SIDBI Foundation for Micro Credit

 

Who Can Apply ?

 

i. Micro finance

SIDBI provides need-based financial assistance by way of loans to MFIs on an annual basis for on-lending to the economically disadvantaged people, mostly women. Under Micro Credit Schem (MCS) SIDBI extends term loans to:

  • Micro Finance Institutions (MFIs) for onlending to the poor – individuals or groups of individuals formed as JLGs, SHGs, etc.
  • entities for onlending to MFIs.

Eligibility criteria

To be eligible for term loan assistance from SIDBI the MFIs:

  1. should be registered as Society, Trust, Company/ Section 8 Company, NBFC-MFIs, Co-operative Society and MACS.
  2. should have been lending under MF for at least 36 months or should have promoters/ senior management having at least 10 years of experience in micro credit/ banking/ NBFC lending operations.
  3. has a minimum outreach of 5,000 loan accounts or 3,000 borrowers.
  4. has a minimum term loan requirement of `0.50 crore.
  5. targets the poor, especially women and is secular.
  6. has audited financial statements (in case of NGO with microfinance as a programme, the NGO should have separate audited financial statements for the MF programme) and
  7. has systems, processes and procedures in place required of a financial intermediary like accounting, internal audit, risk management, cash management, timely MIS, etc.
  8. shall be in compliance with RBI and other statutory guidelines.

Others

  1. Mainline NBFCs are other than those NBFC which have been acquired/ promoted by NGO-MFIs or whose main line business (atleast 90% of the total assets) is small loans (< `25,000/-) would be considered for assistance under microfinance by SFMC-V, HO on a case to case basis.
  2. MFI may follow any generally practiced MF models like Grameen model, SHG model, JLG model, cooperatives, etc., and any other appropriate model permissible under the law.
  3. First loan to an MFI shall not be more than 25% of its outstanding loan portfolio.
  4. For NBFCs or any other MFI set up for/ by taking over the existing MF operations of another entity, track record of the earlier entity can be considered for eligibility of 36 months tenure and exposure subject to continuity of promoters/senior management of the earlier entity.
  5. SIDBI’s loan to be on lent by MFIs for use by borrowers in:
    • Setting up/ running non-farm income generating activities and micro enterprises under MSMED Act and
    • for construction of new/ renovation/ expansion of dwelling units/ dwelling unit-cum-work sheds, etc.
  6. NBFC-MFI to submit a certificate from a C.A regarding compliance with RBI norms for NBFC-MFIs and all other MFIs to submit a C.A certificate regarding compliance with RBI’s norms on eligibility of bank loans to MFIs under priority sector.
  7. Availability of a valid external rating.
  8. Primary security shall comprise hypothecation of bookdebts/ receivables.
  9. Suitable collateral security like deposit of FDs, personal guarantee, pledge of shares, guarantee by multilateral donors and other forms of collateral security may be considered on a case to case basis.
  10. Additionally all MFIs has to follow tenets of Responsible Lending Practices and agree to the common set of loan covenants as per Lenders’ Forum.

Benchmarks for Sanction:

SN

Parameters

BfS Norm

1

External Rating

MfR5

2

Debt-Equity Ratio

10:1

3

CRAR@

>or =15%

4

Gross NPA

< 5%

5

Operational Self Sufficiency

100%

ii. India Microfinance Equity Fund (IMEF)

To ease the tight liquidity situation, in the FY 2012, GoI stepped in with creation of a Rs.100 crore Fund (viz., IMEF in the Union Budget 2011-12), operated through SIDBI, to strengthen capitalization of smaller, socially oriented MFIs, especially in underserved states/areas. The allocation under IMEF has been increased by Rs. 200 crore in FY 2013-14. The assistance under the Fund is expected to help the MFIs leverage more debt funds from the banks and financial institutions and help in increased flow of assistance to the poor in the unserved/underserved areas of the country. As on September 30, 2017, 65 MFIs were committed assistance under the fund amounting to INR 195.50 Crore. IMEF: Scheme Guidelines (attachment)

iii. Missing Middle Segment

SIDBI has also been extending financial assistance for the Missing Middle Segment of the micro enterprises. In India, ‘Missing Middle’ connotes the financing gap that lies above micro-finance loans and below traditional institutional financing i.e., loans with financial volumes ranging from INR 50,000 to INR 10 lakh. The support under this scheme is channelized through Participating Financial Institutions (NBFCs, RRBs, UCBs, MFIs, etc.).

2. Support to Small Finance Banks (SFBs)

Two facilities have been introduced to strengthen Small Finance Banks (SFBs) and augment their equity and resource base:

  • - Provide equity investment for setting up/capitalisation of the SFBs to meet their initial equity/capital gap; in particular, the requirement for equity from domestic sources.
  • - Post transformation of the MFIs/NBFCs into SFBs, SIDBI has been providing refinance support

Eligibility Norms for Refinance to SFBs:

  • (i) Should have been granted final license by Reserve Bank of India (RBI) for carrying on Small Finance Bank business and have commenced operations of the Small Finance Bank.
  • (ii) The SFB / previous entity prior to conversion into SFB (taken together) should have earned profits during at least 2 years out of the last 3 years.
  • (iii) Should have sizeable outstanding portfolio comprising advances to micro credit and / or MSMEs; and
  • (iv) Should have strong fundamentals based on last audited balance sheet and shall be in compliance with applicable Benchmarks for Sanction.

Benchmarks for Sanction :

SN

Parameters

BfS Norm

1

Networth

> or = `100 crore

2

CRAR@

>or =15%

3

Gross NPA

< or = 5%

Eligible Activities for Refinance:

Refinance shall be provided for the following eligible loans extended by the SFBs :

  • (i) Loans relating to micro finance activities and or financing micro enterprises under non farm income generating activities eligible for coverage under SIDBI’s extant guidelines.
  • (ii) Loans to units in the MSM Sector as defined under MSMED Act 2006 / Small Road Transport Operators (SRTOs) for productive purposes.