The Government will introduce a debt relief package to revive the cash trapped Small and Medium Enterprise (SME) sector, providing financial freedom and stimulus to this important economic segment.
“The Monetary Board has approved the assistance package and all licensed commercial banks will be directed to provide relief to ailing SMEs to enable them to carry on their commercial activities in a sustainable manner. The government considers the SME sector to be a key economic driver of the country and hence expects them to contribute more towards the national economy deriving the maximum benefit from the revival measures taken by the government,” State Minister of Development Banks and Loan Schemes, Shehan Semasinghe said in Colombo last week.
Going by the action plan presented in the election manifesto, Minister Semasinghe said that it has been already decided by the government to implement the policies which will lead to accelerated economic growth.
“The country’s economic growth has stumbled to a low level of 2 percent and the government will work to reach 6.5 percent growth this year.
To this end it focuses on the SME sector for enhanced contribution and will take measures to provide financial independence by way of a credit package to fuel its operational capacities that will enable the sector to be a vibrant component of the economy,” he said.
The government will have an effective work plan aiming at higher economic growth, reducing unemployment and to have a stable exchange rate that will stimulate and attract investments. Plans are underway to introduce a simplified SME-friendly tax system and build up confidence locally and internationally to facilitate a higher flow of investments, he said.
“The government will take corrective action to direct the economy to the state where it recorded over 6 percent growth. There is a positive approach to reach this accelerated growth. These facilities will be offered strictly for SME revival as the government believes that SMEs will be the future of the country,” he said.
The SME sector loan burden will be taken care of by the government in its credit package under two categories on performing and non-performing loans. There will be restructuring of loan repayment and the interest component by way of longer repayment period without burdening the SMEs.
Secretary to the Treasury said. S.R. Attygalle said, “With the aim of providing local entrepreneurs encouragement to continuously contribute to the economy, the government has identified the sectoral needs and will extend the support needed through the infusion of funds. Bothe active loans and NPLs are eligible for the relief measures and the government is confident that the funds will be used only for the specified purpose.
“The key aim of this assistance is to revive the bankrupt ventures and the banks are adviced to give an extension to temporary overdraft facilities. In meeting the immediate working capital needs of these ailing SMEs, the banks will provide funding facilities up to Rs. 300 million for three months with a grace period of six months.
“However, we are mindful of the constraints face by the banking sector too and it will be protected by way of a credit guarantee scheme covering 75 percent of the fund disbursement with an interest charge of 1 percent. The Central Bank has the funds for this purpose,” he said.