The Central Bank (CB) has called for a robust institutional structure and more efforts on marketing to connect micro, small and medium-sized enterprises (MSMEs) with supply chains in order to reap the full benefits of financial accessibility and credit supplement initiatives.
“In my view, most intractable problem is marketing. If the marketing channels are cleared, even access to financing and everything else become much easier,” CB Governor Dr. Indrajit Coomaraswamy said.
He was speaking at the 32nd Annual Conference of the Asian Credit Supplementation Institutions Confederation, held in Colombo, yesterday.
“In Sri Lanka, we had numerous SME development programmes. However, we tended to focus on production function and not paid enough attention to marketing to link up SMEs and MSMEs with supply chains in their own locality or in the regional economy or cross border,” he added.
The CB has also identified that training and access to information and technology as crucial areas, which require effective intervention in creating a conducive environment for SMEs to benefit from financial accessibility and credit supplement initiatives.
However, Dr. Coomaraswamy underlined that the current institutional architecture supporting the development of SMEs remains weak in Sri Lanka due to poor coordination and cooperation among various institutions.
“Speaking from my own experience in Sri Lanka, we have a plethora of institutions. However, there are challenges in terms of coordination and cooperation. Therefore, I think it’s important to rationalise the institutional structure to support SME development to ensure there’s strong cooperation and coordination across institutions,” he said.
Dr. Coomaraswamy stressed that a robust institutional structure is vital in creating an environment for making financial accessibility and credit supplement initiatives more effective for SMEs.
According to the CB, over 75 percent or over one million of businesses in Sri Lanka are MSMEs, employing 45 percent of the labour force while generating 52 percent of GDP. Hence, Dr. Coomaraswamy emphasised that the MSMEs are a vital sector for the country’s economic growth.
The CB, with the assistance of the International Finance Corporation (IFC), has recently concluded a financial inclusion survey to measure and understand the overall landscape of the financial inclusion levels across the country. “The survey was conducted successfully covering all the districts of the country and the final document is close to finalisation and is expected to be launched at the end of this year,” Dr. Coomaraswamy revealed.
The CB in consultation with the IFC is also in the process of developing a national financial inclusion strategy (NFIS), in order to enhance the financial accessibility for MSMEs.“The CB’s regional department together with the IFC have identified the relevant government, semi-government and private institutions and academia as stakeholders for the NFIS,” Dr. Coomaraswamy added.
He noted that the NFIS would be based on four policy pillars—digital finance and payments, MSME finance, consumer protection and financial literacy
and capacity building.
Further, the CB also launched the Roadmap for Sustainable Finance in Sri Lanka in the mid part of this year. The roadmap in particular is expected to play a critical role in mitigating these adverse climate-related shocks.