SIDBI was established on April 2, 1990. The Charter establishing it. The Small Industries Development Bank of India Act, 1989 envisaged SIDBI to be “the principal financial institution for the promotion, financing and development of industry in the small scale sector and to co-ordinate the functions of the institutions engaged in the promotion and financing or developing industry in the small scale sector and for matters connected therewith or incidental thereto.
Objective of the SIDBI
> Mandatory Objectives
Four basic objective are set out in the SIDBI Charter. They are :
> Financing > Promotion > Development > Co-ordination
for orderly growth of industry’ in the small scale sector. The Charter has provided SIDBI considerable flexibility in adopting appropriate operational strategies to meet these objectives. The activities of SIDBI, as they have evolved over the period of time, now meet almost all the requirements of small scale industries which fall into a wide spectrum constituting modern and technologically superior units at one end and traditional units at the other.
Potential Schemes of SIDBI for NGOs
- Fast Track Financing Scheme
Existing borrowers (SSI units or service sector enterprises) having a default-free track record with SIDBI. If such well run units having impeccable track record of satisfactory performance and repayment are identified by SIDBT from its existing clientele, then a fast track financing scheme could be offered to them meeting such requirement.
The unit should generally be a private limited / public limited company. However, partnership firms, sole proprietorship concerns, Trusts and societies would also be considered on case to case basis.
Extend of assistance
A limit shall be fixed up to which drawl can be made by the borrower on tap basis.
To meet financial requirements of existing clients on a fast track basis for purpose(s) such as acquisition of additional machinery, equipment, miscellaneous fixed assets, undertaking various marketing related activities, quality up gradation and modernisation measures, meeting working capital requirements including gap in MPBF or margin or any other purpose considered relevant.
Generally Rs. 10 lakh to Rs. 50 lakh to be fixed at the time of application on the basis of SIDBI’s assessment of the account, limit shall be valid for one year and to be reviewed annually thereafter:
Disbursements to be made on need-basis within the sanctioned limit and validity period
> Norms & parameter > Debt Equity Ratio
Generally not exceeding 2:1 for the company as a whole
Period of loan/limit : Flexible, but not more than 3 years.
- Integrated Infrastructural Development (IID)
For setting up of IID centres with facilities like water supply, power, telecommunication, common services centre including for technological back up services for small scale industries in rural backward areas as envisaged under the policy for promoting and strengthening small, tiny village enterprises announced by Govt. of India (GOI) on August6, 1991 .The cost of improving/upgrading the deficient infrastructural facilities to increase the productivity and optimum utilisation of the existing centres / clusters in backward / rural areas may also be covered under the scheme.
Implementing agencies (a public sector corporation or a corporate body or a good NGO having sound financial position) entrusted with the task of implementing the scheme by the concerned State / Union Territory (UT) Govt.
Selection of IID centre should be preceded by a comprehensive industrial potential survey of the area. Suitable land would be provided by State / U.T. Govt. cost of which may be recovered from implementing agencies. Normally, agricultural land may not be used for setting up of an IID centre. The size of IID centre would be about 15 to 20 hectares. The centre should provide for various facilities like water supply, power, telecommunication, effluent treatment etc.
The ceiling on project cost is Rs. 50 million. Cost in excess of Rs. 50 million may be met by State / UT Govt. Cost of Rs. 50 million to be financed by Grant from Govt. of India (Gol) Rs. 20 million and loan from SIDBI, from any other bank/FI of Rs. 30 million. In case of North-Eastem Region, the amount of Grant from GOI and loan from SIDBI, from any other bank / fl would be Rs. 40 million and Rs. 10 million respectively.
- Scheme for Development of Industrial Infrastructure in FFI Sector (DDI) Purpose
Setting up of industrial estates / development of industrial areas including such projects found eligible under KVIC model.
Strengthening of existing industrial clusters/estates by providing increased amenities for smooth working of the industrial units. Setting up of warehousing facilities for SSI products/units.
Providing support services viz., common utility centres such as convention halls, trade centres, raw material depots, warehousing, tool rooms/testing centres, housing for industrial workers, etc. Any other infrastructural facilities which will benefit predominantly SSI units / entrepreneurs.
