Jan 17, Colombo: The Asian Development Bank's (ADB) on Tuesday said its Board of Directors has approved $75 million in additional financing to continue support toward the development of small and medium-sized enterprises (SMEs), considered vital for economic growth and job creation in Sri Lanka.
"SMEs have the potential to reduce regional inequalities in Sri Lanka given that SMEs are more widespread throughout the country than larger enterprises, which are mainly based in the capital Colombo," said Don Lambert, an ADB Principal Finance Specialist. "The additional support will ensure that more SMEs have wider access to credit."
SMEs contribute about 45% of Sri Lanka's gross domestic product and provide about half of the country's jobs. However, access to finance remains a significant challenge for the SMEs. About 30% of local enterprises cite this issue as a major deterrent to their growth and development - one of the highest percentages among ADB developing member countries after Afghanistan, Mongolia, and Nepal.
Many of these SMEs have no previous experience dealing with formal financial institutions like banks, are led by women, or based in rural areas.
The additional financing for the SME Line of Credit Project will increase the available loans for participating banks to $175 million by 2020, from the original loan figure of $100 million approved in February 2016. This additional support will further encourage local partner banks to grow their SME portfolios - particularly to enterprises outside Colombo or are women-led - and eventually help Sri Lanka address some of its major development challenges through economic diversification, job creation, women empowerment, and inclusive growth.
Apart from providing wider access to finance to SMEs, the project is also developing innovative SME financing schemes, while building capacity of SMEs particularly in information and communications technology, business process outsourcing, fruits and vegetables, as well as processed food and beverage.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members - 48 from the region.