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Sri Lanka trade financing benefited state banks, SOEs, ADB finds

ECONOMYNEXT – Trade financing provided by the Asian Development Bank (ADB) has large been used by Sri Lankan government banks to support loss-making state-owned enterprises, an independent evaluation of ADB programs has found.

The ADB’s trade financing facility could have been better used by banks that have a stronger focus on supporting trade by small businesses, according to the ADB country assistance program evaluation released recently.

It said the relevance of the ADB’s Trade Finance Facilitation Program (TFP) to private sector development in Sri Lanka had been “fairly modest”.

The purpose of the Trade Finance Facilitation Program is to address the lack of access to trade finance by ADB’s member countries.

A significant program increase in 2009 was approved as a direct response to the global financial crisis, which had severely affected the availability of trade finance.

The program supported $787 million of trade finance for Sri Lanka through 339 transactions over 2006–2015.

“The program had primarily been used by the two large state-owned banks to secure confirmations for large trades of petroleum and fertilizer for loss-making SOEs,” the evaluation report said.

The evaluation argued that “the development impact of the TFP could be greater in Sri Lanka if its resources were used in those banks that have a stronger focus on supporting trade by SMEs.”

(COLOMBO, Nov 24, 2016)

 

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