Small business loan rates in Sri Lanka return to pre-economic crisis levels, says central bank

Sri Lanka’s Central Bank has revealed that the average interest rate for loans extended to the nation's small businesses is now hovering around 10.0 %, a level not seen since early 2022, just before the economic crisis hit.

According to the compilation of monthly Micro, Small and Medium Enterprise (MSME) lending rates, known as the Average Weighted New SME rate (AWNSR), these businesses secured new rupee loans from licensed banks at an average of 10.79 % by the close of August 2025.

This marks a dramatic drop from the peak of over 27.5 % recorded in November and December 2022, when the economy was grappling with the worst of the crisis and the Central Bank had sharply raised rates.

In a key difference, the Average Weighted Prime Lending Rate (AWPLR)—which tracks loans to large corporations—stood at 8.10 % at the end of last week.

The higher rate for small businesses reflects the generally accepted view that they carry a greater credit risk and are more vulnerable to economic turbulence than large firms.

The Central Bank has only recently begun publishing this AWNSR data, though it has been compiling the figures since July 2020.

Despite the current rate reduction, the average small business loan rate remains slightly above the sub-10.0 % figures seen throughout most of 2020 and 2021.

During that period, the Central Bank had slashed rates and injected substantial liquidity to support businesses struggling amidst the disruption of the COVID-19 pandemic, with some loans even offered at rates as low as 4.0 % for a two-year period.