All forms organisations such as Public / Pvt. Ltd. Companies; Registered Societies/Trusts; Government Corporations; Corporate / Co-operative entities / accredited NGOs approved by KVIC.
Cost of Project : Not to exceed Rs. 100 million.
Debt Equity Ratio : Not more than 3:1
Repayment Period – Not exceeding 10 years including initial moratorium period of upto 3 years.
- Marketing Fund for Women
The assistance under the Fund is available to women entrepreneurs and organisations involved in marketing of products manufactured by women entrepreneurs to increase their reach, both in domestic and international markets.
> SSI units managed by women entrepreneurs.
> Marketing related service provides Organisations / units in the corporate / co-operative/ NGO sectors which are providing support services like internet, trade related information, advertising, marketing research, warehousing, common testing centres, etc. to enterprises owned and managed by women.
Organisations / Associations / Women Groups / Marketing Consortia that have an exclusive marketing mandate and have, as their vendor base, a wide range of small and tiny units owned and managed by women entrepreneurs. While the terms and conditions for sanction of assistance would be flexible, they would essentially depend upon the soundness of the management, track record of performance and viability of future operations.
Besides providing financial assistance as mentioned above, SIDBI could also consider, on a selective basis, developmental assistance by way of soft loans/grants for organising group activities and programmes such as trade fairs, exhibitions, buyer-seller meets, seminars, workshops, training programmes, etc. to promote marketing of products manufactured by women entrepreneurs.
- Mahila Udyam Nidhi (MUN)
Purpose : To meet gap in equity
Women entrepreneurs for setting up new projects in tiny / small scale sector and rehabilitation of viable sick SSI units. Existing tiny and small scale industrial units & service enterprises [tiny enterprises would include all industrial units and service industries (except Road Transport Operators) satisfying the investment ceiling prescribed for tiny enterprises] undertaking expansion, modernisation technology upgradation & diversification can also be considered.
> Scheme operated through SFCs/twin function SIDCs/Scheduled Commercial Banks/ Select Urban Co-operative Banks
> Cost of Project – Not to exceed Rs. 1 million.
> Soft Loan limit – 25% of cost of Project subject to a maximum of Rs. 2,50,000 per project.
> Service charges – 1% p.a. on soft loan.
- SIDBI Foundation for Micro Credit
Small Industries Development Bank of India (SIDBI), has launched a major project christened “SIDBI Foundation for Micro Credit” (SFMC) as a proactive step to facilitate accelerated and orderly growth of the micro finance sector in India. SFMC is envisaged to emerge as the apex wholesaler for micro finance in India providing a complete range of financial and non-financial services such as loan funds, grant support, equity and institution building support to the retailing Micro Finance Institutions (MFIs) so as to facilitate their development into financially sustainable entities, besides developing a network of service providers for the sector. SFMC is also poised to play a significant role in advocating appropriate policies and regulations and to act as a platform for exchange of information across the sector. Operations of SFMC in the next few years, are expected to contribute significantly towards development of a more formal, extensive and effective micro finance sector serving the poor in India. SIDBI FOUNDATION FOR MICRO CREDIT (SFMC) has been operating as a specialised Department of Small Industries Development Bank of India from January 1, 1999.
SFMC – Range of Service
SFMc offers customised need based package of loan, grant and equity to partner MFIs, for meeting their on-lending requirements as also for their institutional capacity building to enable them to transform themselves into ‘state of the art’ financial institutions, besides facilitating the overall growth of the micro finance sector in India. This include efforts to develop a market of service providers, consultants, rating agencies, micro finance training institutions, mentors etc, through a number of initiatives.
SFMC – Financial Products
- A) Loans for On-Lending
> The MFI has been in existence for at least five years and/or it has a demonstrated track record of running a successful micro-credit programme at least for the last three years. However, any new MFI desirous of initiating a micro credit programme may also be considered for assistance if it has been promoted and managed by experienced micro finance professionals with experience of at least three years in micro credit.
> The MFI has achieved minimum outreach of 3,000 poor members (through individual lending/ Self Help Groups (SHGs)/partner NGOs or MFIs) or demonstrates the capability to reach this scale within a period of next twelve mottles or so.
