World Bank lending $400 million more for SIDBI project

02 May 2009

The World Bank has approved a $400 million additional financing facility for the Small Industries Development Bank of India (SIDBI), aimed at improving access to finance for small and medium enterprises (SMEs). The new loan will help SIDBI scale up a fully disbursed original World Bank project approved in November 2004, the bank said in a release.

The World Bank loan will help SIDBI extend the much-needed financing on competitive terms, particularly longer tenure loans, to the SME sector in  India. Small and medium enterprises in the country have been constrained by lack of liquidity or inadequate liquidity amidst the ongoing global financial crisis.

Credit growth to SMEs has declined over the last year, which has held back the growth of SMEs and impacted overall growth and development. 

''The project is part of a larger programme of support in response to the Government of India 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,'' 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,'' he added.

''The credit facility will channel long-term and working capital loans for SMEs in geographical areas beyond those that were covered in the original project,'' a World Bank report said. ''This includes expanding to new geographical areas, possibly to India's low-growth states, thereby promoting inclusive growth,'' it added.