MSMEs to get loan worth $750 million from World Bank; deal signed to meet immediate cash requirements

The World Bank’s relief programme will address the immediate credit requirement to help MSMEs withstand the impact of the current shock.

Credit and Finance for MSMEs: In a major relief to MSMEs, the World Bank will provide loans worth $750 million to nearly 1.5 lakh micro, small, and medium enterprises in India. The World Bank and the Indian government have today signed the agreement for the MSME Emergency Response Programme to support increased flow of finance into the hands of MSMEs, which are severely impacted by the coronavirus crisis. The World Bank’s relief programme will address the immediate credit requirement to help MSMEs withstand the impact of the current shock and protect millions of jobs, said a statement by the Ministry of Finance.

Highlighting the government’s focus on ensuring sufficient liquidity in the market, Sameer Kumar Khare, Additional Secretary, Department of Economic Affairs, said that today’s move will support the government in providing targeted guarantees to incentivize NBFCs and banks. He added that the move will also help the financial institutions to continue lending to viable MSMEs and help them sustain through the crisis. He further noted that the coronavirus pandemic has severely impacted the MSME sector, leading to loss of livelihoods and jobs.

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The World Bank will help the government by unlocking liquidity; strengthening NBFCs and SFBs; and enabling financial innovations. So far, the World Bank has committed $2.75 billion to support India’s emergency COVID-19 response, including the new MSME project. The first tranche of $1 billion emergency support was announced in April this year for immediate support to India’s health sector, another project of $1 billion was approved in May to increase cash transfers and food benefits to the poor and vulnerable, and now $750 million loan has been approved for lifting the MSME sector.

Meanwhile, in the Atma Nirbhar Bharat package announced by Prime Minister Narendra Modi, the government pledged to provide government-backed guaranteed loans of Rs 3 lakh crore. The definitions of MSMEs have also been modified to help them reap more benefits from the government’s relief measures. However, the MSMEs are still struggling to keep their businesses stand in the times when there are less liquidity support and subdued demand in the market.