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Asian Tribune is published by E-LANKA MEDIA(PVT)Ltd. Vol. 20 No. 113

International Finance Corporation facilitates SME Banking

By Quintus Perera – Asian Tribune

Colombo, 27 May, ( In a recently released survey done by the International Financial Corporation (IFC) the private sector arm of the World Bank indicated that in a Research Study, highlighted opportunities for growth in smaller businesses in Sri Lanka and underscored the challenges these companies face, such as lack of access to finance. The study examines businesses in several key industries and suggests concrete steps to improve the local business environment.

It indicated that smaller businesses in Sri Lanka account for nearly 70 percent of employment in Sri Lanka’s business sector and, therefore, play a key role in the country’s economic development. According to the study, a number of obstacles prevent them from growing more rapidly, such as access to finance, complicated loan procedures, lack of technical and management skills, marketing constraints, inadequate infrastructure, outdated technology, and inflexible labor laws. Recommendations include enhancing the funding capacity of banks by introducing dispute resolution mechanisms, establishing a small business credit rating agency, and creating a moveable assets registry.

An interesting finding is that the average annual turnover of companies across sectors increased by 14 percent in 2005 reflecting the growing importance of the SME sector as a whole. Of the sectors studied, the greatest growth was seen in deep sea fishing and in construction, due to the flurry of post-tsunami reconstruction.

According to Gilles Galludec, IFC Country Manager for Sri Lanka and Maldives, “The study is an essential tool to help bankers identify their target market segments, manage their risk and reward mechanisms more efficiently, refine their strategies for small businesses, and develop appropriate banking products. This will contribute to making SME financing profitable in Sri Lanka.”

Small and medium enterprises are seen as a key source of entrepreneurship and innovation in more industrialized economies. They have played a key role in transforming economies in Asia, including Japan, South Korea, Singapore, and Taiwan. In Sri Lanka, SMEs are also an important strategic sector with significant potential to promote economic growth and social development.

The sectors covered by the study include tea, rubber, printing, gems and jewelry, foundry, deep-sea fishing, construction, commercial transport, and coconut-based industries. The key findings of the study were presented at an event for CEOs and SME heads of banks operating in Sri Lanka.

IFC in collaboration with six leading private sector Banks - Nation Trust Bank, Commercial Bank of Ceylon, DFCC, Sampath Bank, National Development Bank Ltd and Hatton National Bank - has thus organized a SME banking Road Show at the Sri Lanka Conventional Centre on 18th and 19th May. A Seminar was also held to clear the misconceptions about access to finance as well as other assistance and advice on application for loan facilities, among a host of other services under one roof.

At the inauguration, Ajith Nivard Cabraal, Governor, Central Bank said that there are two types of economies in the country one in the Western Province and the other in other parts of the country where the per capita income in the WP is recorded at US $ 1900 while in the other parts of the country it is at US $ 730 and therefore they have to work with these two type and develop the SME sector and stressed the importance of bridging the gap in this scenario.

He lauded the IFC and the participating banks for organizing the road show which will help the SME sector very much indicating that the Road Shows are ear-marked for large companies but the organizers of this Road Show have taken an innovative step for small timers.

IFC Country Manager Gilles Galludec said that IFC has been involved in more than 400 projects in Sri Lanka and would do more in the future. He said the Road Show would give plenty of opportunities for the SMEs through expanding its branches.

Amitha Gunaratne, Managing Director, Commercial Bank said that their Bank started to change the focus into SMEs in 1990 and trying to nurture small businesses and work on not only branch expansion but lot of things such as customer awareness of different markets. He said that they have sufficient expertise to assist the SME customers in providing them assistance. They introduces various financial schemes which are made available to SMEs.

Nihal Fonseka, CEO, DFCC said that they have opened the SME market in 1970 and as of now 50 percent they advance for SME and most of them are outside the Western Province. He said that SME development also generate employment.

Chandula Abeywickrama, DGM, Personal Banking and Network Management, Hatton National Bank said that the timeliness of the initiative is laudable and they were involved in SME banking since around 1973. He said that through SME capitalized economy would create more opportunities for the people. He said that their Bank has great commitment towards micro-financing and SME and they are inclined to do small things in a big way.

Zulfiqar Zavahir, CEO, Nation Trust Bank said that they were involved with SME Banking wince 1989 and for the last four years they have come up with various schemes in servicing the SMEs. They have offering their SME customers what they needed.

Nihal Welikala, Director/CEO, NDB said that it was widely accepted that SMEs while greatly develop the economy, it generates employment and there lies great potential too. NDB traditionally focus on SME and work through the branch distribution network. He said that the banks should have a clear understanding of the industries SME operate which becomes very essential.

Anil Amarasuriya, MD, Sampath Bank said that SME is very much vibrant in the economy and it is essential for the economic development of the country. He said that their bank is involved in SME banking since 20 years and they have created a separate division to exclusively deal with SME.

- Asian Tribune -

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