The Asian Development Bank ( ADB ) and Shriram Finance have signed a loan agreement for US$150 million to boost access to finance for micro, small and medium-sized enterprises ( MSMEs ) in India with a focus on business loans and for financing electric vehicles ( EVs ) and low-emission commercial vehicles for business purposes.

The loan, which will particularly benefit women-owned MSMEs and those in lagging states, is part of a total US$306 million financing package led by the ADB as the mandated lead arranger and bookrunner, which includes a loan of US$150 million from Japan International Cooperation Agency and 500 million rupees ( US$5.80 million ) from Export-Import Bank of India.

MSMEs play a vital role in India’s economy, the ADB points out, contributing 30% of the country’s GDP and employing over 123 million people. However, they face significant challenges in accessing formal credit, with only a quarter of the MSME market being served by financial institutions.

Women entrepreneurs face additional barriers, the bank adds, due to social norms and limited access to collateral. The ADB’s loan will help bridge this gap by enhancing Shriram Finance’s ability to provide tailored financial solutions to MSMEs, enabling them to reach underserved segments particularly in rural, semi-urban areas and in lagging states, and provide economic opportunities for women-owned MSMEs.

The ADB’s loan also supports the government’s initiatives to reduce air pollution through the adoption of EVs and low-emission ( Bharat Stage-VI compliant ) vehicles. The government’s EV30@30 initiative targets 30% of all new vehicle sales to be electric by 2030.

The loan, says Mio Oka, the bank’s country director for India, underscores the ADB’s commitment to supporting financial inclusion and sustainable development in India while addressing the significant financing gap faced by MSMEs. “By partnering with Shriram Finance,” she adds, “we will empower MSMEs, particularly women entrepreneurs, and accelerate the transition to electric mobility, which is crucial for reducing air pollution and achieving India’s climate goals.”

Shriram Finance is the flagship company of the Shriram Group and is one of India’s largest non-banking financial companies specializing in commercial vehicle financing and MSME lending. Founded in 1979, it has 3,196 branches and 79,405 employees serving over nine million customers, with assets under management of 2.54 trillion rupees and strong operations in rural and semi-urban areas.