brand logo

Tourism soft loans: Finance Ministry struggles to convince banks

17 Jun 2019

By Madhusha Thavapalakumar The full implementation of working capital soft loans for the tourism sector faces further delays with only five banks agreeing to grant loans as at Friday, 14 June, The Sunday Morning Business learns. The Sunday Morning Business exclusively reported on 7 June that no loans had been provided by banks under this scheme up to that day, even though the facility had been available from 17 May onwards. The Ministry of Finance, the steering entity of this initiative to provide relief to the battered tourism sector, had sent a Memorandum of Understanding (MoU) along with a circular on the working capital soft loans to 19 banks just over a month ago (14 May). However, remarkably up to yesterday, only state-owned People’s Bank and Bank of Ceylon (BOC) along with Hatton National Bank, Union Bank, and Commercial Bank of the private sector had signed the agreement. Of these five banks, Commercial Bank, the largest private bank in Sri Lanka, had been the last to sign, possibly indicative of a degree of reluctance. Speaking to The Sunday Morning Business, an official from the bank noted that the signed MoU was sent to the Ministry of Finance on Thursday (13) and the bank is expected to have a discussion with the Ministry tomorrow (17) with regard to the implementation of the guidelines. Interestingly, Regional Development Bank (RDB), the leading state-owned development bank in Sri Lanka, has not signed the MoU with the Government. However, at a press conference held on Thursday (13), which was attended by Minister of Tourism Development, Wildlife, and Christian Religious Affairs John Amaratunga and Non-Cabinet Minister of Economic Reforms and Public Distribution Dr. Harsha de Silva in Colombo on Friday, an official from the Treasury noted that all 19 banks are expected to enter into the MoU this week. The official, however, elaborated on the difficulties faced by the Finance Ministry in obtaining the participation of the banks. “We put out the cabinet paper on working capital soft loan on 7 May and received the Cabinet approval on 14 May. Right after the approval, we sent out circulars together with the MoU to all the banks. We even had to extent our deadline to sign because the procedural delays vary from one bank to the other.” At this point, a representative from BOC rushed to the defence of the banking industry, highlighting the procedure a bank has to go through to enter into a MoU of this nature. “Banks have to get the approval from their respective credit committees, which should be followed by the approval from the board of directors. The board of directors convene only twice a month. After obtaining their approval only can we send it to the Finance Ministry.” At this point, Dr. de Silva noted that Minister Amaratunga and himself, as the members of the Tourism Revival Cabinet Subcommittee, would convene all CEOs of banks and have a discussion in this regard this week. Following the Easter Sunday attacks and its devastating impact on the tourism sector, the Government introduced working capital loans up to Rs. 250 million to help the industry carry out day-to-day operations, with the exact amount to be decided on the turnover of the previous year. The loan has a preferential interest rate as low as 3.46% and the borrower can take two years to repay it. These loans have been available for the industry since 17 May and were further announced at a press conference on 30 May. Interest subsidy for the soft loan is being guaranteed by the Ministry of Finance, which means 10% of the interest subsidy will be borne by the Ministry while the rest of the 3.5% will be paid by the borrower. However, if the borrower defaults, that subsidy will not be given to the bank – the entire loss will then be borne by the banks. Owners of tourist hotels, guest houses, home stays, bungalows, rented houses, heritage bungalows, rented apartments, boutique hotels, boutique villas, and hostels are eligible for this loan and both registered and existing non-registered individuals and entities with Sri Lanka Tourism Development Authority (SLTDA) can apply. However, the non-registered individuals and entities have to register with SLTDA prior to applying for the loan. The working capital soft loan initiative is driven by the Ministry of Finance and not by CBSL, as the fund allocator for this concession is the Treasury. However, the soft loan still coordinated on behalf of CBSL by its Regional Development Department, as it is the banking sector regulator.

Kapruka

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!


More News..