Local banks in Sri Lanka are finding it difficult to follow the newly implemented priority sector lending target on credit granted to individuals and businesses in the micro, small, and medium enterprises (MSME) sector.
The Monetary Board of the Central Bank of Sri Lanka (CBSL) recently advised licensed banks to increase their loans to the small business sector by a minimum of 20% in 2021, as it is not satisfied with the pace of growth in loans given to the private sector, specifically certain priority sectors.
Speaking to us, Commercial Bank of Ceylon Chief Financial Officer (CFO) Nandika Buddhipala said that 20% per annum growth rate on a YoY (year-on-year) basis for the MSME sector is challenging to achieve, even though the bank has been lending to SMEs for a long period of time.
“We have over 260 branches islandwide, out of which we mostly focus on supporting and developing SMEs. We are looking at the new implementation positively, but it's challenging to achieve the target given for MSMEs. We have to try our best to increase the level by the expected 20%,” he said.
On a positive note, Buddhipala mentioned that since restrictions on imports to Sri Lanka are in place on several goods, small-scale entrepreneurs will have the capacity to improve their production capacity. However, it will also depend on the economic circumstances.
The CBSL introduced the priority sector lending target recently to promote economic sectors with high potential in terms of domestic economic growth and export earnings, with the intention of it contributing towards the broad-based revival of the economy.
CBSL Deputy Governor T.M.J.Y.P. Fernando, speaking to us, said that the initiative was taken to facilitate the growth of the economy by encouraging the MSME sector to increase its production capacity.
“The Government has targeted a production-led economy in order to achieve the growth, hence the CBSL is now having an accommodative policy. The expectations are high but with this, MSMEs will be given priority with extra attention,” Fernando added.
Furthermore, we also spoke to People’s Bank Chief Executive Officer (CEO) Ranjith Kodithuwakku, who stated that this new facility will be available to MSMEs similar to how it was made available to SMEs.
Attempts to contact Bank of Ceylon (BOC) and Sampath Bank proved futile on 22 April.
With reference to the press release of the CBSL, the prioritised economic sub-sectors for MSMEs would be: food and beverage processing, production of medical utilities and related products, development of distance learning facilities, domestic cottage industry, rubber and rubber products, ship and boat building, cosmetics, batik and handloom, gem and jewellery, health and wellness, electronics and electrical components, motor vehicle assembly, pharmaceutical manufacturing and porcelain, ceramics, and pottery.
Furthermore, according to the Monetary Law Act, enterprises with an annual turnover not exceeding Rs. 1 billion will also be considered as MSMEs.
CBSL’s MSME priority sector lending target: Local banks find implementation difficult
25 Apr 2021
CBSL’s MSME priority sector lending target: Local banks find implementation difficult
25 Apr 2021
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