Sri Lanka-based Commercial Bank of Ceylon, ComBank, has recently announced a new partnership with the International Finance Corporation (IFC), to develop a supply chain financing (SCF) strategy that will help the bank to lend more to local SMEs.
The Asian country highly depends on SMEs to make more than a half (52%) of the total GPD, as they also comprise of more than 75% of the total number of companies in Sri Lanka. At the same time, these small and medium-sized enterprises account for 45% of the total workforce. Unfortunately, despite their heavy role in the local economy, SMEs find it difficult to access credit lines that are designed to meet their unique needs in challenging times, and, thus, preventing their growth potential.
The latest collaboration between ComBank and IFC aims to solve these issues, facilitating lending to SMEs, including those owned by women.
Building and raising the supply chain financing will help the local bank to expand its SME portfolio in a sustainable matter that will ultimately benefit millions of workers across Sri Lanka. However, even though domestic and cross-border SCF represents a vital opportunity for the local financial institutions, the sector remains undeveloped.
Moreover, the limited capacity of banks and heavy reliance on collateral-based lending represent some of the key factors that have impacted the growth of SMEs, not allowing them to reach their full potential over the past years. By allowing SMEs to quicker access to funds and lending, Sri Lankans claim that the country will accelerate its economic growth, creating new jobs and fastening financial inclusion.
ComBank has relied on IFC since 2003, when the two financial institutions first partnered. Throughout the past two decades, IFC has supported the Sri-Lanka based commercial bank through various investments and with advisory support. Along other two local banks, ComBank even received financial support worth of USD 400 million in the form of a cross-currency swap facility that streamlined the imports of essential goods, including food, medicines, and fertilisers.
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