Bhathiya Barukanda
National Credit Guarantee Institution Limited (NCGIL) commenced its operations in January and issued the first set of guarantees to 3 Financial Institutions (FIs) to partly cover the loans approved by them for 3 Micro, Small and Medium enterprises (MSMEs).
Under the guarantee program, NCGIL is providing individual guarantee cover to its shareholder Financial Institutions (SFIs) to encourage them to grant loans for viable projects based on cash flows instead of depending on tangible securities. This is the first program of this nature operated at national level with the involvement of Government of Sri Lanka (GOSL) and Financial Institutions for supporting Sri Lankan MSMEs who are the backbone of the country’s economy.
NCGIL, a Public Private Partnership between the GOSL and chosen 13 Participatory Financial Institutions (PFIs) was incorporated with the prime objective of providing a solution to one of the common challenges faced by local MSMEs, namely access to finance through the formal banking channels in Sri Lanka. A USD 50Mn long term funding received by the GOSL from the Asian Development Bank (ADB) has been invested in NCGIL accounting for 90% stake, whilst the balance 10% shareholding with an investment of USD 5.375Mn is with 13 leading Financial Institutions including 8 Commercial Banks, 2 Specialized Banks and 3 Licensed Finance Companies namely Peoples Bank, Bank of Ceylon, Regional Development Bank, Commercial Bank, Hatton National Bank, Sampath Bank, Seylan Bank, National Development Bank, Nations Trust Bank, Sanasa Development Bank, LB Finance, Central Finance and Citizens Development Business Finance.
The program is now on and any MSME (with an annual turnover of less than LKR 1 Billion) who already runs a viable business or has a viable business proposal (Start-Up) could now apply for a Term Loan from any of the 13 FIs and The FIs can approach NCGIL for a Credit Guarantee (currently up to 67% of the principal loan amount approved by them) to partially cover their credit risk. The minimum and maximum size of the TERM LOANS considered by the SFIs, for CAPEX or Permanent Working Capital requirements, are LKR 500,000 and LKR 25M respectively.
Picture shows the issuance of the first 3 guarantees of NCGIL to CDB, Commercial Bank and Hatton National Bank (from left) to partly cover the loans approved by these Financial Institutions to three of their MSMEs engaged in Agri projects.
