ADB approves $100 mln loan to support SMEs in Sri Lanka

Photo caption:  (from left to right):  Utsav Kumar, Deputy Country Director, ADB, Sri Lanka Resident Mission and K.M. Mahinda Siriwardana, Secretary to the Treasury, Ministry of Finance.

The Asian Development Bank (ADB) has approved a US$100 million loan to provide small and medium-sized enterprises (SMEs) in Sri Lanka more access to finance and build their resilience to external shocks, such as the economic crisis and climate change, the bank said in a media release on Tuesday.  

“SMEs play a critical role in Sri Lanka’s economy, contributing 52 per cent to the country’s gross domestic product and employ 45 per cent of the population,” said ADB Senior Financial Sector Specialist Manohari Gunawardhena. “It is therefore important to provide SMEs, particularly women-led enterprises, with the necessary support to sustain and grow the sector’s contribution to the economy. This project will provide working capital and improve SMEs’ access to finance, helping them expand operations and prepare for the changing environment.”

ADB, through participating financial institutions, will open a $50 million line of credit for underserviced SMEs in the export, tourism, technology, agriculture, and manufacturing sectors. It will establish a $500,000 special facility to cover guarantee subsidies for women-led SMEs. A gender gap assessment will be conducted with a view to improving women’s access to finance. 

The project will build on the government’s equity contribution through the National Credit Guarantee Institution Limited (NCGI), which provides partial credit guarantees on loans to SMEs. ADB will help the NCGI adopt procedures to effectively support SMEs including underwriting guarantees, risk management and risk-based pricing, and guarantee recovery operations. The project will incorporate green finance elements through climate adaptation and mitigation measures for SMEs.