Sustainable Finance Scheme (SFS)

SIDBI has introduced a new scheme called the Sustainable Finance Scheme for funding sustainable development projects that contribute energy efficiency and cleaner production but not covered under the international or bilateral lines of credit. All sustainable development projects such as renewable energy projects, Bureau of Energy Efficiency (BEE) star rating, green microfinance, green buildings and eco-friendly labelling, etc. are applicable for the scope of this scheme. Moreover, financial assistance has been provided to Energy Service Companies (ESCOs) and Original Equipment Manufacturers (OEMs) that are engaged in the manufacturing energy efficient and cleaner production equipment.

Objective of the Scheme

The following are the main goals of the Sustainable Finance Scheme.

According to the definition laid down by the MSMED Act 2006, new/ existing MSME units would be eligible for assistance under the scheme.
Existing units must have a satisfactory track record of the past performance and sound financial position and should not be in default to institutions/ banks.
The units should have a minimum credit rating of investment grade or its equivalent according to the internal credit rating model.
Renewable energy projects such as solar power plants, wind energy generators, mini hydel power projects, biomass gasifier power plants, etc. for captive/ non-captive use.
Any potenatial CP investments that include waste management.
Suitable assistance to OEMs that manufacture energy efficient/ cleaner production/ green machinery/ equipment. Further, the OEM has to be an MSME, or it has to supply its products to a substantial number of MSMEs.

Scheme Overview

The scheme develops the entire value chain of energy efficiency (EE)/ cleaner production (CP) and sustainable development projects that lead to necessary improvements in EE/ CP/ sustainable development in the MSMEs that presently not covered under the viable financing lines of credit.

Rate of Interest

The rate of interest applicable would be the standard lending rate by the credit rating of MSMEs.

Activities Eligible for Assistance

Here are the activities that are eligible for assistance by the scheme.

Renewable energy projects such as solar power plants, wind energy generators, mini hydel power projects, biomass gasifier power plants, etc. for captive/ non-captive use.
Any kind of potential CP investment that includes waste management.
Green microfinance that offers microloans that are up to Rs. 5 lakh to micro enterprises for green/ energy efficient equipment measures.
Expenditure on energy sudit/ environment compliance audit/ pollution control and management consutancy services.
The expenditure made on green rating, eco-friendly labelling, BEE star rating, etc.
ISO 50001/ 14000 or other accredited energy/ environmental certification.
CDM registration about expenditure.
Suitable assistance to OEMs that manufacture energy efficient/ cleaner production/ gree machinery/ equipment. The aid could be made either in the form of Deferred Payment Guarantees, Channel Partner/ Referral arrangement, etc. Either the OEM has to be an MSME, or it has to supply its products to a substantial number of MSMEs.

Eligibility Criteria

The acceptable standards for this scheme are as follows.

Renewable energy projects like solar power plants, wind energy generators, mini hydel power projects, biomass gasifier power plants, etc. for captive/ non-captive.
Any potential CP investments that include waste management.
Suitable assistance to OEMs that manufactures energy efficient/ cleaner production/ green machinery/ equipment. Either the OEM has to bean MSME, or it has to be supplying its products to a substantial number of MSMEs.

Fiscal Incentives

Suitable assistance using term loan or working capital is granted to the ESCOs that implements EE/ CP/ Renewable Energy Project. To be eligible for this grant, the ESCO must be an MSME or otherwise the unit to which it renders its services has to be an MSME.

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Frequently Asked Questions

Common questions about Sustainable Finance Scheme for MSMEs.

The Sustainable Finance Scheme (SFS) is a new scheme introduced by SIDBI (Small Industries Development Bank of India) to provide funding for sustainable development projects that contribute to energy efficiency and cleaner production. It covers projects that are not eligible under international or bilateral lines of credit.

Projects eligible for funding under the SFS include renewable energy projects (solar, wind, mini-hydel, biomass gasifiers), waste management investments, green microfinance, green buildings, eco-friendly labeling, and energy-efficient equipment manufacturing by OEMs (Original Equipment Manufacturers) catering to MSMEs.

New or existing MSME (Micro, Small, and Medium Enterprises) units as defined by the MSMED Act 2006 are eligible to apply for assistance under the SFS. Existing units must have a satisfactory track record, sound financial position, and no defaults to banks or institutions.

The units applying for assistance under the SFS should have a minimum credit rating of investment grade or its equivalent according to the internal credit rating model used by SIDBI.

Eligible activities include renewable energy projects for captive or non-captive use, cleaner production investments (including waste management), green microfinance (up to Rs. 5 lakh for micro enterprises), energy audits, environment compliance audits, pollution control consultancy, green rating/labeling, BEE star rating, ISO 50001/14000 certification, and CDM registration expenditure.

Yes, OEMs manufacturing energy-efficient, cleaner production, or green machinery/equipment are eligible for assistance under the SFS. However, either the OEM has to be an MSME or it should be supplying its products to a substantial number of MSMEs.

The SFS provides assistance in the form of term loans, working capital, deferred payment guarantees, channel partner arrangements, or referral arrangements, depending on the project and the applicant's eligibility.

The interest rate applicable under the SFS is the standard lending rate determined by SIDBI based on the credit rating of the MSME unit.

Yes, ESCOs implementing energy efficiency, cleaner production, or renewable energy projects are eligible for assistance under the SFS, provided they are MSMEs or rendering services to MSME units.

The SFS offers suitable assistance in the form of term loans or working capital to ESCOs implementing energy efficiency, cleaner production, or renewable energy projects, subject to the condition that the ESCO is an MSME or the unit it serves is an MSME.