IFC to help SME sector growth

Channa Kasturisinghe

SME SUPPORT: Sri Lanka's small and medium enterprise (SME) sector will be better positioned to obtain much needed financial assistance through the local banking sector following the launch of South Asia Enterprise Development Facility (SEDF), a multidonor technical assistance programme carried out by the International Finance Corporation (IFC).

The local SME sector, the growth of which has been hindered mainly due to lack of funds will be able to improve its performance and compete globally with the launch of this programme.

IFC, the private sector arm of the World Bank Group aims to accelerate the growth rate of the SME sector by enhancing access to finance and facilitating the establishment of an enabling environment for SME development through SEDF programme, Iyad Malas, IFC's Director for South Asia told the media in Colombo yesterday.

"We will work in partnership with the Government of Sri Lanka, the private sector, donor partners and other development partners to identify and address the constraints to SME development. The facility will also complement the development of an effective business support infrastructure already started by the governments and other bilateral and multilateral agencies," he said.

SEDF is one of IFC's 11 regional SME facilities in emerging markets, with combined annual spending of nearly 60 million US dollars. The programme will also apply best practices, tools, and techniques for SME development in Sri Lanka and Maldives by leveraging the existing knowledge and resources from IFC's SME programmes.

The programme will initially focus on all areas of Sri Lanka except the North and East. The IFC has initially selected four private banks in Sri Lanka to support the SME sector.

Program Advisor/ SEDF A. L. Somaratne, said that in Sri Lanka although there is enough funding for SME's the poor disbursement level of these funds through the banking system due to certain shortcomings of the banks and the SME sector itself has been a longstanding problem.

"A recent survey revealed that a 61 percent of the local SME sector find it difficult to obtain financial assistance from banks. On the other hand we have found that most banks struggle to disburse money to SME's due to various reasons. Through the SEDF programme we will work with banks and the SMEs to ensure smooth disbursement of these funds which are much needed to promote the local SME sector," Somaratne said.

In Sri Lanka enterprises which invest less than Rs. 70 million are considered to be in the SME category according to guidelines given by the Asian Development Bank," Somaratne said.