Highlights:
- World Bank approves $ 750 million for facilitating credit finance for MSMEs in India
- MSME in India contribute to 30% of India;’s GDP and 40% of the exports
- The MSME sector is facing severe stress due to the COVID-19 outbreak
The World Bank has approved $ 750 million for the support and increase the flow of finance into the accounts of the Micro, Small and Medium Enterprises (MSMEs) in India which has been severely affected by the novel Coronavirus outbreak.
The package from the World Bank will aid the MSME package which was announced by the Government of India (GOI) under the self-reliance Indian programme or the AtmaNirbhar Bharat Yojna.
In a statement, the World Bank said, “The World Bank’s MSME Emergency Response program will address the immediate liquidity and credit needs of some 1.5 million viable MSMEs to help them withstand the impact of the current shock and protect millions of jobs,”.
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The MSME sector in India contributes to 30% of the GDP of the country along with 40% of all the exports and is facing huge stress as of now. The MSME sector employees anywhere between 150 million to 180 million or 15 crore to 18 crore people is now under the pressure from the cancelled orders, loss of customers and supply chain disruption which has forced the revenues to take a nosedive.
The shortage in cash flow is worsened by the limitations on access to finance which has put a cloud of potential insolvency problems. The pan-industry loss of cash flow has triggered a chain of non-payments throughout the economy which has not even left the financial sector out of its reach.
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World Bank Country Director in India, Junaid Ahmad said, “The MSME sector is central to India’s growth and job creation and will be key to the pace of India’s economic recovery, post COVID-19. The immediate need is to ensure that the liquidity infused into the system by the government is accessed by MSMEs. Equally important is to strengthen the overall financing ecosystem for MSMEs,”.
He added, “This operation seeks to achieve both these objectives by furthering the role of NBFCs and SCBs as effective financial intermediaries and leveraging fintech to broaden the reach of finance into the MSME sector.”
As of now, the World Bank has committed $ 2.75 billion or more than Rs. 20,000 crore to support India’s emergency COVID-19 response which includes this new MSME package of $ 750 million.
The initial $ 1 billion or over Rs. 7,550 crore emergency support was announced in April for the immediate support for the healthcare sector of the country. Following this, another $ 1 billion was pumped in in May to facilitate cash transfers and food benefits to the vulnerable and the poor including a better-unified delivery platform which was accessible to both urban and rural population in the country.
The $ 750 million in loan for the MSME sector in India from the International Bank for Reconstruction and Development (IBRD) will have a maturity of 19 years which includes a grace period of 5 years.
