Ease of Doing Business for MSMEs: Small and medium enterprise (SME) focused rating agency SMERA Ratings, component of Acuite Group, is taking its SME rating business enterprise to South Asian nations by the finish of October 2021. “Countries where English is one of the business languages such as Indonesia, Thailand, Malaysia, Bangladesh, and the Philippines are being considered,” Sankar Chakraborti, Chairman, SMERA Ratings and Group CEO, Acuité told TheSpuzz Online.
He added that the standard rating model will stay the exact same but they will make specific adjustments with respect to benchmarks (such as the definition of MSMEs, business classification, and so on.). “The fundamentals of SME business in these South Asian countries are similar; they are all export oriented, they suffer from the same problem of lack of funding, so the same model can be easily replicated,” he mentioned.
Credit ratings play an crucial function in generating cost-effective funding accessible to SMEs as they bridge the details asymmetry in between the external creditors and the SMEs themselves. However, assessing the credit threat of SMEs has normally been a challenge due to the lack of details about the firm’s monetary information and unviability of the SME rating business enterprise itself because it is a low-margin business enterprise.
“Rating SMEs is a volume game and just like any low-margin business reaching global scale is critical to do meaningful business,” mentioned Chakraborti on the rationale of taking the business enterprise out of India.
SMERA is solving the trouble of scale working with technologies to limit human intervention and hold operational expenses in verify. For instance, their program can automatically pull details about the firm’s relative competitiveness with respect to its peers.
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To place this in point of view, Chakraborti explained, if an analyst does 5 rating reports a month working with the universally applicable bond rating approach, an analyst for rating SME can full 25 reports throughout that time frame. However, bond rating is for big enterprises and does not do justice to compact organizations. For SME ratings, SMERA has a customised rating scale of eight points alternatively of the scale of 20 utilized in bond ratings.
Currently, the firm determines the creditworthiness of 150-250 SMEs just about every month. These requests come from banks who want to lend to SMEs and also big corporates that offer you monetary facilities to their MSME vendors and face a important credit exposure.
On the business enterprise of ratings for compact firms, Chakraborti mentioned they are now working on a model to price providers without having balance sheet, relying on their money flow statements and GST returns. “We believe that bank loan ratings and bond ratings are relevant when the loan is at least Rs 15 to 20 crores. Below that it is probably better to look at the SME rating framework and our job is to enable banks to lend to all kinds of SMEs profitably,” he mentioned.
SMERA was earlier set up as a joint venture (JV) in between the Small Industries Development Bank of India (SIDBI) and Dun & Bradstreet. It changed its name to Acuite Group in 2018 to position itself as a complete-service rating agency. Currently, SMERA is a wholly-owned subsidiary of Acuite.