The Union Government signed an agreement on Monday with the World Bank for disbursal of US $750 million for the MSME Emergency Response Programme that will support increased flow of finance to micro, small, and medium enterprises (MSMEs), which have been severely hit by the COVID-19 crisis.
The World Bank’s MSME Emergency Response Programme will address the immediate liquidity and credit needs of 1.5 million viable MSMEs to help them withstand the impact of the current shock and protect millions of jobs, according to an official release. This is the first step among a broader set of reforms that are needed to propel the MSME sector over time.
The agreement was signed by Sameer Kumar Khare, Additional Secretary, Department of Economic Affairs, Ministry of Finance, on behalf of the Government of India and Junaid Ahmad, Country Director (India), on behalf of the World Bank.
Mr. Khare said that the COVID-19 pandemic had severely impacted the MSME sector leading to loss of livelihoods and jobs. The government was focused on ensuring that the abundant financial sector liquidity available flowed to NBFCs, and that banks which had turned extremely risk-averse continued taking exposures in the economy by lending to NBFCs. This project would support the government in providing targeted guarantees to incentivise NBFCs and banks to continue lending to viable MSMEs to help sustain them through the crisis.
The World Bank Group, including its private sector arm, International Finance Corporation (IFC), will support the government’s initiatives to protect the MSME sector by unlocking liquidity, strengthening NBFCs and SFBs and enabling financial innovations.