The $500-million loan from the International Bank for Reconstruction and Development (IBRD), has a maturity of 18.5 years including a 5.5-year grace period. According to the World Bank, over 90 per cent MSMEs in India have less than five workers.
Less than a year after the World Bank made its first intervention with the $750 million MSME Emergency Response Program to help Covid-hit MSMEs in India, the global financial institution has now approved a $500 million programme called Raising and Accelerating Micro, Small and Medium Enterprise Performance (RAMP) to further back government’s initiative to help the sector recover from the Covid menace. According to a statement by the World Bank, RAMP aims improvement in the performance of 5.55 lakh MSMEs and is likely to mobilise financing of $15.5 billion as part of the government’s $3.4 billion MSME Competitiveness – A post-Covid Resilience and Recovery Programme (MCRRP).
With RAMP, “the World Bank’s financing for improving the productivity and financial viability of MSMEs amounts to $1.25 billion over the past year,” the statement released on Friday added. Moreover, the programme will support the government’s efforts to enhance the productivity of MSMEs 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 restricting MSMEs’ growth. Under last year’s MSME Emergency Response Program, 5 million MSMEs have accessed finance from the government programme, as of June 4, 2021. According to the World Bank, over 90 per cent MSMEs in India have less than five workers.
“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 $500 million loan from the International Bank for Reconstruction and Development (IBRD), has a maturity of 18.5 years including a 5.5-year grace period.
Along with its private sector arm International Finance Corporation (IFC), the World Bank Group will back MSMEs by setting up an MSME Council for better coordination between national and state-level programmes. “State level Strategic Investment Plans (SIPs) will provide a roadmap and measurable metrics; enhance the capacity of the MSME ministry to design, implement and assess policies and programs through innovative digital platforms data systems,” the bank added. Moreover, it would support integrated portals to deliver online cost-effective MSME services at scale and create a more decentralized, flexible, and cohesive programme to address the local context and challenges to MSME growth. The programme will provide access to finance and working capital for MSMEs by “strengthening the receivable financing markets, and scale-up online dispute resolution mechanisms to address the problem of delayed payments.”
“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 programme.