Take us through your journey at the Small Industries Development Bank of India (SIDBI). Tell us about the evolution of technology, and how it has brought a change in the functioning of SIDBI in all these years.
Technology is omnipresent. India has experienced an overhaul in digital infrastructure with well-calibrated interventions resulting in ‘India-Stack.’ These interventions have also become the foundation for tech-driven financial solutions, promoting financial inclusion. The objective of such disruptions has been the transformation in access to, and delivery of services, and has encouraged competitiveness driving innovation. Synergies among various tech-based solutions have created a gold mine of data, which, when leveraged, enable improved user profiling and better offerings.
SIDBI has used digital solutions to power several Micro, Small and Medium Enterprise (MSME) ecosystem solutions underlining its digital prowess. SIDBI has fully digitised its own direct credit processes to facilitate SME loans and also developed tools for on-tap credit availability for customers. We have also developed digital interventions like ‘Udyamimitra’ and ‘Standup India’ portal-executing digital implementation of several credit/MSME-linked schemes under different ministries of the Government of India (GoI); PSBLoansin59minutes- a contactless credit platform providing in-principle approval of loans; Receivables Exchange of India (RXIL) (TReDS platform)- for receivable discounting of MSMEs. Each of these interventions have attempted to bridge the credit gap for the MSME sector.
Some of the recent initiatives include:
- GST Sahay Project: An ‘on tap’ invoice-based financing (cashflow-based) for small value credit to micro enterprises. The app journey is paperless and covers the entire credit lifecycle from origination to repayment.
- Finance Income and Trade (FIT) Rank: Under the mentorship of SIDBI, Credit Information Bureau India Limited (CIBIL), in collaboration with Online PSB Loans (OPL) has launched FIT rank, a ranking model for MSME lending. The ranking model uses Machine Learning (ML) algorithms to arrive at probability of an MSME becoming a Non-Performing Asset (NPA) in the next 12 months.
- Express Loan (FIT Rank-based direct finance product for machine/equipment purchase): A new Express Loan product to provide expeditious term loan for acquisition of machinery and equipment through automated platform with reliance on FIT Rank, GST score and CIBIL MSME rank.
- Udyam Assist Platform: Ministry of MSME (MoMSME) and SIDBI launched the Udyam Assist Platform that enables registration of the Informal Micro Entities (IMEs) and generates the Udyam Assist Certificate. IMEs, with an Udyam Assist Certificate, shall be treated as Micro Enterprises under MSME for the purposes of PSL classification. Over 1.5 crore MSMEs have been registered on the UAP platform.
Kindly elaborate on some of the initiatives and programmes that SIDBI has implemented to facilitate the growth and development of SMEs.
SIDBI works towards the growth and development of the entire MSME sector through various measures such as finance, developmental activities, knowledge building/sharing, fund of funds, etc. Through its carefully designed impactful initiatives (directly or through partnerships) aimed at igniting and supporting entrepreneurship, SIDBI has been able to assist a wide range of MSMEs.
It has also taken forward the mandate of inducing the entrepreneurship culture amongst youth, unserved/under-served segments and geographies, including those at the bottom of the pyramid. In addition, it has taken up the initiative to facilitate access to low-cost borrowings to micro enterprises in the “Missing Middle Segment,” by providing loans upto Rs 5 lakh under scheme name PRAYAAS. It has partnered with institutions/companies to extend micro loans for livelihood activities to people in rural/urban areas. The majority of the assisted borrowers belong to the rural sector.
As on 31st December, 2023, more than 1,59,000 beneficiaries have been assisted under the scheme with more than 87 per cent of the beneficiaries being women entrepreneurs.
SIDBI’s ‘Mission Swavalamban’ aims at “one entrepreneur in every household” towards which a host of activities/initiatives are implemented to collectively build a strong entrepreneurial culture in the nation.
What challenges do SMEs typically face in accessing financing, and what steps has SIDBI taken to address these challenges?
MSMEs are required to submit information/data/documents offline in order to avail credit from banks/institutions. Though banks/institutions have started using India Stack resulting in improving the underwriting process and turnaround time (TAT), there is still a long way to go for fully digital services to MSMEs.
Further, there are two segments viz., formal MSMEs (that are capable of availing finance from formal financial institutions) and informal MSMEs (that are unable to avail finance from formal financial institutions.) The under-penetration of credit to the second segment may be attributed to the limited availability of verifiable data, among other challenges, hindering credit underwriting and integration of the smaller informal enterprises into formal credit channels.
