Finance Ministry Secures USD 1 Bn IFC Funding To Boost Long-Term MSME Credit

New Delhi, Sept 7 (KNN) Finance Ministry has secured USD 1 billion from the International Finance Corporation (IFC) to help banks and financial institutions expand long-term credit to micro, small and medium enterprises (MSMEs).

The facility complements the government’s credit support measures, including the Emergency Credit Line Guarantee Scheme (ECLGS), and will enable MSMEs to access loans with tenures of up to seven years.

USD 500 Million Already Provided To SIDBI

IFC has already provided USD 500 million to the Small Industries Development Bank of India (SIDBI) from its own resources, while the remaining USD 500 million will be mobilised through SIDBI’s lender syndicate, reported Economic Times.

The funding has been structured as a long-term countercyclical financing platform to address the mismatch between the tenure of SIDBI’s borrowings and its MSME loan portfolio.

The facility has also been swapped into Indian rupees through the Reserve Bank of India’s special swap window.

Focus On Manufacturing, Services Sectors

The facility will target MSMEs across manufacturing and services value chains, including auto and auto components, engineering goods, electronics, textiles, food processing and logistics, along with other employment-intensive sectors.

A substantial portion of the funds will be directly on-lent by SIDBI to MSMEs for up to seven years, with a suitable moratorium. The loans will primarily support machinery acquisition, modernisation, business expansion and project financing.

SIDBI will also use the funds to lend to financial institutions, particularly non-banking financial companies (NBFCs), for refinancing existing MSME loans, with a focus on micro enterprises and first-time borrowers.

Facility To Support MSME Capex

The Finance Ministry said the facility is expected to boost capital expenditure by MSMEs while complementing measures such as ECLGS 5.0, which addressed short-term funding requirements.

The longer-tenure funding is also expected to help address a structural mismatch in SIDBI’s lending profile. Currently, none of SIDBI’s borrowings has a tenure exceeding five years, while the average tenure of its MSME credit book is around 4.8-5.4 years.

(KNN Bureau)