> It should choose clients irrespective of class, creed and religion and its activities should be secular in nature.
> It maintains a satisfactory and transparent accounting, MIS and internal audit system or is willing to adopt such practices with SIDBI assistance.
> It has a relatively low risk portfolio or has a definite plan to further improve its recovery performance.
Types of eligible intermediaries
> Societies registered under Societies Act, 1860 or similar State Acts:
> Trusts Registered under Public Trusts Act, 1920 or similar Acts:
> Companies registered under the Companies Act, 1956 including Section 25 Companies:
> Non Banking Finance Companies providing financial services to the poor.
> Specialiesed and other Co-operative such as Mutually Aided Co-operative Societies etc.
> Any other type of institutions that offer micro finance and related services may be considered on merit
MFIs may on-lend directly to SHGs/individuals or route their assistance through their partner NGOs and MFIs. They may also adopt any other lending channel so as to effectively reach financial assistance to the poor clients.
The loans to ultimate borrowers is to be utilized for financing micro enterprises and non-farm activities.
Frequency and quantum of loan
> Annual or need based repeat assistance.
> Loan assistance per MFI for on-lending is subject to a minimum of Rs. 1mn.
> Maximum amount lent by the MFIs to an individual borrower/member in general may not exceed Rs. 25000/-
Rate of interest
Loans were earlier available to MFIs @ 11% p.a. now it varies between 8.5 to 10.5% p.a. MFIs, in turn, may determine the interest rates for on-lending keeping in view the cost of operation and in consultation with their partners/SHGs/clients.
MFIs are required to repay the loan to SIDBI generally within a period of 4 years on quarterly basis including an initial moratorium on the principal of 6-12 months from the date of first disbursement. Interest payments and principal repayments are required to be made on quarterly basis on March 01, June 01, September 01 and December 01 of each year.
> Term Deposit Receipts (TDRs) equivalent to 10% of the loan amount together with interest accrued thereon, are required to be pledged as security. The TDRs should be for a minimum duration of 4 years or currency of the loan, whichever is late.
> Assets created, if any, out of the assistance are held in trust by MFI on behalf of SIDBI.
Capacity Assessment Rating (CAR) of MFIs is undertaken prior to each assistance. CAR is an important component of selection criteria for MFIs. CAR serves as a decision making and evaluation credit worthiness, absorption capacity and business intent of both potential and existing clients.
- B) Liquidity Management Support
> The Liquidity Management Support (LMS) is envisaged to help the partner MFIs to meet the immediate unexpected liquidity needs for their micro finance programme. lt will help them to cater to the unusual cash outflows on account of on-lending.
> At least two years of partnership with SFMC
> The MFI should not have been in default to any lending agency/bank including SIDBI.
> The LMS is being offered to the MFIs on an annual basis.
> The quantum of support is limited to a maximum of 15°/o of the loan outstanding (as on March 31 of the previous year) of the MFI under the regular MCS loan or Rs. 2.5 mn., whichever is less.
> The facility may be renewed/enhanced/reduced subject to a review at the end of the year. The nature of security has been kept unchanged from that under the regular loan product viz. Pledge of Term Deposit Receipts (TDRs) for operational simplicity.
- C) Transformation Loan
The Transformation Loan (TL) is envisaged as a quasi-equity type support to a select band of top level non-corporate Micro Finance Institutions (MFIs). TL would help the MFIs not only in transforming themselves into corporate entities but also in enhancing their equity base thus helping in leveraging loan funds and expanding their micro credit operations on a sustainable basis.
> At least three years of partnership with SFMC.
> Minimum loan outstanding of Rs. 10 mn. with SFMC.
> Minimum portfolio size of Rs. 150 mn.
> A sufficiently large and focused micro finance programme.
> Portfolio-at-risk (>30 days) not more than 10%.
> Demonstrate the willingness to transform into a more appropriate legal entity which would facilitate smooth implementation of micro finance programme.
> Not been in default to any lending agency/bank including SIDBI.
> The TL would have the feature of conversion into equity after a specified period of time
subject to the MFI attaining certain structural, operational and financial benchmarks.
