Exim Bank plans $500m MSME fund

Export-Import Bank of India is planning to set up a $500-million fund to assist export-oriented micro, small and medium enterprises (MSME) with long-term foreign currency loans. The development financial institution (DFI) will put together the corpus of the ‘Technology & Innovation Enhancement and Infrastructure Development' Fund on its own and lend to MSMEs over the next five years.

Exim Bank will work in collaboration with other commercial banks/ financial institutions to reach out to a large number of MSMEs to build capacities in the area of skill development, design, packaging, and market development, for specific MSME clusters.

Fund constraints

As per the MSME Census 2010, because of the funding constraints of Tier II banks, only 12.2 per cent of registered MSME units had taken foreign currency loans. Most MSME units get only working capital loans from banks.

For term loans they have to either make do with their own funding or depend on informal sources of finance.

“Our collaboration with mid- and small-sized commercial banks will be win-win. While we have the expertise in raising foreign currency resources, the banks have the reach to extend foreign currency loans to MSMEs,” said Mr Samuel Joseph, General Manager, Exim Bank.

Export-oriented MSMEs, which currently get rupee loans only at 14-15 per cent interest, could get foreign currency loans (term and working capital) at 7-8 per cent interest from the Fund.

Support for creative units

Exim Bank plans to launch a new programme for financing export-oriented creative industries.

India has competitive advantages, among others, in modern segments such as animation, gaming software, content development for movies, media, education, as also traditional skills, including making carpets, decorative items, wickerware, glassware, handmade lace, needlework rugs, and embroidery.

India is the 8th largest exporter of creative goods in the world and the growth rate in 2010 was the highest among the top 10 exporters.

kram@thehindu.co.in