Minister calls out banks for ‘lack of enthusiasm’ on flagship credit guarantee scheme

A flagship government credit guarantee scheme designed to fuel the growth of Sri Lanka’s small and medium enterprises is failing to gain momentum, a slowdown that Deputy Minister Chathuranga Abeysinghe has blamed on a “pronounced lack of enthusiasm” from the nation’s banks.

The National Credit Guarantee Institution Limited (NCGIL) was established by the Ministry of Finance to tackle one of the most persistent obstacles for Micro, Small, and Medium Enterprises (MSMEs): access to finance. Through partnerships with 13 leading financial institutions, NCGIL issues guarantees to lenders, substituting for the traditional collateral that many entrepreneurs lack. The scheme provides for loans ranging from Rs.500,000 to Rs.25 million for working capital and capital expenditure.

In a recent social media post, the Deputy Minister of Industrial and Entrepreneurship Development revealed the specific sticking point behind the banks’ reluctance. 

“One of the main reasons is that banks are still required to bear a 33 percent risk under this scheme,” his post stated.

Abeysinghe urged entrepreneurs to mitigate this perceived risk by presenting robust business plans with viable cash-flow projections, noting the scheme is “most suitable for expanding already existing businesses.”

To further incentivise lending, he highlighted a crucial provision for female entrepreneurs, for whom the guarantee coverage is increased to 80 percent, leaving the bank with only a 20 percent risk exposure. 

“If your longstanding bank still says they cannot offer you this facility, then you need to question their true commitment to development goals,” he challenged.

Acknowledging potential communication breakdowns, the Ministry of Industries will now directly support applicants who find their local bank branches unaware of the programme. Abeysinghe noted the ministry will intervene on behalf of entrepreneurs, a move signalling a more hands-on approach from the government to ensure the scheme’s success. (NF)