Opportunity Sri Lanka | » Asian Development Bank to decide on investing US$ 100 million in Sri Lankan company to assist SMEs
Asian Development Bank to decide on investing US$ 100 million in Sri Lankan company to assist SMEs

Asian Development Bank to decide on investing US$ 100 million in Sri Lankan company to assist SMEs

The Asian Development Bank (ADB) has reportedly said it will in February review a proposal to invest US$ 100 million in a credit guarantee firm in Sri Lanka which will serve small and medium sized enterprises (SMEs).
A management review meeting is to be held on February 24 and a management review meeting is the final step before a project is presented to the ADB board for approval.
The ADB had approved the concept in February 2017 and the Bank had then engaged in a fact finding mission to support setting up the new non-bank finance firm.
According to report, the finance firm will be set up through the Treasury, with a US$ 500,000 technical assistance grant from the ADB.
Reports further stated that SMEs make up 52 percent of Sri Lanka’s gross domestic product (GDP), but have trouble accessing finance to expand their businesses due to a highly traditional and risk averse banking sector.
The ADB has stated that the Sri Lankan government in the past had introduced various SME credit guarantee schemes, but none had succeeded due to slow claims processing, limited guarantee coverage and high premiums.
“The new guarantee institution should be well-funded, efficiently managed, financially sustainable, removed from political influence, operated with the highest level of corporate governance, and subject to central bank regulation and supervision,” the ADB has been quoted as saying.
The ADB has already provided a US$ 175 million credit line to support SMEs in Sri Lanka, with a special focus on empowering women-owned businesses, local media reports state.

OSL take:

The consideration of a loan facility to empower Sri Lanka’s SME sector is indicative of the confidence international lending agencies have on Sri Lankan businesses as well ad the overall economy. This is a positive sign for foreign businesses exploring opportunities in Sri Lanka and looking at forming partnerships/joint ventures with local businesses. The option of seeking foreign funding assistance is an option given the positive economic trends in the country.

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Article Code : VBS/AT/20200116/Z_7

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