First-ever auction of funds for SMEs by ADB
The Asian Development Bank (ADB) has launched for the first time an auction of its US$100 million loan assistance to the SMEs, with local commercial banks due to the non-disbursement of previous credit lines in this regard. ADB South Asia Department Senior Finance Specialist Donald Lambert told reporters in Colombo this week that this was the first time an auction was carried out in Sri Lanka and even elsewhere by the bank with the condition that the funds allocated to the banks through a bidding process would ensure that it would reach the SME sector in the country. Sri Lanka was picked to carry out this first-ever auction by banks since the last credit line did not fully disburse the funds for the SME sector, Mr. Lambert explained.
He noted that this year they were prioritising lending for SMEs in Sri Lanka. The bank stated that SMEs are responsible for 30 per cent of Sri Lanka’s GDP and provide 35 per cent of the country’s jobs. The conditions for the allocation of these funds to the selected banks would be that 50 per cent of these monies should be given as loans targeted to SMEs outside the Colombo district run by women, with or without collateral and new client; and 50 per cent for SMEs. In addition, 10 per cent of the loans was said to be allocated to new clients and five per cent to women led SMEs.
The auction will be carried out by KPMG acting as the independent third party in the conduct and administer of each auction on behalf of the Ministry of Finance with the 10 selected banks – NDB, Sampath Bank, Bank of Ceylon, NTB, Commercial Bank, People’s Bank, DFCC Bank, Pradesheeya Sanwardana Bank, HNB and Seylan Bank.
The first of the eight auctions started on Monday at 10.00 am for US$12.5 million for banks to place bids through the online single bid auction system made available to them. The funds would be sent to the Central Bank by the ADB and disbursed in June. The auctions will take place as a bi-annual auction in March and September with a floor price of 6 months plus LIBOR of 150 basis points. Mr. Lambert explained that those banks that disburse the funds could bid more aggressively at the next auctions. The banks would be given the rate for 10 years and these could be disbursed within this period as well, it was noted.