SIDBI, being the principal financial institution for the promotion, financing and development of MSME sector, has always endeavored to meet various credit and non-credit needs of the MSME sector.

Going forward, our thrust will continue to be on identifying gaps in the MSME sector, more particularly in clusters and develop niche products, processes and delivery channels to address various gaps, such as, financing both in debt and equity funding through structured and innovative products (viz. receivable financing, cluster-based financing products, risk capital financing, start-up financing, venture financing,  etc.), funding for efficient use of energy/sustainable development, attending to non financial areas of technology, marketing, business development services, skill development & entrepreneurship development,  etc. In this way, SIDBI will continue to strengthen the MSME eco-system to match the constantly evolving needs and demands of this vibrant sector. Our thrust shall be on launching customized and innovative products. Here we shall utilise our rich partnerships with international agencies. 

Are there differential offerings from SIDBI in terms of products and services aimed at MSME Domain particularly thematic and existing and new entrepreneurs? Do you treat women entrepreneurs separately and have special schemes for them? If not, is SIDBI planning to support women entrepreneurs and their projects?

SIDBI's bouquet of offerings have , in past few years, been on thematic aspects whether it is Environment and Social Risk or Green Loans or special dispensation for niche sectors , we have always been in front. Few such offerings include  energy efficiency / environment protection/cleaner production, Green Loan Scheme (PLR minus), Privileged Customer Scheme a pre-approved financial assistance for unforeseen expenditure to well performing existing entrepreneurs), providing equity / risk capital to start-ups and high growth MSMEs, receivable finance to improve the working capital cycle of MSMEs,  'Missing Middle' (loan size from Rs` 50,000 to Rs` 10 lakh) through upscaling and downscaling techniques, etc. We have implemented a comprehensive cluster development programme (in 19 MSME clusters) aimed at making markets work for MSMEs. It is ready for replication and scale up.

In addition to scaling up the existing innovative schemes, recently SIDBI has started two new innovative schemes to address the varied needs of the MSME sector, viz.

Growth Capital and Equity Assistance Scheme for MSMEs (GEMs): Under the scheme, SIDBI offers special financial assistance to bridge the gap between the two chief sources of finance viz. bank loans (senior debt) and promoter's capital. SIDBI offers this assistance in form of mezzanine/ convertible instruments, subordinated debt and, in deserving cases, equity. Such assistance is collateral free, has higher moratorium on repayment and provides for flexible structuring.

Flexible Assistance for Capital Expenditure [FACE] : Under the scheme, SIDBI provides need based assistance to eligible borrowers in both manufacturing and service sectors to meet their project specific investment plans with varying terms for creation of different types of assets viz. land & building (immovable assets) and plant & machinery and other assets (other assets).  Separate term loans would be extended for (a) land & building, and (b) plant & machinery and other assets. While the term loan for land & building would have longer moratorium and repayment period, the component for plant & machinery and other assets would have normal moratorium and repayment period under the scheme.

SIDBI has addressed the women entrepreneurship through its micro finance programme. 90% of the beneficiaries of SIDBI's micro finance programme are women. As per a Seven-Year impact assessment study, SIDBI's micro finance programme has helped women in achieving a better standard of living by providing them easy access of credit for income generating activities of their choice.

Further, to address the capacity building of the women entrepreneurs in this micro sector, SIDBI has partnered with Asian Development Bank for facilitating financial literacy, leadership and communication skills and business development training to these prospective women entrepreneurs

What do you look for in projects and entrepreneurs who seek SIDBI's support especially existing ones seeking funds for growth?

Our thrust always remains on the project. We basically look at financial, technical, marketing and economic viability of project. In case of existing projects, their future plans and prospects, viability and past track record of the entrepreneurs remains our emphasis. Cluster financing has been our thrust strategy as it enables us to widen our outreach through customized products.

As we know, the MSME sector is highly heterogeneous in terms of the size of the enterprises, products and services produced and levels of technology employed. While one end of the spectrum contains highly innovative and high growth enterprises, a large proportion of MSME units are with area of basic or low end technology. Yes to some extent. For better & effective judgment, the promoter's background and capability are carefully looked into since it is often a one man show.

