Credit guarantee scheme for SME
The government is to set up a credit guarantee fund to enable small and medium enterprises (SMEs) to secure loans, top officials said.
“The SME cannot take loans from banks as they do not have collateral. This is why we are trying to introduce a credit guarantee scheme,” Deputy Minister of Industries and Entrepreneurship Development Chathuranga Abeysinghe told The Sunday Times Business.
“Access to finance can be facilitated by obtaining loans from financial institutions backed by governmental credit guarantees. Therefore, the development of a sound credit guarantee scheme will be an important step in filling the financing gap of SMEs.”
The ministry is currently discussing this scheme with the Finance Ministry, where the Asian Development Bank-backed, National Credit Guarantee Institution (NCGI) was also established, other officials explained. “We are currently working on the modalities of establishing this fund,” an official explained. Separately, the ministry is trying to set up an SME loan facility with a consortium of banks. The official added that the Bank of Ceylon has already agreed to a Rs.5 billion loan facility in this regard. “We are in discussion with the Regional Development Bank for a similar facility,” he said. Similarly, the ministry will discuss with other government banks such as the Peoples Bank, the National Savings Bank etc. This will be for seed funding without collateral for SMEs.
Going forward, the ministry hopes to rope in commercial banks as well in this regard. Generally, small businesses are considered high-risk by banks as well as non-banking financial institutions. Data showed that most SMEs are led by women and first-time borrowers without collateral.
The deputy minister pointed out that now there is no lifestyle management for start-ups and that the ministry has plans to ensure the life cycle management of start-ups.
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