(MENAFN- Colombo Gazette) Sri Lanka takes a significant step forward for small and medium enterprises (SMEs) with the launch of the Secured Transactions Registry (STR), enabling greater credit access through movable collateral and laying the foundation for a resilient and inclusive credit infrastructure.

This initiative is a collective effort led by the Credit Information Bureau (CRIB), in collaboration with the Central Bank of Sri Lanka and the Ministry of Finance, with technical assistance from the International Finance Corporation (IFC), a member of the World Bank Group, and funding support from the European Union's regional initiative 'Accelerating Climate Smart and Inclusive Infrastructure in South Asia' (ACSIIS).

While SMEs form the backbone of Sri Lanka's economy – comprising over 75 percent of all businesses and providing 45 percent of jobs – they often struggle to secure financing as many lack fixed assets to secure loans. An effective secured transactions system can expand Sri Lanka's financial services by enabling credit access for a wider range of borrowers, including MSMEs, entrepreneurs and self-employed individuals, thereby driving economic growth.

“Historically, borrowers in Sri Lanka, particularly MSMEs, have encountered significant barriers in accessing formal credit sources. This has been primarily due to their inability to provide fixed asset collateral and the absence of standardized credit practices. To address these challenges, the reforms to the legal and institutional framework governing movable collateral, seeks to establish an enabling environment that allows borrowers, especially MSMEs, to unlock the value of their movable assets,” said Chaaminda Bandara, Chairman of the Secured Transaction Registration Authority.

“The launch of the Secured Transactions Registry marks a transformative milestone in Sri Lanka's credit ecosystem. By enabling the use of movable assets as collateral, the STR expands access to finance for SMEs and entrepreneurs who have traditionally been constrained by the lack of immovable assets. This initiative reinforces CRIB's commitment to fostering financial inclusion and strengthening the digital credit infrastructure of the country,” said Pushpike Jayasundera, Director/General Manager, Credit Information Bureau of Sri Lanka.

Globally, the absence of comprehensive laws and registries for secured transactions restricts businesses from using movable assets like machinery, inventory, and equipment as loan collateral. Reforming these systems can especially benefit women, who are more likely to have movable assets that facilitate business startup or expansion.

“Empowering SMEs is critical for creating jobs and sustaining economic momentum in Sri Lanka. A strong and efficient credit infrastructure is essential in unlocking the growth potential of these businesses and transforming the financial sector. IFC has been proud to contribute its expertise throughout every phase of this reform, and look forward to also supporting greater awareness for uptake. These efforts, backed by both public and private sectors, is poised to unlock enormous potential and drive lasting progress for generations to come,” said Gevorg Sargsyan, Country Manager for World Bank Group in Sri Lanka and Maldives.

The STR will feature simple and inclusive rules for establishing security interests, a fast and efficient database/filing system, and robust procedures and legal protections in case of default, including enforcement and repossession rights. Through this, IFC will also help advance financial literacy initiatives for SMEs, empowering businesses to leverage movable assets as collateral and thereby strengthen access to formal finance.

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