World Bank clears $407 mn loan for two projects

The World Bank will provide a $407-million loan for two projects to promote microfinance and strengthening statistical base.

"The WB approved two projects worth $407 million to India, consisting of a $300-million credit/loan for scaling up the Sustainable and Responsible Microfinance Project and a $107-million loan to strengthen statistical data base," the bank said in a release today.

The funding to the microfinance project will be used by the Small Industries Development Bank of India for on-lending to microfinance institutions, the bank said.

Funding to microfinance institutions is designed to enhance their financial strength and help them leverage private commercial funds for lending larger amounts to the under-served, it added. The project will help establish a microfinance information platform, promote adherence to a code of conduct for microfinance institutions, and enable their capacity building and monitoring capabilities.

The bank said although India has a well-developed banking system, and there has been significant progress in banking reforms, a significant portion of its billion-plus population has only limited or no access to financial services.

The $200-million loan for the microfinance project is from the International Bank for Reconstruction and Development (IBRD). It has a 25-year maturity which includes a 14.5-year grace period. The rest, $100 million, is a credit from the International Development Association, the World Bank’s concessionary lending arm. It carries a 0.75 per cent service fee, a 10-year grace period, and a maturity of 35 years.

The $107-million loan for strengthening statistical data base comes from the IBRD and has a 30-year maturity including a 5-year grace period.

On this loan, the bank said that India’s rapid economic and social transformation over the past decade has brought to the fore a need for better and timely statistical information. The bank also said the loan would support an institutional and policy-based reform of the government for strengthening state statistical systems within a national policy framework.

It further said the country's rapid economic growth, private investments, increased role of states and effects of the global economic crisis -- which India is weathering successfully -- have renewed demands for more accurate statistical information.