More than 80% of the Rs. 95 billion allocated by the government in 2026 to support micro, small and medium-sized enterprises (MSMEs) has already been utilized, according to the Department of Development Finance.

The Department said more than Rs. 75 billion had been disbursed as loans by the early part of the third quarter of the year.
The government allocated the Rs. 95 billion package through the 2026 Budget, recognizing the significant contribution of MSMEs to the Sri Lankan economy. Of this amount, Rs. 55 billion has been earmarked specifically for the development of small and medium-sized enterprises.

According to the Department, 6,832 beneficiaries have received financing under five separate loan schemes. The program is being implemented by the Department of Development Finance under the Ministry of Finance, Planning and Economic Development, in partnership with 15 state and private banks. The government has also mandated that at least 20% of the loans be allocated to women entrepreneurs and a further 20% to young entrepreneurs.

The government has introduced additional financing facilities for businesses affected by Cyclone Ditwah and the recent economic crisis.

Under a dedicated disaster loan scheme, cyclone-affected businesses are eligible for working-capital loans of up to Rs. 25 million at an annual interest rate of 3%. Of the Rs. 10 billion allocated for the scheme, around Rs. 8 billion had been disbursed to 3,966 affected entrepreneurs by the end of July 2026.

More than 90% of the beneficiaries under the scheme are micro and small-scale businesses, the Department said.

Meanwhile, 70 businesses in the non-performing loan category have received a combined Rs. 235 million in working-capital loans, despite being unable to secure further financing through the conventional banking system.

The Department also said 342 MSMEs that took advantage of government-backed debt restructuring arrangements have resumed business operations following agreements with participating banks.

Collateral-free lending expanded

The government is also implementing a collateral-free lending program for MSMEs through the National Credit Guarantee Institution, in partnership with state and private banks.

The Department said guarantees worth approximately Rs. 9.65 billion have so far been issued for 2,143 loans, covering a total loan value of nearly Rs. 14 billion across all districts of Sri Lanka.

The broader government-funded MSME lending framework is intended to provide concessionary financing to eligible businesses through participating financial institutions, with the aim of helping enterprises survive, recover and expand.