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Sri Lanka: Small and Medium Enterprise Regional Development Project

sector: Industry and Trade | country: Sri Lanka

This validation finds the lessons drawn out by the project completion report (PCR) suitable. Adopting a local interest rate anchor – such as the average weighted deposit rate (AWDR) – was not widely accepted by other development partners, which in many cases adopted fixed interest rates, often lower than prevailing market rates. Therefore, promoting a standard anchor for interest rates is needed to conform development partners’ assistance to the local environment and to avoid market distortions. This validation agrees with the project completion report (PCR) findings that including a capacity development technical assistance in project design would have provided the necessary skills training, and improved the capacity of borrowing small and medium-sized enterprises (SMEs). SMEs generally suffer capacity constraints and lack skills in business development, marketing, planning, human resource management, and other business skills. Institutional support in various business aspects would make SMEs more bankable. This validation supports the PCR findings that timely disbursement is critical especially for financial intermediation loans under the project. Project administration should have given greater attention to efficient and timely disbursement to facilitate implementation.

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