CMA Sri Lanka COVID 19 SME Development Conference identifies, Need for Equity Capital, SME Credit Guarantee I

The CMA Sri Lanka COVID 19 SME Development Conference “Supporting Small Businesses through COVID 19 Crises” To Celebrate United Nations - Micro, Small and Medium-Sized Enterprises Day, was held on Sunday 27 June online via Zoom with the support of Commercial Banks, Chambers of Commerce, Professional Bodies and Industry Experts supported by the United Nations with around 1,000 registered participants.

As per the UN Small businesses, including those run by women and young entrepreneurs, are being hit hardest by the economic fall-out of the pandemic. Unprecedented lockdown measures enacted to contain the spread of the coronavirus have resulted in supply chain disruptions and a massive drop in demand in most sectors.

According to the data provided by the International Council for Small Business (ICSB), formal and informal Micro-, Small and Medium-sized Enterprises (MSMEs) make up over 90% of all firms and account, on average, for 70% of total employment and 50% of GDP.

In Sri Lanka the SME sector forms the backbone of the economy and is found in all sectors of the economy and accounts for 52 percent of the GDP and 45 percent of the total employment, whilst making up more than 75 percent of the total number of enterprises in the country.

At the Inaugural Session Prof Lakshman R Watawala President CMA Sri Lanka and co-ordinator CMA Sri Lanka COVID – 19 SME Development Committee stated that they were happy to organize the conference on the UN MSME day to support the SMEs and recognize the important role they are playing in the economy. He stated that the initiative taken by their committee to set up the SME Credit Guarantee Institution with the backing of Ministry of Industries has been rewarded and the Cabinet has granted approval to meet a major need of the SME sector.

The Guest of Honour Ms Faiza Effendi – Officer- In- Charge, UNDP Sri Lanka addressed the conference on the Significance of United Nations - Micro, Small and Medium-Sized Enterprises (MSME) Day.

She stated that the UN General

Assembly declared 27 June Micro-, Small and Medium- sized Enterprises Day, to raise public awareness of their contribution to sustainable development and the global economy.

The Key Note Address was delivered by Hon Ajith Nivard Cabraal State Minister of Money, Capital Markets and State Enterprise Reforms on “Need for Equity Capital for Sustainability of the SME sector”.

He stated that due to the COVID 19 Pandemic the Government has provided a lot of assistance through the commercial banks but it was essential to provide equity capital to support the SME sector. He also stated the Government decision to set up the SME Credit Guarantee Institution will greatly assist the SME sector and entrepreneurs who are unable to provide collateral to the banks to obtain loan facilities.

Mr Ratnayake Deputy Secretary to the Treasury Ministry of Finance addressed on the topic Setting up of the Sri Lankan MSME Credit Guarantee Institution and its operation and stated that the project has been approved by the Cabinet of Ministers and the Development Finance Department of the Ministry of Finance was discussing with the Asian Development Bank regarding the setting up of the institution and also getting selected commercial banks and finance companies to take equity capital amounting to 20 percent with the Government initially taking 80 percent. The initial capital will be app. Rs 25.0 B and the government will contribute 20.0 B and private sector Rs 5.0 B. This will enable the credit guarantee institution to grant guarantees upto Rs 125.0 B. A public company will be floated with a professional board of directors selected from the public and private sector to manage the affairs of the company. Also that they are planning to have the Credit Guarantee Institution operational in early 2022.

Thereafter a Panel discussion on the Credit Guarantee Institution Moderated by Mr Adrian Perera Group Chief Executive Officer Sascon Holdings Ltd., and The Thinnai Group and comprising and eminent

Panel comprising Mr Sujeewa Rajapaksa Chairman Peoples Bank, Mr. Priyal Silva Deputy General Manager (Sales and Channel Management), Mr Chandrarathna D Vithanage, Senior Assistant Secretary General, The Ceylon Chamber of Commerce, Ms Kuloja Peiris Deputy Director Department of Development Finance, Mr J P R Karunaratna Assistant Governor Central Bank of Sri Lanka was held. The commercial banks, chambers of commerce supported the setting up of the Credit Guarantee Institution. The Department of Development Finance were confident that the work connected with the setting up and commencement of operations could be expedited as the ADB loan facilities have all been finalized. The Central Bank too agreed to provide all support for the project.

