Ex-Ante Evaluation (for Japanese ODA Loan)
Private Sector Partnership and Finance Department, JICA
1．Name of the ProjectCountry: India
Project: Support for Micro, Small, and Medium Enterprises in India
Loan Agreement: March 27, 2020
Borrower: Mahindra & Mahindra Financial Services Limited
2．Background and Necessity of the Project(1) Current State and Issues of the MSME Sector in India
The number of micro, small, and medium enterprises (MSMEs) registered in India in
2016 was 63.38 million. Of these, 99.4% were micro enterprises, with 0.5% and 0.1%
represented by small and medium enterprises respectively (source: Indian Ministry ofMicro, Small and Medium Enterprises). MSMEs play an important role in the Indian
economy, accounting for 31% of total GDP and 45% of total exports and creating jobs
for 124 million people (approximately 10% of the population). MSMEs’ access tofinancial services is limited (22%), and the funding gap is enormous, at $3978.5 billion(about 15% of total GDP) (source: International Finance Corporation (IFC)). In India,
while poverty is improving nationwide, the poverty rate in northern, eastern, andnortheastern states in which the income level per person is low still remains high, andthese poor states account for 24.2% of the funding gap for MSMEs (source: IFC).
(2) Japan's and JICA's Policy for the MSME Sector in India
Japan’s Country Assistance Policy for India (March 2016) holds up enhancing
industrial competitiveness as one of its main pillars. The JICA Country Analysis Paperfor India (March 2018) views developing high-productivity industries as its priority issue.
In particular, as part of its initiatives for contributing to creation of new employment,
reinforcement of the economy’s technological foundation, and increase in productivity
by strengthening the manufacturing sector, JICA has developed and offered
management personnel training programs to develop SMEs through the senior
manager training project for the manufacturing industry (technical cooperation),
promoted MSMEs’ energy conservation initiatives through the MSME energy
conservation project (bilateral government loan), and improved the investment
environment through the Tamil Nadu state investment promotion program and theGujarat state investment promotion program (bilateral government loan). In the future,in order to ensure sustainable and comprehensive growth of the Indian economy,another pillar of the Country Assistance Policy for India, it is indispensable to takemeasures such as expanding the scale of assistance for MSMEs through mobilizing1

private funds, diversifying approaches to MSME funding, and broadening the base ofsupport for the poor states. The Project, which aims at expanding MSMEs’ access tofinancial services particularly in the low-income states through Mahindra & Mahindra
Financial Services Limited (MMFSL), which has a network of branches that covers theentire country, will contribute to help achieve three of the SDGs: Goal 8 (expanding
access to financial services), Goal 9 (promoting industrialization by expanding small
enterprises’ access to financial services), and Goal 17 (partnership).
3．Project Description(1) Project Objective
By providing long-term finance to MMFSL in India, the Project aims at expanding theaccess of MSMEs to financial services, particularly in low-income and special categorystates, thereby helping fill the regional funding gap and contributing to sustainableeconomic growth in the country.
(2) Project Site/Target Area
Low-income and special category states in India (Bihar, Uttar Pradesh, Madhya
Pradesh, Odisha, Rajasthan, Jharkhand, Chhattisgarh, Assam, Meghalaya, Manipur,Mizoram, Sikkim, Uttarakhand, and Himachal Pradesh)(4) Environmental and Social Consideration/Gender Category① Social Considerationa) Category: Cb) Reason for Categorization:
It is judged under the JICA Environmental and Social Considerations Guidelines(promulgated in April 2010) that the undesirable effects of the Project on theenvironment are minimized② Gender Category: [Not included] ■GI (gender mainstreaming needs
survey/analysis project)<Reason for Categorization> Gender mainstreaming needs were confirmed during
the examinations, but the Project did not lead to the implementation of specificinitiatives for contributing to gender equality and women’s empowerment.
(5) Other Important Issues
This is a joint financing project with Sumitomo Mitsui Banking Corporation.
4. Targeted Outcomes(1) Quantitative Effects
The balance of loans granted to MSMEs in the low-income and special category2states will be measured.
(2) Qualitative Effects
The Project is expected to expand MSMEs’ access for financial services.
5. Lessons Learned from Past Projects(1) Results of Evaluation of Similar Projects
The results of ex-post evaluation of the Micro Enterprise Assistance Project, aJapanese ODA loan for the Arab Republic of Egypt, drew two lessons: in developing
similar projects to support finance for micro and small enterprises, it is important thatfinanciers have (i) rich financing experience and (ii) many branches to grasp thecreditworthiness of customers scattered throughout the country.
(2) Lessons for the ProjectIn the examination process, MMFSL’s financing experience and branch system areexamined and confirmed that MMFSL has sufficient ability to implement the Project.
6. Evaluation Results
The Project is relevant to the development issues and development policy of India andis consistent with Japan's and JICA's development cooperation policies. It is also
expected to contribute to sustainable industrial development by providing MSMEs withbetter access to financing. Therefore, the Project is expected to help achieve three ofthe SDGs, Goals 8, 9, and 17, and is highly significant.
7. Plan for Future Evaluation(1) Indicators to Be Used
As described in Section 4. (1) above.
(2) Timing
Scheduled for March 2024.
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