SME and MSME sectors: Drawing plans for further strengthening

18 Sep 2021

SME and MSME sectors: Drawing plans for further strengthening

18 Sep 2021

By Uwin Lugoda Despite being recognised as the backbone of the Sri Lankan economy, the small and medium-scale enterprises (SME) sector has been heavily impacted by the ongoing pandemic. Now, stakeholders of the sector are calling for the Government’s help in aiding their businesses and preventing mass unemployment. According to Confederation of Micro, Small, and Medium Industries (COSMI) Founding Chairman Nawaz Rajabdeen, the sector has seen no improvement so far. He said that despite countless reports, local SMEs have not received any support from the Government as yet. “We have reached out to all the regional and district chambers to understand what the sector is facing, and all of them have stated that there has been no support given to regional SMEs. We are the backbone of the country’s economy, and there are approximately 1.4 million SMEs in all 25 districts; we are one of the strongest business groups in the country. But if we don’t receive support in the next few months, there will be an uptick in unemployment throughout the country,” Rajabdeen said, speaking to The Sunday Morning. SME and micro, small, and medium-scale enterprise (MSME) sectors account for more than 75% of the total number of enterprises in the country, providing 45% of the employment and contributing to 52% of the gross domestic product (GDP), according to the National Policy Framework for SME Development. Rajabdeen explained that the main issues faced by the sector are due to the shortage of funds and a lack of access to banking services. He stated that while some SMEs can survive by going digital, others lack the resources to do so. “Most shops are closed due to lockdown, but SMEs survived by moving into platforms like Uber and PickMe. People learned how to market their products through e-marketing programmes. But most SMEs are short of funds, and banks are not even willing to consider our requests,” he said. He stated that the Government needs to summon all chambers, starting from those at the grassroots level, to understand what the main issues are. He went on to state that then, both the Government and the chambers can enter into a public-private partnership (PPP) and address these issues. However, Rajabdeen stated that the sector is in favour of the Government introducing import restrictions on non-essential items. He explained that the SME sector is not heavily impacted by the restrictions due to them mainly catering to the local market, and such restrictions on imported goods can shine a favourable light on their local counterparts. “We are happy that import restrictions were imposed on certain products. We saw this happen before, back in the 1970s, which was our industrial revolution. The companies that began during that time have become our most branded export products. We don’t need to import unnecessary goods such as expensive fruits, because they end up costing as much as an entire lunch packet. Now all the Government has to do is incentivise our people to grow more homemade fruits as a replacement,” he explained. Rajabdeen suggested that giving SMEs the required resources such as land and educating the public on the consumption of local goods can support the entire economy. However, Ceylon National Chamber of Industries (CNCI) Chairman Raja Hewabowala stated that these import restrictions might cause a future scarcity of raw materials for all sectors. Speaking to us, he explained that the local SME sector is dependent on raw material imports from countries of a certain quality, without which their businesses cannot function. He said this was one of several issues being faced by the sector, other issues being the depreciation of the rupee and fluctuations in the prices of goods. “We know it is not the Government’s fault; the whole world is currently facing a similar situation. But SMEs and MSMEs are two of the biggest sectors in the country, and they employ the most amount of people. So we need the Government to be proactive and address these issues fast,” Hewabowala stressed. He went on to state that the chambers have already initiated a joint chamber committee, which has already reached out to the Ministry of Finance and other relevant authorities. This committee not only includes representatives from the SME and MSME sectors, but also those from larger ones. Government’s response Speaking to us on the matter, Ministry of Youth and Sports Small Enterprises Development Division (SED) Director Sudheera Jayarathna stated that the Government is always ready to aid both the SME and MSME sectors. He explained that the Government routinely helps people set up their SMEs and gives them the required resources to do so via SED. As such, Jayarathna stated that the Government is already looking into the issues faced by the sector and has made plans to aid them. One of these plans is placing special focus on SMEs in the upcoming budget and looking at addressing these issues. When asked about the budget, Treasury Secretary S.R. Attygalle stated that the budget has always addressed the needs of the SME sector. He pointed out that ignoring a sector that accounts for 75% of the country’s economy would also mean ignoring a majority of the local population who survive via these SMEs. Furthermore, the sector is receiving additional aid thanks to $ 40 million in financing provided by the US to Sanasa Development Bank (SDB), to strengthen local SMEs and women entrepreneurs. The loan was given on Thursday (16) as a part of $ 265 million in funding the US International Development Finance Corporation (DFC) is providing to Sri Lankan banks, including SDB, DFCC Bank, and National Development Bank (NDB), to promote international investment and inclusive economic growth. SDB will be allocating the $ 40 million to provide over 1,400 loans, ranging from Rs. 500,000 to Rs. 1 million each, to SMEs throughout Sri Lanka.

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SME and MSME sectors: Drawing plans for further strengthening

SME and MSME sectors: Drawing plans for further strengthening

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