Govt. launches Rs. 20 b loan package to boost MSME sector

The Government has announced a new stimulating package worth Rs. 20 billion to support the Micro, Small, and Medium Enterprises (MSMEs) sector through a State-funded loan scheme. 

The move aims to provide concessionary credit to eligible MSMEs via selected Participatory Financial Institutions (PFIs), helping these businesses survive, recover and expand, as well as providing seed capital for new ventures.

The package includes a Rs. 15 billion funds for investment category with a 7% lending rate, repayable over 10 years, including a maximum one-year grace period. PFIs can receive up to Rs. 750 million initially, with the possibility of an additional Rs. 500 million after utilising 80% of their allocation. Additionally, Rs. 5 billion is allocated to support MSMEs in the Non-Performing Loan (NPL) category, with an 8% interest rate and a 5-year repayment period, including a six-month grace period.

Eligible sectors for this scheme include manufacturing, construction, export-oriented businesses, tourism, apparel, fisheries, animal husbandry, agriculture, and agro-based industries. Activities eligible for funding include purchasing assets for business expansion, implementing cost reduction initiatives, upgrading technology, and refurbishing or expanding facilities. Ineligible activities include trading, leasing, renting businesses, and vehicle purchases, unless for land vehicles in the hotel or tourism sectors.

MSMEs must meet certain criteria to qualify, including a turnover below Rs. 1 billion and fewer than 200 employees. The enterprise must be registered, and each registered entity can obtain only one loan. Additionally, at least 51% of women-led enterprises must be controlled by women.

Participating credit institutions include Bank of Ceylon, People’s Bank, Regional Development Bank, Hatton National Bank, NDB Bank, DFCC Bank, Sampath Bank, Commercial Bank, Seylan Bank, Sanasa Development Bank, Cargill’s Bank PLC, State Mortgage and Investment Bank, Pan Asia Banking Corporation PLC, Union Bank of Colombo, Nations Trust Bank PLC and Housing Development Finance Corporation.

The Government also introduced the SMILE III Revolving Fund Loan Scheme and the E-Friend II Revolving Fund Loan Scheme to further support the MSME sector. These schemes offer various financial assistance options with different interest rates, loan amounts, and repayment periods, targeting specific needs such as technical transfers and environmental compliance.

The initiatives aim to promote stable and balanced economic growth, empower MSMEs and strengthen the institutional capabilities of intermediary financial institutions.