Contacts: In Delhi:
Sudip Mozumder 91-11-24617241 smozumder@worldbank.org
In Washington: Jan Erik Nora (202) 458-2624 enora@worldbank.org
New Delhi, June 5, 2009 ─ A US$400 million additional financing loan to the Small Industries Development Bank of India (SIDBI) was signed today by representatives from the Government of India, SIDBI and the World Bank. The signatories to the Agreement were Mr. Anup K Pujari, Joint Secretary, on behalf of the Government of India, Mr. R M Malla, Chairman & Managing Director, SIDBI, and Mr. Roberto Zagha, Country Director, for the World Bank. The Small and Medium Enterprises Financing and Development Project is designed to improve access to finance for Small and Medium Enterprises (SMEs). The additional financing will help scale up the fully disbursed original loan (US$120 million) which was approved by the World Bank in November 2004. The lending from the original project covered 927 SMEs spread across 10 Indian states. An assessment of the original project showed that the nearly 300 beneficiary SMEs surveyed reported a significant growth in sales and profits after receiving long-term financing from SIDBI. Further, nearly two-thirds of the SMEs that were financed upgraded their technology, which, in turn, helped increase productivity.
Access to adequate and timely financing on competitive terms, particularly longer tenure loans remains a challenge for SMEs around the world and for Indian SMEs as well. This problem has been exacerbated by the current global financial crisis and the ensuing slowdown in credit growth in the Indian financial sector. In particular, credit growth to SMEs has declined over the last year, which has held back the growth of SMEs and impacted overall growth and development. "This Project is part of a larger program Mr. Zoellick has launched in response to the global economic and financial crisis. At the Government of India's request, the project is targeted particularly at SMEs, to help address the credit slowdown that has resulted from the crisis," said Roberto Zagha, World Bank Country Director for India. “Achieving and sustaining growth and employment will require a sharp step up in industrial and services growth. This needs to be spurred by SMEs which have the greatest potential to provide employment.”
The credit facility supported by the Project will channel long-term and working capital loans for SMEs in geographical areas beyond those that were covered in the original Project. This includes expanding to new geographical areas, possibly to India’s low-growth states, thereby promoting inclusive growth.
Under the credit facility SIDBI will also explore refinancing other banks and financial institutions for on-lending to SMEs. In addition, this Project will build linkages with an on-going DFID financed technical assistance component which is helping banks enhance the quality of their SME loan portfolios, strengthening business development services and building market linkage programs. “To the extent feasible, the Project will aim to use a cluster approach which would help channel both technical assistance and on-lending to SMEs in high growth potential clusters. This integrated Project will thereby help SMEs improve their profitability and competitiveness, and become more creditworthy,” said Niraj Verma, World Bank Senior Financial Sector Specialist and project team leader.
Finally, the Risk Sharing Facility supported by the Project will expand the coverage of this innovative initiative launched under the parent Project.
The loan, from the International Bank for Reconstruction and Development (IBRD), is backed by a Republic of India guarantee. It has a 15 year maturity which includes a 5-year grace period. For more information on the Project, visit SME Financing and Development Project
For more information on the Bank’s work in India, visit http://www.worldbank.org.in |
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