The World Bank’s Board of Executive Directors has approved a 500 million dollars program to support the Government of India’s nationwide initiative to revitalize the MSME sector, which has been heavily impacted by the COVID-19 crisis.
The program targets improvements in the performance of 555,000 MSMEs and is expected to mobilize financing of 15.5 billion dollars, as part of the government’s 3.4 billion dollars MSME Competitiveness – A Post-COVID Resilience and Recovery Programme (MCRRP).
”To date, 5 million firms have accessed finance from the government program. With the program approved today, the World Bank’s financing towards improving the productivity and financial viability of the MSME sector amounts to 1.25 billion dollars over the past year,” the world bank said in a statement.
”Having supported the immediate liquidity and credit needs of viable MSMEs in the first phase, the RAMP Program will support the Government of India’s efforts to increase MSME productivity and financing in the economic recovery phase, crowd in private sector financing in the medium term, and tackle long-standing financial sector issues that are holding back the growth of the MSME sector,” it added.
The MSME sector is the backbone of the country’s economy, contributing 30 per cent of India’s GDP and 40 per cent of exports. Out of some 58 million MSMEs in India, more than 40 per cent lack access to formal sources of finance.
”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 MSME sector in India faces several challenges. There is a need to strengthen access to formal sources of financial and non-financial services, including of women headed MSMEs, and strengthen coordination in the national and state MSME support programs. Given the magnitude and geographical spread across the country, direct interventions can be prohibitively costly,” said Peter Mousley, Lead Private Sector Specialist and World Bank’s Task Team Leader for the program.
“The RAMP program will support the Government’s MCRRP objective of providing a more comprehensive and coordinated Centre-State approach to improve MSME sector productivity, reduce the gender gap, and promote more environmentally sustainable investments,” he added.
The 500 million dollars loan from the International Bank for Reconstruction and Development (IBRD), has a maturity of 18.5 years including a 5.5-year grace period.