India: Small and Medium Enterprise Trade Finance Development Facility

Nonsovereign Project | 41930-014 Status: Active

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 EXPORT-IMPORT BANK OF INDIA
Country India
Location India
Approval Number 7301/2559
Type or Modality of Assistance
7301 Loan USD 100.00 million Committed
Strategic Agendas Regional integration
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 Marro, Peter
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 SME 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

Promotion of economic growth through trade. The project helps the government meet its trade development objective for sustained economic growth. With the ADB facility, more jobs are created in the SME sector, as seen through incremental growth in export production. International experience suggests a strong associate between a country''s trade openness and the individual incomes of its citizens. Exim Bank has also been a catalyst in channeling foreign direct investment (FDI) into the country in sectors that are export-oriented. A sample survey undertaken by Exim Bank in 2015 of ten FDI manufacturing projects financed by Exim Bank with total assistance of Rs.15.97 billion has been able to facilitate FDI of Rs.43.80 billion into the country and cumulative exports of Rs.277.07 billion in the last five years. Exim bank also continues to play an important role in India's foreign trade policy. Its operations are mostly in export credit and finance to support the globalization efforts of Indian companies, where it also provides information and advisory services to those companies.

Mobilization of long-term export finance for trade diversifications. The facility helps Exim Bank's ability to lend long-term foreign currency to Indian exporters and SME clusters to match their cash flow, as well as supports the Government's strategy of diversifying trade into new emerging countries.

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 30 Sep 2016

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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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