The micro, small, and medium-scale enterprises (MSMEs), were severely affected due to the Easter Sunday blasts, Covid-19 pandemic and the economic crisis that followed and the sector today has a massive loan burden estimated to be around US$ 5.3 billion (Rs. 1.6 trillion).
“Around 15% of MSMEs are non-willful defaulters,” said Founder President of Sri Lanka’s Confederation of Micro, Small and Medium Industries (COSMI), Nawaz Rajabdeen at the BIMSTEC business summit in New Delhi.
“In a bid to revitalise this sector the Government introduced a comprehensive package of financial facilities with the involvement of Commercial Banks of the country last month,” he said.
This package included both investment and working capital facilities for MSMEs.
The loans were provided under two main categories: support for MSMEs and assistance for MSMEs with non-performing loans. Under the Micro, Small, and Medium Enterprises Strengthening Investment Loan scheme, loans were available at a concessional interest rate of 7% for 10 years.
For micro, small, and medium-scale enterprises (MSMEs) under the non-performing loans category, a working capital loan of up to Rs. 5 million is now provided for five years at an interest rate of 8%.
The Government is also trying to postpone parate executions by banks on MSMEs that owe the banks.
The UN estimates that 92% of establishments in Sri Lanka’s MSME sector to be micro totalling 935,736, followed by 7% in “small” scale totalling at 71,126 and 1% to be “large” scale. Today the MSME sector accounts for 75% of the total employed in the non- agricultural economic sector.
The number employed in Micro was 1.3 million persons, in Small businesses 529,751 persons, and Medium businesses at 386,756. Around 75% of MSMEs were in the rural sector which shows the heavy impact of MSMEs in the rural sector of the country.
The MSMEs were in all the sectors of the economy-in Industry, Trade and Service. 26% were in the industry sector, 41% in the trade sector and 33% in the services sector.
This sector is a growth driver due to them being breeding ground for larger organisations in future, their strong employment provision power, overall output capacities and their role in increasing business competitiveness.
The engine of the Sri Lankan economy is the MSME sector as over 75% of all non-agricultural businesses are SMEs and some analysts say this to be as high as 90% and provides 45% of employment and contributes to half of the country’s GDP.
The Department of Census and Statistics (DCS) Economic Census conducted in 2013/14, found 1.017 million SME sector establishments in operation, providing livelihood to nearly 2.255 million persons.
The Government sees this sector not merely as a sector for “protection and promotion” but also as a driving force for “growth and development”.
The preservation of this sector has become a new urgency in the aftermath of recent crises that negatively affected Sri Lanka’s economy significantly. “In addition this sector needs to focus on competitiveness due to globalisation.”
The challenge has become larger due to the realisation that SMEs, despite playing such a great role in the GDP, are playing a very minor role in the country’s exports, not exceeding 5%-10% of total exports of the country.
The leadership of COSMI too fully realises the importance of industrial MSMEs to the national economy and understands the many challenges faced by the sector.
To-date, COSMI has supported several MSMEs by facilitating loans amounting to several millions of rupees and have supported the sector via holding several B2B business matchmaking opportunities with local and international businesses, creating new sales opportunities by partnering with sellers, and helping many women entrepreneurs to scale up their businesses to next level. (SS)
