Small Industries Development Bank of India
Financial Inclusion Programmes
S. Muhnot, Chairman & Managing
Director
December 05, 2011
Thimphu
1
Financial Inclusion
Financial Inclusion is the process of ensuring access to
appropriate financial products and services needed by all
sections of the society in general and vulnerable groups
such as weaker sections and low income groups in
particular at an affordable cost in a fair and transparent
manner by mainstream institutional players.
2
Financial Inclusion
 Twin Aspects of Financial Inclusion - Financial Inclusion and Financial
Literacy are twin pillars. While Financial Inclusion acts from supply side
providing the financial market/services what people demand, Financial
Literacy stimulates the demand side – making people aware of what they
can demand.
Financial Literacy
&
Financial Inclusion
Demand Side
Supply Side
Financial Literacy & Credit Counseling Centres
Credit Absorption Capacity
Knowledge of products
Need for total products & services
Financial Markets , Banks &
Services
Appropriate Design of
products & services
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Extent of Financial Inclusion -India
 In India, around half of the country is banked.
 Approx. 55 per cent of the population have deposit
accounts and 9 per cent have credit accounts with banks.
 There is one bank branch per 14,000 people.
 Around 20% of the population have life insurance and
9.6% of the population have non‐life insurance coverage.
4
Financial Inclusion – The Indian Way
 Board approved Financial Inclusion Plans (FIPs) of banks for 3
years, starting April 2010.
 Roadmap to cover villages of above 2000 population by March
2012
 Availability of minimum four banking products through
Information Communication Technology (ICT) model has been
ensured .
 Mandatory opening of 25 % of new branches in unbanked rural
centers.
 Know Your Customer (KYC) documentation requirements
significantly simplified for small accounts.
 Pricing for banks totally freed . Interest rates on advances and
deposits totally deregulated.
5
Financial Inclusion – Models and Activities
Business Facilitator
(BF) –
NGOs, Farmer Clubs, Community
based organisations, Co-operative
Societies, Panchayats, IT enabled
rural outlets of Co-operative
Entities
• Identification of borrower
• Collection and verification of
primary information
• Processing and submission of
application to banks
• Monitoring and Follow-up
• Educating about savings, other
products, debt counseling
Business Correspondent
(BC) –
Section 25 companies, NBFC not
accepting deposit, Post Offices,
NGO MFIs under
Societies/trusts, MACS
All activities of BF
+
•Collection of small value deposits
•Enabling withdrawals
•Sale of other financial products
•Receipt
and
delivery
of
remittances / payment instruments
•Disbursal of small value credit and
recovery of principal and interest in
a limited way
6
Micro Credit as a tool for Financial Inclusion

Demand (overall)

Potential
market:
77
mn.

Supply (overall)

Two major channels
Households



Small Industries Development Bank of
Estimated annual micro credit
India (SIDBI) pioneered Microfinance
demand: USD 18 bn to 27 bn.
Institutions (MFI) lending channel

Demand for other services: USD
SHG-Bank
Linkage
Programme
pioneered by National Bank for
2.43 bn.
Agriculture and Rural Development
(NABARD)

These twin channels have total size of
around USD 10bn. serving 120 mn
clients
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SIDBI – An Apex Financial Institution




Constitution
 Set up under an Act of Parliament - April 1990
 Initially carved out as a wholly owned subsidiary of IDBI
 Subsequently made autonomous in 2001
Mandate
 Promotion, financing and development of SSIs (now Micro Small and
Medium Enterprises (MSMEs) Co-ordinate the functions of
institutions serving the sector.
Shareholding
 Authorized – USD 222 Mn / Paid-up – USD 100 Mn
 Shares held by 35 GoI owned / controlled Banks and FIs
Structure
 Head office at Lucknow
 6 Zonal offices
 100 Branches across all the states, catering to 580 clusters
8
Role of SIDBI
Supply
side
Activities
–
Microfinance
• Help transform NGOs/Societies etc.
Demand Side – Promotional
Developmental Activities
&
•
Enterprise promotion programmes
•
Skill-cum-Technology
to more regulated entities.
• Associated with more than 150
Programme
MFIs
• Introduced the concept of rating of
•
MFIs
• Term loans
• Equity / Quasi Equity
• Capacity Building Grants
Upgradation
Cluster
Development
Programme
(CDP)
•
Entrepreneurship
Development
Programme (EDPs)
9
Phases of Microfinance Programme of SIDBI - Learning
Exploratory Phase
Growth Phase
Responsible Lending
Achievements
Achievement
Alternate credit
delivery channel
Successful Implementation of
National Microfinance
Support Programme
Need based products
Achievements
Lenders Forum
Code of conduct
assessment
Operational & Financial
Sustainability of MFIs
Capacity Assessment Rating
Learning
Learning
Perceived high risk
Need for Capacity
Building support
Collateral free
assistance
Learning
Need for regulation
Transparency
Governance
Client focused
strategies
Rope in more
stakeholders
10
Promotional & Developmental Initiatives
Rural Industries Programme (RIP)
Achievement
Approach
Implementing agencies (IAs) are identified in the
districts selected for carrying out RIP.



The IA is required to open a field office in the
identified district and position one or two facilitators
dedicated to the implementation work.
The identified provides various professional services
necessary including bank linkage for setting up of tiny
enterprises. Costs of IA include success fee.

Implemented in more than 100
districts in 24 states
More
than
33000
units
promoted;
Capital formation - over USD 22
Mn
Employment generation -more
than 0.1 million persons.
Target group -potential entrepreneurs in the
rural areas.
Focus - value-addition with a view to facilitate
promotion of sustainable rural enterprises.
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Addressing the Missing Middle
(> USD 1000 upto USD 20,000)
Micro Enterprise Strengthening


Downscaling Project
 to develop tools to assess cash flows of the borrowers who generally
do not have formal financial data/information
 validate such information through cross verification
 standardize the methodology for use on a larger scale among
different categories of borrowers in the segment.
The project also developed a credit scoring tool contextualized to the
Indian missing middle segment and risk monitoring formats, etc. to
monitor the portfolio quality and its performance over a period.
12
SIDBI’s – Umbrella Network
One Stop Solution for MSME sector
Improve flow of
Credit to MSMEs
Credit Plus
Approach
Associate organizationsSpecialized functions
Refinance
Entrepreneurship
/ Enterprise
promotion
SVCL- Venture
Capital
Structured
Products
Credit delivery
models
SMERA- Credit
Rating- Green
Rating
Business
Development
Services
CGTMSE – Credit
Guarantee- RSF
Missing Middle –
Downscaling
ISTSL-Technology
Transfer-pCDM
Direct Credit
•Risk Capital
•Sustainable
Finance
Micro finance
•Nurturing
MFIs
ISARC – Asset
Reconstruction
13
SIDBI – Products & Services
DIRECT
FINANCE
RISK
CAPITAL
REFINANCE
WORKING CAPITAL
FINANCE
SIDBI
RECEIVABLE
FINANCE
MICRO
CREDIT
TECHNOLOGY
UPGRADATION,
CLUSTER
DEVELOPMENT
PROMOTIONAL &
DEVELOPMENTAL
ACTIVITIES
14
THANK YOU
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