The Central Bank has announced new concessionary measures on the debt of micro, small and medium enterprises (MSMEs) and individuals including fixed income earners and pensioners affected by the present macroeconomic conditions.
Noting that the continuation of these adversities would pose a severe threat on banks recoverability of outstanding loans and advances, the Central bank Bank has directed all banks to restructure and reschedule credit facilities of performing and non-performing borrowers who are adversely affected by the prevailing adverse macroeconomic conditions on the basis of an objective assessment on the future repayment capacity and viability of the business.
Banks have also been requested to suspend recovery actions against non-performing credit facilities that have been classified as non-performing on or after 01.01.2020 on a case by case basis based on an objective assessment on the future repayment capacity/viability of business upon the condition that the borrower submits an acceptable repayment plan.
Banks are also requested to facilitate early settlement of existing performing or rescheduled credit facilities without charging any additional fee i.e. early settlement charges and recovery of future interest applicable to lease facilities.
The new concessions and measures are aimed at encouraging MSMEs and individuals with a potential to revive their business/income streams to commence repayment of loans while preventing any elevated strain on the banking sector.
The Central Bank has issued these guidelines at a time where the majority of small scale business enterprises have already closed down their businesses and other medium scale enterprises are struggling to survive amidst high interest rates for their loans and financial difficulties to pay such loans .
The country has been hit by high inflation and forex shortages, accompanied by trade and exchange controls and very high Interest rates that have wrecked most of its small and medium enterprises (SMEs).
The SMEs, which form the backbone of the country and make up a large part of its economy, are the worst hit, which is gradually leading to massive unemployment.
SMEs are an essential source of employment opportunities and rural income, and are estimated to contribute about 35% of employment.
The companies that were profitable prior to the Easter attacks therefore, need support to be guided out of the crisis.
Solutions SMEs are desperately urging the Government to address the high cost of borrowings and to assist them to find new markets in which to expand and grow.
In addition, they seek the setting up of Business Rehabilitation Units to support, advice, and guide affected businesses towards revival.
Some of their other requests include: Allowing the importation of essential inputs to improve domestic production such as machinery, as well as spare parts and raw material; revamping existing strategies to promote tourism; negotiating with donor agencies for soft loans to support SME business revival; and to ensure the provision of the required fertilizer to increase the supply side and reduce food inflation.
The SMEs cannot be held responsible for the misguided economic policies of successive governments. Amidst the power cuts, most small and medium firms do not have a source of back-up electricity, while the country struggles to provide an uninterrupted supply of power.
