Deputy Minister of Industries Chathuranga Abeysinghe says the government has established a new Credit Guarantee Institution to assist small and medium-scale enterprises (SMEs) struggling with loan repayments since Sri Lanka’s economic crisis.
Many SMEs had faced severe debt issues over the past few years, with several unable to service or restructure their loans, leading to the risk of asset seizures by banks, he said.
However, with the intervention of the banking sector and the Ministry of Industries, a large number of businesses were successfully restructured this year, Abeysinghe noted.
To prevent similar crises in the future, the government has introduced the Credit Guarantee mechanism, with up to Rs. 15 billion in guarantees available. Under this scheme, the government will bear 70% of the risk, while banks will assume 30%, enabling financial institutions to provide loans more confidently.
Deputy Minister Abeysinghe clarified that the scheme is not designed for startup businesses or those lacking formal accounts or verifiable cash flow. Instead, it is intended for existing enterprises seeking to expand their operations.
So far, 728 small and medium-scale businesses have benefited from this initiative, receiving a total of Rs. 4 billion in loans. The applicable interest rates align with the prevailing rates offered by commercial banks.
In addition, under the SMILE III concessionary loan scheme operated by the Ministry of Industries, borrowers can access loans at an 8% interest rate, with a two-year grace period and a ten-year repayment term, although collateral is required.
The Deputy Minister noted that the eligibility for such financial support depends on the organizational strength and financial discipline of each enterprise. He added that ministry officials across the country are assisting entrepreneurs in improving business structures to meet these standards.
He further stated that the government is working on creating new financial models to help startups secure capital over the next few years. (Newswire)