The Central Bank of Sri Lanka says farmers, small business owners and small and medium entrepreneurs, will reap numerous benefits from the recently introduced credit guarantee scheme for pawning advances.

Under this scheme, borrowers are eligible to obtain pawning advances up to Rs. 500,000 at an interest rate of 15% per annum, which includes all fees and charges.

World gold prices, which had risen top more than US$ 1,800 in 2012, have now fallen to US$ 1,300. As a result of a parallel decrease in the price of gold in the domestic market, the pawning sector had been faced with a troublesome situation.

As a result, banks reduced pawning advances to 65 percent of the value of the item pawned.

The CBSL notes that the enhanced level of credit ensured by this scheme will help borrowers of pawning advances to meet their financial requirements comfortably particularly in agricultural and business activities.

The credit guarantee scheme for pawning advances was introduced as a result to support licensed banks to increase their loan-to-value tatio. The Central Bank notes that several banks have already signed the agreements with the Central Bank of Sri Lanka.

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