Maharashtra Sees Larger NBFC Role In MSME, Climate And Transition Finance

Mumbai, Oct 31 (KNN) Non-banking financial companies (NBFCs) could play a larger role in financing Maharashtra's micro, small and medium enterprises (MSMEs), as well as emerging areas such as climate and transition finance, by leveraging technology and new risk-sharing mechanisms, said Aman Mittal, Joint CEO, Maharashtra Institution for Transformation (MITRA).

Mittal said the state's ambition to become a USD 1 trillion economy would require substantial private investment, with public sources expected to contribute only a small share of the overall requirement.

He identified strengthening resilience in the MSME sector and improving credit access for businesses with difficult-to-quantify risks as key challenges, reported The Economic Times.

NBFCs could help address these gaps because they are better positioned to operate in niche segments and understand risks that traditional banking models may find difficult to underwrite, he said.

Data-Led Lending To Improve MSME Credit Access

Mittal outlined efforts to develop state business registers and vulnerability maps that could provide lenders with better-quality information on businesses, industries and associated risks.

The objective is to make relevant non-personal public data accessible to financial institutions, enabling them to assess borrowers more effectively and support targeted lending.

Such data infrastructure could help lenders identify businesses that may otherwise struggle to access formal credit because of limited information or risks that are difficult to assess through conventional methods.

Technology And Risk-Sharing Mechanisms

Mittal also highlighted the potential of parametric insurance, tokenisation and smart contracts to pool and transfer risks, reduce dependence on physical collateral and improve access to capital for MSMEs.

These mechanisms could become particularly relevant in financing climate-related investments and the transition requirements of businesses, he said.

By enabling new ways to assess, distribute and manage risk, such instruments could help financial institutions develop products for segments that remain underserved by conventional lending models.

NBFCs Urged To Explore Emerging Finance Opportunities

Mittal urged NBFCs to look beyond conventional lending opportunities and explore transition finance, innovative financial products and risk-pooling mechanisms as India's credit requirements expand.

He said technology-enabled lending and improved risk-sharing arrangements could help mobilise private capital for MSMEs while supporting Maharashtra's broader economic and development ambitions.

(KNN Bureau)