Extending magnitude of support for Sri Lankan prospective exporters-By Nihal Surawimala
Source:Island
With the unprecedented outbreak of COVID-19, almost all the economies have been jeopardized in various ways. With even the mighty economic powerhouses around the globe feeling the pain, it is no point of exaggeration, how the pandemic hindered the emerging economies including that of Sri Lanka. With the objective of revamping businesses affected by the COVID-19 pandemic, the CBSL, in consultation with the Government of Sri Lanka, has initiated various economic measures, considering the turbulent situation and constraints of repayment that have arisen with the pandemic.
Bank of Ceylon, being the number one bank and premier state bank, has been in the forefront of executing the relief packages, introducing novel digital banking products to uplift the entire economy and helping Sri Lankan citizens realise their aspirations. Standing tall as a pillar of support to its valuable clientele, the Bank has established a revival unit with the prime objective of reinforcing the collapsed or disrupted businesses, considering it timely additional support during the pandemic situation. Also, the Bank identified vulnerable sectors and came up with innovative banking products and services to address their needs and the writer’s effort today is to highlight such another significant service introduced to the economy.
Overview of external sector performance
As correlated with the global impact, Sri Lanka’s external sector endured a major contraction in 2020 with the outbreak of the pandemic, stimulating contemporary policy measures by the Government and the Central Bank. Merchandise exports declined sharply in the months in which the spread of the virus and the resultant containment measures were more intense, but reached close to the pre-pandemic levels sooner than expected. It is learnt that in response to the policy measures taken by the Government to restrict most non-essential imports and low crude oil prices, merchandise imports reported a significant decline in 2020. The combined effect of the gradual recovery in earnings from merchandise exports and the continuous decline in expenditure on merchandise imports resulted in the trade deficit to contract notably to record the lowest trade deficit since 2010.
As per the information depicted in the Central Bank of Sri Lanka (CBSL) Annual Report 2020, earnings from merchandise exports were severely impacted during the months in which containment measures were more intense with the spread of the COVID-19 pandemic, but recovered towards the pre-pandemic levels faster than expected. As per CBSL sources, Agricultural exports registered a decline in earnings of 5.1 percent in 2020 compared to 2019, due to weaker earnings from tea, seafood and unmanufactured tobacco, while earnings from spices, coconut, minor agricultural products, rubber and vegetables increased. Agricultural exports such as cinnamon, pepper, dried vegetables, areca nuts, coconut oil and fibres and natural rubber registered increases in earnings during the year, mostly driven by higher volumes. Industrial exports registered a broad-based decline in earnings, with an overall reduction of 18.6 percent in 2020 compared to 2019.
Export of textiles and garments, the single largest export of Sri Lanka, registered a decline in earnings of 21 percent in 2020. As per the latest records pertaining to External Performance published by the Central Bank of Sri Lanka, the trade deficit widened on a year-on-year basis for the third consecutive month in May 2021 to USD 716 Mn, compared to USD 407 Mn recorded in May 2020. It is notable that exports have been resurging as usual amidst many challenges and shows a positive growth. Earnings from merchandise exports increased to USD 892 Mn in May 2021, recording growth rates of 52 percent and nine percent over May 2020 and April 2021, respectively, with higher earnings from all major sectors.
Fulfilling national duty across BOC export circle
In this backdrop, with the objective of boosting the Sri Lankan export industry and to revive the export sector during the present global recession, the Bank of Ceylon has introduced a new service brand ‘BOC export circle’. Exports are incredibly important to the country in terms of earning foreign exchange. The ‘BOC Export Circle’ is a full-fledged one-stop export unit located on the second floor of Bank of Ceylon, Head Office. The availability of adequate finance and end to end advisory services throughout the supply chain are fundamental requirements for the growth of this sector. Therefore the prime objectives of setting up the BOC Export Circle are to provide financial assistance, end to end advisory services specially to SME export customers, facilitate the revival of the export sector which was hindered by COVID-19 pandemic and to attract potential export oriented customers through a comprehensive export credit package.
