World Bank approves $500-million program to support the MSMEs in India

The World Bank said it has approved a $500 million program to support MSMEs in India to increase liquidity access for viable small businesses impacted by COVID-19.

The World Bank’s Board of Executive Directors has approved a $500 million program to support the Government of India’s nationwide initiative to revitalize the MSME sector, which has been heavily impacted by the COVID-19 crisis.

The program targets improvements in the performance of 555,000 MSMEs and is expected to mobilize financing of $15.5 billion, as part of the government’s $3.4 billion MSME Competitiveness – A Post-COVID Resilience and Recovery Programme (MCRRP).

The MSME sector is the backbone of the India's economy, contributing 30% of India’s GDP and 4% of exports. Out of some 58 million MSMEs in India, more than 40 percent lack access to formal sources of finance.

The $500 million Raising and Accelerating Micro, Small and Medium Enterprise (MSME) Performance (RAMP) Program is the World Bank’s second intervention in this sector, the first being the $750 million MSME Emergency Response Program, 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 firms have accessed finance from the government program. With the program approved today, the World Bank's financing towards improving the productivity and financial viability of the MSME sector amounts to $1.25 billion over the past year.

Junaid Ahmad, World Bank Country Director in India said,"The MSME sector, a critical backbone of India’s economy, has been hard hit by the Covid-19 pandemic,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.”

Having supported the immediate liquidity and credit needs of viable MSMEs in the first phase, the RAMP Program will support the Government of India’s efforts to increase MSME productivity 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 holding back the growth of the MSME sector.