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POSTED AT 10:29 AM 07-02-2018

High interest rates taking toll on SME sector - SLCSMI

President SLCSMI, Mohideen Carder


The small and medium business sector too is having a negative impact due to the bond issue, said President Sri Lanka Chamber of Small and Medium Industries, (SLCSMI) Mohideen Carder.

Speaking to ‘Daily News Business’ he said due to the Bond issue banks were forced to increase interest rates and as a result it’s no longer practical to look at bank borrowing for reinvestment or for new ventures.

“The interest rate which was around 11% has now shot up to almost 18% and the SME sector borrowings for investment are now not practical. The current interest rate is higher than the rates that were offered during conflict times,” he pointed out.

Asked if the Rs 12 billion plus amount could be recalled from Perpetual Treasuries and put back to the ‘system’ would help the banking sector, he said it would. “This would help the banks to lower the interest rates to a certain extent.”

He also said that though there are low interest loans that were being offered by State banks, when the SME sector applied for them the answer they get was that they have already been given out. “The government must try to provide more finances to State banks to offer more low interest credit to SME sector,” Carder said.

He also said that today under the guise of the ‘BOI’ tag companies get various tax holidays and other incentives. “However the SME sector does not get such benefits and this area to should be addressed.”

The SLCSMI President also said that foreign aided funds too gets dried up soon and they are mostly taken by large corporate.

SME’s generate over 30% of employment and contributes more than 70% to Sri Lanka’s GDP. It also contributes significantly to the export sector in the country. Therefore, it is clear that promoting a sustainable and viable SME sector is essential in the nation’s development and growth.

“However we do not anticipate a major contribution from the SME sector to the local economy this year due to some of these issues,” he predicted.

Commenting on the recently inked Singapore Sri Lanka FTA Carder said that the Chamber favored it. “We think that this FTA would lead to move foreign direct investments to Sri Lanka especially from foreign firms that are based in Singapore.”

The Chamber also said that they also expect that there would be some contracts offered to the SME sector from Chinese companies in the Hambantota Port.