New entrepreneurs have very little background or demonstrable capabilities and track record. How do you evaluate such applications? How difficult or straightforward is it for the novices to get funding from SIDBI?

SIDBI plays a bigger role by not only extending credit but also provisioning for mentoring and handholding the MSMEs for their overall growth.  One may find the application form for seeking loan from SIDBI as very simple.  The officers, dealing with any prospective customer, act as both credit as well as counseling officer, who guide the entrepreneurs to provide qualitative information, which becomes part of risk assessment process thus enabling quicker disposal of the loan application. To enable startups to be financially linked, SIDBI has set up its own venture capital company, supports other VC funds through contributions for investments into MSME and has set up a risk capital fund. NSE and BSE are in the process of setting up SME platforms. This shall provide for much needed growth capital for Indian MSMEs.

The www.msmestartupkit.com website is an amazing effort in presenting the details of setting up a business for new entrepreneurs. SIDBI is truly embracing and utilizing IT solutions and the power of the web to reach the masses. How has been the reaction from the entrepreneurs so far? What additional features do you intend to include in the site coming months?

The MSME sector is a vast sector with more than 3 crore enterprises.  Today they grapple with issues of information asymmetry – both its scarcity as also its abundance. Getting right and reliable information is a challenge.  Government of India, Reserve Bank of India, banks, Financial Institutions, have taken various steps to address the issues of information gap.  SIDBI and its subsidiaries and associates, have taken various steps to bridge the informational gap by conducting various awareness workshops, publications, etc. These are available for free on our websites (www.sidbi.in, www.msmefdp.net)

Furthering this agenda, particularly to meet aspirations of budding entrepreneurs as also growing enterprises, SIDBI has added another milestone in terms of limited launch of a dedicated website www.msmestartupkit.com. MSME Startup Kit is especially designed to cater to the informational needs on sector, theme, segment basis and emerge as a single portlet providing right, reasonable and reliable information at one place. Before its launch we obtained feedback of MSMEs and leading associations and have incorporated their suggestions/ inputs. At pilot stage, the reactions of entrepreneurs have been good and a public launch is scheduled thereafter with an appropriate name.

We plan to evolve it into a site that provides solutions to start up concerns, gives directions to aspirations/ dreams and lends credence to a project decision . The aim is to provide end to end solutions to Indian MSMEs in a simple and understanding way. Suitable provision has been made to update the website contents.  

SIDBI has rightly understood the need for mentoring services to SMEs. The Mentoring Program definitely has a two-way benefit helping SMEs and letting professionals hone their skill. How do you intend to take it forward (www.msmementor.in)?

SIDBI's officers have been trained to provide various advisory and mentoring services to MSME clients. Further, SIDBI in association with National Stock Exchange and Prime Database, has come out with a portal www.msmementor.in, which  is a new online platform for facilitating the process of identifying and reaching the right professionals / service providers in a simple, cost-effective and time-efficient manner for Indian MSMEs.

We would try to facilitate registration by more & more MSMEs and professionals and also ensure matchmaking between right professionals and MSMEs to enhance the use of the website for MSME growth.  Our key thrust is on ensuring sustainability of the effort.

One of the stated objectives of SIDBI is financing. How much portion of financing is being utilized for technology upgradation and greening of SMEs?

There is huge MSME financing gap in India and hence, it has not reached to a level, where a lender would differentiate the proposals on the basis of purpose of financing or have separate buckets for technology upgradation, energy efficiency, cleaner production, etc. Our support is extended for any purpose i.e. expansion, any form of capital expenditure, technology upgradation, energy efficiency, working capital, equity/growth/venture capital, marketing, etc., but it should be viable project expected to contribute to growth  of MSME sector.

However being the leader in thematic financing (coupled with non financial support) SIDBI has picked up the agendas of environment and social risk, greening MSMEs through financing and developmental support and so on.

