Trade Commission, a UN agency for the WTO agenda with the aim to benchmark the Indian textile sector with international performances. In partnership with other national institutions, it is also seeking funding from various development programmes.

Promoting Networks and BDS in Ambur, Bangalore and Ahmedabad

UNIDO Focal Point recently completed its second project of cluster development in Ambur (leather), Bangalore (machine tools) and Ahmedabad (drugs & pharmaceuticals). Learning from its previous experiences in Jaipur, Pune, Tirupur and Ludhiana, UNIDO refined further its methodology. In particular, the potential role of networks and Business Development Services was better understood and thus emphasised. Alongside associations, networks of SMEs were promoted. It was found that institutional bodies such as industrial associations prove effective in activities such as trust building and message dissemination whereas smaller, homogeneous networks work better when it comes to business related initiatives. Furthermore, in the delivery of services - especially for grassroot activities - involving private Business Development Services may be a better choice than resorting to public institutions. More details will be available with the End of Projects Reports, currently under preparation.

SSI clusters to be included in the State Level Credit Plans

In a significant move, it has been decided by the Reserve Bank of India Standing Advisory Committee on SSI that select SSI clusters would be incorporated in the State Level Credit Plan. The Ministry of SSI has identified 60 SSI clusters for this purpose.

For more information, visit www.ssi.nic.in

A new example of Public-Private Partnership

The Textiles Committee has approved the setting up of a testing laboratory at Bellary. The Textiles Committee will invest Rs. 85 lakhs (USD 177 000) in equipment. On the other hand, the local industry association of Cotton Ginners will provide the building, electricity, required manpower etc. Bellary Garments Manufacturers Association will also be a partner and get advantage of the laboratory.

For more, contact Mr. SSankaramoorthi, UNIDO at sangam156@yahoo.co.uk

Jamnagar: Seminars on international marketing and diversification

International marketing being one of the important thrust areas of intervention in the Brass Parts cluster in Jamnagar, the Entrepreneurship Development Institute (EDI) of Ahmedabad organised a workshop on "Export Marketing". After the event, some entrepreneurs started contacting brass parts importers from abroad. This initiative is expected to reduce dependency on the merchant exporters of Kolkata, Delhi and Mumbai. A second seminar on diversification was organised. By using the same plants, machinery and labour force new products such as marine hardware and defence equipment can be manufactured. These products, which are often imported, can fetch higher market prices. For instance, India imports Rs.700 crores (USD about 145 millions) of marine hardware every year.

Contact Mr. Sanjay Pal at sanjaypal@ediindia for further information

Cluster practitioners from 24 countries share experiences

150 cluster practitioners from 24 countries participated in the European Seminar on Cluster Policy held on 10 June in Copenhagen, Denmark.Papers and presentations at www.ebst.dk/cluster_papers

Cluster Development: a lens

Are economic development and community development divergent options or complementary? Similarly, are investment attraction and endogenous growth competing strategies or convergent ones? During a recent cluster training workshop in Auckland, New Zealand, with a team active in supporting economically distressed regions these questions came to the front. Stuart Rosenfeld's recent publication "Just clusters: economic development strategies that reach more people and places" describes well the rationale for applying a cluster lens to development strategies.

For more information, visit www.rtsinc.org/publications

Australian magazine focuses on clusters

Business Review Weekly, Australia's leading business magazine, has a feature article on "Industry Clusters - the future of business". The article first explains what clusters are and then focuses on how to identify and develop them.

The article can be downloaded from www.brw.com.au

Fighting marginalisation and tehcnological gap: new publications by UNIDO

UNIDO has just released four new publications: one paper on regional innovation systems and three studies on the automotive, apparel and wood furniture sectors.

The papers are intended to contribute to the ongoing dialogue on how developing countries can best participate in the process of intensified globalisation, while fighting marginalisation and increased technological gap. They are designed to raise awareness and assist governments, intermediary institutions, civil society organisations and business communities, in their decision making on how best to leverage global sources of technology, knowledge and skills for domestic industrial development in this global setting.

