The World Bank has approved a $500 million scheme to help India’s MSME sector grow

The World Bank has approved a $500 million scheme for the MSME sector

The World Bank’s Board of Executive Directors has approved a USD 500 million programmes to help India’s statewide push to revive the MSME sector, hit hard by the COVID-19 issue.

According to a statement released last Friday, the programme aims to improve the performance of 555,000 MSMEs. It is estimated to raise USD 15.5 billion in funding as part of the government’s USD 3.4 billion MSME Competitiveness Post-COVID Resilience and Recovery Programme – MCRRP.

The World Bank’s second intervention in this sector is the USD 500 million Raising and Accelerating Micro, Small and Medium Enterprise Performance  Program, which follows the USD 750 million MSME Emergency Response Program, which was approved in July 2020 to address the immediate liquidity and credit needs of millions of viable MSMEs severely impacted by the ongoing COVID-19 pandemic.

“To date, 5 million businesses have taken advantage of the government’s financing scheme. With today’s approval, the World Bank has committed USD 1.25 billion to strengthen the productivity and financial viability of the MSME sector over the past year “According to the release.

“After supporting the immediate liquidity and credit needs of viable MSMEs in the first phase, the RAMP Program will now support the Government of India’s efforts to increase MSME productivity and financing during the economic recovery phase, crowd in private sector financing in the medium termThe World Bank has approved a $500 million scheme to help India's MSME sector grow, and address long-standing financial sector issues that are stifling MSME growth,” it added.

According to the press release, the MSME sector is the country’s economic backbone, accounting for 30% of GDP and 40% exports. More than 40per cent of India’s 58 million MSMEs does not have access to official financing.

“The Covid-19 pandemic has wreaked havoc on India’s MSME sector, which is a vital backbone of the economy,” said Junaid Ahmad, World Bank Country Director in India. “The RAMP initiative will step up efforts to assist enterprises in returning to pre-crisis levels of production and employment while establishing the groundwork for longer-term productivity-driven growth and job creation in the MSME sector.”

By enhancing receivable financing markets, the RAMP initiative will improve MSMEs’ access to finance and operating capital and scale up online dispute resolution procedures to address the problem of late payments. Such initiatives are expected to boost the programmes’ cost-effectiveness, quality, accessibility, impact, and reach.

“The MSME sector in India is confronted with a number of issues. Access to formal financial and non-financial services, notably for women-led MSMEs, must be improved, as must cooperation between national and state MSME support programmes. Direct interventions can be prohibitively expensive due to the volume and geographic distribution of the problem across the country “According to Peter Mousley, the program’s Lead Private Sector Specialist and Task Team Leader at the World Bank.

“The RAMP initiative will contribute to the Government’s MCRRP goal of offering a more comprehensive and integrated Centre-State approach to boost MSME sector productivity, close the gender gap, and promote more ecologically sound investments,” according to the government.

The International Bank for Reconstruction and Development (IBRD) loan, worth USD 500 million, has a maturity of 18.5 years, with a 5.5-year grace period.


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