ADB provides US$ 75mn worth lending to Sri Lanka’s small businesses

The Sri Lankan government had obtained Asian Development Bank (ADB) financial assistance worth US$ 100 million in 2016 to finance the Small and Medium-Sized Enterprises (SME) Line of Credit Project. 

The objective of the project was to strengthen the SME sector in Sri Lanka by facilitating access to finance and expand the employment opportunities in the sector. 

The project is being successfully implemented and given the importance of this intervention, the Sri Lankan government decided to obtain an additional financing through a loan of US$ 75 million with the intention to scale up the ongoing SME Line of Credit Project.  

Dr. R H S Samaratunga, Secretary to the Ministry of Finance and Mass Media on behalf of the Government of Sri Lanka and Sri Widowati, Country Director of ADB – Sri Lanka Resident Mission on behalf of ADB, signed this loan agreement to obtain US$ 75 million at the Ministry of Finance and Mass Media yesterday. 

The additional financing will be utilized to increase financing to SMEs through intermediaries, development of innovative SME financing scheme, enhancement of capacity of SMEs in targeted clusters for accessing financial services and strengthening of international competitiveness of information and communication technology/business process outsourcing (ICT/BPO) cluster. 

The additional loan of US$ 75 million is planned to be disbursed in 3 tranches of approximately US$25 million each. The government will relend the loan funds in local currency to participating banks through three semiannual allocations based on the banking sector’s average weighted deposit rate. The proceeds of the loan will be available to the participating banks for relending to the SMEs based on the previously agreed targets between the Asian Development Bank and the Government specially focusing on first time borrowers, women-led SMEs and SMEs located outside of Colombo etc. Further, participatory banks should achieve SME on-lending targets before participating in subsequent 
allocations. 

The Ministry of Finance and Mass Media will be the executing agency of the SME Line of Credit. The Department of Development Finance will be the implementing agency for outputs of increase of financing to SMEs through intermediaries, development of innovative SME financing scheme and Export Development Board will be the implementing agency for outputs of enhancement of capacity of SMEs in targeted clusters for accessing financial services and strengthening of international competitiveness of information and communication technology/business process outsourcing (ICT/BPO) cluster.  The overall project is scheduled to be completed by 31st March 2020.