What is the support provided specifically to Micro Finance Institutions and how much it has impacted the segment? What steps have been taken up for responsible financing eco system in this arena?

SIDBI's micro finance serves as a potent tool of inclusive growth and attainment of Millennium Development Goals by catering to the bottom-of-the-pyramid sections of the society. In that respect, SIDBI works with and through a large number of Micro Finance Institutions (MFIs) who have been nurtured, incubated and strengthened through a comprehensive range of financial and non-financial assistance. Over the years, SIDBI has provided these MFIs need-based financial assistance by way of loans for meeting their on-lending fund requirements, besides the concessional transformation loan in the nature of quasi-equity and a steady inflow of capacity building grant structured specifically to their requirements. Capacity building support is provided by way of branch infrastructure, MIS, Information and Communication Technology (ICTs), professional human resources. These financial and non-financial support, along with, efforts for strengthening the micro finance stakeholders, has created a favorable eco-system for these MFIs.

SIDBI-supported MFIs are now reaching out to the masses and creating a silent revolution of providing livelihoods to millions of Indians. The Bank has, so far, provided cumulative micro finance assistance of around ` 7,700 crore as at end March, 2011 through more than 140 Micro Finance Institutions (MFIs) partners, thereby benefiting more than 310 lakh disadvantaged persons, mostly women in the rural sector.

We have partnered from time to time with international agencies for attending to the domain. Recently we have structured with ADB and JFPR for attending to Missing Middle segment (enabling unorganised MF beneficiary to enter the realm of Micro enterprise). The responsible financing agenda is also taken forward in the micro finance sector with support from World Bank.  SIDBI has been propagating “Responsible Lending” through strategic initiatives, such as, creation of Lenders' Forum (major lenders work together to impress upon the MFIs to implement important loan covenants viz. transparency, competitive practices, improved accounting standards, Code of Conduct, etc.); development of tool for measuring adherence to Code of Conduct  for MFIs (voluntary, but aimed at instilling governance i.e. Credit services- Pre and post sanction, collection, thrift, etc.); development of India Microfinance Platform (global, web-based microfinance information platform); impressing upon the MFIs to share their beneficiary data with credit bureaus (data uploading with two major credit bureau already commenced) for better credit decision and multi lending. We are sure these efforts bring unique proposition for the micro finance domain.

The years of experience in the banking and financial sector and today while managing SIDBI, you have the most comprehensive storehouse of knowledge and insight about the issues faced by SMEs and the procedures and diligence performed by banks and financial institutions. Should SMEs expect a banker who is leading SIDBI or an innovative financier crusading for the cause of SMEs?

Any institution moves in the direction where the stakeholders want it to move. After joining SIDBI, I met with all the MSME stakeholders (internal and external, domestic and international) to enlist their expectations from SIDBI. In this direction, I had also met representatives of various MSME associations and am constantly in touch with them.

As you are aware, MSME sector being significant contributor to the Indian economy, is ever evolving. It imbibes the changes which our economy faces. This calls for continuous innovation by the sector as also throws challenge to funding agencies. SIDBI is the institution, which has, since inception, shouldered this responsibility on proactive basis as against reactive basis. We shall continue to innovate such that a enabling eco-system evolves and flourishes and larger segment of MSMEs adopt and adapt themselves to these.

You have a degree in ecology and environment. Will you be taking special interest in projects which are eco-friendly, energy efficient and self-sustaining? Do you intend to create special schemes for promoting renewable energy generation initiatives of entrepreneurs considering the constant gap in demand and supply of power in India?

Funding Energy Efficiency and clean/green Environment shall remain our niche. SIDBI has already taken various steps for addressing and demand side need of the MSME sector in eco-friendly, energy efficient and self sustaining projects. On the supply side, SIDBI has organized several awareness programmes, workshops, come out with booklets, etc., which have motivated MSMEs to think on the aspect of energy efficiency and cleaner production while going for technological advancement. 

