Business

‘Bad Bank,’ Big Stakes: Sri Lanka’s Rs. 300bn gamble on growth

Published

8 months ago

2026/02/12

The top table at the SLCSMI press conference.

Sri Lanka’s small and medium enterprise (SME) sector—responsible for 52 percent of GDP and employing nearly half the national workforce—has become the next decisive test of the country’s fragile economic recovery.

A proposal to establish a Rs. 300 billion “Bad Bank” to absorb distressed SME loans now places policymakers at a crossroads: act boldly to revive credit and growth, or risk entrenching stagnation in the real economy.

The Sri Lanka Chamber of Small and Medium Industries (SLCSMI) on Tuesday told journalists that they had unveiled a detailed blueprint aimed at restructuring an estimated Rs. 460 billion in non-performing loans (NPLs), much of it concentrated among SMEs battered by successive shocks—from the Easter Sunday attacks and the pandemic to sovereign default and climate-related disruptions such as Cyclone Ditwah.

While headline indicators suggest macroeconomic stabilisation, including lower inflation, improved reserves and a profitable banking sector, credit transmission to smaller enterprises remains severely constrained, Chambers think tank pointed out.

“This is not about rewarding defaulters,” said SLCSMI President Prof. Rohan De Silva. “It is about protecting the productive backbone of the economy. If SMEs collapse, the consequences will extend far beyond individual balance sheets.”

Despite strong liquidity and a return to profitability in the banking system, thousands of SMEs remain blacklisted at the Credit Information Bureau (CRIB), unable to access fresh working capital.

The Chamber argues that unless distressed assets are separated from viable enterprises, banks will remain structurally risk-averse, prolonging the paralysis in private sector credit growth.

The proposed “Bad Bank” would function as a specialised rehabilitation vehicle, purchasing or warehousing toxic SME loans and granting viable firms a five-to-ten-year restructuring window, shielded from parate execution, to rebuild cash flows. Senior Vice President Colvin Fernando described the initiative as an economic circuit-breaker rather than a bailout. “These are not failed enterprises,” Fernando said.

He added:”They are businesses hit by extraordinary external shocks. Unless we ring-fence these distressed loans, credit transmission will remain paralysed.”

The concept draws on international precedents where asset management companies were deployed after systemic crises. Yet such mechanisms succeed only when governed by strict asset valuation discipline, professional management and insulation from political interference. Without these safeguards, they risk becoming vehicles for concealed subsidies or fiscal leakage.

The most contentious element of the Chamber’s proposal lies in its funding model. It calls for a hybrid structure combining low-cost international financing, a levy on commercial bank profits and the utilisation of unutilised balances from the Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF).

Prof. De Silva argues that the banking sector, having restored profitability partly through elevated interest margins during the crisis years, has both the capacity and systemic responsibility to contribute. “The banking system has returned to strong profitability,” he said. “A structured contribution toward SME rehabilitation is not punitive—it is an investment in systemic stability.”

The suggested mobilisation of pension fund balances, however, is likely to provoke scrutiny over governance and fiduciary safeguards, while a levy on bank profits may raise investor sensitivity in a sector that has only recently regained confidence.

Fernando acknowledged the risks, emphasising that transparency and strict eligibility criteria would be essential. “This must be professionally managed, transparent and focused strictly on viable enterprises. Without discipline and accountability, the entire purpose would be defeated,” he cautioned.

Adding urgency to the debate is the Government’s decision to lower the VAT registration threshold to Rs. 36 million annually from April 1, 2026, drawing more small firms into the tax net. The Chamber warns that tightening tax compliance while credit remains restricted could create a double squeeze. “You cannot increase tax burdens and restrict financing simultaneously without economic consequences,” Prof. De Silva observed, describing the timing as highly sensitive.

Immediate Past President Mohideen Cader underscored the scale of the stakes. With SMEs contributing 52 percent to GDP and already under severe strain, he warned that inaction would result in irreversible economic scarring.

The macroeconomic logic is clear: without restoring SME balance sheets, private investment and employment growth are unlikely to regain momentum. Yet the countervailing risk is equally apparent. A poorly designed vehicle could create moral hazard, transfer private losses onto public shoulders and introduce new contingent liabilities into an economy still emerging from sovereign default.

Sri Lanka’s IMF-backed reform programme has so far focused on fiscal consolidation and debt sustainability. The SME “Bad Bank” proposal introduces a more complex phase in the recovery narrative—one that shifts attention from stabilisation to growth. The question confronting policymakers is whether the economy can sustain recovery without unclogging the credit arteries that feed its most labour-intensive sector.

The Rs. 300 billion proposal is, in essence, a calculated gamble that repairing SME balance sheets will unlock lending, revive investment and restore economic momentum. If executed with rigour, transparency and independence, it could serve as a bridge from crisis management to expansion. If mishandled, it risks deepening vulnerabilities in a system that has only recently regained its footing. For an economy seeking to move beyond stabilisation, the stakes could hardly be higher.

By Ifham Nizam

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Business

World Bank puts USD 110m into climate-resilient road rebuilding

Published

21 hours ago

2026/10/6

Sahan Weerasooriya

A Cyclone Ditwah-damaged area in Sri Lanka.

By Ifham Nizam

The World Bank has approved USD 110 million in additional financing to rebuild around 600 kilometres of roads damaged by Cyclone Ditwah, with the investment aimed not merely at restoring connectivity but at making critical transport infrastructure more resilient to future climate shocks.

The financing comes against a much larger recovery requirement for the transport sector, estimated at USD 1.31 billion, highlighting the scale of the infrastructure challenge following one of the most destructive weather disasters to hit the country in recent years.

The World Bank said the additional financing, provided through the International Development Association (IDA) Crisis Response Window, would support road reconstruction incorporating improved drainage, landslide protection and upgraded engineering standards.

