Nordic investors channel US$ 35mn into Sri Lanka’s MSME sector via LB Finance

LB Finance PLC has secured US$ 35 million in long-term funding from Norway’s Norfund and Sweden’s Swedfund.

The deal is expected to channel fresh foreign capital into Sri Lanka’s small business sector at a time when access to long-term financing remains limited despite the country’s improving economic outlook.

The facility, comprising US$ 20 million from Norfund and US$15 million from Swedfund, marks the first partnership between the two European development finance institutions and LB Finance, the country’s second-largest non-bank financial institution with assets exceeding Rs.400 billion.

The funding will be used to expand lending to micro, small and medium enterprises (MSMEs), support the adoption of climate-smart agricultural technologies and finance electric and fuel-efficient hybrid vehicles, aligning with broader efforts to strengthen private sector growth and sustainable economic development.

Sri Lanka’s financial sector continues to rebuild access to international funding following the economic crisis, with development finance institutions increasingly stepping in to provide long-term capital aimed at supporting productive sectors of the economy rather than short-term consumption.

“Access to finance is critical for MSMEs to invest, grow and create jobs. At a time when long-term funding remains constrained in Sri Lanka, this investment will help increase funding for smaller businesses while also supporting the transition to more sustainable transport,” Swedfund Investment Director Björn Areskog said.

He added that LB Finance’s focus on MSMEs and extensive presence outside Colombo would help direct financing towards businesses that are often underserved by conventional lenders.

MSMEs account for the overwhelming majority of enterprises in Sri Lanka and are among the country’s largest sources of employment, but many continue to face challenges in obtaining affordable long-term financing, particularly following the sharp rise in interest rates during the economic crisis.

LB Finance said the partnerships would also help strengthen its environmental, social and governance (ESG) framework through technical assistance and guidance from the two development finance institutions.

“It is a privilege for us to work with Norfund and Swedfund, two globally respected development finance institutions. We are currently in an exponential growth stage, and securing these funding facilities enables us to focus on our growth strategies with greater vigor,” Executive Director Ravi Tissera said.