India, World Bank sign USD 750 million agreement for MSME Emergency Response Programme

The Indian Government and the World Bank have signed an agreement for MSME Emergency Response Programme worth USD 750 million. The agreement aims at supporting an increased flow of finance to micro, small, and medium enterprises (MSMEs) that have been adversely impacted by the COVID-19 crisis. 

The MSME Emergency Response Programme will help address the immediate credit and liquidity needs of 1.5 million eligible MSMEs to rescue them from current economic crisis. 

According to the Union Ministry of Finance, this is the first step towards bringing out a broader set of reforms that are needed to propel the MSME sector over time.

Key Highlights

•  Under the MSME emergency response programme, the immediate liquidity and credit needs of nearly 15 lakh eligible MSMEs will be taken care of.

•  The emergency financial assistance will help the eligible MSMEs to withstand the impact of the current shock and protect millions of jobs. 

•  This is the first part of a broader set of reforms needed to propel the MSME sector.

•  The agreement was signed by Sameer Kumar Khare on behalf of the Indian government and Junaid Ahmad on behalf of the World Bank. Khare is the Additional Secretary at the Economic Affairs Department, while Ahmad is the World Bank Country Director (India).

Significance

The Coronavirus pandemic has had a major impact on the MSME Sector, which has lead to a major loss of livelihood and jobs. To aid economic recovery, the government is focused on ensuring that abundant financial sector liquidity flow is available to non-banking finance companies (NBFCs) and that banks that continue taking exposures in the economy.

The project will support the government in providing targeted guarantees to incentivise the banks and the non-banking financial institutions to continue lending to eligible MSMEs to help sustain them through the crisis.