PFIs must use DBG Loans to finance eligible, viable, and creditworthy MSMEs and small corporates operating in the eligible sectors – agribusiness, manufacturing, and high-value services.

PFIs will determine the viability and creditworthiness of MSMEs and small corporates using their own underwriting criteria and processes. They will also make all credit decisions and retain the full credit risk of lending to eligible borrowers.

DBG will ascertain the eligibility of the sub-loans provided by PFIs to ensure that they meet the project requirements, but it will not conduct its own underwriting of sub-loans or subprojects.

The allocation limits must be met at the portfolio and not PFI level (i.e., DBG lending to certain PFIs can deviate from the thresholds as long as the thresholds are met at portfolio level).

The minimum eligibility criteria for MSMEs and Small Corporates to be financed under the project are:

• Majority private ownership (private ownership more than 50 percent);
• Properly registered as a legal entity (e.g., sole proprietorship, partnership, limited liability company, etc);
• Registered with the tax authorities and, if applicable, be duly licensed with the respective licensing authority for the relevant sector.
• Financially viable, as determined by the PFI.

Additionally, eligible MSMEs and Small Corporates must use the sub-loans to finance investment and working capital needs of projects/activities that are:

• in eligible sectors – agribusiness, manufacturing, and high-value services;
• financially viable, as determined by the PFI;
• compliant with the project’s environmental and social requirements;