India: Small and Medium Enterprise Trade Finance Development Facility

Nonsovereign Project | 41930-014 Status: Approved

Summary

The SME Trade Finance Development Facility consisted of: (i) a $100 million direct loan and a (ii) technical assistance of $1.5 million (from Technical Assistance Special Fund) to the Export-Import Bank of India (Exim Bank), for onlending to eligible micro, small and medium enterprise (MSME) borrowers in states of India which included some less developed states. Assistance to the MSMEs will help in increasing their competitiveness and integration in the export value chain. While the loan is provided on a senior unsecured basis, without government guarantee, it is supported by the risk participation of KfW Bangkengruppe (KfW) of up to $50 million.

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Project Name Small and Medium Enterprise Trade Finance Development Facility
Project Number 41930-014
Borrower/Company
Country India
Location India
Approval Number 7301/2559
Type or Modality of Assistance
7301/2559 Loan US$ 100.00 million Approved
Strategic Agendas Inclusive economic growth
Drivers of Change Private sector development
Sector / Subsector

Finance - Small and medium enterprise finance and leasing

Gender Equity and Mainstreaming
Responsible ADB Department South Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SARD
Responsible ADB Officer Peter Marro
Project Sponsor(s)
Description The SME Trade Finance Development Facility consisted of: (i) a $100 million direct loan and a (ii) technical assistance of $1.5 million (from Technical Assistance Special Fund) to the Export-Import Bank of India (Exim Bank), for onlending to eligible micro, small and medium enterprise (MSME) borrowers in states of India which included some less developed states. Assistance to the MSMEs will help in increasing their competitiveness and integration in the export value chain. While the loan is provided on a senior unsecured basis, without government guarantee, it is supported by the risk participation of KfW Bangkengruppe (KfW) of up to $50 million.
Objectives and Scope The proceeds of the loan to Exim Bank will be used for the bank's medium and long-term lending to its MSME clients.
Linkage to Country/Regional Strategy ADB's support of India's trade policy, tax and tariff reform, infrastructure investment, regional integration and connectivity, and capacity building for SMEs, are consistent with the objectives of India's export strategy. Provision of trade finance is a critical component of that strategy and is embedded in the CPS with India. Tariff and customs reforms and harmonization are key components for trade policy reforms that have been supported by ADB along with infrastructure at the India Nepal border and harmonization of customs procedures and product standards is under way among the four countries of the South Asia Sub-regional Economic Cooperation. Recent efforts to develop trade, and mobilizing aid for trade, will bring into sharper focus spillover benefits through the combination of enhanced industrial, agriculture efficiency, and trade infrastructure development in India. Combining infrastructure, trade facilitation and policy reform, and capacity building integrated into global value chains will generate crucial benefits.
Status of Development Objectives Out of the SME Trade Development Facility of USD 100 million, USD 60.31 million has already been disbursed. Additional loans amounting to approx. USD 40 million have been approved by India Exim Bank, of which it can be expected that a minimum amount of USD 22 million will be drawdown by November 2014. The utilization of these loans will depend on how fast the SME borrowers can comply with the conditions precedents, in particular with the creation of security. Additionally, India Exim has a pipeline of USD 15 -17 million which are proposed to be approved by September 2014. Of the same, an amount of USD 7-10 million, potentially, can be disbursed by November 2014. The above will take the total drawdown figure to approx. USD 92 million, leaving a shortfall of just USD 8 million.
Material Changes None

Safeguard Categories

Environment FI
Involuntary Resettlement C
Indigenous Peoples C

Summary of Environmental and Social Aspects

Environmental Aspects The loan is classified as category FI under ADB's Environment Policy (2002). The TA will support Exim Bank in establishing the environmental and social management system.
Involuntary Resettlement The loan is classified as category C under ADB's Involuntary Resettlement Policy (1995).
Indigenous Peoples The loan is classified as category C under Policy on Indigenous Peoples (1998).
Stakeholder Communication, Participation, and Consultation Not applicable

Timetable for assistance design, processing and implementation

Concept Clearance 22 Feb 2007
Due Diligence 01 May 2007
Credit Committee Meeting 08 Nov 2007
Approval 30 Sep 2009
Last PDS Update 23 Sep 2014

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Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

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Evaluation Documents See also: Independent Evaluation

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Related Publications

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