CB begins to approve Saubagya loans | Sunday Observer

CB begins to approve Saubagya loans

A large number of applications received by the Central Bank (CB) under the Saubagya Covid-19 Renaissance Facility will be processed and approved from this week, Central Bank Governor  Prof. W. D. Lakshman told Sunday Observer Business last week.

The institution has approved about 400 applications thus far after the loan scheme was introduced under instructions of the Government as a refinance facility for businesses that are adversely affected by the pandemic. 

Weighing in the complaints made by most businesses claiming that the loan scheme has not come through, Prof. Lakshman said, “It takes a few weeks for the loan scheme to get going.” 

‘Any income generating activity/economic activity conducted/carried before the Covid-19 outbreak, as stated in the Section 2 of the Monetary Board Circular No. 05 of 2020,’ and ‘sub-loans will be granted to facilitate working capital requirements of the eligible sub-borrowers for their existing income generating/economic Activity’ are eligible to be sub-borrowers under the new scheme.

“We have initiated the scheme in a stage by stage process. In the initial stage the applications for less than Rs. 10 million loans will be approved, then applications for Rs. 10-25 million, and finally the much larger loan applications,” the Governor added.The loans are given through commercial banks at an interest rate of  four percent per year with two months working capital requirement and to be paid back in two years, which includes a six months grace period.

Many businesses are in doubt if the loan could be paid back in 24 months as instructed by the Central Bank. This is especially true to the country’s tourism sector that was still recovering from the Easter Sunday bombings when the pandemic hit forcing the Government to step in and temporarily suspend passenger flights. 

This left the country with no tourist arrivals in April. The industry was seeing a gradual drop of tourist arrivals this year compared to 2019. In January it saw a decrease of 6.5 percent, February 17.7 percent and in March 70.8 percent.  

Taking the plummeting tourist arrivals into consideration, tourism businesses wonder if the CB’s loan scheme is ‘practical’. According to tourism experts the industry will take up to 12-18 months to see a recovery.“They (CB) are giving only two months working capital and this is not enough,” Association for Small and Medium Enterprises in Tourism (ASMET) Vice President  Prabudda Jayasinghe said. He said that this period is not sufficient to recover and businesses would need at least six months working capital.

He added that it is not practical to expect tourism businesses to pay the loan within two years. It will be sensible, he said, if the payback period is four years. He hopes the government will consider the adverse effects  of  the Easter Sunday attacks and Covid-19  on the tourism industry and advise the CB to make alterations to the introduced loan scheme.