Interest free loan up to a maximum of Rs. 0.23 mn. per MFI – only a service fee of 1% p.a. is payable by the MFI.
Capacity Building Initiative
- Capacity building of MFIs
Financial assistance by way of grant is provided to partner MFIs for meeting their capacity building needs encompassing all areas of operational, organisational and managerial aspects with a view to making them sustainable corporate entity serving the poor, in due course. It is hoped that initial doses of operational support and technical assistance, increase in the volume of business and efficient financial management, would gradually enable and equip the MFIs to cover their costs.
- Capacity building of Formal Financial Institutions (FFIs)
SIDBI works with a large number of Formal Financial Institutions (FFIs) in the mainstream business of financing small scale industry. Networking with them for delivery of micro finance would be beneficial to the sector as the FFIs have wide outreach. It provides enabling inputs for increasing their micro finance operations on sustainable lines.
- General Capacity building of the Micro Finance sector
SFMC provides financial support to specialized technical and management institutes for conducting training and orientation programmes for the functionaries and staff of MFIs.
- Financial services to underserved areas
Development of micro finance and concentration of MFIs has hitherto been skewed, mainly to the southern part of India. SFMC has taken several proactive steps to increase the flow of assistance to hitherto, under-served areas particularly North-Eastern, Eastern and Northern Region including tying up with long-term partnerships arrangements with committed capacity builders for facilitating capacity building support to new/small micro finance institutions, which are not being directly supported by SFMC,
Presently, SFMC is also working on framing the strategy of encouraging some of its bigger partner MFIs to promote MFTs in under-served areas. SFMC is also extending support to reputed NGOs/ development institutions, working in under-served areas and having experience in implementing livelihood promotion programmed in rural areas by way of initial capacity building support.
- Efforts towards improving policy environment
The issues faced by MFIs currently include lack of appropriate legal form for an MFI, and various changes that are required in the existing legal framework to facilitate the operations of MFIs throughout the country. Hence, SFMC has been involved with various national level efforts towards improving the policy environment for the sector. Also, in keeping with SIDBFs role of an apex institution for the small scale sector. SFMC also supports the process of dialogues and deliberations at state and national levels aimed at formulation of appropriate and coherent policy guidelines and regulatory norms for the sector. One of the major activities envisaged as part of policy advocacy initiative is supporting an annual high-level seminar with participation from policy makers, national/international micro finance practitioners (including SIDBI Foundation assisted MFIs) and service providers. This major national event is envisaged as a forum to discuss emerging themes in micro finance, examine new micro finance innovations and compare Indian achievements with best practices elsewhere.
New innovative ideas in areas such as micro finance practices, credit delivery techniques and methodologies, products etc., are supported as part of the action research plan which includes support towards studies, field testing, pilot implementation and commercialization of feasible ideas.
- Rural Industries Program
A unique approach for rural industrialisation where the emphasis is on stimulating and helping the potential entrepreneurs to set up small enterprises through consultancy outfit positioned by SIDBI.
Development of viable and self-sustaining tiny/small enterprises in rural and semi urban India by harnessing local entrepreneurial talent. The Programme attempts to address the problems such as rural unemployment, urban migration and under-utilisation of local skills and resources, and is designed as a comprehensive Business Development Services programme.
The Rural Industries Programme (RIP) of the Bank provides a cohesive and integrated package of basic inputs like information, motivation, training and credit, backed by appropriate technology and market linkages for the purpose of enterprise promotion.
Development of underdeveloped areas : Under RIP, an economically underdeveloped district is identified and an Implementing Agency (IA) Development professionals, Technical consultancy organisation or Non-Government organisation is positioned to provide a comprehensive and integrated package of inputs and business development services to potential entrepreneurs. The identified IA positions a team of professionals at the field level for a period of five year. IA also provides support post implementation period to ensure sustainability of enterprises.
Integrated approach : The package of services provided by IA, inter alia, includes identifying and motivating rural entrepreneurs, identification of viable ventures based on local skills and resources, training, appropriate technology linkages and finance tie-up with the formal banking sector.
