Fresh boost for informal economic sector

by Lalin Fernandopulle

The informal and semi-formal economic sector received a fresh boost through policies which encourage manufacturers and suppliers, the Finance and Planning Ministry Annual Report of 2013 released recently said.

The report highlighted the role and importance of supporting the informal sector which makes a salient contribution to the Gross Domestic Product (GDP).

“The small and medium sector entrepreneurs who fall into this category are often a left out when it comes to access to funds and borrowing without collateral. Lending institutions are reluctant to fund the informal sector due to the recovery factor”, a senior banker said.

The report stresses on the need to improve the informal sector in which there is enormous potential to develop niche products for a vibrant export market.

Business chambers such as the National Chamber of Commerce have given top priority to support SMEs which are considered the backbone of the economy.

Horticulture, animal husbandry, ornamental fish, cut-flower and foliage, handicraft and garments are some of the sectors of the informal economy which have been placed in the back burner.

The report said that improving this sector which creates a large number of self-employment and livelihood opportunities received special attention in the formulation of development strategies. The government made concerted efforts to encourage participation of the informal sector in mainstream economic activities, setting up of the Divi Neguma Development Department, tax concessions such as exemption from VAT and NBT for annual turnover of less than Rs. 12 million and simplifying of fee-levying services provided by provincial and local authorities.

Special emphasis has been placed on rural agrarian smallholder operations in dairy, fish processing, poultry, floriculture and fruit and vegetable production.

Small industries producing handloom, gift items and household ornaments, pottery, handicrafts have been incentivised through technology transfers. Micro financing loans from State micro financing institutions amounted to Rs. 8.5 million last year.

- LF