- ‘Saubagya COVID-19 Renaissance Loan Scheme’ continues to be rolled out
- 45% of loans given to companies in service sector, 38% industry and 17% agriculture
- Phase III announced from 1 July to share credit risk of borrowers while providing 5% interest subsidy to banks
The Central Bank yesterday said it has approved more than Rs. 53 billion worth of working capital loans to more than 20,000 businesses at a concessional rate of 4% per annum as part of its efforts to help COVID-19 affected companies under a Rs. 150 billion support scheme.
The Central Bank, in consultation with the Government of Sri Lanka, has introduced the Saubagya COVID-19 Renaissance Loan Scheme to provide working capital loans at 4% interest rates to businesses adversely affected by the COVID-19 outbreak, through licensed banks, thereby supporting the revival of economic activity in the country.
This loan scheme is available for COVID-19-affected businesses with an annual turnover below Rs. 1 billion, including self-employment and individuals. The Rs. 1 billion limit of annual turnover will not be applicable to businesses engaged in tourism, exports and related logistical supplies.
The loan scheme, which has been implemented in three phases, is expected to disburse a total of Rs. 150 billion in working capital loans at the rate of 4% per annum. The total of working capital loan facilities provided by the Central Bank to be distributed among 20,240 businesses under the loan scheme as of 2 July exceeds Rs. 53 billion. These loans carry a concessional interest rate of 4% per annum with a repayment period of 24-months including a grace period of six-months.
Under Phase I of the loan scheme implemented with effect from 1 April, the Central Bank granted approval for 13,926 loans amounting to Rs. 28 billion. Out of approved loans, licensed banks have already disbursed more than Rs. 21 billion among 10,270 affected businesses and individuals islandwide as of 2 July.
Under Phase II of the loan scheme implemented with effect from 19 June, the Central Bank approved 6,314 loans amounting to Rs. 25 billion distributed among 6,314 businesses and individuals.
Out of Rs. 53 billion approved under both Phases I and II of the Scheme, 45% has been provided to businesses in the services sector led by trade services, while distributing 38% and 17% among businesses in the industry sector and the agriculture sector respectively.
The Central Bank announced Phase III of this loan scheme with a credit guarantee and interest subsidy with effect from 1 July with a view to accelerating lending at 4% per annum using the already available excess liquidity with licensed banks and to ensure adequate flow of funds for businesses which lack collateral to back their creditworthiness.
Accordingly, the Central Bank will share a major portion of credit risk of end borrowers, while providing an interest subsidy of 5% per annum to banks to cover their cost of funds. The credit guarantee provided by the Central Bank ranges from 80% for the smaller loans to 50% for relatively larger loans.