CB mulls setting up SME development bank and permanent credit guaranteeing unit

Admits Sri Lanka’s poor record in development banking
By Nishel Fernando
The Central Bank (CB) is currently considering the establishment of a national entrepreneurship development bank  and a permanent credit guaranteeing institution to support domestic industries, while bearing in mind the country’s poor record in development banking. 

“Discussions are underway at the Central Bank to establish a national entrepreneurship development bank, which could support SMEs and start-ups. Also under discussion is a plan to introduce a permanent credit guaranteeing institution,”CB Governor Prof. W.D. Lakshman revealed. 

He made these remarks delivering  the 70th anniversary oration of the Central Bank last Friday.

“These are avenues through which Central Banks in developing states have actively supported domestic industries to grow and become global giants,” he added. 

Prof. Lakshman noted that central banks often play a key role in establishing such development banks by  partly providing  equity.

However, he admitted that Sri Lanka has a poor record in development banking.

The country’s earlier attempts to set up such development banks with State support ended up in failure. 

“Central banks in many countries have provided capital to development institutions  such as industrial and agricultural banks. The development banks as opposed to commercial banks have been the source of funding for new investments,” he added.