SIDBI Enters Co-Lending Space for Unsecured Loans to MSMEs

Small Industries Development Bank of India (SIDBI), the country’s apex financial institution for MSMEs, announced entering into its first co-lending arrangement with Ambit Finvest Pvt. Ltd. (“Ambit Finvest”), the Non-Banking Financial Company (NBFC) of the Ambit Group, to provide Unsecured Business Loans to MSMEs.

RBI’s Co-lending framework envisages leveraging the comparative advantages of banks and NBFCs in a collaborative effort to boost the priority sector lending.

Shri Sivasubramanian Ramann, CMD, SIDBI said, “NBFCs are an important vehicle in the growth strategy of SIDBI due to their willingness and ability to reach bottom of the pyramid businesses, especially in credit deficient geographies, adoption of innovative and nimble credit delivery models and understanding of the local ecosystem. While SIDBI has been providing financial assistance to a wider spectrum of NBFCs, under our new growth vision, we are looking at the co-lending framework put in place by the RBI as another major opportunity to channelize affordable and timely credit to the smallest of the MSMEs, especially New to Credit borrowers, in partnership with NBFCs. In this foray, we are happy to commence the first co-lending arrangement with Ambit Finvest, which will help provide affordable business loans to lower segment of the MSMEs. While most of the tie-ups in co-lending space have been for secured loans, our partnership with Ambit Finvest is one of the earliest such arrangements for unsecured Business Loans”.

Mr. Sanjay Agarwal, CEO, Ambit Finvest added, “We are delighted to partner with SIDBI in increasing its reach to meet the credit requirements of the MSME segment. The alliance with SIDBI will enable Ambit Finvest to reach wider geographies and offer unsecured business loans at a blended lower rate of interest to many MSMEs who currently face challenges of higher interest rates, and hence are excluded from access to Banking services. Also, a co-lending partnership with a pioneering organisation like SIDBI will help Ambit Finvest further expand its footprint in the MSME segment”.

Co-lending is a win-win arrangement wherein relatively smaller NBFCs, which usually operate in remote geographies and have significant contribution in inclusive growth and socio-economic development of the country, can increase their business footprints and income by marrying with the balance sheet strength of Banks, whereas Banks, through risk and reward sharing, could extend their geographical reach and fulfil their Priority sector lending obligations. The ultimate beneficiaries are the MSMEs which are able to obtain the credit faster and at a more affordable price under this arrangement.

SIDBI, under its Direct Credit operations, has been focussing on high credit demand segments through digital adoptions, innovative measures and partnerships. SIDBI’s co-lending agenda is a vital step in this direction and SIDBI aims to collaborate with such NBFCs that will provide to it wider geographical reach to enable it deepen its offerings to the smallest of the businesses in un/ under-served geographies, thereby creating a higher impact and providing the much-needed impetus to the sector.

CMD SIDBI believes that efficient use of data and digital strategies would be key to reach to the still excluded MSME segment. Going forward, he said, fully automated seamless data flow through co-lending tech platforms, backed by a robust API integration layer in the backend, would prove to be a milestone in achieving the long-cherished dream of serving the smallest of the businesses in the country in an affordable manner, thereby realising the ‘Atma-nirbhar Bharat’ vision of the Government of India.

Since its formation in 1990, SIDBI has been creating impact through various “credit plus” engagements across various strata of society - from traditional, bottom-of-the-pyramid entrepreneurs to high-end knowledge-based technopreneurs, including women entrepreneurs and the weaker section.