The non-sovereign facility will be used by Exim Bank to provide medium- and long-term loans to export-oriented client SMEs. The terms of the loan include assurances that Exim Bank will target increased trade and competitiveness amongst small exporters in selected states such as Assam, Madhya Pradesh, Orissa and Uttar Pradesh.
India's economy has grown sharply in recent years on the back of its buoyant trade sector, but SMEs in many poor regions lack the resources, infrastructure, access to markets and competitive ability to take part in export value chains, and have largely missed out on the benefits of global trade, including higher incomes and reduced poverty.
India has made the expansion of SME exports, employment and income in its poorest regions a key objective of its foreign trade policy, as it seeks to mitigate the adverse impacts of the global economic crisis. ADB's loan will support that goal, by providing Exim Bank with longer term funds for SME development that it has been unable to source through normal commercial financing channels, such as bank loans.
“The loan facility can be expected to generate employment for 50,000 or more people in strengthened SME export clusters, with an incremental trade volume of $1 billion or more over 10 years,†said Cheolsu Kim, Principal Financial Sector Specialist, with ADB's South Asia Department.
As India's trade diversifies, and export value chains become increasingly globalized, there are emerging opportunities for SME exporters in poorer regions that could provide valuable new income for vulnerable groups, including women. However, support is needed to create better linkages with export markets, to find new markets, and to add value to local products. Exim Bank, which established a division in 2004 dedicated to developing export-oriented SMEs, is an ideal vehicle to support the sector given its broad range of services including advisory services and long track record of business with exporters in various countries.
The unsecured loan facility, from ADB's Ordinary Capital Resources, has a tenor of up to seven years, with a grace period of three years. ADB's risk exposure is partly mitigated by a credit guarantee of up to $50 million by German development bank, KfW Bankengruppe. Loan pricing will be determined by ADB's Investment Committee and will be benchmarked against dollar-denominated loans and bonds issued by similar Indian financial institutions as well as the credit strength of the Exim Bank.
ADB is also extending a technical assistance grant of $1.55 million equivalent from its concessional Technical Assistance Special Fund to help Exim Bank draft a five-year trade development strategy. Exim Bank will provide additional support of $1 million equivalent.#
$100 Million to India's Exim Bank to Boost SMEs, Expand Jobs, Trade
Special Correspondent - 2009-09-30 11:15
MANILA, PHILIPPINES - The Asian Development Bank (ADB) is extending a $100 million loan facility to India's state-owned Export-Import Bank (Exim Bank) to boost the export potential of small and medium enterprises (SMEs) in poor and disadvantaged regions that have largely missed out on the country's trade boom.