5 Things Your Business Needs to Know About the World Bank’s MSME Programs

World Bank emergency response program

This blog was updated on June 8th, 2021, with new World Bank MSME schemes 

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.

And as of June 8th, 2021,

The World Bank’s Board of Directors has approved a $500 million program to support India’s nationwide initiative to help the MSME sector come back up after a second wave tore down several businesses once again. 

This new initiative by the World Bank is termed the ‘ Raising and Accelerating Micro, Small and Medium Enterprise Performance (RAMP) Program.  This new program targets over 5,55,000 MSMEs and is expected to – 

  1. Help raise funds of over $15 billion 
  2. Improve access to finance and working capital for MSMEs by strengthening financing markets 
  3. Scale-up online dispute resolution mechanisms to address the problem of delayed payments 
  4. Improve cost-effectiveness, quality accessibility, impact, and outreach. 
  5. Help boost the Government’s $3 billion MSME Competitiveness – A post-COVID Resilience and Recovery Program (MCRRP) 

“ Over 5 million firms have accessed finance from the Government program. With this program, the World bank’s financing will improve productivity and financial viability of the MSME sector. – World Bank Task Team 

The scheme’s maturity period is 18 years. 

The World Bank’s MSME Emergency Response Program carries:

  1. An overall $ 2.75 Billion to support India’s emergency COVID 19 response including the MSME project.
  2. $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:

1. 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.

2. 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 organization’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.

Also read: How to choose the right payment gateway for startups

Enable and increase production in the healthcare sector

The World Bank’s emergency $750 million will help push businesses in the health sector to 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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