Sri Lanka micro and small enterprises strapped for cash
The problems encountered by Sri Lanka’s micro sectors during the pandemic was access to finance as they lack knowledge in having a dialogue with the financial sector. Micro sectors are also ignorant of technology when accessing finance with poor records of credit ratings with banking institutions. Technology is an important tool for micro enterprises to get approvals for their products, said Ms. Simrin Singh, Country Director, International Labour Organisation (ILO), the country office for Sri Lanka and Maldives at a webinar hosted by the Central Bank of Sri Lanka this week. The topic discussed was: “Value Chain Financing for Micro and Small Enterprises Sector in Sri Lanka”.
She said that most micro enterprises do not differentiate their products resulting in flooding the market in an area with low prices. It is important that they differentiate products to access markets and market diversification is an issue with micro enterprises. In areas such as Kalutara and Gampaha many micro enterprises with products are keen on looking for access to finance.
Micro enterprises also do not know how to harness technology and to access markets to obtain finances and other relevant services. They also do not have access to business development services to bring products to certain standards. Product development and research development and skills development is also vital in this connection. Statistics from the Labour Department show that small and micro enterprises were affected following the COVID-19 pandemic and were cash strapped as a result. “We are looking at how we can help them to access working capital to get started again. Products that were affected most were sectors producing garments,” she added.
She said most enterprises in Sri Lanka falls into the category of Micro and Small Enterprise (SME) which is 98.7 per cent significant to the Sri Lankan economy. Small enterprises according to the local definition consist of less than 50 employees while micro enterprises consist of less than 15 employees and 57 per cent of them are registered while the rest operate in the informal economy.
Deputy Governor of the Central Bank K.M.M Siriwardana said that during the COVID-19 pandemic period and the lockdown period many businesses came to a halt, which is recovering gradually. There are many challenges that SMEs are facing for their survival to facilitate their revival and to promote their expansion. “We need to explore further ILO’s value chain business model for future development of SME’s. It is our responsibility to protect these value chain endeavours. We will implement agriculture value chains for vegetables and spices with banks in the near future. We are issuing guidelines to commercial banks in this respect,” he said.