Sri Lanka launches collateral-free loan program to boost small businesses

Sri Lanka officially launched the National Credit Guarantee Institution on June 2, 2025, enabling small and medium enterprise (SME) entrepreneurs to access loans without providing collateral, making it easier for small businesses to grow.

The institution is a joint effort by the Asian Development Bank (ADB) and Sri Lanka’s Ministry of Finance. It operates as a public-private partnership with the government owning 90% and the remaining 10% held by 13 private banks and financial institutions.

The ADB has contributed USD 50 million in capital and technical support to establish the institution.

One of the biggest challenges for small business owners has been the requirement to offer property or other assets as loan security. The new scheme solves this by offering a 67% guarantee to banks, allowing them to provide loans based on the business’s potential rather than on collateral.

This is particularly beneficial for women entrepreneurs who, due to cultural and legal reasons, often do not have ownership of assets. Now, they have a better chance to access funding and grow their businesses.

Loans under this scheme range from Rs. 500,000 to Rs. 25 million and are available across all sectors. To qualify, business owners must show their business is viable when applying through banks.

Already, 116 entrepreneurs have benefited from this program, receiving a total of Rs. 500 million in loans.

Deputy Minister of Industry and Entrepreneurship Development, Chathuranga Abeysinghe, emphasized the importance of spreading awareness about the scheme. “This is a turning point for Sri Lanka’s SME sector,” he said in a statement.

People seeking help can contact officials from the Small Enterprise Development Division (SEDD), the Industrial Development Board (IDB), or the National Enterprise Development Authority (NEDA) at any Divisional Secretariat office.

The Ministry of Finance and the Ministry of Industries are working closely to expand the initiative and introduce more collateral-free loan options in the future, part of the government’s promise to uplift small, medium, and micro enterprises across the country.