SIDBI To Offer MSME Loans Through Fintechs, Partners With DLAI

The Small Industries Development Bank of India (SIDBI) has signed an agreement with the Digital Lenders Association of India (DLAI) to propel the growth of the fintech sector in the country.

The agreement calls for cooperation with SIDBI to create standard protocols to hasten the implementation of digital lending partnerships, such as alliances between banks and Lending Service Providers (LSPs), co-lending collaborations, and others. SIDBI will also provide resource support to eligible DLAI member NBFCs and also explore Assignment and Securitization transactions.

SIDBI CMD Sivasubramanian Ramann said, "We are pleased to collaborate with the Industry on other important aspects like standard protocols, customer protection, and grievance redressal to facilitate faster adoption of digital lending."

As a part of its business strategy, SIDBI is using digital technology and partnerships to directly reach out to micro enterprises and will explore offering its credit products through the DLAI members, he added.

Fintechs can create a more inclusive banking system and deliver the last mile connectivity. Through co-lending, the bank-fintech partnerships will help fintech companies to collaborate and leverage their respective strengths to provide services to MSMEs.

Through the agreement, SIDBI and DLAI are looking to explore partnerships for its "Prayaas" Scheme for informal enterprises, co-lending, GST Sahay, Express loan, green financing, and other direct credit schemes. This partnership signifies an important step in India's fintech journey for enhancing their role in financing the MSME sector.

The Fintech sector holds the key to revolutionizing lending and plays a vital role in bridging the credit gap and empowering the MSME sector in India. Increasing internet and smartphone penetration and rise of digitalization has paved the way for fintech space’s significant growth. With the use of advanced technologies such as artificial intelligence and machine learning, Fintech platforms are revolutionizing the lending process for MSMEs.

With the vast reach of banks and technology-laden fintech-led NBFCs, an MSME borrower can procure finance from the remotest corner of the country. Co-lending partnerships can help them get loans as both traditional and digital lenders analyze structured and unstructured data to assess risk and this helps the micro, small, and medium enterprises get early loan approvals.