Sri Lankan Government steps up efforts to resolve SME debt crisis

Another round of discussions on the current progress in resolving the debt crisis faced by small and medium-scale entrepreneurs was held yesterday (March 28) at the Ministry of Industry.

The discussion took place under the leadership of the Deputy Minister of Industry and Entrepreneurship Development, Chathuranga Abeysinghe.

The Minister further stated that, in parallel with this discussion, talks with banks, the Ministry of Finance, and the Central Bank of Sri Lanka (CBSL) are also progressing successfully.

According to reports from the CBSL, approximately 12,000 small and medium-scale borrowers are currently facing a financial crisis, with the total outstanding debt affected by this crisis amounting to around Rs. 210 billion.

However, around 1,000 of these borrowers have already initiated debt restructuring discussions with their respective banks, while the Ministry has intervened on behalf of approximately 400 of them.

The progress of these discussions depends on the nature of each business and its repayment capacity. Factors such as interest rate reductions, loan tenure extensions, new working capital provisions, and future interest adjustments vary for each entrepreneur.

While data indicates that banks have actively engaged in this process, the Minister pointed out that entrepreneurs still expect greater involvement from financial institutions.

As the Ministry of Industry acts as a mediator between these expectations, Deputy Minister Abeysinghe emphasized that entrepreneurs have the opportunity to formulate their future debt repayment plans and negotiate with their banks through the Ministry.

Over the past few weeks, discussions between the Ministry and banks such as Bank of Ceylon, Sampath Bank, and Commercial Bank have yielded approximately 50% success. Although banks, under the prevailing laws, may take legal action against defaulters, the Minister assured that this does not prevent entrepreneurs from engaging in negotiations.

Accordingly, the Minister highlighted that the best and only viable solution at this moment is for entrepreneurs to proactively discuss their future financial plans with their respective banks.

He also confirmed that the Ministry of Finance, the CBSL, and the Ministry of Industry are prepared to continuously intervene in assisting the 12,000 affected entrepreneurs.

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