ECONOMYNEXT – Manila-based Asian Development Bank said it loan 50 million dollars to state-run Regional Development Bank in Sri Lanka with a sovereign guarantee to be given to micro, small and medium enterprises (MSMEs).
"MSMEs have high growth potential, create more jobs, and over time, potentially increase the tax base at a quicker pace than larger enterprises," ADB Country Director of the Sri Lanka Resident Mission Sri Widowati was quoted as saying.
"Because of their distribution over the whole country, they also help reduce regional inequalities."
The 50 million dollar loan with a sovereign guarantee will be structured to boost RDBs regulatory capital so that it can provide up to 500 million dollars of loans to micro enterprises, the ADB said.
Sri Lanka is implementing a 500,000 subsidized credit program for small hotels, through the RDB.
The project will also have a million dollar technical assistance grant from the Japan Fund for Poverty Reduction, finance by the government of Japan, which will train about 500 women entrepreneurs.
The ADB said only 30 percent of Sri Lankas firms have sufficient access to bank loans and other capital which was a key barrier facing entrepreneurs in Sri Lanka.
"These constraints are even greater for micro and small enterprises led by women or located in rural areas," the lender said.
Sri Lanka has a permanently depreciating exchange rate, which destroys real capital and keeps nominal interest rates high due to a soft-pegged monetary regime involving targeting both the exchange rate and interest rate that began in 1950, critics have said. (Colombo/June15/2019)