'Sidbi is optimistic of matching last year’s loan target of 17%'

Though larger industries are witnessing a slowdown, micro, small and medium enterprises (MSMEs) are still going strong, believes NK Maini, deputy managing director, Small Industries Development Bank of India (Sidbi). In a conversation with Vishwanath Nair, he talks about Sidbi’s plans for the current fiscal and how the lender plans to support smaller corporates. Edited excerpts:

Q: What are your views on the current state of economy and according to you, what impact will it have on the MSME sector?
A: MSMEs to a large extent are dependent on how the overall economy performs in general.  Furthermore, since a number of them supply to larger industries by way of parts, components or services, the performance of the large industry will also reflect on the MSMEs’ performance. The international scenario also is another factor to be reckoned. For example, the textile sector which has normally shown a fairly high growth over the years grew by only 7% last year due to a slowdown of demand. Although there is a slowdown, it is not like all MSMEs are affected.  There are certain sectors which have recorded 20-25% growth in 2011-12, for example, gems and jewellery, vehicle parts, transport equipment, engineering products, rubber, plastics and similar products, wood and wooden products and food processing.

Q: What is your loan growth target this fiscal?  According to you, which are the sectors driving loan growth in MSMEs?
A: Last year, we grew at about 17%. This year, too, we would be targeting a similar growth.  MSMEs actually is a very vast sector with more than 7,000 products. Within manufacturing, the growth sectors are the ones which are going to receive more finance as they would be in a position to absorb more debt. This would include engineering and machine tools, food processing and agro-based industry, auto components, textiles, ready-made garments, drugs and pharmaceuticals, among others. The services sector, which has emerged as a major component of the economy, would be another thrust area. Within services, sectors like healthcare, IT, business process and knowledge process outsourcing could be some of the areas that could be targeted. 

We would build appropriate financing models depending on the specific needs of individual sectors.

Q: What are your current fund-raising plans? Can you share with us your plans about the Rs5,000 crore tax-free bonds?
A: Invariably, every year we need to raise funds to meet the growing needs of the MSME sector.  This year, we would target anywhere between Rs12,000 crore to Rs15,000 crore and it could be slightly higher in case the growth is beyond our projected numbers. Part of this would come by way of tax-free bonds which have been allocated to us in the Budget, another part would come from international borrowing windows and the rest would be through market borrowings. We are awaiting the formal government approval with regard to the tax-free bonds and then, we would look at coming into the market in the second half of this year.

Q: Sidbi has partnered with Glocal Healthcare to set up corporate rural hospitals on PPP model.  How many more such rural hospitals do you plan to set up?
A: With Glocal Healthcare, we have a plan to help in setting up a chain of rural hospitals coming up on the periphery of district headquarters and try to provide state-of-the-art medical services at affordable rates. Today, against popular belief, the poorer class is willing to pay for quality services, but in an affordable range. If you look at these rural areas, outside the periphery of district headquarters, the cost of land or infrastructure comes down considerably, which also reduces the project cost. The number of hospitals being set up will depend on Glocal Healthcare’s business plan. Sidbi will participate in the project by investing through its venture capital arm.

Q: UK Government’s Department for International Development (DFID) had launched a private sector development programme named ‘Samridhi’ in India in partnership with Sidbi last calendar year to promote pro-poor investment in poorer states in India. Can you give us some update on that?
A: Some time back, DFID had come out with a tender to promote microcredit in the four poorest states in India i.e., Bihar, Madhya Pradesh, Uttar Pradesh and Orissa. This project was envisaged to provide finance to the poor and access to the market also. Sidbi was one of the many organisations worldwide which bid for the project, as a consortia. The Sidbi-led consortium was eventually awarded the project. The whole idea is to provide funding to the poor in these states by way of microfinance -- both through MFI and SHG models -- and build capacities of organisations which are involved in the entire chain of providing microfinance. The second side of the project is an impact investment programme, which we will be delivering through Sidbi Venture Capital (SVCL). 

The investments would be in socially relevant ventures which impact the poor at large.