Annual Report 2008 - Ministry of Finance and Planning

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7. Development Finance 278 SMERDP No of Loans and amount disbursed by Districts under SMERDP - 2008 Jaffna Killinochchi Mullaitivu Mannar Vavuniya Trincomalee Anuradhapura 3 15.8 11 42.0 Puttalam 5 19.0 Polonnaruwa 16 38.8 Kurunegala 51 208.9 Matale 3 33.3 Batticaloa Gampaha Colombo Kalutara 1 3.5 Kegalle 6 21.7 Rathnapura Kandy 33 223.6 Nuwara Eliya 4 38.0 29 124.1 Badulla 33 103.3 Monaragala 1 3.8 Ampara 5 0.9 Galle 31 231.6 Matara 30 178.5 13 34.0 Hambantota Amount disbursed (Rs. mn) No of Loans Source: DFCC, NDB, Commercial Bank, Sampath Bank Ministry of Finance and Planning Sri Lanka Annual Report 2008
7. Development Finance 279 Credit Guarantee Insurance Scheme Easy Access to credit facilities is vital for the enterprise development. Lending institutions however tend to cater mainly to profitable and low risk sectors while meeting increasing prudential norms and standards. The Micro, Small and Medium Enterprises (MSME) sector is generally considered a high credit risk area due to the unavailability of collateral among MSME entrepreneurs. Most of the Banks have their own loan scheme to cater to MSME Sector, but no incentives are provided to mitigate the risk involve in lending to this sector. In order to fill this vacuum, the successive government of Sri Lanka has undertaken various policy measures such as credit guarantee schemes, refinance facilities and venture capital funding to support SMEE. In this endeavor, the budget 2008 proposed to implement a Credit Guarantee Scheme for the Gem and Jewellery subsector. Treasury has released the initial seed capital of Rs 20 million to the Central Bank of Sri Lanka for implementation of the Credit Guarantee Scheme for the Gem and Jewellery Subsector, under the Production Unit Modernization Scheme (PUMS) of the Ministry of Enterprise Development and Investment Promotion (MEDIP). The objective of the scheme is to assist 50 Small and Medium Enterprises engaged in Gem and Jewellery sector to obtain financial assistance from Participatory Financial Institutions (PFII) to purchase the machinery and upgrade the technology in the industry. Fifty loans, granted under the PUMS of the MEDIP to SMEE registered with National Gems and Jewellery Authority and/or Sri Lanka – Export Development Board will qualify for the guarantee cover under this guarantee scheme. The maximum loan amount covered under the Credit Guarantee would be confined to Rs 1.2 million per borrower with a repayment period of 10 years including grace period of two years. The extent of guarantee cover will be eighty percent of the principal loan amount granted or amount in default whichever is lower. This scheme is implemented through the Participatory Financial Institution namely; National Development Bank, Development Finance Credit Cooperation, Bank of Ceylon, Commercial Bank, Sampath Bank, Kadurata Development Bank and Wayaba Development Bank. The Credit guarantee scheme commenced its’ operation with effect from 30 September 2008. The Central Bank of Sri Lanka has initiated the scheme by conducting several awareness programme for the PFII during the year. Development of Small and Medium Scale Industries In the budget 2008 it has been proposed to grant concessionary loans up to a maximum of Rs 15 million, at an interest rate of 10 percent, for the small and medium scale garment factories situated outside Colombo district to enable the modernization. The loan scheme was implemented through the Lankaputhra Development Bank for modernization of the on-going operational factories. The Department of Development Finance developed the eligibility criteria for the loan scheme in consultation with the Ministry of Textile Development, representative from the Joint Apparel Association Forum (JAAF) and the Lankaputhra Development Bank. As per the criteria set-out for the loan scheme, firms were entitled to obtain financial facilities for modernization of building and upgrading and purchasing machineries for the industry with 350 employees and annual turnover less than Rs 100 million. It was also decided to include the indirect exporters for this scheme. The eligible firms were selected through paper advertisement and during the year, Lankaputhra Development Bank has evaluated 11 proposals amounting to a total estimated cost of Rs 125 million. These proposals were sent to the Ministry of Textile Development for further evaluation and three proposals were recommended to the initial phase of the loan scheme. Accordingly, the treasury has agreed to release funds to LDB in January 2009. Micro Finance The Micro Finance (MF) sector has been identified as a vital sector in the economy due to its contribution to poverty alleviation and income generation, particularly, in rural sector. The Rural Finance Sector Development Programme Ministry of Finance and Planning Sri Lanka Annual Report 2008
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2008 Annual Report Ministry of Fina
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2 This Report is Published in terms
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4 Heads of Treasury Departments (as
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6 Heads of Statutory Boards / State
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8 Contents Chapter 1 - Macro Econom
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10 Contents Contd. Table 3.9 - Key
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14 Contents Contd. Chart 3.1 - Accu
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16 Sri Lanka at a Glance - 2008 KEY
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18 Sri Lanka at a Glance - 2008 Con
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1. Macro Economic Perspectives 20 E
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2. Fiscal Developments - 2008 46 An
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138 Ministry of Finance and Plannin
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3. Performance of Public Enterprise
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4. Reform Initiatives 174 An Overvi
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4. Reform Initiatives 176 also prov
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4. Reform Initiatives 178 Finance/R
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4. Reform Initiatives 180 Environme
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4. Reform Initiatives 182 Pradeshiy
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4. Reform Initiatives 184 SALIENT F
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4. Reform Initiatives 186 The Credi
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4. Reform Initiatives 188 Name of t
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4. Reform Initiatives 190 Project P
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4. Reform Initiatives 192 TERMS OF
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4. Reform Initiatives 194 Table 4.8
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4. Reform Initiatives 196 grounds,
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5. Foreign Financing of the Budget
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Annual Report 2008 - Ministry of Finance and Planning

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