- Its share in MSME borrowing increased from 7.5% to 17% in the last two years.
- The balance sheet has increased from Rs 1.9 lakh crore to Rs 4 lakh crore in the past two years.
- SIDBI takes credit to non-metro, tier II and tier III centres.
- Focus on green businesses such as EVs and sustainable manufacturing.
Through my entrepreneurial journey spanning almost 15 years, I have come to a realisation that sustainability is the way forward. Climate risks are a reality and building green and sustainable businesses is the route to prosperity. During my interaction with SIDBI chairman Sivasubramanian Ramann, it was evident that he was equally passionate about sustainability.
He understands the importance of developing green ventures and has instilled the same values in his organisation as well.
When the Small Industries Development Bank of India launched its Swavalamban Challenge Fund in 2021, one of the first businesses to walk through its doors came all the way from rural Ladakh. Looms of Ladakh, a collective of 30 women herders and artisans, had banded together in 2017 to revive the dying art of Pashmina. They were grazing the cashmere goats, shearing their wool, and processing it at villages in Leh and Kargil to weave and sell luxurious shawls and sweaters. But as the orders began flying in, they needed capital to scale up resource planning and activity tracking. The main purpose of SIDBI’s challenge was to help expand the scope of exactly this type of local and sustainable business, so it promptly offered Rs 35 lakh in funding for tech upgrades.
“It was normally Bengaluru, Gurugram, and Mumbai, which were associated with startups. But there is a real hunger for growth in non-metro centres, in tier-I and tier-II India,” says the SIDBI chairman
Since Ramann took over in April 2021, the government-owned lender has sharpened its focus on formalising the MSME space and taking credit to distant pockets of the country. It is doing so by lending directly to entrepreneurs, rolling out schemes, and being a lender to lenders.
“Today is the era of the MSMEs. SIDBI has to play a part in that story,” says Ramann in an exclusive interview with YourStory. “These efforts are really about energising the productive forces within the people.” In fact, at the SIDBI office in Bandra Kurla Complex, Ramann got the ground floor cleared for displaying creations of MSME artists from across the country.
MSMEs are crucial for the equitable development of India’s economy. They create wealth and jobs and boost related industries. The roughly 6.3 crore MSME units manufacture over 8,000 products, making up a third of the GDP, 45% of manufacturing output, and 40% of direct and indirect exports in the country. But the sector is also scattered, ill-equipped, and unevenly supported with funds and know-how. That is where a development financial institution such as SIDBI, as the umbrella body for SME lending, intervenes to offer a leg-up.
Total borrowing by MSMEs in the country is Rs 25-Rs 26 lakh crore. SIDBI’s share in lending to MSMEs has jumped in the last two years from 7.5% to 17%.
Ramann wants to take that number up to 25% soon. And he expects hand-holding entrepreneurs through their options, and encouraging green businesses will get them there.
Banking with ‘kindness’
When Ramann entered SIDBI, its balance sheet for the year ending March 2021 closed at Rs 1.92 lakh crore. The lender closed last year with Rs 4 lakh crore. Ramann describes the fast-growing SIDBI as a benevolent development finance institution. “Our lending is a little kinder,” he says.
What makes it kind? Through 85 centres located near MSME hubs across India, SIDBI helps entrepreneurs understand its own as well as other schemes and government subsidies they could avail of. “We actually sit the person down and spend three hours with him or her, telling them all that they need to know about their own work. We tell them what the market looks like, even if you don’t take our money,” Ramann explains.
“There is a tilt towards being a little more humane to the MSMEs because some of them are actually first-time entrepreneurs who are saying, ‘I know my skills, I can raise maybe Rs 10 lakh – Rs 15 lakh, but I need the loan’. This is where we step in, give an initial loan of Rs 1 crore – Rs 1.5 crore, and get them started.”
For instance, a little before COVID hit, SIDBI had run the first pilot of Swavalamban Credit Kendras in 100 districts across three or four states. It trained people to guide entrepreneurs with their ideas, and knowledge of government schemes and subsidies, and even help with filling up application forms to get loans from the local bank. “We got over 40,000 people walking in, and roughly 4,000 actually got connected with credit, which is a very good conversion rate of 10%.”
Now, Ramann is pushing for expanding that rollout to 300 districts.
The lender also lends to MSMEs indirectly, by extending affordable credit to the NBFCs and MFIs that lend to them. “We are one of the largest lenders to NBFCs and we’re ramping that up. In fact, the aim is to create another 50 small NBFCs in pockets of India,” the chairman notes. All of this helps spur the entrepreneurial movement in India.
The most impressive of SIDBI’s achievements is partnering in the government’s Startups FFS (Fund for Funds) scheme, through which the lender committed about Rs 9,000 crores to AIFs (Alternative Investment Funds). The AIFs have invested in 900 companies by now, at least 15% of which are in new and smaller centres such as Surat, Rajkot, Indore, and Guwahati.
Interestingly, these funds don’t remain static. They actually multiply. “So far, the drawdown has been half of our Rs 9,000 crores commitment — Rs 4,500 crores. The AIFs have in turn added Rs 12,000 crores of their own. That takes the fund to Rs 16,000 crores,” Ramann explains.
SIDBI’s efforts are helping create jobs, says Ramann. “Let us consider 7 crore MSMEs, assuming that all of those are single-person entities, each one of them will add at least one person. That is 7 crore more people getting employed at the minimum.”
G for green and G for growth
Not just greenfield businesses, SIDBI has its eye on green businesses too. “We are expanding the size of our chest, which will go into funding green,” says Ramann.
SIDBI’s eco push includes access to electric vehicles. Through the EVOLVE Mission, launched in June with NITI Aayog, World Bank and others, the lender is now offering MSMEs affordable commercial financing to MSMEs in the EV space. Before this, its Mission 50K-EV4ECO funded MSMEs who were struggling to get loans to buy EVs. Ramann wants not just two-wheelers but also three-wheeler EVs to get a kickstart from the effort.
The lender is also encouraging existing businesses to go green. Last year, it launched an experiment — a solar rooftop on every MSME — which picked up in November. By March, SIDBI had lent more than Rs 650 crore to roughly 650 MSMEs for solar rooftops. Demand has risen now, and it expects to close the current financial year with Rs 7,000 crore in loans for solar rooftops.
Then, there is its Moradabad intervention. In partnership with the World Bank, it has been convincing the 5,000 units manufacturing engraved brass plates and vases to change from coal fire to less-polluting gas furnaces. About 100 have made the switch already.
The move towards green, Ramann expects, will also fuel growth. Both for SIDBI and the MSME sector.