According to the Bank’s website, the programmatic approach for the program was approved in 2023 to stabilize and strengthen the finance sector following the country’s sovereign debt and economic crises by (i) strengthening the stability and governance of the banking sector; (ii) improving the asset quality of the banking sector; and (iii) deepening inclusive and sustainable finance, particularly for micro, small, and medium-sized enterprises (MSMEs) led by women. This subprogram is anchored in Sri Lanka’s macroeconomic stabilization efforts under the Extended Fund Facility (EFF) of the International Monetary Fund (IMF) and complements the strategic support of the Asian Development Bank (ADB) for finance sector stabilization and resilience. The programmatic approach, comprising two subprograms of $200 million each and a third subprogram of $100 million, enabled flexibility to address complex and challenging structural reforms in a sequential and holistic manner. Subprogram 1 prioritized immediate actions to enhance the government’s crisis management regulatory framework and to stabilize the finance sector. Subprogram 2 sustained the momentum of these structural reforms to develop a resilient and inclusive financial system. Subprogram 3 represents the culmination of previous reform efforts, focusing on the completion and long-term sustainability of measures to enhance the finance sector’s resilience and inclusion. Incorporating subprogram 3 into the programmatic approach was approved together with subprogram 2 as a strategic continuation of the program. The technical assistance (TA) approved with subprogram 1 continues to provide capacity building and support for implementation of policy actions and structural reforms.

In compliance with ADB’s Safeguard Policy Statement (2009), subprogram 3 is classified as category C for environment, involuntary resettlement, and Indigenous Peoples.

While most policy actions will have no environmental impact, policy actions 3.5 and 3.7 under reform area 2—the transfer of SME schemes and special credit guarantee scheme for MSMEs led by women in various sectors, including tourism, agriculture, IT, export, and green businesses—were considered. The anticipated downstream impact in most cases is either minimal or zero, and can be addressed through the screening processes of the MOF and NCGIL to ensure MSMEs’ compliance with national laws on the environment and land acquisition.

The funding for subprogram 3 is $100 million from ADB’s concessional ordinary capital resources.

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The Accountability Mechanism is an independent complaint mechanism and fact-finding body for people who believe they are likely to be, or have been, adversely affected by an Asian Development Bank-financed project. If you submit a complaint to the Accountability Mechanism, they may investigate to assess whether the Asian Development Bank is following its own policies and procedures for preventing harm to people or the environment. You can learn more about the Accountability Mechanism and how to file a complaint at: http://www.adb.org/site/accountability-mechanism/main.