Technical Session 2 was on the topic Setting up of Export Houses to increase SME Exports from 5% to 25%.

The Guest Speaker was Mr Suresh de Mel Chairman Export Development Board and the Panel Discussion was Moderated by Mr Athulla Edirisinghe, Founder Managing Partner of Strategic Management Alliance and a Past President of JASTECA - Japan Sri Lanka Technical and Cultural Association.

The Panelists included Mr Sarada de Silva Chairman B Darsin de Silva & Sons (Pvt) Ltd., Chairman Spice Council, Ms Thusari Weerakoon Director Ramya Horticulture, Mr Dilshan Fernando Manager SME Commercial Bank, Mr. Saranga Goonewardena, Chairman Chamber of Young Lankan Entrepreneurs (COYLE), Mrs Shirley Jayawardena President FCCISL,

Chairman EDB Suresh De Mel in his key note address explained the benefits that will be accrued through Export Houses that will eventually increase the contribution by SMEs towards National Exports from current 5% to 25.

The Panelists supported the link up of SMEs with Export Houses to increase exports such as expansion into web based online marketing, Horticulture business, use of TIEP scheme. Also ways and means how export houses will support SMEs to achieve better product standards and quality, support when borrowing from banking sector , integration of more SMEs into supply chain. .

Technical Session 3 was on Cash Flow and Working Capital Management for SMEs delivered by Dr Chamara Bandara - Founder/MD Corporate Directors (Pvt) Ltd.

The Panel Discussion was Moderated Mr Chaaminda Kumarasiri Chairman of H C P Consulting (Pvt.) Ltd. and the Founder/CEO of The Human Capital Partner and the Panelists were Mr Lakshman Abeyesekera Chairman Sanasa Development Bank, Mr Nandika Buddhipala President National Chamber of Commerce Sri Lanka, Mr Sumie Mithrapala Chief Manager - Branch Banking Sampath Bank PLC, Mr Bandara Rekogama Head of Refinance & Special Lending Products – Hatton National Bank PLC., Mr Damith Gangodawilage MD/ Chief Compliance Officer – Taxperts Lanka Pvt. Ltd, Vice President – Sri Lanka Institute of Taxation, Sajith Nandalal, Manager Factoring, Seylan Bank PLC. The importance of cash flow management, maintenance of proper books of accounts, not to mix business cash and personal cash, not to be afraid of taxation as most SMEs were not liable for tax and to get assistance from consultants, support of the banks in assisting expansion and helping in restructuring with proper project reports were discussed.

Technical Session 4 was on Supporting Employment & Skills Development in the SME Sector. The address was given by Guest of Honour Ms Simrin Singh Country Director ILO.

The Panel Discussion was Moderated by Mr Kanishka Weerasinghe Former DG Employers Federation and the Panelists were Mrs Ramya Weerakoon Chairman Ramya Holdings, Dr Kulatunga Rajapaksa, Emeritus Chairman - DSI Samson Group (Pvt.) Ltd., Dr Nirmal de Silva Strategy Consultant, Entrepreneur and Board Director, Mr Janaka Jayalath Deputy Director General – TVEC, Mrs Indrani Fernando, Chairperson, Women’s Chamber of Industry and Commerce, Amal Piyatilake Consultant / Founder President – All Island Regional Chamber Presidents Forum.

The importance of supporting women SMEs and entrepreneurs was supported by the Country Director ILO. Also the importance of improving skills and meeting the shortage of skilled workers was another matter of great importance. Providing assistance to SMEs hit by the COVID 19 pandemic and unable to make payment of salaries to workers required assistance from the Government and the labour ministry. Improving the skills also meant that this would enable SME sector to have a trained workforce to service the export sector especially in the industrial and horticultural products. The TVEC the government skill development authority should work closely with the private sector to bridge gap in the skill requirements of the SME sector. Training was considered a very important segment that should be given to all employees in the SME sector.

With over 400 SMEs participating at the UN MSME conference it was decided that the SME sector the backbone of the economy of the country should be supported for the development of the economy of the country and that the CMA Sri Lanka COVID 19 SME Development Committee will follow up on the key findings and also submit a report and make representations to the Government and respective authorities to obtain their support to build the SME sector and contribute to the prosperity of the Nation.