New schemes a boon to SME entrepreneurs

by L.S.A. Wedaarachchi

The SME Bank encourages export oriented and import substituted SME projects. The SME Bank provided loans worth Rs. 360 million to the SME sector last year. The Bank also provides loans for projects which use value added local material and generate employment.

The SME Bank was set up in 2005. The main objective of establishing the SME Bank was to support the SME sector which had been neglected by some leading commercial banks in the past. The higher interest rates, ill-treatment of Commercial banks and lack of financial and technological knowledge were longstanding grievances of the SME sector.

The CEO of the SME Bank Douglas Weerasingha said that a number of financial products and programs to assist the SME sector were launched after a careful study by the Bank.

"The Bank's aim is to build a strong entrepreneur culture in Sri Lanka, developing small and medium enterprises by introducing innovative financial products and development services.

The SME Bank is ready to meet the demands of SME enterprises which are needed for expansion, upgrading and diversification," he said. Loans and leasing facilities can be obtained for these purposes from the Bank. SME defines small scale projects with an asset value of Rs. 20 million while projects under Rs. 50 million are considered medium scale projects.

The value of the land and building is excluded from these assets. Up to 70 percent of the proposed investment will be financed by the SME Bank as a loan. The loans should be repaid within five years.

According to the CEO collateral is determined on a case by case basis and the minimum security required will be the assets created by the loan facility. The SME Bank introduced special micro loan schemes under the 'Mahinda Chintana' for selected traditional handicraft manufacturers in Kandy, Matale and the Nuwara Eliya districts.

The entrepreneurs engaged in giftware lifestyle goods, tapestry production and handicraft industries catering to niche and export markets can obtain SME loans at very reasonable interest rates including a grace period.

According to the CEO one of the very successful micro loan schemes is the 'Kantha Diriya' which promotes women - entrepreneurs in the handloom industry. It was implemented in Ampara, Anuradhapura, Colombo, Gampaha, Hambantota, Kandy, Kegalle, Kurunegala, Matara, Ratnapura, Puttalam and the Trincomalee districts.

The women entrepreneurs were selected by the Ministry of Textile Industries. The SME Bank implemented another loan scheme in collaboration with the Mahaweli Authority in the areas under the Mahaweli authority. Entrepreneurs who obtained loans up to Rs. 10 million, having a one-year grace period for repayment were selected by the Mahaweli Authority.

Sri Lankan SME entrepreneurs who have business registrations in the age group 18-55 are eligible to obtain assistance from the SME Bank.

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