On the demand side, SIDBI contracted Lines of Credit (LoC) with World Bank (USD 520 Million for Environment and social risk framework-E&S- aligned lending which also trackes the procurement practices of MSMEs),Japan International Cooperation Agency (JICA), Japan - JPY 30 billion ; Kreditanstalt fur Wiederaufbau (KfW), Germany  - Euro 50 million ; and Agence Francaise De Development (AFD), France – Euro 50 million) for promoting thematic agenda of environment and Energy Efficiency [EE] projects in MSME sector. Under these Lines, apart from offering assistance at concessional rate of interest to MSMEs to take up energy efficiency investments, Bank has also taken up promotional activities to showcase the advantages of EE investments in the high energy intensive MSME sector. 

With the help of technical experts, the Bank has mapped high energy intensive MSME clusters, prepared cluster profiles, suggested EE investments suitable to the clusters, conducted several awareness campaigns and focused group meetings in various MSME clusters across the country for information dissemination.  A list of over 600 energy efficient equipments in various industrial segments was circulated to MSME industry associations for information dissemination. Bank has also provided training to credit officers of SIDBI, NBFC and SFCs to improve their skills to assess Environment & Social risk and energy efficiency in lending proposals. You will be happy to know that, in Micro finance and ME funding Line contracted from ADB, we have imbibed the E&S framework as well. SIDBI has set up a dedicated Energy Efficiency Centre (EEC) at New Delhi to coordinate and collaborate with like minded players and take forward the agenda. We have also spearheaded a WB- GEF project in 5 Indian clusters.

Financing of renewable energy expenditure for captive consumption is provided under our Green Loan Scheme for existing MSME customers. This Green Loan Scheme also covers the expenditure for energy efficiency, waste recycling, waste treatment & disposal, ISO certifications, energy audit, BEE star rating of their products, green rating, etc. for sustainability of their manufacturing facilities. 

SIDBI has always taken pro-active steps for the MSME sector in India to make them globally competitive. It has taken the lead in terms of greening the process, technology, products of the MSMEs and undertaken various initiatives in this direction and will continue to work on its sustainable finance agenda of greening MSMEs.

Does SIDBI have any plans to encourage entrepreneurs gain carbon credits?

In this area, SIDBI's one of the associate, India SME Technology Services of India Ltd. (ISTSL) is constantly working by way of organizing awareness campaigns, seminars and guiding MSMEs to take advantage of the opportunities existing in carbon credit market. Towards this end, ISTSL and our EEC have identified Stainless Steel Re-rolling cluster of Jodhpur, Rajasthan for implementation of programmatic CDM [p-CDM] project under overall programme of bringing energy efficiency in the SME steel industry. The p-CDM constitutes a new instrument available within the framework of the Kyoto Protocol for support of projects involving quantifiable reductions in greenhouse gas emissions. ISTSL would scale up these activities to encourage MSME entrepreneurs for encashing the opportunities in the carbon credit market.

SIDBI's MSMEFDP project has been one of the best developmental interventions in India and comparable at world level. What are your experiences from the project & what are your plans to scale them up or continue with similar projects?

We are happy that SIDBI has implemented the multi agency / multi activity Project on Financing and Development of Indian MSMEs. While SIDBI has been assigned with the responsibility of implementing the project, the Department of Financial Services, Ministry of Finance, Government of India is the nodal agency for the same. The World Bank, Department for International Development (DFID) UK, KfW Germany and GIZ Germany are the international partners in the Project. The Project  aimed at making MSME lending an attractive and viable financing option as also facilitate increased turnover and employment in the sector.

The Key Achievements include

The project has reached out to more than 40,000 beneficiaries largely MSMEs and other stakeholders.

The project has won two international awards from Association of Development Financing Institutions in Asia pacific (ADFIAP) for the project's developmental impact.\

The project has been fetching consistent good ratings from project partners. The project has fetched mention among global models as enlisted by G20 SME group on SME finance.

