SIDBI s Initiatives in. Sustainable Finance WE EMPOWER MSME

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1 SIDBI s Initiatives in Sustainable Finance 1

2 An overview of Indian MSME MSME Sector Contribution to Indian Economy 8% of GDP of the country 45% of manufactured output 40% share in exports More than 8000 products Second largest sector after agriculture More than 47 million enterprises. Provides employment to over 100 million Accelerates the growth of Economy Vibrant, Flexible & Resilient makes MSME the Backbone of Indian Economy.

3 Constitution About SIDBI Established as a Development Finance Institution (DFI) on April 02, 1990 under the Act of Parliament. Mandate promotion, development & financing of MSMEs and to co-ordinate the functions of such institutions serving the sector. Mission To facilitate & strengthen credit flow to MSMEs and address both financial & developmental gaps in the MSME eco-system. Vision To emerge as a single window for meeting the financial & developmental needs of the MSME sector to make it strong, vibrant & globally competitive, to position SIDBI Brand as the preferred & customer - friendly institution & for enhancement of share - holder wealth & highest corporate values through modern technology platform.

4 SIDBI Range of Products & Services REFINANCE DIRECT FINANCE (INCL. NODAL AGENCY CLCSS/ TUFS/ IDLSS) RISK CAPITAL WORKING CAPITAL FINANCE SIDBI TECHNOLOGY UPGRADATION, CLUSTER DEVELOPMENT Sustainable Finance SERVICE SECTOR PROMOTIONAL & DEVELOPMENTAL ACTIVITIES 4

5 SIDBI Make in India Fund for Micro, Small and Medium Enterprises (SMILE) Purpose A corpus of Rs crore to provide soft loan in the nature of quasi equity and term loan relatively on soft terms to MSMEs to meet the required debt equity ratio for establishment of MSME. Form of assistance Term Loan & Soft Loan (in form of quasi equity) Tenure Interest rate (for initial 3 years) For Women/SC/ST/PWD Security Benefits Upto 10 years Soft Loan : 9.35% p.a. Term Loan : 9.45% to 9.95% p.a. (Depending on Internal Rating) Soft Loan : 9.15% p.a. Term Loan : 9.45% to 9.60% p.a. Flexible, including collateral free lending for loans up to Rs. 1 crore under CGTMSE Lower Promoter s Contribution required : 15% of project cost for projects up to Rs. 1 crore and 20% for the rest subject to DER of 2.5 :1 Reduced Rate of Interest and Lower Upfront Fee : 0.50% 5

6 Make in India- 25 Sectors Automobiles Automobile Components Aviation Biotechnology Chemicals Construction Defence Manufacturing Electrical machinery Electronic systems Food Processing IT and BPM Leather Media and entertainment Mining Oil and Gas Pharmaceuticals Ports Railways Renewable Energy Roads and Highways Space Textile and Garments Thermal Power Tourism and Hospitality Wellness Others 6

7 Risk Capital Scheme Objective & Purpose - To provide growth capital to deserving MSMEs for: Bridging the gap in the means of finance for expansion/ modernization/ scaling up. New businesses/ diversification by entrepreneurs with established track record can be considered, selectively. Intangibles or non-asset creating investments viz product development, marketing related expenditure, R&D, investments in quality control, energy efficiency equipment, etc. Margin money for working capital or working capital on selective basis Any other bonafide expenditure required for growth of the business Non Participative debt based products Subordinated Debt Fixed coupon 7 yr repayment 3 yr moratorium Participative debt products Sub debt/ debt or debentures with Conversion options Royalty features Equity kickers Equity based products Optionally Convertible Cumulative Preference Shares Equity

8 Energy Efficiency Potential India is the third-largest energy consumer in the world, after the United States and China. Indian MSME sector consumes almost half of the total energy consumption by industrial sector. Many MSMEs are highly energy inefficient due to obsolete technology/processes. Potential for enhancing energy efficiency in MSME : 10-25%. Barriers Lack of awareness / information on Energy Efficiency (EE)/ EE best practices/ee technologies Inadequate focus on EE/ clean tech/ renewable energy financing by the banks Lack of sufficient expertise in banks to assess EE loans ESCO market is still underdeveloped in India

9 SIDBI s Initiatives Introduced schemes for financing Energy Efficiency (EE) & Cleaner Production projects in MSME sector. Entered into strategic partnership with BEE, TIFAC, The World Bank, DFID, JICA, KfW, GIZ & AFD for promoting & financing clean & EE investments in MSME sector. Created a dedicated team of experts housed at Energy Efficiency Centre for focused approach. Besides financing, also actively pursuing various developmental initiatives including WB-GEF Project, 4E scheme, PRSF project etc. Conducted awareness campaigns, focused group meetings, energy audits, pilot interventions in MSME clusters.