All documents can be downloaded from www.unido.org/en/doc/12782

A Case Study

Seeking Credit through Mutual Credit Guarantee Fund Scheme

A Case Study of Jaipur, Ambur and Alleppey

June 6, 2000 was a big day for the small printers of the Jaipur Hand Block Printed Textiles cluster, where UNIDO had started a cluster development programme in 1997. The Small Industry Development Bank of India (SIDBI), the State Bank of India (SBI), the Bank of Baroda, the State Bank of Bikaner and Jaipur in collaboration with UNIDO flagged off a Mutual Credit Guarantee Fund Scheme (MCGFS). Access to credit for small entrepreneurs was viewed as a meaningful component of a holistic cluster approach. MCGFS in particular was aimed at making credit facilities available to micro and small entreprises (MSEs) without collateral securities, thus developing banking habits among them, changing the attitude of banks in lending and building relationship between banks and MSEs and among the MSEs themselves.

In the case of Jaipur, with a minimum contribution of Rs.5000 individually and additional contribution of Rs.1000, a group of 10 to 15 members could deposit their contributions in a bank. After ensuring contributions from members, SIDBI would release a matching contribution for an equal amount. These two contributions were clubbed together to make a corpus fund and deposited as a Fixed Deposit Receipt with a local bank. Taking this deposit as a liquid guarantee the local bank would finance twice the amount of collateral security to the group in the form of individual loans. MCGFS loans would be available without any traditional "collateral" requirement. The loan applications were verified by a committee (of the support unit, beneficiaries and industry experts) that understood the needs of the business better thus reinforcing the conviction of the banks in this scheme.

The scheme was conceptualised by UNIDO and SIDBI based on a similar model practiced in Italy. In Jaipur, the NGO implementing UNIDO programme, the Indian Institute for Rural Development (IIRD) acted as the fulcrum of the project. It monitored loan disbursement and repayment. IIRD had been working in the cluster for a long time and its trustworthiness helped in introducing the Scheme smoothly. The printers were involved in choosing their peer group whom they could influence in all financial issues, especially repayment of monthly instalments. SIDBI was involved to give a big push to the concept at this nascent stage. The involvement of SIDBI also brightened the scope for replication of this scheme at the national level. The participation of the local banks opened the door to further dialogue between them and the printers. Also, the success of one-off collateral free scheme given by one bank created peer pressure for other banks.

By June 2003, 6 groups of printers (for a total of 65 artisans) had been formed. Most of them were not able to access from the conventional loan system previously due to poor track record with the banks. But thanks to the MCGFS, they were able to receive loans worth about Rs.15 lakhs (approximately USD 31 thousands) from banks. The recovery status of the loan was around 95 percent.

The promising results of MCGFS in Jaipur cluster and the presence of micro enterprises in the leather cluster of Ambur prompted UNIDO to replicate the scheme there. The Tiny and Small Scale Shoe Makers Association (TASSSMA) was created to act as the implementing agency. TASSSMA promoted the creation of three groups for a total of 30 beneficiaries whereas SIDBI accepted to sanction the matching grant. The first disbursement occurred in January 2002. Till date, an amount of Rs. 10 lakhs (USD 20 800) has been disbursed under the MCGFS by the Syndicate Bank as a working capital term loan to micro enterprises for business development. The scheme has given very positive results in Ambur. On an average the units assisted have been in a position to improve their turnover by 20% and until now, there has not been a single default in repayment of loans.

In Alleppey, as part of the State Bank of India (SBI) Project UPTECH, a cluster development initiative has started in July 2002 with the support of UNIDO. The project aims at strengthening the local coir industry. In less than a year, 63 consortiums of more than 1000 tiny manufacturers have been formed. At present, the MCGFS is operational for thirty of these consortiums while the remaining consortiums are in the process of accessing the scheme. Each consortium deposits Rs 50 000 (USD 1050), the Khadi Village Industry Board provides the matching grant of Rs 50 000 whereas SBI lends up to Rs 2 lakhs (USD 4200). Funds are used for the common procurement of raw material, allowing to buy it at reduced cost. The consortiums, created mainly to provide access to credit, have served also as common platforms for joint efforts for process up gradation and marketing.

