SME Exchange: Panacea for SME Sector?

Small and Medium Enterprises (SMEs) sector is one of the most important sectors of Indian economy as it contributes around 22% and 40% of our GDP and exports respectively. SME sector is the second largest sector in terms of providing employment with around 60 million people working for it and around 1.3 million new jobs are created every year by SMEs. The current sources of financing to SMEs are inadequate as they don't have an easy access to funds from venture capitalists, Angel investors or Private equity investors. Therefore, a need was felt to have a separate platform for small and medium scale enterprises which should help these organizations in raising funds at much cheaper cost and ease. On March 13, 2012, Bombay Stock exchange launched a full-fledged SME Exchange with the listing of BCB Finance share at 8% premium. Similarly, NSE also launched its SME Exchange on 18th September 2012 with the listing of Thejo Engineering stock. Since then dedicated SMES exchanges are performing well as total 70 SMES now have registered with considerable market capitalization. Yet, in order to make this source of finance more significant for SMEs, certain snags need to be removed. This paper discusses the issues and challenges faced by SME exchanges in India and throw some light and provided few recommendations which could help in the vibrant growth of these exchanges.