Last week, the World Bank approved over $ 750 million as part of the World Bank’s MSME Emergency Response Program to help the Indian MSME sector financially and ensure liquidity to the sector.
The World Bank’s MSME Emergency Response Program carries:
- An overall $ 2.75 Billion to support India’s emergency COVID 19 response including the MSME project.
- $1 billion is expected to help finance India’s health sector and another $1 billion will be used to help cash transfers and provide food and necessities using a consolidated delivery system.
What does the World Bank’s MSME Emergency Response Program hope to achieve?
Here are 5 key factors your business should know about the $750 million emergency response program by the World Bank:
Empowering Small Finance Banks
The $750 million MSME Emergency Response program from the World Bank will strengthen financing capacity for NBFCs and small finance banks that run low on funds during a national pandemic. The World Bank will support SFBs through loans and equity.
A New ‘Self-Reliant’ India
Recently, the Government banned over 60 Chinese apps. It has also promoted ‘Make in India’ and ‘Vocal for Local’ to help MSMEs bounce back.
The World Bank’s scheme aims to push these schemes into effect. The organisation’s loans will help different sectors r(new and established) restart production, shipping and distribution of Indian goods and services, all made within the country.
“ 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,” said Junaid Ahmad, World Bank Country Director in India.
Opening doors for financial innovation
As per the World Bank Press release, only 8% of Indian MSMEs get access to secure credit. The emergency response program will ensure a rapid increase in digital lending and payment platforms for MSMEs to gain better credit.
Enable and increase production in the healthcare sector
The World Bank’s emergency $750 million will help push businesses in the health sector increase production and supply to the Government.
Immediate Credit Needs for MSMEs –
The World Bank and International Finance Corporation have come together to support the Indian Government in distributing immediate cash flow to severely COVID affected small businesses.
The World Bank is working with the RBI to enable lending de-risking. Through this, it will remove any barriers, paperwork or risks associated with applying for working capital loans.
An Economic Times article quoted “ The Government has piggy backed on guaranteed systems to de-risk lending to MSMEs. By de-risking, the Government is taking on a bit of risk themselves and in time of crisis, this is exactly what you want the Government to do.” – Junaid Ahmad, World Bank Country Director in India
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