SL tapping ADB and AIIB for SME support
Sri Lanka is tapping the Asian Development Bank (ADB) and Asian Infrastructure Investment Bank (AIIB) to support the local small and medium enterprises (SME) sector with loans worth a total of US$300 million.
State Minister of Finance Shehan Semasinghe on Tuesday said that Sri Lanka is discussing with ADB for a credit guarantee scheme worth $200 million, to support SMEs. “This scheme will be established and implemented by the Ministry of Finance. The discussions are progressing well,” he told the Business Times.
The Treasury is also discussing with AIIB, a multilateral development bank and international financial institution based in China for supporting the SMEs. “We had a discussion at the spring meeting in Washington DC with officials of AIIB with regards to supporting the SME sector,” Mr. Semasinghe said.
These discussions are also on track with the AIIB which aims to collectively improve economic and social outcomes in the country, he added. This loan will be roughly around $100 million.
He added that the government is very concerned about the SME sector and is keen to get them out of the rut. “The SME sector is hit the hardest by the pandemic, and the ensuing economic crisis. We are looking at many avenues to emerge from the bad situation.” He also said the government is expecting the banks to pass on the benefits to the sector by lowering inflation rates and reducing interest rates. “We do understand the banks’ constraints but with improving economic indicators, we expect the banking sector to help out the small and medium entrepreneurs.”
SMEs make up 52 per cent of the GDP and 45 per cent of national employment.
The Ministry of Finance is negotiating another two loans with the ADB. Finance Ministry officials said that one is for banking sector stability worth $200 million and the other one is $100 million worth of loans for power sector reforms. “The banking sector stability loan is to be finalised
by early next month,” one official said.
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