Mar 28, 2016 (LBO) – Asian Development Bank announced the first auction of a 12.5 million US dollar tranche of re-finance funds for Sri Lankan banks to provide loans for small and medium enterprises in Colombo, Monday.
“This is the first time ADB is disbursing funds in this manner where funds will be allocated through an auction to the financial institutions that submit the highest bids,” Donald Lambert, senior finance specialist said.
“So far we have received 5 bids and we are expecting more before it closes at 1300 hrs today.”
Lambert says after today’s auction the banks can draw down on the funds from end of June.
Initially the funds will be loaned to the Sri Lankan government at the 6-month London Interbank Offered Rate plus 50 basis points.
The government signed the loan agreement with ADB to borrow 100 million US dollars to implement a small and medium enterprise credit line project in February 2016.
The project agreements of the SME credit line was signed with the ADB and 10 local financial institutions: Peoples Bank, Bank of Ceylon, Commercial Bank, Sampath Bank, Hatton National Bank, DFFC, Regional Development Bank, National Development Bank, Nations Trust Bank and the Seylan Bank.
The ADB will have bi-annual auctions every March and September for the next four years.
Fifty percent of the loans have to be given to businesses from out of the district Colombo, for working capital without collateral, to women, and new clients.