Penal interest on bank borrowings:
CNCI calls for SME respite
The Ceylon National Chamber of Industries (CNCI) has called upon the
Government to provide a respite to the SME sector on the penal interest
for bank borrowings, which is running more than 30 percent to sustain
At present most SME sector enterprises borrow at a high interest rate
- 28 percent and at times are unable to pay the interest in the current
economic situation. Therefore, they have to pay the default payments to
the banks in addition to the interest, CNCI Chairman Newton
Wickramasuriya told Daily News Business.
He said the SME sector has been identified as an important strategic
sector to promote growth and social development in Sri Lanka. Over the
years it has also gained wide recognition as a major source of
employment, income generation, poverty alleviation and regional
development, he said.
The banks reduce interest rates periodically but SME sector entities
still obtain loans at higher interest and it is now calling upon the
Government to provide a respite to them until the economic crisis ends,
Wickramasuriya said the SME sector, the biggest entrepreneurial
sector, especially the export sector and its export supporting services
are now facing another challenge when importing raw materials in the
current economic conditions.
The SME sector is gradually becoming un-competitive, including export
sector entities with the imposition of heavy duty and other charges when
importing raw materials, he said.
To import raw materials for the manufacturing sector, the company has
to pay 2.5 percent Customs Duty. In addition they have to pay 38.25
percent on duty and other levies. Therefore, the SME sector is getting
into a deeper crisis with high bank interest rates along with the penal
interest on bank lending, he said.
In these tight circumstances, the SME sector including the export
sector is compelled to lay off employees on a temporary basis until the
global financial crisis eases.
The Government has given the SME sector, including exporters, the
green light to temporary lay off employees for one year but it has not
made an official announcement, he said.