‘Cyclone Ditwah has had a devastating impact on connectivity across Sri Lanka, but rebuilding also gives us an opportunity to build back stronger, said Gevorg Sargsyan, World Bank Group Country Manager for Sri Lanka and Maldives.

The World Bank said the programme would go beyond repairing damaged roads, helping reconnect farmers with markets, communities with essential services and households with economic opportunities.

The additional financing will extend the Inclusive Connectivity and Development Project (ICDP) by three years, taking total World Bank transport investment under the operation to USD 610 million.

The World Bank’s December 2025 GRADE assessment estimated Cyclone Ditwah had caused USD 4.1 billion in direct physical damage, equivalent to around four percent of GDP. Infrastructure accounted for approximately USD 1.735 billion, or 42% of the total, with roads, bridges, railways and water systems among the heavily affected assets.

The Bank has stressed that the USD 4.1 billion estimate measures direct physical damage and does not include income or production losses or the full cost of recovery and reconstruction.

The transport sector alone suffered extensive disruption, making the rebuilding of road networks a critical component of the broader economic recovery.

The latest USD 110 million package is expected to directly benefit more than 830,000 people, while nearly two million people across eight districts are expected to benefit from improved connectivity.

The programme is also expected to support employment during reconstruction and improve market access for approximately 22,000 tea, vegetable and paddy farmers.

The World Bank’s intervention therefore combines immediate disaster recovery with a longer-term infrastructure objective: ensuring that money spent on reconstruction does not simply restore roads to their pre-disaster condition but reduces their vulnerability to the next extreme-weather event.

That approach is becoming increasingly important as climate-related disasters place additional pressure on already constrained public finances.

Rebuilding the same infrastructure repeatedly after floods, landslides and other disasters carries a significant economic cost, making resilience an increasingly important part of infrastructure investment decisions.

Business

SLIC Life offers Rs.1million free life cover to parents of children born on World Children’s Day 2026

Published

21 hours ago

2026/10/6

Sahan Weerasooriya

Senior Management of SLIC Life and officials of Castle Street Hospital for Women symbolically handing over a Free Life Cover of Rs. 1 million to a parent whose child was born on 1st of October 2026

In celebration of World Children’s Day 2026, Sri Lanka Insurance Life (SLIC Life) has once again extended a Rs. 1 million free life insurance cover to the parents of every child born on 1 October 2026, across Sri Lanka. Now in its fifth consecutive year, the initiative was implemented island-wide, covering hospitals across the country and enabling parents of newborns to benefit from this special offering.

Beyond providing financial protection, the initiative seeks to highlight the importance of planning for a family’s financial security from the very beginning of a child’s life.

“The birth of a child marks the beginning of a new journey filled with hopes, dreams and aspirations. At SLIC Life, we believe that protection should begin from the very start of that journey. Through this initiative, we aim to create greater awareness of the importance of planning ahead and the role life insurance can play in safeguarding families against life’s uncertainties. As we continue this initiative for the fifth consecutive year, we remain committed to extending meaningful protection to Sri Lankan families and contributing towards a more secure future for the next generation,” said Dr. Sameera Dharmasena, Chief Executive Officer of SLIC Life.

Launched in 2022 as part of SLIC Life’s Corporate Social Responsibility (CSR) programme, the World Children’s Day initiative was introduced with the aim of supporting parents and strengthening financial security for families at an important stage in their lives. Over the years, the initiative has become a significant part of SLIC Life’s annual CSR calendar, reflecting the company’s broader commitment to children, families and communities.

SLIC Life’s commitment to children and education extends across several long standing CSR initiatives. The ‘Pasal Piriyatha Surakimu’ programme, launched in 2007, has benefited over 3,365 underprivileged schools through initiatives including classroom refurbishments, water facilities, libraries and learning resources. The 2026 edition of the programme is scheduled to be carried out in November, continuing SLIC Life’s efforts to enhance learning environments for children across the country. Complementing this, the ‘Suba Pathum Scholarship Programme’, which has been conducted since 2014, has now awarded 2,425 scholarships valued at Rs. 265 million to children of policyholders who demonstrate excellence in national examinations. The programme reflects SLIC Life’s continued focus on supporting educational aspirations and creating opportunities for the next generation.

Children remain at the heart of SLIC Life’s commitment to building a more secure future. Through the annual World Children’s Day initiative and its wider CSR programmes, SLIC Life continues to demonstrate that the value of insurance extends beyond financial protection, contributing to stronger and more resilient families and communities.

Business

HelpAge thanks donors for helping in carrying out free cataract surgery program

Published

21 hours ago

2026/10/6

Sahan Weerasooriya

A surgery in progress under the aegis Helpage.

At a recent seminar HelpAge Sri Lanka (HASL) thanked local and foreign donors for strengthening the on-going free cataract surgeries program conducted by HelpAge Eye Hospital, Wellawatta for less- privileged elders over 55 years.

According to HelpAge Eye Hospital statistics the free cataract surgery programme was commenced in 2002 and over 55,000 surgeries have so far been performed for elderly citizens.

Head of HelpAge Eye Hospital Mahanama Wijesinghe said needy persons over 55 years of age could contact the hospital on telephone numbers 0112555759 and 0112589450 for free cataract surgeries.

‘Steps have been taken to conduct surgeries within a short duration of 30 days after attending the Eye Hospital clinic, he said.

Wijesinghe thanked all donors for their donations towards helping underprivileged citizens of the country.

HelpAge, Executive Director Dr. Harsha Bandara said HelpAge also conducts free medical and eye camps for needy elders and thanked donors for their donations towards this meritorious cause.

He requested philanthropists and donors to make their contributions for the sake of the needy.