News Today: ADB Strengthens Sri Lanka’s Financial Sector with $200M Funding

The Asian Development Bank (ADB) has approved USD 200 million in funding to support Sri Lanka’s financial sector reforms. This initiative is part of the second phase of ADB’s Financial Sector Stability and Reforms Program, building upon measures introduced in 2023 to stabilize the economy and manage financial challenges.

ADB Country Director Takafumi Kadono emphasized that the program aims to strengthen governance in the financial sector and expand financial inclusion to ensure sustainable recovery, resilience, and poverty alleviation. A key aspect of the program includes enhancing the Central Bank of Sri Lanka’s (CBSL) regulatory oversight, with the implementation of advanced early warning systems to address potential risks in banking operations and new stress-testing models to monitor solvency and liquidity.

Reforms will also improve the banking sector’s asset quality. Policies will guide credit concentration risk limits, and incentives will encourage banks to support micro, small, and medium-sized enterprises (MSMEs). Special initiatives are designed to reduce collateral requirements and provide guarantees to boost MSME growth.

Additionally, the Ministry of Finance (MOF) will strengthen financial inclusion for women and vulnerable groups by digitizing personal information to enhance electronic transactions. The MOF will also create a policy framework for women-led MSMEs, with CBSL providing assistance to financial institutions in identifying eligible entrepreneurs.

The ADB’s efforts aim to foster sustainable development, improve resilience, and address poverty across Sri Lanka and the Asia-Pacific region.