Sri Lankan government receives ADB assistance to provide affordable credit to local MSMEs
The government of Sri Lanka, Asian Development Bank (ADB) and the Sri Lankan state owned Regional Development Bank (RDB) have reportedly signed Loan and Guarantee agreements to further assist Sri Lanka in providing affordable and accessible credit to rural micro, small, and medium sized enterprises (MSMEs) in the country.
Under the financial agreements, ADB will provide a $ 50 million loan with sovereign guarantee from the government, the local media has stated.
“MSMEs have high growth potential, create more jobs, and over time, can potentially increase the tax base at a quicker pace than larger enterprises,” ADB Country Director of the Sri Lanka Resident Mission Sri Widowati has been quoted as saying. “Because of their distribution over the whole country, they also help reduce regional inequalities.”
Widowati has signed the Guarantee agreement on behalf of ADB while Sri Lanka’s Finance Ministry Secretary to the Treasury Dr. Samaratunga has signed for the Government. In addition, a Loan agreement had been signed between ADB and RDB.
According to local media reports, with only approximately 30% of Sri Lankan firms having sufficient access to bank loans and other capital, limited access to finance is a key barrier facing entrepreneurs in Sri Lanka and these constraints are even greater for micro and small enterprises led by women or those located in rural areas.
The project will not only directly fund US$ 50 million of long-term financing through RDB to micro and small enterprises outside of Colombo, including women-led businesses, but will also be structured to provide RDB the additional regulatory capital that would leverage up to an additional US$ 533 million of lending to MSMEs, the local media reports note.
Also, integral to the project is a technical assistance (TA) grant of US$ 1 million from the Japan Fund for Poverty Reduction, financed by the Government of Japan, to support RDB’s sustainable long-term growth. The TA will upgrade RDB’s business model and directly promote gender mainstreaming through training of about 500 women entrepreneurs.
OSL take:
The support received by the government of Sri Lanka to assist Sri Lanka’s MSMEs is an encouraging sign for foreign businesses looking at forming partnerships/joint ventures with local companies. The many trade agreements as well as trade concessions enjoyed by Sri Lanka could be utilised by such joint ventures to enter the manufacturing and exports sectors.
| Article Code : | VBS/AT/19062019/Z_3 |