Home / FT View/ Wealth creation

Wealth creation


Comments / {{hitsCtrl.values.hits}} Views / Monday, 19 March 2018 01:22


A nationwide poll conducted by research firm Kantar TNS for business magazine LMD has revealed a majority of respondents (52%) feel the generation gap does not impact business – they believe that ‘anyone can do business.’ But several elements still need to come together for entrepreneurship and wealth creation. 

Sri Lanka has a gap in its private sector. On one hand there are large corporations, mostly based in Colombo, that employ thousands of people and are the backbone of the private sector and on the other are hundreds of thousands of small enterprises that employ up to a few dozen people and are mostly based in rural areas. The middle is conspicuously empty and while brave new startups have attempted to colonise this space, they remain largely scattered. 

One of the main issues that startups and entrepreneurs in Sri Lanka have is funding. The other is adequate mentoring and networks linking them to the market. Both of these are needed if banks are to loosen their demand for collateral. Officials are well aware of this and have raised the point that some loans are already guaranteed by the Central Bank, reducing the risk to financial institutions. But clearly more needs to be done by the financial industry, which concentrates the majority of its resources on promoting consumption rather than the manufacture of tradable goods and services. 

The National Economic Council’s request was made  in the context of a case made out by the Policy Development Office (PDO) of the Prime Minister’s Office on the basis of some recently applied research by the PDO which showed that a large number of young entrepreneurs with professional vocational qualifications have started up businesses in the Service sector in what mainstream economists describe as the ‘gig economy’ i.e. outsourced contractual services, a sector which has seen massive expansion even in developed economies, in Sri Lanka especially in hair dressing, beauty culture, bridal dressing, event organisation, catering and the delivery of goods and services. 

Moreover, large numbers of unemployed graduates also could be drawn into this net, rather than employed in the already overburdened public sector. 

This significant section of the economy is often overlooked and struggles to be directly influenced by macro level policies. 

The burden of capital becomes even more difficult in Sri Lanka as there are limited efforts by banks to tailor loans or other products to these small-time entrepreneurs. Angel investors too are few on the ground and mostly limited to the IT sector. Crowd funding and other options are also at their infancy in Sri Lanka and most would be wary of backing anything without adequate credibility. It is a vicious cycle for entrepreneurs as they try to build a sustainable business. 

However, one thing is clear, there are many pieces of the puzzle that need to be worked on simultaneously. Banks providing loans is only part of this effort and more if not equal effort needs to be made to formulate competent business plans, target markets and accounting practices to make ideas flower. 

The Government in its latest Budget announced about Rs. 15 billion to be earmarked for loans for entrepreneurs but this policy needs to be supported by many other stakeholders to become a sustainable measure. A start has been made but other pieces of the puzzle need to come together too.


Share This Article


DISCLAIMER:

1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.

COMMENTS

Today's Columnists

In the desert of Tamil films, actor Sivaji Ganesan was an oasis

Saturday, 22 September 2018

‘Indian Film,’ first published in 1963 and co-authored by former Columbia University Professor Erik Barnouw and his student Dr. Subrahmanyam Krishnaswamy, is considered a seminal study of the evolution and growth of Indian cinema. The book is cit


Imran may turn blind eye to blasphemy law and persecution of Ahmadiyyas

Saturday, 22 September 2018

There are clear signs that Pakistan’s freshly minted Prime Minister, Imran Khan, will make a sincere effort to reduce corruption and maladministration in the domestic sphere. In foreign affairs he is likely to make a brave attempt to mend fences wi


The rate of exchange, capital flight and the Central Bank

Friday, 21 September 2018

The Central Bank (CBSL) exists for the sole purpose of price stability. Its controls on the financial system and monetary policy exist to maintain price stability. As put forth many times by the Governor, the failing of the CBSL to control inflation


Red flag over the Sri Lankan Navy

Friday, 21 September 2018

Shocking story Rusiripala, a former banker in Sri Lanka, who has taken to writing in Daily FT, is perturbed by the red flag I have raised (Daily FT article 18 September) over the shocking charge that our Navy had operated a ransom gang that had abduc


Columnists More