World Bank approves US$ 57.4 m for SMEs

A vibrant Small and Medium Enterprises (SME) sector can play a key role in creating jobs and high economic growth in post-war Sri Lanka, the World Bank said in a report released Thursday.

The report titled ‘Small and Medium Enterprises: Engines of Growth in Post Conflict Sri Lanka’ said the global economic crisis affected the SMEs sector the most and achieving and sustaining high economic growth and higher employment will require a boost in industrial and services growth, spurred by SMEs.

Quoting Cecile Niang, an economist with South Asia Finance and Private Sector Development, the World Bank said the creation of employment opportunities is critical for faster recovery in post conflict countries such as Sri Lanka.

“Yet, several factors constrain the growth and competitiveness of Sri Lanka’s SMEs,” Niang has said.

Niang says that lack of access to adequate and timely financing is especially critical. “Without it, borrowing becomes more expensive and profit margins are reduced, holding back the establishment of new units and the consequent increase in job creation,” she says.

The World Bank has recently approved a $57.4 million credit for strengthening access to finance for Sri Lankan SMEs.

According to the monetary authority, the project supports the Sri Lanka Government’s efforts to improve access to finance for SMEs affected by the global economic Crisis.

Funded under the Pilot Crisis Response Facility, the project consists of two components.

The Financing and Risk Sharing Facility component includes a Line of credit to participating state and private commercial banks to refinance SME loans and a risk sharing facility providing partial credit guarantees to reduce the banks’ risk of lending to SME borrowers.

The second component focuses on policy and capacity enhancement for SME banking providing technical assistance to support banks in developing their SME banking capabilities.

The project includes support to identify measures to create a more enabling environment for SME banking, the report said.

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