Credit and finance for MSMEs: Corporate debt solution company Yubi on Tuesday announced a partnership with the country’s largest bank State Bank of India (SBI) for the latter to integrate with its co-lending marketplace Yubi Co.Lend for credit to the priority sectors including small businesses. Yubi Co.Lend allows lenders to discover partners including non-banking financial companies (NBFCs), housing finance companies (HFCs) and fintechs, and collaborate with them to jointly disburse loans. The marketplace has facilitated the disbursal of over Rs 5,000 crore loans so far, registering more than 80,000 transactions per day, the company said.
Yubi said it will also build, manage and monitor SBI’s co-lending portfolio and ensure compliance as well. “This partnership has the potential to unlock $1 trillion in capital for Priority Sector Lending in Tier-2,3 and 4 cities, small enterprises, and farmers, which will go towards scaling their businesses, increased earning power, and the ability to create value for their communities and the country at large,” said Gaurav Kumar, Founder and CEO, Yubi.
Initiated by the Reserve Bank of India, co-lending provides a framework for collaboration between two financial institutions including a bank and an NBFC to jointly fund credit disbursals.
This arrangement makes the most of the strengths of both lenders by combining the low-cost fund of a bank with the local capabilities—sourcing and service experience of an NBFC—making it a win-win situation for all parties involved, the company said. On Yubi’s co-lending platform, SBI will be able to choose its co-lending partners, create its co-lending product programme, and digitally manage operations.
Importantly, SBI has been signing co-lending agreements with a number of financial institutions over the past few months including Vedika Credit Capital, Save Microfinance, Paisalo Digital, U GRO Capital, Capri Global Capital, Adani Capital, etc. The bank is also reportedly eyeing a retail loan book of Rs 10,000 crore for personal, MSME, and agriculture sectors through the co-lending model.
Co-lending as a model is expected to help address the challenge of lack of credit access faced by a number of MSMEs. According to the available data from SIDBI, the demand for MSME loans, which is measured as the number of commercial credit enquiries, as of Q4 FY22 grew 1.6 times the pre-pandemic levels (Q4 FY20). The MSME sector’s credit exposure grew to Rs 23.12 lakh crores during Q4 FY22, up from Rs 21.8 lakh crore in Q4 FY21 and Rs 20.2 lakh crore in Q4 FY20 with outstanding balances increasing across lender types.
Speaking at an event Global Fintech Festival recently, V. Anantha Nageswaran, India’s Chief Economic Advisor had noted that the lending potential for MSMEs will be about Rs 3 trillion by FY23 based on GST invoices and bank statements made available on account aggregator and banks adopting Open Credit Enablement Network.