Sri Lanka moving on a private sector-led growth path
Sri Lanka’s economy is on the correct path of progress with a change from the traditional system of depending on state-run enterprises to a more vibrant, private sector-led growth model with a crucial role, in it, for Small and Medium Enterprises (SMEs).
This was indicated by Mangala Samaraweera, Minister of Finance and Mass Media when he launched the SME Enterprises Board established under the Colombo Stock Market (SEC), on Thursday at the BMICH, Colombo.
Mr. Samaraweera asserted that the government understands the major constraints the SMEs face in establishing and developing their businesses, that of obtaining loans – the required capital and said, “We hope to address the issue of obtaining loans, through 15 tailor-made loan schemes under the umbrella of Enterprise Sri Lanka and all these loan schemes are provided with highly concessional interest rates in the range of 6.7 per cent and as low as zero in some cases. In fact, these loans are designed for graduates and give them (a total of) Rs. 1.5 billion at zero interest”.
He said that in the 2018 Budget they have proposed a number of measures to liberalise markets including land and labour and will be implemented with regular monitoring by the Ministry of Finance and Enterprises Sri Lanka Programme which was launched with the objective of enhancing the capital to SMEs.
The 2018 budget allocated over Rs. 6.5 billion to pay the interest subsidy this year, he indicated. He stressed that the lack of collateral is an issue of young entrepreneurs for small businesses while through the Enterprise Sri Lanka loan scheme they are encouraging banks to approve the loans on the quality of the business plans and the expected cash flows.
He said that, in addition the Enterprises Sri Lanka will soon establish a SME Guarantee Fund which will be another avenue to SMEs to borrow without physical collateral. The next step for Sri Lankan entrepreneurs, he indicated is the start-up economy to graduate to the capital market by these SMEs. The government would support these companies in the early stages but eventually companies must be able to stand on their own feet and grow into larger enterprises.
“The SME Board of the Colombo Stock Exchange I believe will play an important and crucial role in establishing such young companies to take steps to go into the capital markets and raise equity funding to the next level. I understand that the SME board will provide the necessary flexibility to encourage the listing of small businesses and gradually expose them to the expectations of mature capital market,” he said.
The loans of the SME Board is indeed a crucial step, he indicated, in the right direction in the development of the evolution and the development of Sri Lanka’s capital market.
He said that the establishment of the SME Enterprise Board by Securities and Exchange Commission (SEC) is a timely and important step to empower the private enterprise in Sri Lanka “which as you know is a key channel of the Government’s economic programme.”
The Minister said that earlier Sri Lanka has relied on the state-led model for economic growth which has resulted in a plethora of state enterprises many of which have become a burden on the Treasury. But it is now high time to change this model and understand the realities of the horrendous situation of these institutions.
He said: “It is high time to change the mindset of the citizens expecting to be provided with everything by the state from jobs to all manner of subsidies and our government in fact is changing this economic model and geared to change this mindset.”