World Bank Offers $750 million Emergency Response Fund for Indian MSME Sector

The money will aid MSMEs in withstanding the impact of the economic downturn and preserve various jobs
  • BY Jaspreet Kaur

    Feature Writer, BusinessEx

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  • Jul 01,2020
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  • 9 Mins Read

The Indian economy is battered while fighting back with the pandemic. Lockdown that was held initially to control pandemic has degraded the business environment. Broken alliances and trust of foreign players have also taken away various business deals. Currently, small and medium-sized companies are striving to stay buoyant.  

Seeing this condition, the World Bank has lately approved a $750 million loan to uphold increased flow of finance to the country's micro, small, and medium enterprises (MSMEs) that is badly impacted by pandemic, reported Business Standard.

The World Bank is offering money under the MSME Emergency Response program. Through this program, the World Bank focuses on addressing the immediate liquidity and credit requirements of around 1.5 million fully operational MSMEs. The money will aid MSMEs in withstanding the impact of the economic downturn and preserve various jobs. This move has taken the World Bank's commitment to $2.75 billion to aid the country’s emergency Covid-19 response.

The World Bank has given financial aid to the country in three tranches. In the first tranche, it gave $1 billion emergency support to the Indian healthcare segment. While the second portion was offered in May to enhance cash transfers and food benefits to the poor and vulnerable people, encompassing a more solidified delivery platform that is accessible to rural as well as urban demographic beyond geographical boundaries of the states. 

The World Bank in its official statement said that the organisation wants to amalgamate MSME infrastructure which is considered to be the core of the Indian economy. 

"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," Junaid Ahmad, World Bank Country Director in India, said in the organisation's official statement.

"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," Ahmad added. 

The World Bank in collaboration with private arm, International Finance Corporation (IFC) will uphold India’s initiatives to safeguard MSME sector by facilitating surged liquidity, reinforcing NBFCs and SFBs. The association will also try to encourage financial innovations. The aid in the financial digital services and fintech industry will intensify digital payment systems along with transforming the country into a cashless economy. 

 

The official statement also informed that the credit loan given from the International Bank for Reconstruction and Development (IBRD), holds a maturity of 19 years including a 5-year grace period.

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