Sri Lanka SMEs buoyed by new government’s surprise Christmas bonanza
Originally Published in the Lanka News Web, December 23, 2019

Sri Lankan SME sector rejoiced the latest initiative by the new government to suspend recovery of loans obtained by them and the action to halt the auction of the small entrepreneurs property kept as surety from auctioning.

The Confederation of Micro, Small and Medium Industries (COSMI) representing the SMEs praised on the new government for its prompt action to revive domestic SMEs and SME paddy millers through its December 20 announcement.

“The directive by President Gotabaya Rajapakse and Prime Minister Mahinda Rajapaksa on December 20 addresses the need of the hour for our SMEs and is clearly a timely step in the right direction over the longer term.

What is more, we warmly welcome the comprehensive package to be followed for SMEs which is expected to come anytime. We are very hopeful that this additional package will give a bigger boost to both the lender and the borrower in this sector, which is the lifeline of our economy” said Nawaz Rajabdeen, Founder President COSMI recently.

On 20 December, the Government suspended recovery of loans obtained by the SME sector, not exceeding Rs 300 Mn for each entity through a directive to revive SMEs in the country.

“Financing and lack of credit are the banes of Sri Lankan SMEs -of all types. According to the 2018 Ernst and Young (EY) SME Survey commissioned by the Ministry of Industry and Commerce,

‘Access to Finance’ was the foremost issue faced by SMEs in doing business. 59% of the respondents in the Ernst and Young Survey said the SMEs were hampered by finances.

None of the surveyed small enterprises were able to secure an SME loan facility, while most medium level enterprises were granted bank loans at commercial rates at high interests-“the effective interest rates charged by banks (13%-17%) and non-bank financial institutions (30%-50%) are high and burdensome for SMEs” the report said.