The budget expected to reveal fund of funds for MSME zone

The budget expected to reveal fund of funds for MSME zone


Before we getting started, let’s get to know what exactly is this Fund of Funds? Is it some kind of provision or is it a set of rules coined and implemented by the finance department?

And if yes, then how is it associated with that of the MSME sector?

Again, what is this MSME that has been referred to?

So here we are, stuck with a bunch of queries regarding the aforementioned terminologies.

Let’s walk through all the queries one by one and gain a brief idea as to they are in the most convenient way possible.

A Fund of Funds (FOF) is a set of rules, or we can say, a set of behaviour or methods that are designed to mentor an investor holding a finance odd portfolio of another investor other than spending money directly in bonds, shares, or in any kind of securities.

If we dig up a bit more, we find that the original Fund of Funds saw its conception in the year 1962 by Bernie Cornfeld. But unfortunately, it went insolvent after being looted by Robert Vesco (also famous for being an American criminal investor).

MSME, which stands for Micro, Small and Medium Enterprises.

According to the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are categorized into two classes-

  1. Manufacturing Enterprises
  2. Service Enterprises

Manufacturing enterprises are completely engaged in the manufacturing of merchandise concerning fabrication, specified as one of the first-ever schedule of industries under the development and regulation of the Act of 1951. So basically, it is defined as the investments made in Plant and Machinery.

On the other hand, Service Enterprises is concerned with the provision of services or is completely involved in the terms of investments made for the purpose of the equipment.

According to some news, the government of India is likely to increase it’s interest rate for MSMEs purposes, as announced by our Prime Minister Narendra Modi, in November 2018.

According to one of the surveys, India is most likely to unveil a Fund of Funds for Micro, Small and Medium Enterprises (MSME) zone in the future or upcoming budget in order to provide finances to the above mentioned MSME sector.

The scheme is aiming for the increase in both the manufacturing of the goods and services in order to improve the stabilisation of the MSME sectors.

The MSME members have also announced budgeting of Rs.12,000 crore for the financial year 2020-21, in order to bring about a 70% allocation of the required fiscal.

It is also clarified by the Union Minister that MSMEs contribute 29% to the country’s GDP, and is also targeted by the ministry to increase the figure to an amount of up to 50% in the upcoming five years.

From some sort of specialised reference sources, it has also been confirmed that Fund of Funds is sponsored by the government for a contribution of Rs.10,000 crores in order to support Venture Capital and Private Equity (VC/PE) investing in this sector based upon MSME that will hold up crowd cube from VC/PE firms, which mostly focuses on spending money in the segment of MSME on specialised sheets developed by Small Industries Development Bank of India (SIDBI).