Combank boosts SME support
The Commercial Bank of Ceylon, the largest lender to Sri Lanka’s Small and Medium Enterprise (SME) sector in 2012, has announced the establishment of a dedicated centre exclusively for the processing of loan applications from SMEs.
The work of the centre, which is in Colombo, will supplement the processing done by the Bank’s country-wide branch network, and will be facilitated by an on-going initiative to automate the processing of such applications to expedite disbursement of funding, the Bank said.
Commercial Bank s loan portfolio stood at Rs 390 billion at the end of 1Q 2013. Already accounting for a significant share of the loan portfolio, the SME segment continues to grow due to the particularly attractive rates and longer repayment periods offered to SMEs in the manufacturing and service sectors under its ‘Diribala’ Development Loans scheme, the Bank said.
“One of factors behind our success is that we do not insist on project reports from borrowers,” the Bank’s Assistant General Manager Personal Banking Chandana Gunasekera said. “We have found that many borrowers are unable to produce clear proposals that would meet the Bank’s requirements. Our solution is to visit and interview prospective borrowers and produce our own reports for internal evaluation.”
This process, which is usually undertaken at branch level, will now be significantly enhanced by the introduction of automated processing and a dedicated SME centre, he said.
For the purpose of categorisation, Small and Medium Enterprises are defined, as agreed under the Basel II Accord, as businesses with an annual turnover of under Rs 600 million, to which the Bank has lent up to Rs 200 million. While the repayment period for a standard SME loan is four to five years, loans from Commercial Bank’s ‘Diribala’ credit line carry repayment periods of up to seven years, with a grace period of two for new businesses, and an attractive interest rate that averages around 15 percent.
All recipients of SME loans from Commercial Bank have access to technical advisory services from within the Bank, or from external experts sourced by the Bank for its clients, Gunasekera said. This contributes to significant capacity building within the enterprises supported by the Bank with funding.
On average, an SME loan is disbursed within about three weeks of a request, while requests from businesses in trading are at times processed in as little as two weeks, he added.
According to a recent study by the International Finance Corporation (IFC), SMEs supported by Commercial Bank l oans have generated about 200,000 employment opportunities in Sri Lanka since 2010 to February this year, when the IFC invested a further $75 million (approximately Rs 9.6 billion) in Commercial Bank to expand the Bank’s operations and increase access to finance for SMEs. This investment is expected to benefit up to 16,000 small businesses and generate about 170,000 more direct and indirect jobs by 2017.