For new start-ups, loans will be given at 10 percent up to half-a-million rupees, he told a news conference.
Entrepreneurs have to put up 15 percent of the money from their own funds with the bank giving the balance 85 percent.
The refinance scheme is to start with immediate effect with a 500 million rupee fund which will be replenished, Karunaratne said.
Central Bank governor Nivard Cabraal said the funds will be from money in the Central Bank's revolving credit fund.
"We will not be printing new money to do it," he told the news conference.
The Central Bank has several schemes through which 11.8 billion rupees of revolving funds is supplied as credit for agriculture, dairy, fisheries as well as poverty reduction mainly in the island's north-east region.
Sri Lanka is recovering from a 30-year ethnic war that ended in May 2009 in which the north-east region was the worst affected.
Economic disruption caused by war put many businesses into difficulty and they are now trying to recover.