Small Credit

April 27, 2007 (LBO) – The International Finance Corporation (IFC) has joined hands with six Sri Lankan private banks to educate small and medium enterprise (SME) owners on getting loans to finance their business. Local banks are heavily weighted towards collateral-based lending, instead of project-based lending, which makes it difficult for smaller firms to access funds.

"Funds do not flow smoothly from the banking sector to the SME sector due to the communication gap between banks and businesses," L Somaratne, IFC Program Advisor told reporters.

"Most SMEs are not aware of the facilities available from the banking sector.

A banking road show is to be held in May to educate SME owners on the services banks provide for small businesses.

The banks will stress on correct procedures in applying for loans, business planning and creating finance proposals during the sessions. Small businesses are often unable to provide credible financial records on operations that are mandatory when getting loans.

A report by IFC, the private sector arm of the World Bank, says around 61 percent of SMEs surveyed in Sri Lanka said that access to finance was their biggest stumbling block for development.