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

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 financial intermediation loan (FIL) project will support small and medium-sized enterprises (SMEs) through two components: (i) a new SME line of credit (SMELOC2) for those affected by the 2022 economic crisis to provide emergency working capital (SMELOC2 component), Finance Ministry sources said.

It will help the government for equity infusion into the National Credit Guarantee Institution Limited (NCGI), which will provide partial credit guarantees (PCG) on investment loans to SMEs with inadequate or no collateral (PCG component).

The project will help SMEs by enhancing access to finance and strengthening their capacity to adapt their business models to external changes, including those caused by climate change.

It is designed to particularly support women entrepreneurs who are often disadvantaged, as well as promote climate adaptation and mitigation activities. The implementation of both components is supported by ongoing technical assistance (TA), which was approved in January 2022

This project will provide working capital and improve SMEs’ access to finance, helping them expand operations and prepare for the changing environment.

This would be disbursed as capital through the National Credit Guarantee Institution and distributed via 13 banks within the national banking system.

This approach will facilitate the implementation of a loan guarantee programme for SMEs industrialists in the country. Additionally, it will enable a programme that provides loans with subsidised interest rates.

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. (Bandula)