World Bank Confirms a $500 million Program for Indian MSMEs Enterprises

The loan taken from the International Bank for Reconstruction and Development (IBRD) is said to have a maturity period of 18.5 years, including a grace period of 5.5 years. 

The World Bank has approved a $500 million loan program in favor of Indian MSMEs(Micro, Small, and Medium Enterprises) to increase the liquidity access crunch created by the ongoing COVID-19 pandemic in the country.

Reportedly, the loan has been approved by the World Bank’s Board of Executive Directors in support of the Government of India’s country-wide initiative to boost up the MSME sector, hugely impacted by the COVID-19 crisis.

The program targets to support and improve the performances of 555,000 MSMEs and is expected to allocate financing of $15.5 billion as part of the government’s $3.4 billion MSME Competitiveness – A Post-COVID Resilience and Recovery Programme (MCRRP).

The MSME sector is the core of the Indian economy, contributing approx. 30% of the country’s GDP and holds around 4% of the total exports. With so much potential, more than 40 percent of the MSMEs lack access to formal financing currently. The total number of MSMEs stands at 58 million in India.

The $500 million RAMP, which is explained as the Raising and Accelerating Micro, Small and Medium Enterprise (MSME) Performance program, is the second intervention of the World Bank for the MSME sector in the country. In addition, a $750 million assistance was approved in July 2020 as the MSME Emergency Response Program for assisting the immediate liquidity and credit crunch caused by the ongoing COVID-19 situation in the country. To date, around 5 million firms have taken advantage of financing from the government program. 

With its new loan sanction, the World Bank’s total loan amount reached $1.25 billion in the past year.

"The MSME sector, a critical backbone of India’s economy, has been hard hit by the Covid-19 pandemic; the RAMP program will intensify efforts to support firms to return to pre-crisis production and employment levels while laying the foundations for longer-term productivity-driven growth and generation of much-needed jobs in the MSME sector," said Junaid Ahmad, World Bank Country Director in India.

The RAMP program is aimed at supporting the arising liquidity crunch while addressing the credit needs of viable MSMEs with a broader vision to support the Government of India’s efforts to boost MSME productivity and financing in the economy in the post-COVID recovery phase, uncrowded in the private sector financing in the medium term, and tackle the long-term financial issues that are hindering the glorious paths of the MSME sector in India.