Therefore, with some of the initiatives mentioned above such as Prayaas, targetted at nano/micro enterprises, UAP for formalisation of the informal enterprises, along with initiatives such as GST Sahay, FIT Rank, Express, that leverage technology and analytics, SIDBI is attempting to serve the entire gamut of the MSME segment.
In what ways does SIDBI provide financial assistance and advisory services to SMEs?
SIDBI operates various schemes for financing and promotion and development of MSMEs. Financing schemes are broadly classified into indirect finance/refinance and direct finance. Under indirect finance, assistance to MSMEs is extended through banks, including Small Finance Banks (SFBs), Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs) and other institutions by extending refinance/resource support assistance against MSME portfolio of such institutions. This creates a multiplier effect and increases the flow of credit to MSMEs. Under direct assistance, SIDBI extends financial assistance directly to MSMEs through its branch network.
Besides finance schemes, SIDBI takes up various activities/initiatives/schemes for encouraging entrepreneurship, enterprise creation and growth of MSMEs. It has promoted/supported various institutions that are engaged in financing and development of MSMEs.
How does SIDBI support entrepreneurship development and capacity building among aspiring entrepreneurs and the existing SME owners?
SIDBI organises several credit outreach programmes like customer meets to understand the pain points and challenges of the MSME sector so as to provide guidance to the MSME customers, wherever possible. Apart from the above, SIDBI also undertakes various development programmes for the MSME sector such as:
- Micro Enterprise Promotion Programme (MEPP): This initiative by SIDBI aims to promote viable micro enterprises in semi-urban/rural areas and artisan-based clusters by providing business services.
- Swavalamban Connect Kendras (SCKs): The bank has been operating Swavalamban Connect Kendras (SCKs) in various states to guide aspiring entrepreneurs to become job creators through awareness, creating localised project profiles, mapping gaps, skill connect, credit connect, market connect, etc. Cumulatively, 50,301 profiles have been created; 6,200 enterprises set-up/scaled-up and 5,066 beneficiaries credit-linked.
- Skill To Enterprise Model (STEM)– SIDBI has partnered with educational institutions of repute to design, develop and launch courses for skilled youth to venture into entrepreneurship through pilot programme viz., Skill To Enterprise Model (STEM). It has signed Memorandums of Understanding (MoUs) with five reputed universities. These courses are aimed as blended programme for youth with component of experiential and ‘Learning by Doing.’
- Swavalamban Skill Classes for Livelihood– SIDBI has partnered with TATA Strive and Mahendra Skills Training and Development for facilitating skilled and aspiring youth in getting intensive hand-holding support, EDP training for setting up nano and micro-enterprises to increase their income opportunities and generate employment.
- Swavalamban Challenge Fund– With the aim to fuel economic activities and promote development by sourcing and implementing innovative development solutions in the country, SIDBI introduced the concept of Swavalamban Challenge Fund (SCF). The prime objective of SCF is to provide financial support to development organisations/educational institution/start-ups that are working in specialised areas such as green initiative, sustainable livelihood, financial inclusion, health, etc.
Looking ahead, what are SIDBI’s priorities and strategic objectives for further enhancing its impact on SMEs and promoting inclusive growth in India?
SIDBI has pivoted towards digital lending, and has repositioned itself to become a leader in tech-driven solutions for the MSME sector. It has delivered several digital interventions aimed at the diverse needs of the MSME ecosystem. The same shall be expanded through process innovation and development of new products based on the emerging needs of the sector.
Further, SIDBI, in line with the nation’s commitment towards energy independence and carbon neutrality, and to embrace green adoption by MSMEs, has introduced several schemes for extending Green Finance and hand-holding support to MSMEs. It is offering various financial and non-financial solutions, and taking leadership, in thought and action, in respect of green finance.
Any other thing you wish to highlight?
SIDBI shall continue to nurture the MSME sector in realising its potential and support it in its journey of value creation for the nation. It has showcased its agility in modifying and adapting to the changing times and emerging needs of the MSME sector, and shall continue to scaleup its efforts in serving the sector. Furthermore, it shall continue to support the ecosystem players such as MFIs, NBFCs, banks etc., to facilitate credit flow to the MSME sector at competitive rates.
