SMEs call govt. to come up with policy responses to prevent them from going bust

‘Our businesses are more at risk than profit-making banks and financial institutions’, they say

by Sanath Nanayakkare

The National Trade Protection Council (NTPC) which represents over 30,000 Small and Medium Scale Enterprises (SMEs) in the country, a provider of direct employment to over 4.5 million Sri Lankans, says that the normalisation of the economy is paramount for their members to improve their loan repayment capacity.Having met with Dr. P. Nandalal Weerasinghe, Governor of the Central Bank of Ceylon on Dec. 29 to discuss the issue, they further requested President and Finance Minister Ranil Wickremesinghe to intervene to extend their loan moratorium which ended on December 31 2022, to prevent their businesses

NTPC president G.Mahendra Perera told the media that they made an eight-point formula to the Governor of the Central Bank to address the issue in way that would protect the operations of these SMEs. According to him, many SMEs will be forced to close unless the authorities take immediate action.

He said that the Council pointed out to the Governor that loans taken out by SMEs have reached Rs.1, 000 billion, which the sector is struggling to pay back due to the prevailing challenges in the national economy. They owe these monies to banks and non-banking financial institutions.

“As the Governor had mentioned on many previous occasions that the Sri Lankan economy is set to contract further and recovery would take a long time, we told him that that at least 20,000 SMEs would be forced to discontinue operations in early 2023 if no action is taken by the relevant authorities to delay the repayment of interest and capital on the loans taken out by us.”

“In order to help the majority of our members to remain viable in their business operations, we proposed that the Government take immediate steps to implement eight measures. Namely; they are: providing an extension of taking Parate action until end of 31.12.23, stalling legal action already taken against borrowers until end of 2023, extending the capital repayment on borrowings until end of 2023, loan interest rates that apply on concessional rates to continue until end of 2023 and review its position by end of November 2023 (suggesting 15% p.a or lower), part or full waive off Interest upon settlement of all facilities and extending all concessions given under Circular No 2 of 2022 dated 7th July 2022 until end of 2023.

Another proposal they made was that in case of re-scheduling of facilities, interest in areas should not be added to capital, and soft loans should be grated at nominal interest rate.They also moved that financial institutions should not demand additional security to cover interest in areas, on borrowings.

“We kindly request immediate attention by the monetary authorities and the Government to above proposals, which in our opinion would give much-needed lifeline to SMEs which account for over 52% of Sri Lanka’s GDP and more than 45% of our labour force. The Council said details of the bank borrowings by SME entrepreneurs were furnished to the Governor that deserved careful perusal given the vulnerability of the said SMEs.

When asked whether they got a favourable reply from the governor on their proposals, they said,” “We are not happy with the response we got from the Governor in this regard. We felt that he was taking the side of the banking community and not looking at this issue from an SME perspective. That’s why we are appealing to the Finance Minister also for his mediation.”

‘We believe that banks have the capacity and resilience to survive even after extending this moratorium for a further period of one year because banks have declared profits so far. It is the SMEs that are vulnerable, not banks and NBFIs. If we are given reasonable time space and requested facilities, we can repay our loans and make our usual active contribution to the economy. That’s the way to move forward. When there aren’t any SMEs operating, both the country and the banks will suffer.”

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