July 5, 2018 / 2:35 PM / in 4 months

Sri Lanka's bourse launches small business listing amid faltering economy

COLOMBO, July 5 (Reuters) - Sri Lanka’s stock exchange on Thursday began listing small and medium sized businesses in a move to grant access to cheaper finance that could help boost a struggling economy.

Sri Lanka’s economy grew 3.3 percent in 2017, the slowest pace since a recession in 2001. Government officials have forecast growth of around 4.5 percent this year, less than the central bank’s forecast of 5 percent.

Small and medium businesses account for 52 percent of the country’s $87 billion economy and most of them are struggling to continue their ventures in the face of higher borrowing costs, with financial institutions reluctant to lend because of past non-performing loans.

Colombo Stock Exchange launched the new listing for small businesses which have a minimum stated capital of 25 million rupees ($157,332), far less than 500 million rupees of capital required to list in the main board.

Rajeeva Bandaranaike, the CEO of the bourse, said the new initiative has made listing easier for small businesses.

Prashan Fernando, CEO at Acuity Stockbrokers said the move will help small businesses access lower cost financing compared to the current borrowing cost of between 16-22 percent from banks and finance companies.

The main stock index has been on a downward trend due to tight monetary and fiscal policies, lower economic growth, and political uncertainty. The index has fallen around 4 percent so far this year with sluggish trading conditions.

$1 = 158.9000 Sri Lankan rupees Reporting by Shihar Aneez; Editing by Kirsten Donovan

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