The World Bank's Board of Executive Directors has approved a $500 million program to support the Government of India's nationwide initiative to revitalise MSME (micro, small and medium enterprise) sector, which has been heavily impacted by the COVID-19 crisis.
The program targets improvements in the performance of 5,55,000 MSMEs and is expected 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)', the World Bank said in a release on Friday.
"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," it said.
The $500 million loan from the International Bank for Reconstruction and Development (IBRD) has a maturity of 18.5 years including a grace period of 5.5 years.
So far, about 5 million firms have accessed finance from the government program. The RAMP program will support the government'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, the release added.
The program will help setup a high-level MSME Council to enable better coordination between national and state-level programs. "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; support integrated portals to deliver online cost-effective MSME services at scale; and create a more decentralized, flexible and cohesive program that responds to the local context and challenges to MSME growth."
The World Bank said the program will promote technology-based solutions, green investments and access to services for women-headed businesses, and build partnerships with private sector as service providers to reach greater scale.
In addition to the national level activities, the program will initiate targeted activities in five "first mover" states -- Gujarat, Maharashtra, Punjab, Rajasthan, and Tamil Nadu, with the potential of additional states joining the program going forward.
"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," Junaid Ahmad, World Bank Country Director in India, said.