ADB to Help Underserved Sri Lankan Small Businesses Access Finance through Nations Trust Bank

COLOMBO, SRI LANKA – Small and medium-sized enterprises (SMEs) located in Sri Lanka’s post-conflict and tsunami-hit areas, where unemployment is high, will soon have better access to finance to start or expand businesses, after the Asian Development Bank (ADB) signed a $15 million loan with Nations Trust Bank.

“As the economy continues its robust growth, SME demand for finance has steadily increased. However, SMEs are experiencing difficulties accessing funding, particularly longer-term,” said Monisha Hermans, Investment Specialist in ADB’s Private Sector Operations Department. “Providing financing opportunities will help reach underserved customers and close the funding gap.”

To promote inclusive financial development, Nations Trust Bank will extend the life of its loans from the current average of 2.25 years to up to five years. A minimum of 50% of loans will be offered to entrepreneurs outside Colombo, of which 30% will focus on SMEs based in post-conflict and tsunami-hit areas in the north, east, and south. About 20% of the facility will target women borrowers.

The loan will improve financial inclusion by setting lending targets. ADB proceeds will be onlent to SMEs with a turnover not exceeding SLR600 million. The loan will be disbursed in two tranches to help Nations Trust Bank better manage its growth.

Nations Trust Bank is a commercial bank and was the first to place a strategic focus on its SME portfolio, with the goal of promoting more equitable inclusive growth across the country, in post-conflict regions in particular. Nations Trust Bank has 64 branches, including 18 outside Colombo and six in the north and east, which will help it better access and serve customers outside the capital. At the end of December 2012, Nations Trust Bank had a 2.4% market share of total banking loans in Sri Lanka. Despite its size, its credit standing is close to or at par with some of Sri Lanka’s larger commercial banks.

SMEs are often described as the backbone of the Sri Lankan economy, contributing to about 70% of GDP and providing significant employment opportunities.