The Central Bank of Sri Lanka (CBSL), in collaboration with the Finance Ministry and the Credit Information Bureau (CRIB), has inaugurated a Secured Transactions Registry (STR) aimed at facilitating the utilization of movable assets as collateral for loans targeting Small and Medium Enterprises (SMEs) in Sri Lanka. The initiative aims to promote financial stability and foster economic growth within the country.
The establishment of the STR was made possible with technical assistance from the International Finance Corporation (IFC), a member of the World Bank Group. The new Secured Transactions Registry Act seeks to tackle legal and operational hurdles in the existing legislation to streamline the process.
SMEs constitute a significant portion of Sri Lanka’s business landscape, comprising over 75% of enterprises, contributing 45% to employment, and constituting 52% of the nation’s GDP. However, access to finance remains a major barrier to their growth trajectory. A robust legal framework allowing for the registration of security interests over movable assets is expected to unlock the full potential of small businesses by facilitating easier access to loans.
Pushpike Jayasundera, Director/General Manager of CRIB, emphasized the critical importance of the new law, stating that it establishes a comprehensive secured transaction framework safeguarding the rights of all regulated financial institutions, thereby encouraging them to offer financing secured by movable collateral.
Globally, the absence of functional laws and registries governing secured transactions restricts businesses from utilizing movable collateral to secure financing. However, STRs have the potential to empower women entrepreneurs who are more likely to possess movable assets for pledging.
Alejandro Alvarez de la Campa, IFC Country Manager for Sri Lanka and Maldives, underscored the significance of an effective credit infrastructure in strengthening Sri Lanka’s financial sector. The IFC’s involvement in drafting the new law, in conjunction with extensive consultations and expert insights, underscores its commitment to promoting financial inclusion and facilitating access to financing for small businesses.
Apart from supporting secured transactions regimes, the IFC has been actively engaged in various initiatives aimed at improving access to finance and fostering financial inclusion in Sri Lanka. These efforts include assisting the Central Bank of Sri Lanka in launching the nation’s inaugural national financial inclusion strategy and developing a financial literacy roadmap.
For the fiscal year 2023, the IFC committed a historic USD 43.7 billion to private companies and financial institutions in developing countries, leveraging private sector engagement to alleviate poverty and promote shared prosperity amidst global challenges.
The IFC’s endeavors epitomize its dedication to creating markets and opportunities in developing nations, utilizing its capital, expertise, and influence to drive positive change across more than 100 countries worldwide.
