CNCI calls for SME respite

Hiran H. Senewiratne

The Ceylon National Chamber of Industries (CNCI) has called upon the Government to provide a respite to the SME sector on the penal interest for bank borrowings, which is running more than 30 percent to sustain the sector.

At present most SME sector enterprises borrow at a high interest rate - 28 percent and at times are unable to pay the interest in the current economic situation. Therefore, they have to pay the default payments to the banks in addition to the interest, CNCI Chairman Newton Wickramasuriya told Daily News Business.

He said the SME sector has been identified as an important strategic sector to promote growth and social development in Sri Lanka. Over the years it has also gained wide recognition as a major source of employment, income generation, poverty alleviation and regional development, he said.

The banks reduce interest rates periodically but SME sector entities still obtain loans at higher interest and it is now calling upon the Government to provide a respite to them until the economic crisis ends, he said.

Wickramasuriya said the SME sector, the biggest entrepreneurial sector, especially the export sector and its export supporting services are now facing another challenge when importing raw materials in the current economic conditions.

The SME sector is gradually becoming un-competitive, including export sector entities with the imposition of heavy duty and other charges when importing raw materials, he said.

To import raw materials for the manufacturing sector, the company has to pay 2.5 percent Customs Duty. In addition they have to pay 38.25 percent on duty and other levies. Therefore, the SME sector is getting into a deeper crisis with high bank interest rates along with the penal interest on bank lending, he said.

In these tight circumstances, the SME sector including the export sector is compelled to lay off employees on a temporary basis until the global financial crisis eases.

The Government has given the SME sector, including exporters, the green light to temporary lay off employees for one year but it has not made an official announcement, he said.