USAID CATALYZE’s Private Sector Development Activity in partnership with Sri Lanka’s largest supermarket retailer Keells and Hatton National Bank (HNB) launched an innovative Supply Chain Financing Facility to support micro-, small, and medium-sized enterprises (MSMEs) in the food sector, improving the resilience of the supermarket’s supply chains and helping to meet MSMEs’ working capital needs. The partnership is helping to address the ongoing supply chain disruptions that began during the COVID-19 pandemic and continue to be exacerbated by the country’s recent economic crisis.
Photo: USAID CATALYZE
MSMEs that supply supermarket chains have faced fluctuations in demand, constrictions of cashflow, and new pandemic protocols that restrict operations and negatively impact liquidity and cashflow management. Moreover, the current low supply of credit and high interest rates in the market have made it difficult for MSMEs to access affordable working capital. These factors impact supplier participation in the country’s food value chains.
“Partnering with USAID and HNB on the Supply Chain Financing solution is a significant step in ensuring the working capital needs of MSMEs are met to tide over these challenging times. This is very much in line with our ambition of creating shared value for our stakeholders and supporting the local economy whilst ensuring uninterrupted product availability for our customers,” said Charitha Subasinghe, President of John Keells Holdings — Retail Sector.
Photo: USAID CATALYZE
The lending facility provides funding up to a maximum of 90% of the Goods Received Note (GRN), or invoices, and enables Keells to purchase from their suppliers, who are paid by HNB within a day, thereby absorbing the credit period. Keells then pays HNB for supplier invoices once due upon an agreed date. Suppliers are also able to enjoy a competitive fixed interest rate amongst other enhanced user experiences.
“It is a privilege for HNB to collaborate with Keells to provide such an innovative financial solution for MSMEs in the food sector. This will enable MSMEs to meet their working capital needs, such as purchasing raw materials, paying salaries, and covering other short-term expenses, so businesses continue running smoothly. We are confident that this will further empower MSMEs to achieve their business objectives. We thank both USAID and Keells for partnering with HNB on this initiative.” stated Sanjay Wijemanne, HNB’s Deputy General Manager for SME & Retail Banking.
Gabriel Grau, the USAID/Sri Lanka and Maldives Mission Director said: “Sri Lankan enterprises face increasing pressures due to recent global supply chain disruptions, high energy costs, volatile inflation rates, and economic instability. This supply chain financing facility alleviates some of the pressures and enables MSMEs to optimize their working capital.”
In just the first week of the partnership, eight suppliers received approximately US$439,000 in financing, and the facility expects to provide at least 100 MSMEs with approximately US$4 million in funding in the next six months. This partnership will support both MSMEs and the local economy, and in turn, ensure uninterrupted product availability to consumers, resulting in a more resilient food supply chain and market system in Sri Lanka by strengthening relationships between financial institutions, retailers, and suppliers.
About USAID CATALYZE
USAID CATALYZE, implemented by Palladium, is an 8-year program designed to mobilize $2 billion in private capital for development impact, especially in underserved social sectors and frontier markets across the globe, complemented by a cross-cutting inclusion of gender-lens investing. CATALYZE supports blended finance solutions working with local and international businesses and investors to explore and find commercially viable opportunities and approaches to creating jobs, developing sustainable social services, tightening and rationalizing supply chains, and advancing inclusive growth. We work across 28 countries in Asia, Africa, Europe, Latin America, and the Caribbean, with 190 partners, including financial institutions, business advisory service providers, anchor firms, and job trainers.
This article was originally published by USAID CATALYZE
