Rs. 3 b German boost for SMEs

The crucial Small and Medium Enterprises (SMEs) sector is getting a fresh boost with long-term loans under a joint initiative between Germany’s and Sri Lanka’s development finance institutions.

The German development finance institution DEG (Deutsche Investitions-und Entwicklungsgesellschaft mbH), member of KfW Bankengruppe yesterday signed an agreement with DFCC Bank to provide a loan  of US$ 30 million repayable over 8 years.

DFCC Bank CEO Nihal Fonseka (left) and DEG Senior Vice President Bernd Tuemmers shake hands whilst exchanging the agreements signed in Colombo in connection with the US$ 30 million long-term financing. German Embassy's Deputy Head of Mission Marja Einig is also present

DFCC Bank in turn will utilise the funds to grant sub loans targeted  at the SME Sector across a wide range of businesses including the renewable energy sector.

“This new loan granted by DEG to DFCC reinforces the longstanding relationship of our two institutions going back several decades. It is also a recognition of Sri Lanka’s much improved macroeconomic fundamentals, DFCC’s financial strength as well as the role that is being played by DFCC in the post conflict growth phase of Sri Lanka where we have now extended our footprint to all parts of the country and are actively engaged in financing new SME projects in diverse sectors,“ DFCC Bank CEO Nihal Fonseka said.

“This credit line will supplement and diversify DFCC’s long term funds pool and support our lending activities to green field projects,” he added.

“DEG has had a very cordial and longstanding relationship with DFCC and as part of our international cooperation initiatives, we are very happy to be a partner in the development of Sri Lanka during this crucial post conflict phase of the country’s forward march even in the midst of many adverse global economic conditions,“ DEG Senior Vice President Bernd Tuemmers said.

Of particular relevance to the granting of this credit line according to him is the DFCC’s continuing commitment to supporting entrepreneurs in the SME sector including in the North and East of the country.

DEG, member of Germany’s KfW Bankengruppe, is one of the largest European development finance institutions for long-term project and company financing. For almost 50 years, DEG has been financing and structuring the investments of private companies in developing and transition countries.

DEG invests in profitable projects that contribute to sustainable development in all sectors of the economy, from agriculture to infrastructure and manufacturing to services. It also focuses on investments in the financial sector in order to facilitate reliable access to capital locally. To date, DEG has worked together with more than 1,600 companies and its financing commitments of more than 11 billion euros have contributed to providing an investment volume of 70 billion euros.

DEG’s aim is to establish and expand private enterprise structures in developing and transition countries, and thus create the basis for sustainable growth and a lasting improvement in the living conditions of the local population.

DFCC Bank is a licensed specialised bank and Sri Lanka’s pioneer development financing institution established in 1955 under the name of Development Finance Corporation of Ceylon with a mandate to provide long-term project finance to private sector initiatives.  It is listed on the Colombo Stock Exchange.

The Bank has over the years played an innovative and catalytic role in the development of the private sector, a role not confined to the mere provision of long term loans but one encompassing capacity building, employment generation, business facilitation and poverty reduction, which in turn has had a significant impact on society at large by contributing to capital formation. A publication by the World Bank in 2006 in connection with DFCC’s 50th anniversary identified DFCC as “One among the Successful Few” in the development financing space in the region. While the Bank’s core business is providing project loans and leases throughout the country, it now provides a range of financial services through several group companies including the full range of commercial banking services through DFCC Vardhana Bank. DFCC Bank enjoys a national credit rating of AA(lka) from Fitch Ratings.