The Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) yesterday expressed its serious concern and dissatisfaction over the operationalisation of "Susahana" Loan Scheme introduced by the Central Bank (or rehabilitation of Micro, Small and Medium scale enterprises (MSMEs) affected by December 26 tsunami.
According to the feedback received from its member Chambers in Kalutara, Galle, Matara, Hambantota, Ampara, Batticaloa, Trincomalee and Jaffna the number of loans disbursed by the Bunking network in the affected areas is not satisfactory in terms of number of MSMF's directly affected, number of livelihoods and employment lost, the extent of economic destruction caused by the tsunami and the urgency of reiteration of sustainable economic activities in the affected areas.
FCCISL's "Back to Business" programme is being successfully in operation in all affected areas and District Help Desks have been established in each of the District Chambers of Commerce. These help desks play the role of a co-ordinating point of financial and non. financial post tsunami MSME support services in the respective districts. In order to coordinate the back to business programme, FCCISL also has established a National Coordinating Unit at its Secretariat in Colombo.
FCCISL said one of the major draw backs of the "Susahana" Loan Scheme is that, it is very much collateral oriented and has now become another common "asset based" Loan Scheme demanding collateral instead of being "project based" by considering the viability of the projects.
"Even though the original objective of the Central Bank was to be very relaxed and flexible on collateral requirement in actual operationalisation of the "Sushana" Loan Scheme it has failed to meet that objective," FCCISL said.
In order to overcome these major drawbacks of the scheme FCCISL has proposed the Central Bank to bear the credit risk either fully or jointly with the Participatory Financial Institutions (PFIs) of the "Sushana" Loan Scheme.
FCCISL said Banks are reluctant to bear the credit risk and that is the main reason why the "Susahana" Loan Scheme has been so much collateral oriented. Since most of the affected MSMEs have undergone extensive damages and losses in terms of machinery, buildings, stocks, raw materials etc, they are unable to provide sufficient collateral to meet the bank’s requirements.
FCCISL is of the view that in a post tsunami rehabilitation context these regulations should be flexible and more development oriented in order to stimulate speedy recovery of both livelihoods and economic and industrial activities. In this regard FCCISL request the Central Bank to introduce a Credit Guarantee Scheme also in addition to the existing refinance scheme.
A number of cases also have been reported to several District Help Desks where Banks have demanded proof of adequate transactions during the last few months after tsunami from the affected Customers in order to process their Loan Applications.
FCCISL said affected entrepreneurs have become more helpless in the face of such unjustifiable demands particularly when the bank officials themselves are aware that the particular customers have been severely affected. There have been instances where Banks have requested personal guarantees from the Customers of the same Bank in order to process loan applications. Another practice of certain Bank reported by certain District Help Desks is that Bank prefer personal guarantees of Government Servants drawing a monthly income of over Rs. 15,000.00. FCCISL is of the view that such rules and regulations imposed by Banks are unjustifiable and tend to jeopardise post tsunami rehabilitation efforts of the Government and the Private Sector.
The district help desks also have reported that certain banks die reluctant to reschedule existing loans of tsunami affected entrepreneurs on concessional terms and thereby provide any relief to affected parties. FCCISL is of the strong view that the banks should be more socially responsible in this hour of rebuilding the nation than being very much profit oriented.
It is the view of the FCCISL that the rate at which the loan applications are processed at branch level is very slow despite a large number of applications being registered under the “Susahana’” loan scheme with the Central Bank for refinance purposes. FCCISL request the Central Bank authorities to closely monitor the performance of the “Susahana” loan scheme particularly at branch level.
