October 19, Colombo (LNW) Sri Lanka’s micro, small, and medium enterprises (MSMEs) have urged the newly formed government to initiate critical reforms in MSME financing within the next 60 days, emphasizing the need for interest waivers to support struggling businesses.
The call for action comes as the temporary relief from the suspension of parate execution is set to expire on December 15, threatening the stability of many MSMEs.
The Ceylon Federation of MSMEs, led by President Mahendra Perera, has appealed for the waiver of accumulated interest on loans taken from 2019 to 2024 to alleviate the financial pressure on these enterprises.
Perera emphasized that MSMEs should be granted long-term repayment options with interest rates capped at 10%, and suggested that total interest payments should not exceed 50% of the original loan amount.
The federation estimates that MSMEs currently owe around Rs. 250 billion, with 60% of these loans classified as non-performing, and the interest amounting to approximately Rs. 60-70 billion.
Perera also recommended amending the outdated 33-year-old parate execution law, proposing its temporary suspension for a year, and suggested returning auctioned properties to original owners to facilitate debt repayment.
In addition, the federation’s Vice President, S.N. Raghvan, highlighted the need for a comprehensive overhaul in MSME financing. He argued that although banks have recorded high profits recently, MSMEs’ contribution to the country’s GDP has declined sharply, indicating a dire need for financial reforms.
Raghvan proposed utilizing the Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF) to secure loans for MSMEs, similar to measures taken during the domestic debt restructuring process. He stressed the urgency of implementing these changes within the next 60 days to ensure MSMEs are prepared for the country’s external debt repayments set to begin in 2028.
He concluded that a robust and well-supported MSME sector is crucial to prevent future economic challenges, urging the government to lay the groundwork for long-term financial stability in the sector.
Looking ahead to Sri Lanka’s external debt repayments beginning in 2028, Raghvan asserted the need for a strong MSME sector to avoid another default.
“When we reach 2028, the MSMEs need to be stronger and prepared to handle the payments we have agreed to start repaying. Give them the platform and financial support they need, so they can be ready for what’s ahead,” he said.
