The recent cyclone Hud Hud, which hit Vishakhapatnam, was a lesson for small, medium and tiny units as well for the insurer SBI General Insurance. Bhaskar Jyoti Sarma, MD & CEO of SBI General told Business Line here on Saturday that the insurer got over 300 claims from MSME units affected by the disaster. Though the insurer within a week could make initial 'on account payment' of 10 per cent of the damage claims after surveys, it was revealed how under insured the sector was.
"Most of the units in different clusters did not have proper disaster protection, or did not take the right policies. As spread awareness on insurance was very limited, the penetration of insurance product was also poor. However, the disaster could raise demand for knowledge about the insurance," said Sarma.
On the sidelines of Infocom 2014, said the insurer did not market its product to protect receivables much among the SME units. "The disaster brought out the need and demand for such a product as most of the clients of the small units were also affected by the same cyclone and faced liquidity problems causing delay in payments of the small suppliers," he explained.
Credit collection, has always been a week point, along with other financial management expertise, for the small units. Sharma said the sector's NPA also stems from the problems regarding payment collection, delays and eventual bad debts.
Speaking on the subject of Empowering SMEs, K V Srinivasan, CEO of Reliance Commercial Finance, said that financial inclusion of among the sector units was paltry. "Many of them were not even properly registered. For financing, assessing the true worth of such a unit beyond the financials was a difficult proposition.
"There is a need for B-schools to focus on them. Specifically directed courses for the SME sector would help the sector to bridge the management skill gap in future," Srinivasan said.
Ashish Chauhan, MD and CEO of Bombay Stock Exchange, said listing of the small units (so far 79 on the BSE SME platform) helped them in terms of corporate governance, financial benchmarking and standing in the market place.