• Superannuation funds tapped for long-term capital
• Development units to start in State banks before private rollout
• Standalone development bank delayed; ADB discussions continue

The Government is looking at superannuation funds to mobilise long-term capital for the establishment of the proposed development banking units within the State banking system by 2026, according to the Deputy Minister of Industry and Entrepreneurship Development. 

Speaking to The Sunday Morning Business, Deputy Minister of Industry and Entrepreneurship Development Chathuranga Abeysinghe revealed that, instead of establishing a new development bank, the Government was currently in negotiations with State-owned Licensed Commercial Banks (LCBs) to establish dedicated development banking units within their existing structures. 

“We are not trying to establish a separate development bank because the Government does not have enough bandwidth for this; instead, we will be trying to set up development banking units in some of the commercial banks,” he stated.

Elaborating on how the proposed structure would be operationalised, Abeysinghe stated that the Government was considering tapping into the Employees’ Provident Fund (EPF), the Employees’ Trust Fund (ETF), and domestic insurance funds to provide the long-term financing necessary to support the development banking framework

“For development banking, you need long-term funding. Deposits are short-term funding and banks only have deposits. Therefore, if the EPF, ETF, and insurance funds can step in, we would have long-term capital,” he stated.

He further said that initially, the proposed development banking units would be established within State-owned banks, with plans to subsequently engage with private banks to explore the possibility of establishing similar units.

Abeysinghe noted that the Government had been in dialogue with the Asian Development Bank (ADB) regarding the long-term prospect of creating a standalone development bank. However, as a first step, the focus remains on integrating these units within the existing banking framework.

He stated that the proposed development banking structure would require careful planning and was therefore most likely to be implemented by the 2026 Budget.

In February, President Anura Kumara Dissanayake announced plans to establish a State-owned development bank to support the country’s small and medium-scale enterprises.