Sri Lanka is to get US$75 million from the World Bank for financial sector reforms that will modernize regulatory frameworks and infrastructure and improve access to affordable finance especially for small businesses and entrepreneurs.
The loan, which amounts to about Rs11.4 billion, is provided by the International Development Association (IDA), the World Bank’s grant and low-interest arm, with a maturity of 25 years that includes a grace period of five years.
The new Financial Sector Modernization Project (FSMP) will contribute to increasing financial market efficiency and use of financial services among micro, small and medium enterprises and individuals, a finance ministry statement said.
“A strong financial sector can help Sri Lanka sustain its developmental returns. Efficient financial markets can boost the competitiveness of Sri Lankan firms and overall job creation,” said Idah Pswarayi-Riddihough, World Bank Country Director for Sri Lanka and the Maldives,
“Inclusive finance, in turn, can help increase spatial integration and access to opportunities, encouraging entry into the formal economy. To make all this happen, Sri Lankan authorities must continue effectively addressing challenges in the financial sector; such as gaps in financial sector infrastructure, weak legal frameworks, and in oversight functions of the regulators.”
This 5 year project will be implemented by the financial sector regulators – Central Bank of Sri Lanka, Securities and Exchange Commission and Insurance Board of Sri Lanka, a World Bank statement said.
“Financial intermediaries and regulatory institutions stand to benefit from modernized regulatory frameworks and the state-of-the-art financial infrastructure that will ease access to affordable finance and spur an entrepreneurship culture in Sri Lanka.”
The finance ministry said the project aims to modernize financial market infrastructure, upgrade the legal and regulatory framework for the financial system and strengthen institutional capacity of financial sector regulators; Central Bank, Securities and Exchange Commission and Insurance Board.
“The direct beneficiaries are the financial sector regulators and indirect beneficiaries will be financial firms, micro, small and medium enterprises and individuals.”
Anoma Kulathunga, World Bank Senior Financial Sector Specialist and Task Team Leader, said a competitive, diversified, and well-regulated financial market is imperative for Sri Lanka to create better investment finance for micro, small and medium enterprises and thereby provide economic opportunities for the financially underserved.
” Such financial markets can support shared prosperity and allow Sri Lanka to remain on its development path to an inclusive upper-Middle Income status”.