SBI will prefer co-origination models of lending to MSMEs, says chairman Khara

State Bank of India (SBI) will choose the co-origination mannequin to cater to the financing wants of MSMEs and collaboration with fintechs is a good suggestion because it helps in assessing the chance profile of the borrower in a greater method, its chairman Dinesh Kumar Khara stated on Saturday.

Pointing out that the Micro, Small and Medium Enterprises (MSMEs) are constrained in the present day when it comes to money flows, time hole in realising receivables, amongst others and likewise the extent of lenders’ confidence in funding them, Khara stated collaborating is a greater mannequin than lending on to MSMEs.

“The fact of the matter is that today not many NBFCs have come in this space. And of late, when it comes to finding solutions, we feel that apart from lending directly to the MSMEs, there is a way forward in terms of collaborating with these NBFCs along with the biggest fintechs who have the ability to process the structured and unstructured (financial) data to have a better sense in terms of assessment of risk,” Khara stated.

Based on that evaluation, he stated, bankers really feel very comfy in lending to the MSMEs.

He was talking at a webinar on financing the unfinanced organised by the Global Alliance for Mass Entrepreneurship (GAME).

There may be another choice of financing based mostly on the money movement and never on the idea of stability sheet as a result of fairly often it’s noticed that the stability sheet and the monetary assertion are usually not accessible in a type which is anticipated by any banker, he added.

Also, there’s a broad spectrum of MSMEs within the nation which work in a number of areas and sometimes the type of monetary info coming from them isn’t very organised, Khara defined.

So to the extent the place the info is totally organised, which is extra like some other giant company, it’s the type of spectrum which SBI is participating with, he stated.

“So for different levels of maturity of MSMEs, the comfort level with the bank also differs. If at all they are part of the ecosystem for a large industry major, it becomes all the more easier for the banks to get the information structured vis-a-vis unstructured relating to the (financial) dealings (of the borrower).

“And those who are essentially in the nano category, may be say up to Rs 2 crore or so (turnover), there we actually tend to leverage upon various fintechs who are engaging with these MSMEs. So we would rather collaborate with such fintechs and do the co-origination model (of lending),” Khara stated.

He additional stated that SBI is this sort of a spectrum in financing the small companies.

“So this is the kind of spectrum and this is how we actually intend to operate. It may not be out of place to mention that many of the MSMEs are still having lots of business done on cash.

“So I think that is posing a major challenge because it is not really giving enough insight into their (financial) behaviour and naturally it is not giving any insight into their turnover,” stated the SBI chairman.

He stated the nation’s largest lender can be pleased to cope with the middleman gamers within the financing enterprise and could also be “we can help such intermediary players by buying out their portfolio also”.

The just lately launched scheme the place banks may also finance some type of sweat fairness can be another choice, he added.

“So I think we have got the whole gamut of solutions which are available, but all said and done so as the equity is concerned I think that is something, the sweat equity, which is something wanted by the MSMEs to bring in. Of course in the recent past a new scheme has been introduced where we can also finance some kind of sweat equity also, but that is just the beginning,” Khara stated.

He stated banks must have sufficient confidence into numerous fashions of the MSMEs and likewise the dedication degree of such entrepreneurs.

Only then maybe it is going to improve the consolation for any financial institution and they are going to be ready to help the sweat fairness type of necessities, stated the SBI chairman.