Performance Oriented incentives : Enterprises are grounded on technological and economic considerations. No subsidies or grants are available to entrepreneurs. Besides start-up administrative support, IA is paid performances fee in the range of Rs. 2000 to Rs. 7000 per unit promoted, depending on project size.
Long term viability and sustainability of the enterprises promoted is an important aspect of RIP. New enterprises require continued support, at least for the first year of their operations. Therefore, an amount of Rs. 1,000 per unit is payable to the lAs by way of post-sanction incentive over and above the initial performance fee for providing escort services to the assisted entrepreneurs and post-sanction work.
A sub-sectoral approach is followed to enable the implementing agencies to provide necessary backward and forward linkages to the enterprises.
Mahila Udyam Mitra (MUM)
Mahila Udyam Mitra (MUM) is a variant of RIP which targets promotion of micro enterprises by women entrepreneurs. The programme was test launched in Andhra Pradesh in end 1994 with APITCO as the IA. The programme has met with success in Andhra Pradesh and has led to grounding of 2037 enterprises by women entrepreneurs as on March 31,2003, The success has prompted the Bank to extend the intervention to Kerala with APITCO containing as the IA. The programme has resulted in promotion of 150 enterprises by women in Kerala.
- Entrepreneurship Development Program
Entrepreneurship can be developed by training. Towards this end and also to make the Entrepreneurship Development Programmes (EDPs) result-oriented, SIDBI has been supporting suitable agencies to train and guide potential entrepreneurs to set up enterprises.
EDPs aim at training various target groups in entrepreneurial traits so that they obtain adequate information, motivation ad guidance in setting up their own enterprises. In order to maintain a homogeneous nature of participating groups, EDPs focus on rural entrepreneurs, women SC/ST, etc.
The EDPs are normally of 4-6 weeks duration coupled with proper practical training inputs. Training Agencies specialising in conducting EDPs, Non-Governmental Organisations (NGOs) and specialised technical institutes are extended assistance to conduct product specific EDPs.
In an effort to attract more professional and result oriented institutions into the EDP fold, the Bank has made the scheme more performance oriented by extending reasonable support towards training cost and encouraging the institutions to earn performance fee by grounding units.
- Mahila Vikas Nidhi
Mahila Vikas Nidhi Scheme is aimed at the economic empowerment of women, especially from the weaker strata in rural areas by providing them with avenues for training and employment by creation of infrastructure in the form of Training-cum-Production Centres (TPCs). The Projects are implemented through accredited NGOs with good track record in the field of enterprise development for women.
Offices of SIDBI
10/10. Madan Mohan Malviya Marg, Lucknow – 226 001 U.P., Tel : 2209517-21, 2209565, Fax : 2209512-14
480, Anna Salai, Nandanam, Chennai – 600 035, Tel : 24330286,24330964,24361893, Fax: 24330348
2nd & 3rd Floors, IDBI Building, Opposite Sentinel Press, G.S. Road, Guwahati – 781 005, Tel: 2524020, Fax: 2529545
II, Dr. U.N. Brahmachari Street (8th Floor), Opp. La Martiniere Girls schools, Kolkata-700 017 Tel : 22404183, 22404228, 22801382, Fax: 22404093
11th. Floor Nariman Bhavan, 227, Vinay K. Shah Marg, Nariman Point, Mumbai-400 021 Tel : 22846065, 22873897, 22873899, Fax: 22872450
11th Floor, Videocon Tower, E-l, Rani Jhansi Road, Jhandewalan Extension, New Delhi-110 055
Tel : 23682473-77, Fax: 23682461,23682464
Branch Offices are at: Agartala, Ahmedabad, Aizawl, Aurangabad, Bangalore, Baroda, Bhopal, Bhubaneshwar Chandigarh, Coimbatore, Dehradun, Dimapur, Faridabad, Gangtok, Hyderabad Itanagar, Imphal, Indore, Jaipur. Jammu, Jamshedpur,Kanpur, Kochi, Ludhiana, Nagpur, Panaji, Patna, Ponddicherry, Pune ,Raipur Ranchi, Shillong, Shimla , Tirupur, Varanasi, Visakhapatnam