Thursday Nov 14, 2024
Thursday Nov 14, 2024
Wednesday, 28 April 2021 00:26 - - {{hitsCtrl.values.hits}}
By Uditha Jayasinghe
Cabinet yesterday approved a new loan guarantee scheme, especially targeted at small businesses, which will be administered by the Finance Ministry and aims to support pandemic recovery, a top official said.
Cabinet Spokesman and Media Minister Keheliya Rambukwella told the weekly Cabinet briefing that the new credit guarantee scheme would cover all financial institutions regulated by the Central Bank.
“No matter what is discussed at policy level, at the end of the day when a business owner goes to the bank or a finance company, they are asked for collateral. Despite all the support extended by the Government, small companies are still struggling to get loans to survive COVID-19 or expand their businesses.
Therefore the Government has decided to introduce a new credit guarantee scheme so the risk will be taken by the State,” he said.
However, the Cabinet Spokesman did not give further details of when the new credit guarantee scheme would be operational or how much of loans would be disbursed under it.
Data by the Central Bank released earlier this year showed that moratoriums rolled out by the Government and the monetary authority to limit COVID-19 impact last year failed to widely reach smaller businesses, benefitting big companies more.
A survey of 300 companies conducted by Federation of Chamber of Commerce and Industry of Sri Lanka (FCCISL) and PwC, whose results were released in March, indicated only 23% of companies were able to utilise moratoriums and other relief measures announced by the Central Bank while smaller businesses had to rely on financial support from family, friends and well-wishers.
The Central Bank has repeatedly called on banks to lend more to small businesses and has said it would introduce lending targets for specific sectors.
In June 2020, the Monetary Board decided to implement a Credit Guarantee and Interest Subsidy Scheme to accelerate lending by banks to businesses adversely affected by the COVID-19 pandemic.
Under this scheme, the Central Bank provided a credit guarantee to banks, ranging from 80% for smaller loans to 50% for relatively large loans, enabling banks to grant loans to address working capital requirements of the affected businesses.
