The International Finance Corporation (IFC), a member of the World Bank Group, is considering a loan of up to $10 million equivalent for Alliance Finance Company, a finance company from Sri Lanka, to expand its portfolio in the agriculture sector, according to a disclosure.
Alliance Finance is mainly engaged in financing for vehicles, with 15 per cent of the company’s vehicle financing in March 2018 being exposed to the agriculture and forestry sector.
“The funding will support the expansion of Alliance’s MSME portfolio related to the agriculture sector, with an emphasis on financing climate-smart agriculture solutions and women-owned enterprises,” IFC said in its disclosure.
In Sri Lanka, agriculture sector accounts for 7.5 per cent of the GDP. There are about 1.65 million small farmers in Sri Lanka who contribute about 80 per cent of the total annual food production.
IFC noted that over the last 15 years, Sri Lanka has seen a 13.6 per cent decline in the agriculture sectors’ contribution towards the GDP.
The proposed loan support, which is part of IFC’s ‘Sri Lanka Agriculture Finance Program’, is aimed at providing a holistic solution to bridge an estimated agriculture financing gap of $2 billion, the development institution said.
“Through the proposed project, Alliance expects to provide funding to an estimated 7,000 agriculture-related MSMEs in Sri Lanka over the next 5 years,” it added.
The support by IFC will also contribute towards capacity building for agri value chain financing and encourage the use of smart agricultural practices to improve yields and income levels of farmers/small agribusinesses.
Shareholders of Alliance Finance include the founder family that owns a 60 per cent stake, while the remaining is publicly held.
The agriculture sector in Sri Lanka employs about 26 per cent of the workforce in the country, representing 24 per cent of exports.