IFC helps Sri Lankan small businesses grow through easier access to loans

IFC, a member of the World Bank Group, is working with Sri Lanka’s Credit Information Bureau to make it easier for up to 37,000 micro and small businesses to access loans and other forms of financing using movable assets as collateral.

IFC will provide advice and assistance to CRIB to support the legal framework which will enhance financing for firms against movable assets such as inventory and equipment. Expanding the collateral registry to include non-fixed assets, all of which are more readily available to small businesses,  makes it easier for them to obtain financing even without traditional mortgages like land or property.

“IFC’s assistance in this project will pave the way for a well-developed Secured Transactions Act, and provide transparent rules for creditors,” said Ananda Silva, Chairman, CRIB. “It will also facilitate the use of movable assets as collateral, benefitting businesses and supporting economic growth.”

Sri Lanka’s small and medium enterprise sector constitutes between 80 to 90 per cent of businesses and generates 75 per cent of the employment. However, the World Bank’s 2011 Investment Climate Assessment estimates that only around 35 per cent of Sri Lankan small firms can access a loan or a line of credit, and around 14 per cent of those who applied were denied financing.   

“This initiative will make it easier for small businesses and entrepreneurs with few fixed assets to obtain the financing they need to grow,” said IFC Executive Vice President and CEO Jin-Yong Cai. “And it will allow financial institutions to reduce risks and diversify their lending portfolios.”

Sri Lanka is a priority country for IFC. IFC’s committed portfolio of $274 million in Sri Lanka covers projects across a range of sectors, including infrastructure, tourism, renewable energy, finance, and health care. IFC also provides advisory services to promote sustainable growth among small and medium enterprises by facilitating access to finance, and by offering capacity-building and training opportunities.

IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. It helps developing countries achieve sustainable growth by financing investment, mobilising capital in international financial markets, and providing advisory services to businesses and governments.

In FY12, its investments reached an all-time high of more than $ 20 billion, leveraging the power of the private sector to create jobs, spark innovation, and tackle the world’s most pressing development challenges.