Low interest rates for SMEs:
* Central Bank not helpful
January 24, 2013, 8:49 pm
By Mario Andree
The Sri Lanka Chamber of Small and Medium Industries (SLC-SMI) said President Mahinda Rajapaksa’s promises of reduced interest rates on loans to the SME sector were limited to being mere words as the country’s economic growth engine continues to struggle accessing bank loans.
SLC-SMI President Alloy Jayewardene told journalists earlier this week that the President’s pledge for lower interest rates to the SME sector, made in the 2010 and 2011 budgets, failed to become a reality.
According to him, the announced interest rates ranged from eight to 12 percent which the SME sector expected would drive their businesses, but banks did not lend at these rates. SMEs were compelled to borrow at much higher rates which increased their production costs.
Jayewardene said the chamber took the matter to Central Bank Governor Ajith Nivard Cabraal but did not get a favourable response. "The Central Bank requested the chamber to produce an individual case which they could look in to," he said.
Union Bank Chief Executive Officer Anil Amarasuirya, announcing the appointment of the bank as the principle sponsor for the Industrial Excellence Awards 2013 organised by the chamber, said the bank was lending to the SME sector at the industrial average interest rate which was above 18 percent.
Pledging the bank’s support to develop the SME sector, he said that the bank had opened two dedicated SME credit centres along with 36 branches Island wide.
According to him the lending rate for the SME sector determined by the Central Bank was at T-Bill rate plus two percent.
Collateral was another issue SMEs are not happy about.
Defending the banking sector, Amarasuriya said a bank was managing public funds and needed to mange credit risks to assure safe deposits and incomes to the depositors.
This April the SLC-SMI turns 50.
It has invited SMEs from Pakistan and the Maldives to participate in this year’s edition of the Industrial Excellence Awards.