Sri Lanka banks told to design innovative loan schemes for entrepreneurs

ECONOMYNEXT – Sri Lankan banks should help spur development, supporting fina cial literacy and designing suitable lending schemes for entrepreneurs, Idah Pswarayi-Riddihough, the World Bank Country Director for Sri Lanka, said.

“In this challenging and changing environment, banks should be seen as development enablers,” she said in a keynote speech at the 31st anniversary convention of the Association of Professional Bankers of Sri Lanka.

“Banks can enable development through different means, such as designing innovative loan schemes for entrepreneurs, supporting financial literacy and digital ecosystems in the development of new data-driven business models, and adopting best practices on data governance and cybersecurity to improve trust in the digital economy.”

Pswarayi-Riddihough said banks have a critical role to play in financial inclusion, as well as in increasing access to financing for Small and Medium Enterprises (SMEs).

“Banks also have a critical role to play in supporting remittances that can fuel growth beyond consumption, and help Sri Lanka leapfrog into the digitally-supported growth of tomorrow,” she said.

“You are part of the equation in Sri Lanka’s recent graduation into upper middle-income status, and you will continue to be very important for the country’s future.”

The density of bank branches in the country currently stands at 18.6 branches for every 100,000 adults with about 83 percent of the adult population having a bank account, with women recording a similar penetration rate, unlike many other South Asian countries.

“But having a bank account isn’t enough; it must be used,” Pswarayi-Riddihough said.

“The challenge in Sri Lanka is less about the unbanked; it is more about the underbanked, especially the women.”

According to the International Finance Corporation, the number of individuals who reported no deposits and no withdrawals in 2017 was 31 percent.

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And only 17 percent of the women were successful in borrowing from financial institutions while, in the formal market, about 80 percent of the borrowers have been women, Pswarayi-Riddihough said.

“Moreover, less than 15 percent of SMEs and less than one percent of MSMEs use any form of insurance, which leaves businesses and individuals at greater risks.”

(COLOMBO, 09 October 2019)