ADB provides USD 20.5 Mn financing to SME sector
Out of the Asian Development Bank additional Financing of USD 165 million, a balance of USD 20.5 million is currently being utilized by the participating financial institutions (PFIs) to provide further access to finance to SMEs, an ADB official told a press briefing held in Colombo yesterday.
As a multilateral bank ADB has supported the SME sector in the country for a long time with many lending products and capacity building assistance.
ADB’s lending products like the Small and Medium-Sized Enterprise Line of Credit project (SMELoC) which has been operating since 2016 and Strengthening the Regional development Bank Project (SRDB project) have supported the sector through increased access to finance.
The SMELoC project with three tranches was designed to provide US$ 340 million of assistance to the SME sector commencing from 2016. The first disbursement of US$ 100 million and the second disbursement of US$ 75 million through additional financing have already been utilized.
During C-19, additional financing was provided including working capital loans to support the sector. Women Entrepreneurs Finance Initiative (We-Fi) grant of US $9.5 million is being utilized by the PFIs to provide blended finance to the Women SMEs together with the ADB loan and to develop the ecosystem for WSMEs.
In October 2022, due to the economic crisis the SME loan funds were repurposed for working capital to support the SME sector. In addition, ADB supported developing and launching the SME platform. Since the introduction, this is managed by the National Enterprise Development Agency (NEDA) given their mandate for SME development. Project successfully trained 1,027 WSMEs on business plan development and financial literacy.
As of end April 8,681 SMEs have benefited from the SMELoC loan and more than 22% had been WSMEs. 1,154 WSMEs have received We-Fi grants blended with SMELoC loans.
The USD 50 million loans were provided to RDB in 2019. RDB is a licensed specialized bank regulated by the Central Bank of Sri Lanka (CBSL).
The objectives of the loan were to strengthen RDB by increasing its Tier 2 capital (RDB is using the loan as a subordinated debt instrument) and to strengthen RDB in providing access to finance to MSMEs in a capital and risk efficient manner with a gender-inclusive focus. RDB’s core customer base comprises the MSME sector of the country.
As of April 12,089 MSME’s have accessed finance through the project.
The SMELoC Project Funds have been given to the Ministry of Finance who routed the loans via participating financial institutions (PFIs). There are currently 13 PFIs, namely Bank of Ceylon, Peoples Bank, Regional Development Bank, Commercial Bank of Ceylon, Hatton National Bank, National Development Bank, DFCC Bank, Seylan Bank, Sampath Bank, Nation Trust Bank, Pan Asian Bank, Sanasa Bank and Union Bank.
The project design has included increasing access to women entrepreneurs in many ways. ADB has further assisted the bank in the areas of risk management, strategy formulation, deposit mobilization and introducing processes and systems for improvement and to facilitate efficiently and for catering to the micro, small, medium-sized enterprises (MSMEs) in Sri Lanka.