Small and Medium Enterprise Development Facility

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The objective of the Small and Medium Enterprises Development Facility Project for Sri Lanka is to improve access to finance (including term finance) for small and medium enterprises (SMEs) affected by the Global Financial Crisis in Sri Lanka. The project has two components. (1) Financing and Risk Sharing Facility (RSF) component has two parts: a) a line of credit to participating financial institutions to refinance short term and long term SME loans. Based on expected demand, the World Bank will provide a credit line to participating licensed commercial and specialized banks to SMEs; and b) RSF to reduce the banks' risk of lending to SME borrowers. The purpose of the RSF will be to backstop commercial lenders' losses in cases of defaults by SME borrowers. The eligible loan portfolios will consist of commercial banks' loans to new SME borrowers; and/or SMEs operating in selected sectors; and/or SMEs operating in selected regions. (2) Policy and Capacity Enhancement for SME Banking component has three parts: a) technical assistance on a matching basis to the commercial banks benefitting from the credit line or risk sharing facility, in order to help build capacity to provide lending services to SMEs and ensure that SMEs have the capacity to effectively utilize loans from the banks for the growth of their businesses; and b) technical assistance to strengthen the enabling environment for SME banking, such as undertaking a diagnostic of constraints to SME financing and measures addressing such constraints; and c) implementation support for the Project Implementation Unit.