Sri Lanka thrives on handouts
Sri Lanka continues to be saddled with aid from lending agencies as local banks refuse to take the risk of lending to new clients in small amounts; as a result of which a US$100 million cash infusion for MSMEs will create more opportunities for rural folk.
Sri Lanka’s rural folk that are underserved by local banks have been given more chances to become entrepreneurs and expand their existing businesses following a cash infusion of US$100 million over two and a half years by the Asian Development Bank (ADB) that reached out to 1700 SMEs.
The ADB’s programme was carried out with the participation of 10 banks that had an outreach in the rural parts of the country in a bid to attract the right individuals to join their scheme to become entrepreneurs thereby contributing to further development of the underdeveloped areas, the bank’s South Asia Department Director Bruno Carrasco told reporters on Thursday during a visit to the country.
Banks were not lending small loans to Micro Small and Medium Enterprises (MSMEs) in the rural areas of the country as a result of which Sri Lanka continue to rank fourth highest aid generator from the ADB after Afghanistan, Nepal and Mongolia and followed by Bangladesh.
“Sri Lanka is not in a position to create access to finance where it should be,” Mr. Carrasco explained adding that the banking system in the country was not willing to take a risk by providing cash loans to people outside the Western Province and this affects the bottom line.
Sri Lanka was noted to have an economic participation of SMEs to be below potential due to which reason the ADB believed that generating a cash infusion to these areas could improve the development drive.
“We want to get credit into areas where it’s not accessible; to carry out small business expansions among other requirements of the MSMEs,” Mr. Carrasco said.
This loan was intended to provide long-term financing, which is not easily available in the Sri Lankan market, for underserved MSMEs to develop their business, which leads to enhancing economic activities, increasing income and generating more employment through private
The ADB also spent a further US$2 million to provide borrowers with the necessary business acumen to carry out their businesses efficiently with training on business development in collaboration with the National Enterprise Development Authority, and promoting international branding of ICT sector in collaboration with the Export Development Board to enhance MSMEs better access to finance.
Moreover, the ADB had indicated that there would be a certain basis on which the loans made in four tranches would be disbursed to the banks with the aim of achieving set goals. As a result the banks were able to go above the target by ensuring that about 27.6 per cent of the recipients were women, 26 per cent were first-time borrowers and 91.4 per cent were targeted MSMEs.