The Institute of Certified Management Accountants of Sri Lanka (CMA) incorporated by an Act of Parliament has taken the initiative to set up the “CMA Sri Lanka COVID – 19 SME Development Committee” comprising of Professional Bodies, Chambers of Commerce and Industry, Commercial Banks and Industry Experts.
The Committee is confident that the new Government will give top priority for the development of the SME sector and set up the infrastructure to make this sector sustainable and to be a major contributor to the economic growth and development of Sri Lanka.
At present 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.
The recent Covid-19 Pandemic and the lock down has greatly impacted the SME Sector and the committee is engaged to provide urgent assistance for their revival as many businesses may otherwise close down resulting in loss of jobs and increasing the unemployment rate significantly.
The committee which earlier met twice a week since April 2020 now meets weekly and has taken action on the following matters relating to the SME sector.
- The committee has brought to the attention of the government with the direct support of the Ministry of Industries the urgent need for the establishment of the Small and Medium Enterprises (SME) Credit Guarantee Institution targeting SMEs in Sri Lanka, with a special focus on borrowers without collateral one of the main reasons for banks to reject loans. The committee has noted that the Asian Development Bank has proposed a $50 million loan to support the establishment of the Small and Medium-sized Enterprises (SMEs) Credit Guarantee Institution, a new nonbank financial institution that would help SMEs to access commercial loans. This project is listed in the ADB pipeline projects and is now awaiting the approval of the Finance Ministry which we are confident will take place with the new government in place.
2. The commercial banks who are members of the committee have played a major role in assisting the SMEs and in the grant of loans with a moratorium for old loans. They have also supported the setting up of the SME Credit Guarantee Institution which will enable banks to overcome the problem faced by SMEs that lack collateral and expedite the grant of loans.
3. With the COVID -19 Pandemic the committee has realised the urgent need to provide assistance to the SME sector by providing a tax free regime for a minimum of three years to revive the SME sector and has prepared Tax proposals and incentives which will be submitted to the Government shortly.
- It has also been noted that the Global Contribution of SMEs to Exports is 30% whereas in Sri Lanka it is only 5%. Hence the committee has prepared a Proposal to provide incentives for the setting up of Export Houses to promote the exports of the SMEs.
- The Committee has also proposed Linkages to the big companies which is important for both local and export sales of products and components of SMEs and providing a ready market to SMEs and to provide tax incentives to big companies that support SMEs.
- (a) Another important area of utmost importance is Skill Development and it has been decided to provide education and training in the fields of Finance & Accounting, Taxation, Entrepreneurship, Management, which have been identified as lacking in many SMEs. This was one of the main shortcomings which was number one need of the SMEs as per the survey carried out.
(b) This includes the provision of Technical Skill development and the need to strengthen government institutions to provide the technical education and training to SMEs.
(c) Also to give priority for retraining of existing employees who have lot their jobs so that they could find new employment.
- Chambers of Industry and Commerce who are members of the committee have set up the Help Desk to assist SME members who require assistance to be provided free of charge by the Expert Committees on (a) Financial Management, Accounting & Taxation, (b) Human Resource/Labour Problems, (c) Entrepreneurship & Management development,(d) Marketing – Local and Exports, (e )Industrial/Manufacturing problems,(f) Attract Japanese Investment,(g)Assist those having problems in getting loans from Commercial Banks,(h) Technology and Digitisation.
- The committee has also studied the Indian Finance Minister’s announcement that, “Employees’ Provident Fund Regulations to be amended to include Pandemic as the reason to allow non-refundable advance of 75 percent of the amount or three months of the wages, whichever is lower, lying to the credit of their accounts.” to face the
financial troubles caused by COVID – 19 Pandemic to benefit the families of workers. This decision of the government which was approved by the parliament will help all those EPF subscribers who may have faced a pay cut or run short of money due to the lockdown period or had been laid off. The Committee has supported such a proposal to be submitted to the new government as this would require the change in the EPF Act which has to be approved by parliament.
- The CMA Sri Lanka COVID-19 SME Development Committee conducted a
webinar “Solutions to Meet Challenges Faced by SMEs in Financial Management and Bank Funding Post COVID -19” in July this year and this event was well attended and also provided many responses from participants which have been taken care in planning the future activities of the committee. Some of them are the need for a Credit Guarantee Institution, Skill Development, Marketing support, Assistance to obtain Bank Financing for which proposals have been submitted to Government as well as dealt with by the committee.
- The committee has decided to organize the next seminar in the Hambantota District in the middle of September and this would cover presentations on two of the biggest issues faced by the SMEs; Financial Management and Bank Funding especially working capital and the use of special Central Bank concessions including credit guarantees on loans. This will be followed by a panel discussion and Q & A session enabling participants to learn more about practical solutions on taxation,
management, entrepreneurship, marketing & labour matters.
Prof. Lakshman R. Watawala
CMA Sri Lanka