Not only has the MCGFS proved an effective tool in developing healthy and long lasting business relationships between banks and micro enterprises, but also it has led groups of beneficiaries to undertake joint initiatives other than strictly financial ones. In Ambur for example, this has reinforced group identity and added significantly to the vibrancy of the cluster. Yet, the results of the pilot projects of Jaipur, Ambur and Alleppey require careful monitoring and assessment for replication on a larger scale.

For more information, please contact Mr Tamal Sarkar, UNIDO at unido@vsnl.com

Interesting Web Sites

In this issue of Cluster e-News we are providing you with an overview of Italian Institutions, that may be of business interest.

    1. Sites on Italian Clusters

Club dei distretti (Clusters' Club)

The association, which represents 25 industrial districts, promotes the exchange of information and experience between the districts and relations with the decision-making centres of industrial policy, at both a national and community level. The site contains studies, research, economic data, laws, links and descriptions of the districts.

www.clubdistretti.it

Edison Foundation

The Edison Foundation, set up in Milan in 1999, has the aim of supporting and performing initiatives in the field of culture and scientific research to encourage the knowledge and study of the socio-economic, cultural and civil aspects related to the local productive systems and districts.

www.edison.it

Institute for Industrial Promotion (IPI)

Under the supervision of the Ministry of Productive Activities, IPI provides technical consultancy and training services to the Public Administration and partner countries with the aim of facilitating the growth and competitiveness of manufacturing systems. An entire section of the site is dedicated to industrial districts and provides documents, links, economic analyses and reports.

www.ipi.it

    2. Institutions promoting economic relations between India and Italy

Italian Institute for Foreign Trade

The Italian Institute for Foreign Trade (I.C.E) is the public agency entrusted with promoting trade, business opportunities and industrial co-operation between Italian and foreign companies, mostly by organizing the participation of Italian firms in fairs, exhibitions, workshops and bilateral meetings in more than 100 countries all over the world.

In India, its offices are in New Delhi, Chennai and Mumbai.

www.italtrade.com/countries/asia/india

The Indo-Italian Chamber

The Indo-Italian Chamber of Commerce and Industry is a non-profit organisation recognized by the Italian Government. Founded in 1966, the Chamber can count today on more than 1000 members from all sectors of the industry. It promotes trade, investment and collaboration between India and Italy.

Head office is located in Mumbai, regional offices in Delhi, Kolkata, Bangalore, Chennai and Panjim-Goa.

www.indiaitaly.com

The Italian Embassy in Delhi

Contact the Economic and Commercial office of the Embassy

www.italembdelhi.com

    3. Italian Industrial Associations

In Italy, membership of Industrial Associations is voluntary. The Industrial Associations represent the interests of their members towards national institutions, regional and local authorities in such fields as the welfare and tax systems, health and credit services, and industrial and labour policies.

They normally offer a range services including training, promotion, innovation, marketing, environmental, legal, financial and credit counselling, contract support, assistance in relations with employees, specialised tax counselling and support services.

The associations listed below all represent SMEs and artisans enterprises except Confindustria which groups firms of all sizes.

The Associations are organised at territorial and sectoral level. If you are interested in a specific geographic area or sector, visit the association's web site.

Confindustria

Confindustria groups together more than 111,000 voluntary member companies of all sizes. www.confindustria.it

Confartigianato

More than 521.000 artisan firms belong to Confartigianato www.confartigianato.it

CONFAPI

The Italian Confederation of small and medium-sized was founded in 1947. Today it represents more than 50000 associated enterprises. www.confapi.it

CNA

The National Confederation for the Craft Sector and Small and Medium Enterprise (CNA) has nearly 350,000 members. www.cna.it