Sri Lanka's first SME bank launched

by Shirajiv Sirimane

The newly established Small and Medium Enterprise (SME) Bank would be a model bank and would contribute to the economic development of the country, Minister of Finance and Planning Dr. Sarath Amunugama, said at its launch yesterday.

He said that he was not at all happy in the manner in which both the state and private banks being operated in Sri Lanka and more people should voice their concern against them and more debates should be initiated.

He said that this was the reason why the President instructed him to mould a bank which would genuinely help the SME sector. Amunugama said that this bank was launched in only 100 days after making the proposal at the last Budget.

The domestic agricultural sector is very successful and there are plans to export rice. Similarly the Government has identified the SME sector as a key player to the economy and by providing assistance throught his SME bank this sector too can contribute tremendously to the economy. "It would also help to reduce the gap between the rural and the urban population," he said.

The Government is now looking at an economic growth of 8 percent and this is not an impossible target since other countries in the region have achieved this target. The acting Chairman of the Bank, Sarath Silva said that this bank will offer the lowest interest rate in the country. "We would also introduce revolutionary collateral and the pay back time too would be very flexible," he said.

The Bank would be initially located at the 29th floor of the World Trade Centre. This is the first bank to come under the mantle of the Ministry of Advanced Technology and National Enterprise Development.

The Ministry of Advanced Technology and National Enterprise Development, under the leadership of Minister Bogollagama, now takes on the task to translate this vision into reality," he said.

The SME Bank has an explicit mission: "Improving lives by creating opportunities in small and medium businesses; supporting and developing the SME sector by providing necessary financial and technical assistance on a sustainable basis, enabling the SME sector to contribute to economic development through value and adherence to the highest standards of institutional integrity." Bogollagama said.

These aspirations aim to first, transform SME into a nerve centre of the development process to achieve a balanced rate of economic growth, regionally distributed benefits, high levels of employment and productivity and meet the need to establish a multi-prong support mechanism to promote SME competitiveness while extending full assistance to exporters engaged in high value addition to domestic resources.

The SME Bank, more positively, will provide the way around deterrents such as collateral dependent debt, shortfall in equity financing, high interest rates and low availability of credit convoluted by complicated loan application procedures.

While these are all main barriers to business expansion and productivity, the problems become even more complex in the absence of business plans and total management skills which are consequent to failure and the inability to repay loans.