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Krishani
Krishani
Sep 28 2026
35Sri Lanka's Central Bank has a role to play in expanding collateral-free lending for SMEs and priority sectors, following the benchmark set by the Reserve Bank of India with its priority sector lending target of 40%, Standard Chartered CEO Bingumal Thewarathanthri said, speaking on a panel hosted by DFCC Bank on Wednesday (23), for the 49th Association of Development Financing Institutions in Asia and the Pacific Annual Meeting.
Acknowledging the existing collateral-free lending models utilised by Sri Lankan banks, Thewarathanthri said: “There are multiple ways of lending, without collateral, largely for small-ticket transactions. In Sri Lanka, a lot of the banks are doing it at the moment, the NBFIs are doing it at the moment. They're [engaged in] programme-based lending, they’ve given to communities, across guarantees sometimes. There are tested models for these.”
“Development banks can play a significant role in terms of collateral-free lending. Again, the question should be; should we do it through the existing banks like DFCC, or should we form new banks?,” he queried, noting the engagements of Sri Lankan commercial banks in development financing, and what it would mean to set up Development Financial Institutions dedicated solely for the purpose.
“I think the existing banks also can create those models. The Central Bank should play a role, especially if the fiscal is supporting these initiatives; how do you drive this and to what sectors is [this] very critical?.”
In 2025, the CBSL had granted SMEs Rs 4. 02 billion in collateral-free loans. This target was raised to Rs 7 billion in 2026, according to President Anura Kumara Dissanayake, during the 2026 Budget speech.
By July 2026, the National Credit Guarantee Institution (NCGI) had noted that since commencing operation in January of 2025, it had issued over 2,000 guarantees facilitating more than Rs 14 billion in loans.
Thewarathanthri said that though financing may be enthusiastically given, caution on what segments receive the funding should be exercised.
“Of course there are credit guarantees, the government can participate. Those are tested models; again you have to make sure that money goes into the right segment where growth is a concern. Money should go into the area where economic growth happens.”
“Otherwise what happens in markets like Sri Lanka; when there is funding available, people just get into it, and they just grow mangoes or something, then suddenly realise they have no market for it. Then you access the local market. Watermelon and mangoes are very common and sometimes go at very cheap prices in the local market.”
Referring to the RBI’s requirement for scheduled commercial banks to lend 40% of their Adjusted Net Bank Credit (ANBC) towards priority sectors, he said: If you look at RBI, the RBI has a priority sector lending target of something like 40%. They go into demographics as well; women-led businesses, SMEs, even global banks like Standard Chartered will have to play a role.”
“If we don’t play a role in those segments, money has to be parked in government bonds. Those are good practices and it has worked for India, we have to all agree; 6 to 7% growth has worked for India, and it is something that we can learn from.”
According to projections made by the World Bank earlier this year, Sri Lanka is expected to see growth plateauing in 2027, with a projected 3.8% GDP growth rate.
The International Monetary Fund (IMF), in its statement on the Seventh review of the Extended Fund Facility (EFF) programme noted that though Sri Lanka had seen 4.2% growth in 2026Q2, amidst the global oil shock; downside risks from the uncertainty over the duration and intensity of the Middle East war, global trade policy, and the impact of El Niño remain.
