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Sri Lanka: Supporting SMEs in rural areas with Hatton National Bank
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PROPARCO has just allocated a USD 60m credit line to Hatton National Bank to finance loans for small and medium-sized enterprises in Sri Lanka. At least half of this credit line will be earmarked to finance SMEs in rural provinces which suffer because they find it harder to access banking services.
Over 75% of companies in Sri Lanka are SMEs. They provide 45% of employment, particularly for women and young people, and account for 52% of national GDP. They are therefore one of the main contributors to the country’s development. Yet they are considered to be riskier and find it harder to access long-term financing, especially when they are located in rural areas.
This is why since 2015, PROPARCO has been helping Hatton National Bank Plc (HNB), one of the main players in the SME segment in Sri Lanka, develop its portfolio of small and medium-sized enterprises. PROPARCO’s objective with this new credit line is to encourage HNB to develop its portfolio in rural areas in the country, in order to support SMEs located outside the most economically active regions which find it harder to obtain financing to develop.
HNB is one of the top private sector banks in the country and has one of the most extensive banking networks, with 250 branches (including about 60% in rural areas). It operates virtually nationwide, including in the North and East, the two poorest regions of the country. The bank is currently supporting some 100,000 SMEs and has developed a range of services to assist these companies by facilitating their access to markets or improving their financial management. The bank is also the leader in the microfinance market and therefore a major player in financial inclusion in Sri Lanka.
“Proparco is pleased to once again partner with HNB. Proparco’s US$ 60 million credit line will help HNB to further support SMEs, especially in rural areas. This new operation reflects the ongoing commitment of Proparco to facilitate access to credit for job-creating SMEs”, said Guillaume Barberousse, Head of Financial Institutions & Inclusion at Proparco.
“We are delighted to enter in to this long term loan agreement with PROPARCO at such a critical juncture in the history of the global economy. This is the second time HNB is partnering with Proparco since 2015. Through this long term funding HNB will be in a position to support the much aggrieved SME segment of our nation” Jonathan Alles, Managing Director / CEO of HNB stated.
PROPARCO’s credit line should allow the bank to allocate loans to some 1,500 additional SMEs. The project will also support employment for local people, with over 850 additional jobs at HNB and over 55,000 jobs created or maintained in the bank’s client SMEs.
This new project follows on from a first USD 50m credit line allocated to HNB in 2015 to finance agricultural projects and the development of the bank’s SME portfolio.