The project has built up the capacity of institutions, such as, SME Rating Agency of India Ltd (launch of new models and mapping of these, including green rating – a first timer in world ), Credit Information Bureau of India Limited (setting up Commercial Bureau leading to integration of Consumer and Commercial Bureau), State Financial Corporations (soft infrastructure and training.), Credit Appraisal and Rating Tool - CART(leading to reduced Turn Around Time for loan delivery), SIDBI Foundation for Risk Capital (for enabling Risk Capital eco system) etc.

Credit Facility (CF)- The Project helps facilitate MSME growth for survival and sustainability by providing Environment and Social Risk Framework aligned Credit Facility. Under this component, the Bank has utilized Line of Credit (LoC) from World Bank (USD 440 million) and KfW, Germany (Euro 43.5 million).

Risk Sharing Facility [RSF] – was launched through CGTMSE benefiting 64 MSMEs.  We are soon going to  launch the scaled up version.

 Making Markets Work for MSMEs -SIDBI piloted a unique cluster programme by adopting 19 clusters for soft infrastructure development. By fostering a pool of sustainable & technically competent - locally relevant experts (called as Business Development Services -BDS), SIDBI has instilled functionality in market.  The Project has tried various innovative tools / model for BDS delivery and has won two international awards. It has strengthened the exit vehicles (primarily industry associations) who are ready to take forward the initiative further.

Policy Advocacy – For attending to information asymmetry and contribute to enabling policy environment, project has created a robust knowledge bank (www.msmefdp.net).  Several policy papers/ publications like Factoring (which has helped give shape to  new legislation), corporatization, risk capital, global best banking practices in MSME financing and development have been widely appreciated.

For the first time in India, project has launched the Advocacy Challenge Fund for Enterprise Development, under which support  has been extended for MSME Solution Centre (a facilitation point for BDS and MSMEs), Green Dhabha (making 60 plus road side eateries adopt green agenda) MSME Confidence Index (periodical assessment of MSMEs expectations), e-procurement and Indo- China Textile CSR benchmarking initiatives.  Project has also launched a single source information channel- msmestartupkit.com.

With support of international partners, the Project has adopted and customized several international best practices.

I understand that the project team engaged outsourced facilitator agencies in which more than 100 experts have gained experience in cluster development. This pool is ready to serve the MSME clusters. Further SIDBI has today a team of experienced persons in project management. They have leveraged their experience to structure few forward looking project assignments including WB GEF project, ADB Line and so on. We look forward to leverage their capabilities for spearheading similar assignments in future.

As SIDBI has gained tremendous experience of processes & implementation of MSMEFDP type of projects, do you see a role for SIDBI in international consulting in Africa, Latin America, CIS countries, East Asia whose economies & SME's are similar to India?

Yes, we are looking at utilizing our experience from the project and other developmental initiatives to take up such assignments. SIDBI shall shortly create an International Consultancy Division for the purpose.

SIDBI has been instrumental in institutionalizing the expectations of MSMEs by setting up organizations like:

         SME Rating Agency of India Ltd. (SMERA)    

         Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)       

         India SME Asset Reconstruction Company Ltd. (ISARC)        

         SIDBI Venture Capital Ltd.     

         India SME Technology Services Ltd. (ISTSL)

What has been the motivation behind creating these companies & where do you see them in next 10 years? 

SIDBI has been tracking the concerns and inputs of stakeholders of MSME domain and has sought to address the significant ones through institutional solution. By setting up of associates/subsidiaries for specialized credit and non-credit requirement, it has taken a lead in the direction. We have set up institutions such as  SIDBI Venture Capital Ltd. (for providing venture capital assistance to knowledge based MSMEs), Credit Guarantee Fund Trust for Micro and Small Enterprises (to provide much needed credit guarantee support for MSE loans upto Rs 100 lakh), SME Rating Agency of India Ltd.( to provide comprehensive, transparent and reliable ratings and risk profiling), India SME Technology Services Limited (for providing technology management solutions), Indian SME Asset Reconstruction Company Ltd.(unlocking precious capital locked in NPA- offering speedier resolution of non-performing assets). It has setup SIDBI Foundations for Risk Capital and for Micro Credit. Our specialised divisions such as project Management Division, EEC, EPRC are constantly endeavouring to find solutions to MSME concerns.

