📋 Tender Overview
Source of Funding / Amount: Ta 6903-sri: enhancing small and medium-sized enterprises financial services outreach
Ordinary capital esources: US$ 300,000.00
A proposed adb ta of $800,000 for enhancing small and medium-sized enterprises financial services outreach will support implementation of the proposed small and medium-sized enterprises credit guarantee institution project in sri lanka (the ensuing project), which is a standby project for 2021 in the country operations business plan for sri lanka, 2021-2023.
Development challenge. Small and medium-sized enterprises (smes) are critical for sri lankas sustainable economic growth. They are responsible for 52% of the countrys gross domestic product. Smes are arguably even more important for poverty reduction as they provide 45% of employment and considered as source of innovation. Despite their importance, smes struggle to access financing for business growth. Key constraints include banks insufficient lending capacity, smes limited business development capacity, networking, and insufficient policy and institutional framework. Those issues are more severe for women-owned wsmes (wsmes), which represents only around 8% among formal enterprises. The asian development bank has supported the government of sri lanka to address the issues with strong focus on women empowerment through a series of loans, grants and tas. In particular, small and medium-sized enterprise line of credit project has brought positive impacts in changing the behaviors of banks and smes. During 2016-2020, $175 million worth of adb loans have reached out to 3,539 smes, of which 1,339 (37. 8%) are wsmes, with semi-annual lending targets for participating banks and cofinancing grant for wsmes. However, banks heavy reliance on collateral-based-lending still remains, which results to further financial exclusions of many smes, in particular wsmes, who do not have such collateral. Impact of the coronavirus disease pandemic. The coronavirus disease (covid-19) pandemic has severely impacted the sme sector in the country. Decline of global demand, supply chain disruption, and slowdown of local economic activities due to the social distancing and containment measures have caused many smes to face liquidity shortage which severely hampered business continuation. The government has provided economic relief measures targeting the vulnerable smes: (i) the central bank of sri lanka (cbsl) relaxed monetary policy, launched an lkr150 billion concessionary refinancing program to provide liquidity to smes; (ii) financial institutions were allowed to reschedule non-performing loans without downgrading asset classification; and (iii) the government announced a debt repayment moratorium on bank loans for smes until december 2021. Inspite of these measures and although banks are well-capitalized, there is a risk that the lending capacity of the banks will decline as asset quality worsens and profitability declines due to prolonged impact of the p
