SBI prefers co-origination lending to MSMEs: Khara

The State Bank of India (SBI) will prefer the co-origination model to cater to the financing needs of MSMEs and collaboration with fintechs is a good idea as it helps in assessing the risk profile of the borrower in a better manner, chairman Dinesh Kumar Khara said on Saturday.

Pointing out that the Micro, Small and Medium Enterprises (MSMEs) were constrained today in terms of cash flows, time gap in realising receivables, among others, and also the level of lenders’ confidence in funding them, Mr. Khara said collaborating was a better model than lending directly to MSMEs.

“The fact of the matter is that today not many NBFCs have come in this space,” Mr. Khara said.

‘“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,” he added. Based on that assessment, Mr. Khara said, bankers felt very comfortable in lending to the MSMEs.

Mr. Khara was speaking at a webinar on ‘financing the unfinanced’, organised by the Global Alliance for Mass Entrepreneurship (GAME).

“There could also be another option of financing based on the cash flow and not on the basis of balance sheet because very often it is observed that the balance sheet and the financial statement are not available in a form which is expected by any banker,” he added.

Also, there was a broad spectrum of MSMEs in the country that worked in a host of areas and often the kind of financial information coming from them was not very organised, the chairman explained.

‘Fully organised data’

“So, to the extent where the data is fully organised, which is more like any other large corporate, it is the kind of spectrum which SBI is engaging with,” he said.

“So, for different levels of maturity of MSMEs, the comfort level with the bank also differs,” he said.

“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 ₹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],” Mr. Khara said. He further said that SBI was looking at this kind of a spectrum in financing the small businesses.

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