SIDBI signs two agreements with The World World Bank

Small Industries Development Bank of India (SIDBI) signed two agreements with the World Bank, which will immensely benefit the MSMEs of the country. The agreements were signed by Dr. Kshatrapati Shivaji, CMD, SIDBI and Mr. Onno Ruhl, Country Director, World Bank, in the presence of Shri Tarun Bajaj, Jt. Secretary, Ministry of Finance, GoI, on March 31, 2015.

The first agreement on MSME Growth, Innovation and Inclusive Finance Project is Line of Credit of USD 500 mio to SIDBI consisting of following components:

• USD 150 mio : Spurring early stage Risk Capital finance

o   The main objective is to make available debt assistance to Start-ups through innovative financing models and to meet the gaps in the Start-up ecosystem.

• USD 200 mio : Supporting service sector enterprises

o   Focus on asset light businesses such as franchisees etc.

o   Establishment of franchisee registry

o   Develop innovative financing models for service sector

• USD 150 mio : Financing of manufacturing MSMEs

o   Will complement the ‘Make in India’ programme of Government of India by meeting the financial needs of MSMEs in manufacturing sector

• The project also targets women entrepreneurs (20% of the project) and units in underserved (low income) states such as Uttar Pradesh, Madhya Pradesh, West Bengal etc. (25% of assisted units from low income states).

(ii) Partial Risk Sharing Facility for Energy Efficiency (PRSF) Project with a total outlay of USD 43 mio consisting of following components:

• Component 1: A guarantee fund (risk sharing facility) corpus of USD 37 million to be managed by SIDBI, and
• Component 2: Technical Assistance of a USD 4 million to be implemented by SIDBI and USD 2 million to be implemented by Energy Efficiency Services Limited.
• The objective of the project is to support the GoI’s efforts to transform the energy efficiency (EE) market in India by promoting increased level of EE investments, particularly through energy service performance contracting (ESPC) delivered through Energy Service Companies (ESCOs).

• SIDBI will guarantee the loans given by Banks / FIs / NBFCs to ESCOs and ESCO-implemented projects to minimize their risk perception and also to kick-start the ESPC based ESCO market for Energy Efficiency Projects in India.

• It is estimated that the project is expected to provide credit guarantee to more than 500 ESCO implemented EE projects which would mobilize financing of the tune of US$ 127 million. Further, the project is also expected to result into significant energy savings of the tune of 1002.1 Gwh and mitigation of CO2 emissions reductions of the tune of 0.734 million tons.

The above two projects will mark a new beginning in the area of MSME financing and supplement the Government’s thrust on “Make in India” and Zero Defect Zero Effect” Programme.