World Bank & Indian govt sign $750 million agreement to support MSMEs affected by COVID-19

The Indian government, on Monday, has signed a $750 million agreement with the World Bank for the 'MSME Emergency Response Programme' to support the increased flow of finance into the hands of micro, small, and medium enterprises (MSMEs), severely impacted by the COVID-19 crisis. The World Bank’s MSME Emergency Response Programme is expected to address the immediate liquidity and credit needs of around 1.5 million viable MSMEs to help them withstand the COVID-19 impact and protect millions of jobs. The agreement was signed by Sameer Khare, Additional Secretary, Department of Economic Affairs and Junaid Ahmad, WHO Country Director (India). 

Signing the agreement on behalf of the Indian government, Sameer Kumar Khare highlighted that the current pandemic has 'severely impacted' the MSME sector leading to loss of livelihoods and jobs. He added that the project will support the government in providing targeted guarantees to incentivize NBFCs and banks to continue lending to viable MSMEs to help sustain them through the crisis.

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According to a press release by the government, the World Bank will support the government’s initiatives to protect the MSME sector by infusing liquidity into the market, strengthening NBFCs and Small Finance Banks (SFB), and by enabling financial innovations. 

Representing the World Bank, Junaid Ahmed stated that the operation seeks to achieve liquidity infusion and strengthen the overall financing ecosystem for MSMEs by furthering the role of NBFCs and SCBs as effective financial intermediaries and leveraging fintech to broaden the reach of finance into the MSME sector.

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So far, the World Bank has committed $2.75 billion to support India’s emergency COVID-19 response, including the new MSME project. he first $1 billion emergency support was announced in April this year for immediate support to India’s health sector. Another $1 billion project was approved in May to increase cash transfers and food benefits to the poor and vulnerable, including a more consolidated delivery platform – accessible to both rural and urban populations across state boundaries. 

To battle the COVID-19 crisis, Prime Minister Narendra Modi had announced a financial package worth Rs.20 lakh crore which is equivalent to 10% of India's Gross Domestic Product to boost self-reliance. 

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