Christ Yoder
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The World Bank on Wednesday approved a $750 million loan to support increasing the flow of finance into the hands of India’s micro, small and medium-sized enterprises (MSMEs), badly affected by the Covid-19 crisis.
The World Bank’s MSME Emergency Response Program will aim to meet the immediate liquidity and credit needs of some 1.5 million viable MSMEs to help them weather the impact of the current shock and protect millions of jobs. This brings the World Bank’s total commitment to $2.75 billion to support India’s emergency response to Covid-19.
The first $1 billion emergency aid was announced in April this year for immediate support to India’s health sector. Another $1 billion project was approved in May to increase cash transfers and food delivery to the poor and vulnerable, including a more consolidated delivery platform – accessible to rural and urban populations across borders States.
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In a statement, the World Bank said the organization seeks to shore up the infrastructure of MSMEs which it sees as the backbone of India’s economy. “The MSME sector is at the heart of growth and job creation in India and will be key to the pace of India’s economic recovery from Covid-19. The immediate need is to ensure that the cash injected into the system by the government is accessible to MSMEs. It is equally important to strengthen the overall financing ecosystem for MSMEs,” said Junaid Ahmad, Country Director of the World Bank in India. “This operation aims to achieve both of these objectives by strengthening the role of NBFCs and SCBs as effective financial intermediaries and leveraging fintech to expand the reach of finance in the MSME sector.”
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The Bank, in association with its private sector arm – the International Finance Corporation (IFC), will support government initiatives aimed at protecting the MSME sector by helping to increase liquidity, strengthening NBFCs and SFBs and will also seek to to encourage financial innovations. Aid in fintech and financial digital services will help deepen the digital payment system and drive India towards a cashless economy.
The statement added that the $750 million loan from the International Bank for Reconstruction and Development (IBRD) has a maturity of 19 years, including a 5-year grace period.
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