Sri Lanka faces annual $ 7-10 b investment gap to meet SDGs

SRI Lanka's investment landscape faces deep structural financing gaps despite growing global appetite for social and environmental impact capital, according to a new study by the Lanka Impact Investing Network (LIIN) “Impact Investing Landscape in Sri Lanka”.

- DEVAN DANIEL

LIIN was founded by veteran banker Chandula Abeywickrema, who established Sri Lanka's first impact investing fund to channel private capital into ventures creating measurable social and environmental outcomes.

As Founder and Chairman of GSG Impact Sri Lanka, he has linked the country to the Global Steering Group for Impact Investing (GSG Impact Global), a network spanning more than 50 countries that mobilises capital for sustainable development.

The report, launched this week, offers the first comprehensive mapping of opportunities and barriers to mobilising private capital for development. It comes as Sri Lanka seeks new sources of investment to rebuild a resilient economy and restore investor confidence.

LIIN Senior Manager - Impact Investing Vasanthen Sivakajan said the study's goal was to translate regional insight into national action and position Sri Lanka as a credible destination for impact capital.

"Globally, the impact investment market reached $ 1.5 trillion in 2024, growing by about 21% from 2019," he said, noting that emerging markets account for only 6% of total assets.

"South Asia's impact investment market is valued at around $ 20 billion, led by India and Bangladesh. But despite contributing 45% of global GDP, the region attracts only 14% of global impact capital." Sri Lanka's challenges lie in limited access to finance, high borrowing costs, and policy fragmentation. SMEs, which contribute 52% to GDP and employ nearly half the workforce, have declined from 1.3 million in 2018 to 1.04 million in 2024 amid the crisis.

"Bank loans remain the primary financing source, but with interest rates between 10% and 27% and collateral often exceeding loan values, access to finance is severely constrained," Sivakajan said.

The study estimates investment demand of $7-10 billion annually for sustainable development goals, $ 3-5 billion for infrastructure, and $2-3 billion annually for climate finance.