The Asian Development Bank (ADB) has approved a $200 million policy-based loan to support the Sri Lankan government in further strengthening its financial sector. This funding marks the second subprogram of ADB’s Financial Sector Stability and Reforms Program, building on the stabilization and crisis management initiatives implemented under the first subprogram in 2023.
“Sri Lanka has made significant progress in stabilizing macroeconomic conditions and improving its fiscal outlook. ADB is committed to assisting the country in achieving long-term growth by institutionalizing structural financial sector reforms,” said ADB Country Director for Sri Lanka Takafumi Kadono. “This subprogram emphasizes enhancing banking sector governance and expanding financial inclusion to foster sustainable economic recovery, resilience, and poverty reduction.”
Under subprogram 2, policy reforms will enhance the Central Bank of Sri Lanka’s (CBSL) regulatory oversight of banks, aiming to ensure financial stability. Key measures include establishing an advanced early warning system to detect signs of bank distress and initiate corrective actions. The CBSL will also implement a new stress testing model to monitor potential solvency and liquidity challenges.
The program will further improve asset quality within the banking sector. The CBSL will issue guidance on managing credit concentration risks and encourage banks to support micro, small, and medium-sized enterprises (MSMEs) by offering guarantees and minimizing collateral requirements. The Ministry of Finance, Economic Development, Policy Formulation, Planning, and Tourism (MOF) will provide incentive packages, such as special loans, to help MSMEs—especially women-led businesses—grow.
Efforts to promote financial inclusion for women and vulnerable groups will also be expanded through digitizing personal information to facilitate electronic transactions. The MOF will develop a policy framework to enhance access to finance for women-led MSMEs, with the CBSL aiding financial institutions in identifying eligible women entrepreneurs.
ADB remains committed to fostering a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while continuing to work toward eradicating extreme poverty. Founded in 1966, ADB has 69 member countries, 49 of which are from the region.
