August 30, Colombo (LNW): Sri Lanka’s small and medium-sized enterprises (SMEs) are poised for a significant transformation as the government partners with the International Finance Corporation (IFC) to harness their export potential.
SMEs represent about 70% of the 1.3 million enterprises in the country, employing 2.2 million people and contributing over 50% of the national GDP. However, these enterprises are currently facing unprecedented financial challenges, with many deeply in debt.
The Cabinet of Ministers recently approved a cooperation agreement between the Export Development Board of Sri Lanka (EDB) and the IFC. This agreement, initiated by President Ranil Wickremesinghe in his role as Investment Promotion Minister, has received legal and diplomatic clearances, setting the stage for its implementation.
The business environment for 89% of SMEs has deteriorated, largely due to stringent legal measures taken by banks to recover loans. Official data reveals that, over the past eleven months, 1,183 SME assets have been seized and auctioned off under parate execution.
This legal process, governed by Sri Lanka’s Banking Act, has forced many entrepreneurs to close their businesses as they are unable to meet loan repayments after the expiry of a moratorium provided by the Central Bank.
The cooperation agreement with the IFC aims to reverse this trend by transforming SMEs into active exporters. As part of the EDB’s broader initiative to foster new exporters and expand the export sector, this partnership will provide targeted support to SMEs.
The focus is on helping these businesses scale up, enhance competitiveness, and successfully enter international markets.
Cabinet Spokesman Minister Bandula Gunawardena highlighted that this strategic partnership will bring significant benefits to SMEs, including access to valuable knowledge, training, and financial support.
It aligns with the government’s broader goals of diversifying the export base, reducing economic vulnerabilities, and promoting sustainable development.
In response to the current SME crisis, State Finance Minister Shehan Semasinghe announced that the government has allocated Rs. 50 billion in the 2024 budget to support these enterprises.
Of this, Rs. 30 billion is earmarked for rehabilitation efforts, which will be divided into two segments.
A new facilitating institution will be established under the Ministry of Finance in January, with Rs. 50 million allocated for issuing guarantees and an additional Rs. 50 million for providing financial facilities at subsidized interest rates.
This initiative reflects the government’s commitment to revitalizing the SME sector, which plays a crucial role in the country’s economy.
Through targeted support and international cooperation, Sri Lanka aims to turn its struggling SMEs into competitive players in the global market
