BOC to revive SME sector via new scheme with Rs. 5 b initial funding

BOC Deputy General Manager Development Banking and Branch

Credit Operation Range 2  

M.M.R.P. Fernando 

In support of the Government’s move to achieve stability in the domestic economy and the banking sector, the Bank of Ceylon has committed to an initial funding arrangement of Rs. 5 billion on an innovative SME scheme- “BOC Energiser”, where rural entrepreneurs can reap the benefits of the Bank’s human approach to SME lending.

The SME sector is recognised as the backbone of the economic development of any country, currently contributes 52% to national GDP, accounts for 75% of the total number of businesses and provides employment opportunities to approximately 45% of the population. 

“BOC Energiser” aims to build entrepreneurship from a micro level, with a special focus on empowering women and young entrepreneurship to contribute more to the nation’s GDP.

Out of the initial funding arrangement, Rs. 4 billion is made available for the existing MSME/SME entrepreneurs while Rs. 1 billion is reserved for start-up businesses. Existing businesses are permitted to obtain fresh loans up to a maximum of Rs. 50 million, while start-up projects are entitled up to a maximum of Rs. 2 million.

The scheme has been introduced with an attractive rate of 12% interest p.a. targeted towards the kickstart of new businesses. Settlement of existing facilities or rescheduling of existing loans will not be considered under this initiative.

However, qualifications and experience of respective applicants are prerequisites to lend for startup businesses under this new scheme and lending for purchase of land or vehicles is strictly prohibited. 25% equity in the business is also required to borrow under the new scheme. In promoting ownership of the business, the scheme does not permit multiple loans to a single borrower. 

The bank’s personalised, human approach takes special cognisance and makes allowances for the severity of issues faced by rural borrowers at grass root level during the recent catastrophic COVID 19 pandemic, followed by the national economic crisis which brought the sector to the brink of collapse.

Considering the hardships faced by the sector, the lending policy on existing and new businesses aims to rehabilitate aligning businesses rather than implement traditional loan recovery measures.

The SME Circle and Export Circle are also some innovative initiatives taken in BOC’s drive to support and build entrepreneurship which offers a range of services beyond traditional banking. The bank facilitates non-financial assistance to entrepreneurs in promoting their business by linking them to related institutions like the Export Development Board (EDB), Small Enterprises Development (SED) and Industrial Development Board (IDB).

The bank also organises skills development programs on financial literacy, entrepreneurship and financial management to be regularly conducted by training institutions and relevant organisations for MSME entrepreneurs.

Province level customer forums are held regularly to create awareness among the young entrepreneurs, with the collaboration of authorities which are promoting the MSMEs in Sri Lanka.

With the changes in the country’s macroeconomic landscape which permits the Bank to introduce new concessionary MSME financing schemes it continues to abide by the BOC philosophy of “thin margins, high volumes.” 

Bank of Ceylon leads with its footprint in the country’s rural economy’s development process.