ECONMYNEXT – A secured transaction registry set up with technical assistance from the International Finance Corporation, will help small and medium enterprises expand access to credit by helping them mortgage moveable assets, the Washington-based agency said.
The STR is supported by Sri Lanka’s Credit Information Bureau and the central bank, the IFC said.
“An effective credit infrastructure is key to strengthening Sri Lanka’s financial sector,” said Alejandro Alvarez de la Campa, IFC Country Manager for Sri Lanka and Maldives said in the statement. “The new law, … incorporated several rounds of consultations and expert input, thus ensuring that small businesses and entrepreneurs with few fixed assets can obtain the financing they need to thrive.”
The new law and consequential amendments to 7 related laws is a step in developing “a fully-fledged secured transaction framework to mortgage moveable assets in Sri Lanka that protects the rights of all types of regulated financial institutions, encouraging them to provide financing secured by moveable collateral,” said Pushpike Jayasundera, Director/General Manager, Credit Information Bureau of Sri Lanka (CRIB).
Globally, businesses are restricted from using movable collateral (such as machinery, inventory, accounts receivables, crops, and equipment) to obtain financing because many countries do not have functioning laws and registries to govern secured transactions. Secured transactions reform is also an avenue that can help encourage women—they are more likely to have movable assets to pledge—to start or expand a business, the statement continued.
SMEs comprise more than 75 percent of enterprises while accounting for 45 percent of employment and 52 percent of the country’s GDP. Yet they cite access to finance as one of the key obstacles, it noted. (Colombo/Mar11/2024)