SBI to prefer co-origination models of lending to MSMEs, says chairman
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State Bank of India (SBI) on Saturday said it will prefer the co-origination model to cater to the financing needs of MSMEs and collaborate with fintechs as it helps in assessing the risk profile of the borrower in a better manner.

Pointing out that the Micro, Small and Medium Enterprises (MSMEs) are constrained today in terms of cash flows, time gap in realising receivables, among others and also the level of lenders' confidence in funding them, SBI Chairman Dinesh Kumar Khara said, “Collaborating is a better model than lending directly to MSMEs.”

"The fact of the matter is that today not many NBFCs have come in this space. When it comes to finding solutions, we feel that apart from lending directly to the MSMEs, collaborating with NBFCs along with the biggest fintechs with ability to process the structured and unstructured (financial) data twill give a better sense in terms of assessment of risk," he adds.

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

According to the SBI Chairman, another option of financing could be 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.

Also, there is a broad spectrum of MSMEs in the country which work in a host of areas but often the kind of financial information coming from them is not very organised. Organised data comes from large corporates and it is the kind of spectrum SBI is engaging with, Khara explained.

“The country's largest lender will be happy to deal with the intermediary players in the financing business and may be we can help such intermediary players by buying out their portfolio as well. The recently launched scheme where banks can also finance some kind of sweat equity is also another option,” he added.

He said banks need to have enough confidence into various models of the MSMEs and also the commitment level of such entrepreneurs.

Only then perhaps it will enhance the comfort for any bank and they will be in a position to support the sweat equity kind of requirements.

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