Thursday Jan 23, 2025
Thursday Jan 23, 2025
Thursday, 23 January 2025 05:19 - - {{hitsCtrl.values.hits}}
The economy’s backbone – the Small and Medium-sized Enterprises (SMEs) – this week renewed their serious concerns and lack of effective support for their viability impacted by successive crises and policy missteps.
The SME Alliance said it would not agree with the circulars issued by the Central Bank of Sri Lanka on 24 September 2024 and 1 January 2025, as SMEs have not been provided any relief so far. Although according to this circular SMEs should be exempted from the CRIB when providing loans, banks have not considered this when providing loans and no action has been taken to restructure debt.
The SME sector contributes to 52% of the country’s Gross Domestic Production (GDP) and accounts for over 5 million jobs.
“With the announcement of the country becoming bankrupt in 2022, banks had added a 30 to 35% interest rate for loans taken by SMEs before bankruptcy. The SMEs sector is facing a severe downfall due to the inability to pay the increased bank rates. Therefore, we believe that without deducting the massive amount of interest accumulated since 2019, debt restructuring is not an effective measure.
We strongly believe that an opportunity should be created for SMEs to repay all their interests under a low interest rate of 10% in the debt restructuring process.
During debt restructuring discussions, we realised that debt restructuring will be done at a high interest rate of 15 % to 16%, while banks are paying a 7% interest rate for their normal accounts. SMEs are facing several challenges due to these high interest rates and we need to find effective solutions for this situation.
Over 1,400 properties have been acquired by banks in 2023 through gazette notifications. This has contributed to the loss of a large number of employments, suicides, and family issues etc. A majority of entrepreneurs have kept their only property (house or workplace) to get bank loans and are facing issues when they need to get more loans to develop the business. No action has been taken to remedy this and the Government should look into this.
SMEs are also facing the issue of paying fines for the last five years for the dues of the FPF/ETF, income tax, and VAT and a 100% fine has been added to those as SMEs failed to pay their dues. We request the Government to introduce a system for SMEs only to pay the dues.
Due to the financial crimes committed by the former Government and its Ministers, SMEs have to face the repercussions. The heads of the financial institutions, who dragged SMEs into this pathetic situation and are responsible, are still unharmed as no legal action has been taken against them yet. We believe that they should be punished and SMEs should be paid compensation,” the SME Alliance said in its statement.
