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‘Sixty percent of SME sector on verge of collapse’ – SMI Chamber president

‘Unless the government extends a bailout package immediately to the Small and Medium Enterprises (SME) sector, a minimum of 60% of these enterprises would collapse, throwing a considerable number of the sector’s employees out on the streets’, Chamber of Small and Medium Industries president Aloy Jayawardene told the Monetary Policy Consultative Committee of the Central Bank of Sri Lanka, Feb. 11.

‘The SMI sector is not interested in the reduction of interest rates but in a bailout package, as none of the SMEs could go to any bank for facilities, as they have hypotheticated 100% of their assets to their respective banks, as none of the banks would extend credit without collateral’, Jayawardene explained to the Committee in the course of a presentation.

The Committee which was chaired by Prof. A.D. V. de S. Indraratne, also consisted of Sohli Captain, Preethi Jayawardene, Mahen Dayananda, R.M.B. Senanayake, Yohan Perera and Cubby Wijethunge. The banks were represented by MD and CEO Hatton National Bank and president of the Bankers Association Rajendra Theagarajah.

Jayawardene pointed out that the government should take this threat facing the SMEs seriously and go to the extent of suspending labour laws to allow employee lay-offs. These measures should be prevented from being challenged in court until the crisis is over, he proposed. ‘Our bank loans, interest on loans, taxes and other rates should be put on hold for the next two years. The government should understand that SMIs are the vital cog in our country’s economy, and that they represent 70% of it. A kick start should be given to the SMEs if the economy is to develop’, Jayawardene explained.

Explaining the fallout of the crisis on entrepreneurs, Jayawardene said that the majority of these businessmen are today failing to pay their monthly installments and interest on loans obtained from commercial banks, subsequent to having mortgaged their residential homes, properties and even cars with the banks. Consequently, ‘banks are attempting to take over their mortgaged assets’, to compensate for their anticipated losses.

‘Commercial banks have restricted the granting of ToDs to the SMEs. Even at the present rate of 26%-28%, banks are reluctant to extend this facility. Some of our entrepreneurs extend credit to most government institutions with whom they transact business. We request the Central Bank’s intervention on allowing ToD facilities to government supplies at a nominal rate of interest, based on the receivable amount from government institutions. It is noted that government institutions generally take over three months to settle our bills and in some cases this extends from 5-6 months’, Jayewardene pointed out.

The SMI chief said that a number of relevant ministers were alerted to these issues but nothing positive has materialized from these efforts, thus far. He said that an appeal sent to the President in April 2009 had also drawn a blank.

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