SMEs contribute to GDP growth

The Small and Medium Enterprises (SME) segment is the key segment to fuel economic growth, create employment, improve productivity and thereby contribute immensely to the GDP growth of the country, Deputy General Manager, Retail and SME Banking, Nation Trust Bank, Keshini Jayawardena said.

Keshini Jayawardena

"The emergence of Sri Lanka from 30 years of terrorism brings new opportunities for the country's economic growth and development. SMEs are critical to modernisation and economic growth.

According to the last comprehensive survey of the Local SME market done in 2007 by the IFC (International Financial Corporation), it was estimated that there were about 18,000 businesses in Sri Lanka of which about 80 percent were SMEs, contributing up to 35 percent of jobs in the country."

"Since then the Central Bank redefined SMEs by increasing turnover limit to Rs 600 million per annum.

On this basis over 90 percent of businesses in Sri Lanka are SMEs. This is a huge market and if harnessed properly has enormous potential for the country and for the banks which service them," she said.

However, she said, the lack of up-to-date information at national level on this segment hinders growth of the sector. "Better statistics and information would enable all players to offer better service and grow this segment.

There are 24 licensed commercial banks and nine specialised banks. There is one bank branch or extension office for every 7,000 people in Sri Lanka. Banks' density is very high in the country and this excludes finance, leasing and other non-bank financial institutions. Therefore, the infrastructure for banking and servicing for the SME customers is in place," she said.

"Even though infrastructure is in place, banks are still cautious when lending to the SME segment, fearing loan default.

One reason is the lack of financial records and financial discipline among many small businesses.

Providing financial education and discipline to small businesses, giving them the tools to maintain proper books, do cash flows and business cases, and manage their working capital in a manner conducive to their own business growth will make them more bankable to lending banks," she said.

Ms. Jayawardena said the 'cost of finance' was a barrier for SMEs. "Despite the competitive market, the cost of finance, in the present interest rate scenario makes borrowing expensive and impedes the growth of SMEs," she said.

Ms. Jayawardena said the bank will expand its reach by increasing its branch network to 60 by the year end. "We also have found that our 365-day banking and our extended banking hours has special meaning to our business customers. Many of them are sole proprietors who have to do everything themselves. Being able to bank at their convenience has been very attractive to them.

The extended hours facilitates transactions of both account holders and for third parties without restrictions," she said.

"We have the best current account in the market, which rewards our SME customers based on the volume of business routed through us with loads of value additions.

Our business banking customers can earn attractive reward points, obtain bank services such as import/export services, cheque books at a reduced fee or absolutely free," she said.

Ms. Jayawardena said the Bank conducts 'Nations Business Seminars' across the country, to educate customers and non- customers on various topics to SMEs. We have made available the 'IFC SME Toolkit' website to our customers, at our branches with trained staff to assist customers to access this website which contains useful information in Sinhala, Tamil and English. We also hope to train our young staff to develop our capacity in the SME sector," she said.