ADB approves $165mn loan to support COVID-affected SMEs in Sri Lanka

The Asian Development Bank (ADB) has approved a $165 million loan to Sri Lanka to provide immediate financing support for small and medium-enterprises (SMEs), which have been severely affected by the coronavirus disease (COVID-19) pandemic, and long-term financing to underserved SMEs, including businesses led by women and tea smallholders.

COVID-19 has gravely hit Sri Lanka’s economy due to the decline in demand and supply chain disruption in export-oriented industries, which has led to an economic slowdown that gradually spread across other sectors. Financial support is critical for SMEs to revive their businesses, which account for over 45% of total employment and 52% of gross domestic product of Sri Lanka.

The new financing will build on the ongoing Small and Medium-Sized Enterprises Line of Credit Project, which ADB approved in 2016 to strengthen SMEs’ access to finance. The project is cofinanced with a grant from the G20-led Women Entrepreneurs Finance Initiative (We-Fi) since 2018 to promote women entrepreneurship.

“Through the efficient credit delivery mechanism of the ongoing project, we will swiftly provide affordable working capital loans through 10 local banks for severely affected SMEs in response to COVID-19,” said ADB Financial Sector Specialist for South Asia Takuya Hoshino. “This new loan together with the existing We-Fi grant will further encourage banks to expand their outreach to businesses led by women, to boost long-term economic growth and transformation in the context of a steadily aging population and expected future labor shortage.”

The new loan will introduce a new credit line, cofinanced with a $1.25 million grant from the Japan Fund for Poverty Reduction (JFPR), to promote capital investment by tea smallholders. A supplemental $1.75 million technical assistance grant from JFPR will build tea smallholders’ financial literacy and capacity to access financial services and develop policies to promote value chain development for the Sri Lankan tea industry to strengthen its international competitiveness.

ADB approved a $20 billion expanded assistance package in April to support its developing members’ COVID-19 response.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.

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