The Commercial Bank of Ceylon has secured a US $50 million (about Rs 10 billion at current exchange rates) loan from the CDC Group, the UK’s development finance institution and impact investor, to facilitate lending to small and medium-sized enterprises (SMEs) and support climate projects in Sri Lanka.
CDC’s investment will enable Commercial Bank to further strengthen financial support to local SMEs most in need of funding, enabling them to access necessary working capital to strengthen their operations, maintain employment, and grow their business, the Bank said. By focusing lending toward eligible businesses and customers, the investment will help increase social and financial inclusion across communities which will in turn drive economic activities throughout the country.
SMEs represent 80 per cent of businesses and provide about 35 per cent of jobs in Sri Lanka. Yet, these businesses struggle to access medium and long-term finance, a funding issue which is further exacerbated by the impact of Covid-19 on the country’s economy.
CDC’s investment will equally provide capital that will allow Commercial Bank to extend credit toward renewable and climate-supportive projects. Sri Lanka is facing growing energy demands and has set a national ambition to become energy self-sufficient by 2030 and reach 100 percent renewable energy generation by 2050.
Through this loan facility from CDC, the Bank can increase support for the development of clean energy resources and energy efficiency initiatives, helping Sri Lanka to achieve national climate goals and bolstering the country’s efforts to help reduce greenhouse gas emissions.
The partnership between CDC and ComBank, Sri Lanka’s first wholly carbon neutral bank, is strengthened by a joint commitment to advancing climate initiatives and making investments that help to promote climate mitigation, adaptation and resilience. The landmark investment marks CDC’s re-entry into Sri Lanka market and demonstrates the DFI’s three-pillared Climate Change Strategy through this first climate commitment in the country. Similarly, the investment will strengthen Commercial Bank’s own Green Financing strategy, supporting Sri Lanka’s commitments under the Paris agreement.
Bruce Bucknell, British Acting Deputy High Commissioner to Sri Lanka, said: “We welcome today’s announcement as a step towards financial empowerment for small businesses and communities throughout Sri Lanka.CDC and Commercial Bank of Ceylon’s partnership offers a blueprint for investments that could transform Sri Lanka’s economic future. This investment demonstrates the UK’s continued commitment to supporting Sri Lanka socio-economic development and our shared ambitions for a sustainable future through clean energy transition.”
Srini Nagarajan, Managing Director and Head of Asia at CDC Group, commented:“SMEs are the cornerstone businesses that serve households, local communities and greatly drive the growth of the entire economy. However, the pandemic has created a scarcity of financial support which is hampering growth of SMEs and impeding economic development.
S. Renganathan, Managing Director of Commercial Bank of Ceylon said:“Commercial Bank has a historic link with the UK, as the successor to the Eastern Bank which opened a branch in Colombo in 1920 and provided the start to our 100 plus year journey. We are delighted to partner with the UK government funded CDC in its quest to support SMEs, which are the backbone of the economy of our country. The challenges brought about by the pandemic have been particularly hard on this segment and we have been working tirelessly to support these businessessurvive and grow in these difficult times. This facility will greatly enhance our capacity to provide solutions tailor-made for deserving SMEs and will allow Commercial Bank, already one of the top lenders to SMEs and Green projects in the country, to make a significant difference.”