World Bank approves $400 million loan to SIDBI

The World Bank has approved $400 million additional financing loan to the Small Industries Development Bank of India (SIDBI), which is aimed at improving access to finance for Small and Medium Enterprises (SMEs).      

This will help scale up the fully disbursed original project which had been approved by the World Bank on 30 November 2004, the bank said in a statement.      

World Bank Country Director for India Roberto Zagha said the project is part of a larger programme of support in response to India's request for funding in light of the financial crisis. 

"It is targeted particularly at SMEs, to help address the credit slowdown that has resulted from the financial crisis," he said.      

"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," he said.      

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, the bank said.

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.      

"This integrated project will help SMEs improve their profitability and competitiveness, and become more creditworthy," said Niraj Verma, World Bank Senior Financial Sector Specialist and project team leader.      

The loan, from the International Bank for Reconstruction and Development (IBRD), one of the two development institutions that make up the World Bank, is backed by a Republic of India guarantee. It has a 15-year maturity which includes a five-year grace period, it said.