Borrow Gold

July 17, 2007 (LBO) – Sri Lanka’s gem and jewellery industry is lobbying for new financial instruments like ‘gold loans’ to get cost effective funds for those in the trade, especially small businesses. “Valuations can be dealt with,” said Ellawala. “But having it in the vault is not feasible. After all, this is your working stock.” There are no financial products specifically meant for the gem and jewellery industry available in Sri Lanka and most commercial banks lack the expertise and are unwilling to take the risk of lending to the sector.

According to Chanaka Ellawala, chairman of the Sri Lanka Gem and Jewellery Association, in other countries, gem and jewellery manufacturers do not borrow currency but borrow gold, which is a tradeable commodity.

“Interest rates on gold are much lower than currency interest rates. It is a commonly used financing tool in other manufacturing centres like India where there are specialist lenders,” Ellawala said in an interview.

“We too must provide access to such financial instruments.”

Sri Lankan manufacturers must be able to access specialised financing instruments like gold loans and associated hedging instruments that their competitors around