Seylan Bank PLC of Sri Lanka has signed a term loan agreement with the OPEC Fund for International Development (OFID), the Development Bank of Austria (OeEB) and the German development finance institution DEG—Deutsche Investitions- und Entwicklungsgesellschaft mbH—to promote development and economic growth through micro, small and medium enterprise (MSME) support in Sri Lanka. Alpen Capital introduced this transaction to OFID, who in the context of the recent Cooperation Agreement between both development finance institutions, extended an invitation to OeEB.
The agreement represents the first joint financing facility between OFID, OeEB and DEG. It provides term loan financing of US$45m for a five year tenor and is part of the first round of international fund-raising for Seylan.
Commenting on the agreement, OFID Director-General Suleiman J Al-Herbish said: “We need to work together and build effective partnerships. OFID welcomes this collaboration with OeEB and DEG to provide stable, long-term funding for Seylan, a leading bank in the country.”
Andrea Hagmann, Member of the Executive Board of OeEB also commented: “Together with OFID and as lead arranger for DEG we are able to support economic development especially in northern, rural regions of Sri Lanka. OeEB also contributes TA funds for enhancing environmental and social standards.”
Rena Terfrüchte, Director Financial Institutions Europe/Asia at DEG, expressed her gratitude to the due diligence teams of the organizations for closing the deal successfully. The loan will contribute to the overall development of the country´s economy through the financing of MSME companies, therewith meeting one of DEG´s central financing goals.
Development agencies, OFID, OeEB and DEG, are united in their commitment to achieving the Sustainable Development Goals (SDGs). SDG8, focuses on promoting sustained, inclusive and sustainable economic growth. MSMEs in Sri Lanka contribute an estimated 50 percent to GDP and 45 percent of employment, but typically lack access to long-term finance. Support to these businesses is therefore central to promoting inclusive and sustainable growth.
Seylan Bank, as one of the leading MSME banks in the country, is in an ideal position to support these goals. Seylan Bank CEO Kapila Ariyaratne commented: “SME growth is vital to Sri Lanka’s economic development and this agreement will help us plan for the longer term. I’m hopeful that it marks the beginning of an excellent relationship that will enable us to improve the sector, improve the livelihoods of our people and mutually benefit our organizations.”
Over one third of the funding will support MSMEs in the northern and eastern provinces of Sri Lanka. These areas have been the most affected by the country’s civil war which ended in 2009. Despite strong economic growth and rapidly expanding urban populations, these regions continue to suffer from limited investment.