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National development bank Sidbi (Small Industries Development Bank of India) has announced a growth accelerator programme for small NBFCs (non-banking finance companies) to help them become eligible for bank funding.

Under the initiative, being carried out in association with the Global Alliance for Mass Entrepreneurship and the national NBFC lobby Finance Industry Development Council, Sidbi has onboarded 18 small NBFCs as the first cohort of the programme.

The five-month-long programme is designed to scale small NBFCs through design interventions, enabling them to apply for institutional funding based on holistic evaluation parameters, said Sivasubramanian Ramann, Chairman and Managing Director, Sidbi.

The programme includes mentorship from domain experts on risk, operations, governance, and technology and is structured to encourage and facilitate peer learning, reviews and networking through a blend of in-person, virtual and individualised sessions, said Umesh Revankar, Chairman of FIDC and Executive Vice-Chairman of Shriram Finance.

Of the nearly 80 million small businesses, only 15 per cent get access to formal credit, showing the large addressable market for MSME (micro, small & medium enterprise) funding, Ramann said.

He said, in the past three years, Sidbi’s lending to MSMEs had doubled to cross the Rs 50,000 crore-mark, while the system-wide MSME loan book is Rs 25 lakh crore, which is slated to double over the next three years. Of the present MSME book, only 28 per cent are met by NBFCs.

The objective of the programme is to design a replicable model to enable MSME-focused NBFCs to become eligible for formal funding and be future-ready, said Ravi Venkatesan, Founder, Global Alliance for Mass Entrepreneurship.

When asked how much Sidbi will be lending to NBFCs under the initiative, Ramann said there is no target or cap. It all depends on how many of them clear the programme, he added.

The programme will enhance the fund flow for the MSME sector by enabling NBFCs to get institutional funding. In this cohort, the participating 18 NBFCs will benefit significantly from specific advice, informal interactions with peers, structured reviews and evaluation.

“We have built in the process to ensure that participants demonstrate action to be eligible for continuing to the next stage and mentors endorse and support them ensuring accountability,” said Ramann, adding that, over the next three years, the plan is to prepare 100 non-banks future-ready.