The Circle will launch under a unique brand name and introduce new deposit products and new loan schemes exclusively designed for exporters. In line with the fiscal policy initiatives of the Government with regard to the revival of the economy, loan schemes will be introduced, particularly targeted at direct and indirect exporters.
The Bank has identified the timely requirement of introducing a specific financing scheme that solely addressed working capital requirements of export oriented customers. Preshipment facilities such as Packing Credit Loans in LKR and USD terms and Post Shipment facilities such as LC Bill Negotiation, Export Collection Bill Purchases, Bill Purchases under Open Account basis in Foreign Currency terms will be availed to meet the working capital requirements of direct exporters. Based on their annual turnover and number of years in operation, start-ups and Small and Medium (SME) Sector exporters are considered for the quantum of the facility.
In order to cater to indirect exporters who supply raw materials, packing materials, finished goods or provide infrastructure facilities or any other facilities and services to direct exporters, specially designed credit facilities such as revolving short term loans and local LC bill discounting facility will be introduced through ‘BOC Export Circle’.
Additionally, the Bank has arranged a Trade Information Desk to provide end-to-end supply chain information to exporters and export related advisory services to existing and potential customers of the bank. Assistance for business registration and related services, creating new business alliances with Export Development Board and Ceylon Chamber of Commerce, assisting Sri Lanka Export Credit Insurance Corporation to penetrate the SME export market and arranging links between prospective customers and export related organizations, inter-alia, are services available through the Export Circle. The above-mentioned loan schemes are implemented via the BOC Branch network islandwide. However, it is intended for the credit schemes to operate preliminarily in selected branches and move to other branches gradually.
As it gears up for 2021, the Bank of Ceylon has proven its resilience particularly in trying times such as during the pandemic. The bank emerged as the best financial provider under the ‘Saubhagya’ concessionary loan schemes and extended moratoriums in order to help fulfill the aspirations of the business community in Sri Lanka, achievable thanks to the robust asset base amounting to more than three trillion. Further, the Bank of Ceylon has entered into an agreement with the Asian Infrastructure and Investment Bank (AIIB) under the ‘COVID-19 Crisis Response Facility’ to grant a special credit support scheme for Corporates and Small and Medium sized Enterprises (SMEs) affected by economic upheaval due to the pandemic with a view to reinforce and pump additional liquidity to affected businesses.
The Bank of Ceylon has been nurturing new entrants into solid business entities, by providing assistance in trying times, from its inception through the long journey of more than eight decades in the Banking Industry. Being the bedrock of most successful business stories and a pioneer in accelerating the economy, the writer firmly believes that the BOC Export circle concept would address vital time sensitive issues concerning the entire economy.
As one of the region’s most vibrant export hubs, Sri Lanka is equally competent in agriculture, manufacturing and service sectors. The rest of the world has the opportunity to benefit from the country’s collective competitive advantage through sourcing from Sri Lanka. Over the years Sri Lankan products have gained a strong reputation worldwide for ethical manufacturing of high-quality products trusted by iconic global brands. Young Sri Lankan entrepreneurs, enriched with a diverse skill set, experience setbacks in progress due to lack of resources and financial support. As a premier banking partner the BOC endeavours to pave the way for novices of the export market to step into the global business arena and revamp and reshape the landscape of the entire economy in the long run.
(Nihal Surawimala is currently steering the Corporate and Offshore Banking Division of Bank of Ceylon as the Senior Deputy General Manager [Corporate and Offshore Banking]. He is a senior banker counting over 30 years of experience in both local and international banking. He holds a Bachelor’s (Special) Degree in Public Administration and Master of Science (M.Sc) in Management specialising in Banking and Finance, both from the University of Sri Jayawardenapura, Sri Lanka. He is also an Associate Member of the Institute of Bankers of Sri Lanka.)
