SMEs to drive loan growth

Since an estimated 90% of businesses registered in Sri Lanka are Small and Medium Enterprises (SMEs) recording an annual turnover below Rs. 600 million, they provide an important growth segment to banks, the report noted.               

As the country already has a strong SME presence, it will be the engine of growth in the future, but the report warns is yet to gain a material presence in terms of value in the credit market. 

“One the back of major economic expansion in the post-war environment, policy changes, and a decline in project loans, the SME sector has become a prime focus for all private banks. Domestic credit to private sector as a percentage of GDP in the country remains low at 29.2% far below regional peers showing that the potential for private sector credit growth in the country is significant. 

The Asia Securities report also observes Sri Lanka’s foreign direct investment remains relatively low when compared with regional economies.