Global Alliance for Mass Entrepreneurship (GAME) and Small Industries Development Bank of India (SIDBI) have joined forces to introduce the NBFC Growth Accelerator Program (NGAP). This collaborative initiative aims to address the funding challenges faced by micro, small, and medium enterprises (MSMEs) by focusing on capacity building for smaller Non-Banking Financial Companies (NBFCs). The program will primarily support NBFCs lending to MSMEs in tier two and tier three cities.
Challenges Faced by MSMEs:
Lack of access to capital and inadequate financing options have long been major hurdles impeding the growth of MSMEs. Financial institutions often struggle to provide affordable services due to high operational costs and difficulties in customer acquisition. Paradoxically, small NBFCs, which play a crucial role in funding MSMEs, face their own credit accessibility issues, with larger NBFCs securing the majority of available bank loans.
The Purpose of the NBFC Growth Accelerator Program:
The NGAP’s primary objective is to empower smaller NBFCs with significant exposure to MSMEs by enhancing their capabilities and increasing credit flow to this sector. By providing support in various key areas, the program aims to enable these NBFCs to overcome challenges and thrive.
Capacity Building for Smaller NBFCs:
NGAP will focus on capacity building for at least 100 smaller NBFCs with assets under management ranging from Rs 75 crore to Rs 250 crore. These NBFCs primarily serve micro and small businesses in tier two and tier three cities. Through the program, participants will receive guidance on managing compliances, raising funds from larger NBFCs, and leveraging technology to develop efficient lending platforms for unsecured MSME loans. This technological assistance is expected to reduce the cost of customer acquisition.
Execution of the Program:
GAME, the mass entrepreneurship enablement platform, will be responsible for executing the NBFC Growth Accelerator Program. Before expanding the initiative to other financial services players, a pilot phase will be conducted with 20 NBFCs to test and refine the program’s strategies. The full rollout of NGAP is anticipated in August 2023.
SIDBI’s Role and Empowering NBFCs:
SIDBI, the principal financing body for small enterprises, will play an anchoring role in the program. SIDBI’s support aims to empower NBFCs to address the unique needs of MSMEs effectively. By establishing an accelerator program, SIDBI recognizes the challenges faced by small NBFCs, including high borrowing costs that are subsequently passed on to their MSME customers. The collaboration between GAME and SIDBI seeks to provide the necessary capacity-building assistance to alleviate these challenges.