Sri Lanka SMEs call for deadline extension

Nawaz-Rajabdeen

Jan 22, 2020 (LBO) – Sri Lanka’s Confederation of Micro, Small and Medium Industries (COSMI) said that the landmark loan moratorium for SMEs offered by the government in December 2019 is on track to revive SMEs but the stipulated reporting deadline is ‘too tight’.

“We praise the government for its determined action last December to revive domestic SMEs by suspending recovery of loans obtained by the sector,” said Nawaz Rajabdeen, Founder President of COSMI.

“However, there is a catch- the deadline for submitting business plans and reports to banks to obtain the above rebate on the Moratorium is 31 January 2020. These documents are comprehensive and most Sri Lankan SMEs are simply not capable of completing them by the January 31 deadline. Many SMEs reached out to us to call for an extension from the government” revealed Rajabdeen.

He added: “Therefore we call the government which positively works to revive SMEs to extend this deadline to a more reasonable date in future. A new, feasible and a practical deadline will make this landmark SME revival effort meaningful for both the government and recipients.”

On December 20, 2019 a directive by President Gotabaya Rajapakse and Prime Minister Mahinda Rajapaksa suspended recovery of loans obtained by the SME sector, not exceeding Rs 300 Mn for each entity to revive SMEs in the country.

“The recently announced tax reform initiatives provide substantial savings to all banks including the Central Bank of Sri Lanka. The Government expects the banks to use part of such savings to revive the SME sector on a priority basis” the Treasury announced.

Financing and lack of credit are the banes of Sri Lankan SMEs -of all types. According to the 2018 Ernst and Young (EY) SME Survey commissioned by the Ministry of Industry and Commerce, ‘Access to Finance’ was the foremost issue faced by SMEs in doing business.

59% of the respondents in the Ernst and Young Survey said the SMEs were hampered by finances. “…the effective interest rates charged by banks (13%-17%) and non-bank financial institutions (30%-50%) are high and burdensome for SMEs,” the report said.

The Confederation of Micro, Small and Medium Industries (COSMI) was formed in 2019 and aims to revive and foster the MSME and industry sectors of Sri Lanka.