10 Two-pronged Approach Financial Assistance to MSMEs through focused Lines of Credit: Concessional schemes for financing sustainable development projects in MSMEs Objective of these lending schemes is to reduce energy consumption, enhance energy efficiency, reduce CO2 emissions and improve the profitability of the Indian MSMEs. Developmental Support to MSMEs Cluster focused Awareness & Capacity Building Programmes for MSMEs, Industry Associations, Bankers and other stakeholders. Implementation of various developmental projects.

11 Financing End to End Energy Efficiency Investments in MSMEs (4E Financing Scheme) 4E would help the MSME units to adopt energy efficient practices by providing them the technical consultancy / advisory services. 4E would include the following services : Detailed Energy Audit (DEA) Support for implementing the identified Energy Conservation Measures (ECMs) including Measurement & Verification for quantifying actual savings. Under 4E revolving fund scheme, terms loans upto 90% of the project cost shall be provided to eligible MSMEs with a concessional interest rate of 2.5% below the normal lending rate. India SME Technology Services Ltd. (ISTSL), an associate concern of SIDBI is assisting MSMEs in identifying Technical agency/consultant. 11

12 SIDBI s EE assistance/intiatives: Highlights Sanctioned Assistance of around Rs.5900 crore to more than 6800 MSME units. Sanctioned more than Rs. 400 crore in RE Projects (both Wind & Solar power projects) More than 1043 Million units of electricity saved. Thermal energy savings of 650,000 million kcal Resulted in reduction of 909 kilo tons (kt) of CO 2 annually. Financed Green Buildings/Energy Efficient buildings aggregating to an amount of more than Rs. 100 crore. Reached more than 100 industrial clusters & 2500 MSME units and awareness on EE has been created to 4000 participants from the MSMEs. SIDBI received ADFIAP Award, 2012 for Energy Efficiency Lines of credit 12

13 Partial Risk Sharing Facility for Energy Efficiency (PRSF) Project Objective: Empower and promote ESCO-implemented energy efficiency projects Sectors covered: (a) Large industries (excluding thermal power plants), (b) MSMEs, or (c) Municipalities (including street lighting) (d) buildings. Coverage: The minimum loan amount INR 10 Lakhs and maximum loan amount of INR 15 Crore. The extent of guarantee 75% of the loan amount guaranteed. SIDBI is the Project Execution Agency (PEA).

14 Stand Up India Amount Between Rs.10 lakh and upto Rs.100 lakh (Composite Loan) Eligibility SC/ST and/or woman entrepreneurs, above 18 years of age. Loans to green field project. In case of non-individual enterprises, 51% of the shareholding and controlling stake should be held by either SC/ST and/or WE. Borrower should not be in default to any bank/fi Size of loan Composite loan of 75% of the project cost inclusive of term loan and working capital. Cap would not apply if the PC along with convergence support from any central/state margin/subsidy schemes exceeds 25% of the project cost. Security Besides primary security, the loan may be secured by collateral security or guarantee of NCGTC as decided by the banks. Repayment The loan is repayable in 7 years with a maximum moratorium period of 18 months.

15 Government sponsored subsidy Schemes Presently, SIDBI is one of the Nodal Agencies implementing the subsidy schemes launched by various Ministries of GOI. Brief details are : 1. CLCSS - Credit Linked Capital Subsidy Scheme for MSEs by Ministry of MSME 2. TUFS - Technology Upgradation Fund Scheme for Textile units by Ministry of Textile. 3. IDLSS - Integrated Development of Leather Sector Scheme for leather sector units by Department of Industrial Policy & Promotion & Policy under the aegis of Ministry of Commerce and Industry. 4. FPTUFS - Scheme of Technology Upgradation /Setting up/ Modernisation /Expansion of Food Processing Industries [FPTUFS] by Ministry of Food Processing Industries. 5. TEQUP - Technology and Quality Upgradation Programme to MSME by Ministry of MSME 15

16 T h a n k Y o u 16