CMA Sri Lanka presents budget proposals for MSME sector promotion

The CMA Sri Lanka SME Development Committee comprises members from Professional Bodies, Commercial Banks, Chambers of Commerce & Industry and Industry Experts who have been meeting since April 2020 to find solutions and support the SME sector. 

CMA Sri Lanka’s Budget Proposals made for the development of the MSME sector that would generate employment to around 100,000 unemployed persons are given below.

Setting up of the National Credit Guarantee Institution should benefit Entrepreneurs and Start up projects

We are very happy to seeing the launch of the National Credit Guarantee Institution in June this year and wish to suggest that action be taken to grant loans to Entrepreneurs, and Start up projects with special reference to women. 

The setting up of Export Houses to promote and develop MSME exports

The committee also wishes to recommend the Setting up of Export Houses to promote exports of MSMEs. We suggest that the Export Development Board should grant the necessary approval to these export houses which will have recognition as exporters linked to MSMEs and also for banks to consider them for financing at favourable interest rates.

The export houses will market the products and services of MSMEs and SMEs in Overseas Markets and will mainly support Local Farming and Fishery communities, Local suppliers – producers – manufacturers, export villages,Service providers such as IT and Suppliers of Technical Skills with International Buyers in the Global Market to increase the MSME contribution towards National Exports from the present 5% to 15% within 3-5 years. The registration with the EDB will give official recognition to the Export Houses and it is requested that EDB supports them when organizing International Exhibitions and this status will also assist them in obtaining bank facilities for undertaking exports.  

Definition for MSMEs 

It is suggested to revise the present definitions to fall in line with the depreciation of the currency which has resulted in the price of most goods increasing substantially including capital goods, raw materials, wages etc.It is suggested to increase the upper limit of turnover of Medium sized enterprises officiallyto Rs 1,000 Million which is similar to the Central Bank classification.

MSME Development Act 

Suggest that an MSME Development Act be enacted with the object of promotion and development and enhancing the competitiveness of Micro, Small and Medium Enterprises (MSME) similar to other countries to give necessary support to this most important sector.

The Act should be a single legal framework acting as a one stop shop for all activities of the SMEs including registration, governing and providing protection to Small Industries and its employees throughout Sri Lanka. The National Board established under the Act shall have power to implement various schemes and policies for upliftment of the SME Sector and as a result the SME sector to be made a major contributor of Industrial Production and Exports. The Act should as a necessity make the MSME sector a vibrant and dynamic sector of the Sri Lankan economy and which will provide protection to the SME sector. We will be able to provide necessary assistance to formulate the MSME Development Act. This will immediately result in the establishment of a large number of new projects throughout the country with the support of commercial banks, finance companies and the National Credit Guarantee Institution. 

Support in Accounting, Financial & Cost Management, Digitization & e-Commerce for marketing 

The maintenance of proper books, accounts and cost records is recommended as this will enable the business organizations to determine their costs, prepare [proper accounts, run profitably and to gradually advance from Small to Medium sized enterprises. 

Digitization will support accounting while marketing aspects could be expanded using e-commerce.  Maintenance of financial and cost records should be made mandatory and will also assist the banking sector when lending to the SME sector to provide loans with no additional securityand lower interest rates. 

Building Entrepreneurship

Support be given to building entrepreneurship at all levels and this will enable creating decent jobs and improving livelihoods, small businesses also depend more than ever on an enabling business environment, including support for access to finance, information, and markets. The Grameen concept from unemployment to entrepreneurship should be implemented to promote job creation and innovation.

Linking small business with bigger companies

This is currently been practiced by some big companies and this has assisted in the technical, marketing and financial support for MSMEs. This will also result in reducing the costs of big companies and providing affordable pricing to the society. Hence this should be supported by the Government by getting banks to give priority for such projects and getting the big companies to support the MSME sector.

Official declaration of MSME Day

The UN General Assembly has declared 27th June as Micro, Small and Medium-sized Enterprises Day, to raise public awareness of their contribution to sustainable development and the global economy. CMA Sri Lanka SME Development Committee has been celebrating this event annually by organizing conferences along with the Banking sector and their SME customers which have been very successful. 

CMA Sri Lanka recommends that the government officially declares 27th June every year as Micro-, Small and Medium-sized Enterprises Day to recognize the major role played by MSMEs for the development of the economy of Sri Lanka. 

A quote from the United Nations which is supporting MSMEs worldwide: “Let’s not forget that these enterprises, which generally employ fewer than 250 persons, are the backbone of most economies worldwide and play a key role in developing countries”. In Sri Lanka, MSMEs comprise more than 75 percent of enterprises and account for 52 percent of GDP, 45 percent of employment, and a meager 5 percent in exports.