Dual Financing Strategy To Enhance MSMEs' Role In Renewable Energy Shift: IREDA

IREDA Chairman and Managing Director Pradip Kumar Das has announced the adoption of a dual financing strategy to enhance the role of micro, small, and medium enterprises (MSMEs) in the transition to renewable energy. Emphasizing the economic and environmental contributions of MSMEs, Das reiterated Indian Renewable Energy Development Agency’s (IREDA) dedication to promoting environmental sustainability. The commitment involves increasing MSMEs' involvement in the renewable sector through accessible loan facilities, showcasing the organization's commitment to a sustainable future.

Stressing the role of MSMEs in environmental sustainability, the CMD revealed that MSMEs currently constitute approximately two per cent of the company's total loan assets in FY22. He stated, "IREDA is committed to addressing the challenges faced by MSMEs and actively working towards enhancing their participation in the renewable energy sector."

Ease Of Doing Business

Speaking at a COP28 event, Das highlighted that the agriculture sector and MSMEs are major contributors to gross domestic product (GDP) growth. Recognizing that a significant obstacle for MSME entrepreneurs is securing loans at reasonable interest rates, IREDA has made substantial progress in improving the ease of doing business.

This progress includes the implementation of faceless loan sanctions and disbursements, a reduction in the documentation involved in the loan sanction and disbursement cycle, and an expansion of geographical reach across the country.

Citing a successful case study involving lending to e-rickshaws through Mufin Green Finance, Das shared that IREDA intervened to lower existing interest rates ranging from 30-36 per cent to 18 per cent. Leveraging its track record of making previously unbankable sectors bankable, he expressed confidence that the company’s initiatives would result in increased MSME participation in the green energy sector.

The CMD also underscored IREDA's commitment to encouraging farmers nationwide to reduce their carbon footprint through financing under the PM-KUSUM scheme.

SIDBI’s Initiative

In September this year, SIDBI, the national development bank for the micro, small and medium enterprises (MSME) sector, had announced that it will provide complete financing for MSMEs' green energy and other clean projects.

"We encourage MSMEs to make use of our various financial schemes for implementing solar energy and adopting energy-efficient machinery and business processes. We are prepared to offer a 100 per cent loan at an interest rate as low as 7-8 per cent (depending on their credit ratings) for the installation of rooftop and ground-mounted solar power projects," Jay Kumar Gupta, a deputy general manager of the lender had said.

Conclusion

With dual financing strategies and complete financing initiatives, these institutions aim to not only boost economic contributions but also underscore their commitment to environmental sustainability. As MSMEs increasingly become key players in green energy, the collaborative endeavors of IREDA and SIDBI pave the way for a sustainable and inclusive future in India's renewable energy development.