Saturday Dec 14, 2024
Saturday Dec 14, 2024
Monday, 17 June 2019 01:37 - - {{hitsCtrl.values.hits}}
ADB Country Director of the Sri Lanka Resident Mission Sri Widowati and Treasury Secretary Dr. Samaratunga exchange the signed agreements
The Asian Development Bank (ADB), the Government, and the Regional Development Bank (RDB) have signed Loan and Guarantee agreements to further assist Sri Lanka in providing affordable and accessible credit to rural micro, small, and medium sized enterprises (MSMEs) in the country. Under the financial agreements, ADB will provide a $ 50 million loan with sovereign guarantee from the Government.
“MSMEs have high growth potential, create more jobs, and over time, can potentially increase the tax base at a quicker pace than larger enterprises,” said ADB Country Director of the Sri Lanka Resident Mission Sri Widowati. “Because of their distribution over the whole country, they also help reduce regional inequalities.”
Widowati signed the Guarantee agreement on behalf of ADB while Finance Ministry Secretary to the Treasury Dr. Samaratunga signed for the Government. In addition, a Loan agreement was signed between ADB and RDB.
With only approximately 30% of Sri Lankan firms having sufficient access to bank loans and other capital, limited access to finance is a key barrier facing entrepreneurs in Sri Lanka. These constraints are even greater for micro and small enterprises led by women or those located in rural areas.
Implemented through the RDB, a State-owned bank whose mission is to strengthen the living standards of the rural population by providing affordable and accessible credit facilities, the bank’s unique business model and wider branch network across rural areas can effectively cater to rural small and micro enterprises that are mostly missed out by the private sector commercial banks.
The project will not only directly fund $ 50 million of long-term financing through RDB to micro and small enterprises outside of Colombo, including women-led businesses, but will also be structured to provide RDB the additional regulatory capital that would leverage up to an additional $ 533 million of lending to MSMEs.
Integral to the project is a technical assistance (TA) grant of $ 1 million from the Japan Fund for Poverty Reduction, financed by the Government of Japan, to support RDB’s sustainable long-term growth. The TA will upgrade RDB’s business model and directly promote gender mainstreaming through training of about 500 women entrepreneurs.
ADB is committed to achieving a prosperous, inclusive, resilient and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $ 21.6 billion. Established in 1966, it is owned by 68 members — 49 from the region.
The Finance Ministry said the Government’s ‘Vision 2025 – A Country Enriched’ policy document has identified the importance of enhancing access to finance for the micro, small and medium enterprises. Accordingly, the Government launched the ‘Enterprise Sri Lanka’ loan schemes on an island-wide basis in 2018, to create an entrepreneurial society, particularly amongst the youth, by providing access to capital at concessionary interest rates. In this context, the Government facilitated the Pradeshiya Sanwardana Bank (RDB) by providing a sovereign guarantee to obtain a loan amounting to $ 50 million from the Asian Development Bank, which is operating island-wide, providing financial and advisory services to micro, small and medium enterprises.
"The project will increase employment opportunities in micro, small and medium enterprises. Accordingly, the RDB’s capacity to serve its micro, small and medium enterprise clients will be strengthened by expanding RDB operations, strengthening RDB’s operational capacity and enhancing the capacities of micro, small and medium enterprises to access financial services," the Finance Ministry added.