The motivation for creating these entities was to pro-actively attend  to the need of the MSME sector. Going forward, these companies would continue to scale up the activities in their niche areas of operations, as the big number of MSMEs are still untouched by these institutions and the areas of venture/risk capital, SME rating, technology transfer/energy efficiency/carbon credit, asset reconstruction are still in early stage.

What are your plans for fostering the risk capital market for MSMEs?

The lack of risk/equity/growth capital in the MSME sector is the hindrance to their growth beyond certain point, as equity capital has the leveraging capacity for raising additional debt to support capital expansion of these SMEs.

To address this risk capital need of the MSME sector, SIDBI provides Risk/Growth capital assistance to MSMEs directly as well as through Fund of Funds operation (i.e. through Venture Capital Funds). SIDBI uses various financial instruments, viz. Equity, Convertibles (viz. Optionally Convertible Preference Capital / Debentures / Debt), Subordinated Debt, etc. to dispense risk capital to MSMEs. The Risk/ Growth capital is provided through a scheme called Growth Capital and Equity assistance for MSMEs (GEMs). Under the scheme, SIDBI offers special financial assistance to bridge the gap between two chief sources of finance viz. bank loans (senior debt) and promoter's capital. SIDBI offers this assistance in the form of mezzanine/ convertible instruments, subordinated debt and equity (in deserving cases). This assistance is collateral free, has higher moratorium on repayment and has flexible structuring.

SIDBI also provides venture capital through its wholly owned subsidiary called SIDBI Venture Capital Ltd. (SVCL) to emerging sectors or new idea businesses in existing sectors, such as life sciences, auto components, textiles, clean technologies, retailing, pharmaceuticals, engineering, information technology, services, etc. At present, it manages two SEBI registered venture capital funds, viz. the National Venture Fund for Software and Information Technology Industry (NFSIT) with a corpus of Rs 100 crore and the SME Growth Fund (SGF) with a corpus of Rs 500 crore. After committing the above corpus, it has launched its third fund viz., "India Opportunities Fund" (IOF) with a target corpus of Rs 1,000 crore, which has already received commitments of Rs 600 crore.

In order to address the problem of exit for investment made in the MSME sector through venture capital/equity capital, SEBI has recently accorded its approval to BSE and NSE to introduce SME segments on their respective exchanges. The creation of SME Platforms of the major exchanges in India will be an important step enabling our MSMEs to mobilise equity, which can be leveraged to borrow more from the banks/FIs.

In collaboration with TIFAC SIDBI has launched SRIJAN, a programme for commercializing innovations through soft loan assistance. In order to foster the risk/growth/equity capital to MSME sector, SIDBI would not only scale up its direct growth capital lending & indirect lending through funds of fund approach, but also facilitate market making for MSMES aiming to list at the SME Exchanges being set up by NSE and BSE to ensure viable exits for the investors in MSME sector.

Does SIDBI have any plans for universal banking in near future while retaining its developmental niche?

SIDBI has been created by an Act of our Parliament with the specific mandate of promoting, financing and development of the MSME sector in India.  For the past 21 years, SIDBI has been trying to fulfil the mandate with significant footprints.  We feel proud that SIDBI has carved out a strategic niche for itself over the last two decades which has undoubtedly justified the Government's decision to create SIDBI as an exclusive institution for the MSME sector, way back in 1990 around the same time that India decided to open up to the world economy. We, at SIDBI stand committed to the mandate and shall continue to pro-actively serve the MSME sector such that they emerge more competitive. We shall emerge as one stop shoppe in thematic areas.

As a leader of a robust organization in a dynamic environment, what are your plans for employee empowerment & growth as individuals?  

Our employees are our most valuable assets and thus, form an important stakeholder group which functions in alignment with the Bank's business strategies and corporate goals. We believe in inclusive human resources development as it works “through the people for the people”. We continue to work in this direction by imparting our employees equal opportunities and provide an enabling environment to enhance their productivity and career growth.