IFC promotes access to finance better services for SMEs

IFC, a member of the World Bank Group, will implement an innovative development programme for small and medium entrepreneurs in Sri Lanka.

Funded by Norway, the Southern Chambers Access to Finance and Advisory Services Programme will target members of five chambers of commerce in the country’s southern region: Hambantota, Matara, Galle, Monaragala, and Ratnapura.

Access to loans is one of the top concerns for SMEs in Sri Lanka, according to several studies.

Smaller businesses are often seen as inherently risky and unstable; hence banks tend to demand extensive fixed collateral as security, commonly up to 200 percent of the loan amount.

The country’s banks lack skills in managing a portfolio of small projects, often relying on strict rules for collateral instead.

Norwegian Ambassador Tore Hattrem and First Secretary Ingrid Dana joined the launch for the programme at Hambantota on Tuesday.

General Manager, IFC Advisory Services for South Asia Anil Sinha said, “This programme represents a new milestone in IFC’s and the Norwegian government’s shared vision for SME development.”

The new programme builds on a series of discussions that IFC has had with chamber officials, SME entrepreneurs, and bankers to identify ways to improve access to credit and financial services and promote SME growth in the country’s southern region.

IFC Country Manager in Sri Lanka, Gilles Galludec said, “Improving banks’ efficiency and capacity for serving small and medium enterprises, enhancing the knowledge of their staff, and developing and distributing new SME products will be important parts of this program.”

IFC aims to strengthen the access and quality of services that banks and other institutions provide to small and midsize businesses.

One key component will be an access to finance strategy through which five leading private sector banks in Sri Lanka-Commercial Bank, DFCC, Hatton National Bank, NDB, and Sampath Bank-will work with IFC to enhance their SME banking activities in the region.

A second key component of the programme is advisory services to help SMEs in the South to become bankable businesses. IFC will assist the five chambers of commerce in providing technical advice, training, guidance, and market information to their members.

An important objective is to provide solutions to address the lack of collateral, to raise awareness and knowledge of banking services for the SME sector and to help bring banks and businesses closer.

The Norwegian government has committed funding of $2.5 million for IFC to implement the project over three years.

IFC will build on successful experience with designing and implementing sustainable programs for SME development in emerging markets worldwide.