By: Staff Writer
January 06, Colombo (LNW): The Sri Lankan Government has pledged to design a more effective relief package to support the revival of Micro, Small, and Medium Enterprises (MSMEs), as the relief measures announced by the Central Bank of Sri Lanka (CBSL) through Circular No. 4 of 2024 have been deemed inadequate.
The Ceylon Federation of MSMEs (CFMSME) expressed dissatisfaction with the CBSL’s measures, arguing that they fail to address the severe challenges faced by the sector due to events like the Easter Sunday attacks, the COVID-19 pandemic, and ongoing macroeconomic difficulties.
CFMSME President Mahendra Perera highlighted that the CBSL’s provisions, which include the rescheduling of impaired loans and partial interest waivers, do not sufficiently meet the needs of MSMEs.
He stated that the relief measures lacked practical relevance and omitted key elements previously discussed with stakeholders. Following meetings with Minister Sunil Handunneththi and Deputy Minister Chathuranga Abeysinghe, the Government acknowledged these concerns and directed the CBSL to revise its approach.
Perera revealed that the proposed incentive package under discussion includes several significant relief measures.
These include restructuring existing loans at concessionary interest rates below 10%, issuing new loans at similarly low rates regardless of Non-Performing Loans (NPLs), and either fully waiving or partially subsidizing accrued interest on loans over the past five years.
Under the partial waiver plan, the Government would cover 50% of the interest, with banks absorbing the remainder.
Additionally, the Government is considering removing eligible MSMEs from the Credit Information Bureau of Sri Lanka (CRIB) to improve access to new loans.
Ajith Dhammika Bandara, Coordinating Officer to the Deputy Minister of Industries and Entrepreneurship Development, stated that while CRIB removal is being prioritized, MSMEs will need to work with banks directly to restructure existing loans.
The CBSL’s Circular No. 4 of 2024 outlines several conditions for SMEs seeking relief. Borrowers with credit facilities classified as Stage 3 after 1 April 2019 must initiate business revival discussions with their banks by 31 March 2025 to qualify.
Restructured loans must adhere to specific repayment timelines based on the outstanding loan amount. For instance, loans under Rs. 25 million require repayment commencement by 31 December 2025, while loans exceeding Rs. 50 million must begin repayments by 30 June 2025.
The Circular also offers interest waivers based on the outstanding loan amount and settlement timeframe.
For loans between Rs. 5 million and Rs. 10 million, waivers range from 65% for settlement within six months to 40% for settlement within 12-60 months. Loans between Rs. 10 million and Rs. 25 million receive smaller waivers, starting at 35% for quick repayment and decreasing to 20% over extended periods.
While these measures offer some respite, industry leaders argue they fail to address the sector’s structural challenges. The forthcoming revised relief package is expected to be more comprehensive, targeting the specific needs of MSMEs to ensure their sustainable recovery.
