The Asian Development Bank hopes to develop Sri Lanka’s Small and Medium sized enterprises (SMEs) by granting needy partners with US$S 100 million through local Bank auctions.
The first such Bank Auction will be held on March 31 and all recognized local public and private banks will be required to reach targets on lending to female-led companies and firms outside Colombo and for first time borrowers. The objective of ADB is to channel more and more funds to smaller Sri Lankan firms that are always struggling for necessary funds they need to develop their enterprises.
It is said that 30 percent country’s Gross Domestic Product (GDP) is coming from Small and Medium Enterprises in the country and they also help to create 30 percent jobs to local youth.
At a media briefing held in Colombo ADB South Asia Department, Senior Financial Specialist Donald Lambert said that providing such a large sum of fund to needy enterprises will not only help to grow existing enterprises or new enterprises that are to be commenced , but also to generate large number of employment opportunities to local youth population.
The ADB provide funds to local banks and the banks will thereafter lend funds to Small and Medium Enterprises at a specific interest rate at each US$ 12.5 million auction to be held eight times over the coming four years.
Lambert said there is no market price for lending to Banks if the Banks are required to lend the funds to the least –well served SMEs such as new or rural borrowers or those led by women. “As this should be below normal borrowing cost , it should encourage banks to work more energetically to disburse the funds that country’s SME’s so urgently need,”
ADB channels US$
He also said that currently many SMEs in the country fail to grow due to lack of credit and also the inability of borrowing money from banks. “Banks should deal with higher operating and credit expenses and often cannot recover these costs through higher loan pricing,”
Responding to a question Lambert said both public and private local banks of good standing are eligible to participate in the auction. Meanwhile, the Japan Fund for Poverty Reduction will also provide a complementary US$ 2 million technical assistance grant for business development and financial literacy training for women entrepreneurs in promising export generating sectors to promote SME demand for funding, independent administration of the action and developing plan for a national crerdit gurantee scheme for SMEs.