The National Credit Guarantee Institution Limited (NCGIL) has launched a landmark initiative aimed at enhancing access to finance for Sri Lanka’s Micro, Small, and Medium Enterprises (MSMEs). This national-level programme, operated in partnership with the Government of Sri Lanka (GOSL) and leading financial institutions, marks the first of its kind in the country.
The initiative encourages Participatory Financial Institutions (PFIs) to issue loans to MSMEs based on the viability of business cash flows rather than traditional collateral-based lending. NCGIL provides guarantee cover to these shareholder Financial Institutions (SFIs) to mitigate their credit risk, enabling more flexible and inclusive financing for the MSME sector — widely regarded as the backbone of the country’s economy.
NCGIL began operations in January and has already issued its first set of guarantees to three financial institutions to partially cover loans granted to three MSMEs. Thirteen PFIs, including eight commercial banks, two specialized banks, and three licensed finance companies, are involved in the programme. These include People’s Bank, Bank of Ceylon, Regional Development Bank, Commercial Bank, Hatton National Bank, Sampath Bank, Seylan Bank, National Development Bank, Nations Trust Bank, Sanasa Development Bank, LB Finance, Central Finance, and Citizens Development Business Finance.
The programme is supported by a USD 50 million long-term fund provided by the Asian Development Bank (ADB), which accounts for 90% of NCGIL’s capital. The remaining 10%, amounting to USD 5.375 million, is invested by the 13 financial institutions.
Eligible MSMEs — defined as businesses with annual turnover under Rs. 1 billion — can now apply for term loans ranging from Rs. 500,000 to Rs. 25 million for capital expenditure or permanent working capital needs. Financial institutions participating in the programme can request a credit guarantee from NCGIL to cover up to 67% of the approved principal loan amount.
This initiative is expected to significantly improve credit accessibility for MSMEs and drive entrepreneurship and economic growth across Sri Lanka.
