By: Staff Writer
November 09, Colombo (LNW): Sri Lanka’s small and medium enterprise (SME) entrepreneurs numbering around 77000 have been given some life line by providing access to loan facililities under a new scheme initiated under the 2025 budget, finance ministry disclosed.
It has fulfilled the financial requirements, the biggest challenge for small business owners providing loans without pledging property or other assets as loan security and this facility was based on the business’s potential rather than on collateral. .
Director General of the Department of Development Finance of the Ministry of Finance, Manjula Hettiarachchi revealed that out of the Rs. 200 billion allocated in this year’s budget to provide financial assistance to SME entrepreneurs, loans amounting to Rs. 120 billion have already been approved.
He added that that the remaining Rs. 80 billion be swiftly channeled through the banking system to make the funds available to beneficiaries without delay.
He further stated that one of the major challenges faced by SMEs and other entrepreneurs is the lack of sufficient capital to start or expand a business under affordable interest rates.
Another key issue, he noted, is the absence of adequate collateral to secure such loans. To address both challenges, the government, through the Department of Development Finance, has introduced special loan schemes in collaboration with 13 state and private banks and has also established a National Credit Guarantee Institution (NCGI).
Under this scheme, individuals already operating successful businesses can obtain working capital loans of up to Rs. 25 million at an interest rate of 7 percent, with a 12-month grace period for interest payments. The loan repayment period has been structured over 10 years.
Loans under this scheme range from Rs. 500,000 to Rs. 25 million and are available across all sectors. To qualify, SME owners must show their business is viable when applying through banks.
Additionally, those currently classified as Non-Performing Loans (NPLs) and unable to meet existing loan repayments can access up to Rs. 15 million at an 8 percent annual interest rate. Borrowers are exempt from paying interest for the first six months, and repayment can be made over five years.
The government has officially launched the National Credit Guarantee Institution on June 2, 2025, SME entrepreneurs to access loans without providing collateral, making it easier for small businesses to grow.
It is offering a 67 percent guarantee to banks, allowing them to provide loans based on the business’s potential rather than on collateral.
The institution is a joint effort by the Asian Development Bank (ADB) and Sri Lanka’s Ministry of Finance. It operates as a public-private partnership with the government owning 90 percent and the remaining 10 percent held by 13 private banks and financial institutions.
The ADB has contributed US$ 50 million in capital and technical support to establish the institution.
Chief Executive Officer of the National Credit Guarantee Institution, Jude Fernando, revealed that so far, Rs. 3.5 billion worth of guarantees have been issued, enabling 633 loan facilities. He added that the institution plans to further expand its services
