- Two banks are expected to on-lend proceeds to COVID-19-affected corporates, SMEs
- Each bank will receive up to US $ 90mn sovereign-backed loans
- AIIB is expected to complete loan facility by September, next year
- AIIB approved its first project financing worth of US $ 200mn to Sri Lanka in 2018
By Nishel Fernando
Sri Lanka’s state-run Bank of Ceylon (BOC) and People’s Bank (PB) are likely to secure a US $ 180 million loan from China-led Asian Infrastructure Investment Bank (AIIB), under sovereign guarantees.
The loan is aimed at providing financing support and increasing the supply of liquidity to corporate and small and medium-sized enterprises (SMEs) in the country affected by the COVID-19 pandemic.
The AIIB said the proposed loan facility, ‘Sri Lanka COVID-19 Emergency and Crisis Response Facility’, would be processed under the AIIB’s COVID-19 Recovery Facility (CRF), a framework designed to assist the members in responding to the COVID-19 pandemic.
“The project is designed to mitigate the financial shock stemming from the COVID-19 pandemic and preserve productive capacity by maintaining the flow of credit to corporates and SMEs operating in affected sectors,” the AIIB noted.
Under the proposed facility, both BOC and People’s Bank would be eligible to obtain up to US $ 90 million each.
The facility received the Appraisal Approval in December, last year and is scheduled to be taken up for Financing Approval next month.
The funds would only be utilised to finance working capital sub-loans, covering the payment of operating expenses, short-term non-financial assets (inventories, trade receivables) and short-term non-financial liabilities.
The AIIB is expected to complete the loan facility by September next year.
Following its establishment in 2016, the AIIB has grown its members from 57 to 103 and has approved US $ 22.02 billion worth of projects by end-2020.
In 2018, the AIIB approved its first project financing worth of US $ 200 million to Sri Lanka, to support the third phase of the Colombo Urban Regeneration Project under the Urban Development Authority (UDA).
Under the project, the AIIB is expected to support the construction of about 5,500 housing units in multi-story apartment buildings in eight to nine residential complexes.