Significance of entrepreneurship and skills development for SMEs to survive COVID-19 and succeed

The Skills Development Fund Ltd. (SDFL) – Sri Lanka’s Public-Private Partnership to address skills gaps and institutional capacities for skills development – has partnered with the Global Entrepreneurship Network (GEN) – the largest global entrepreneurial ecosystem – to connect, understand, support, and celebrate entrepreneurship.

The new normal

In preparation for the COVID-19 ‘new normal,’ it is vitally important for many industries, especially Small and Medium Enterprises (SMEs), to be realistic about short to long term viability, and re-think business models to survive and succeed. 

Most SMEs in Sri Lanka are not ‘crisis flexible’ and lag behind in their ability to ‘think out of the box’ for innovative solutions. This makes our SMEs and their employees vulnerable at times of crisis and a burden to the country and the Government. SMEs need to think beyond demanding and expecting ‘hand-outs’ for their survival – they need to ‘re-purpose’.

The significance of entrepreneurship and skills development 

True entrepreneurs find opportunity during challenging times. They are innovators and risk takers. True entrepreneurs will ‘re-purpose’ their businesses, ‘re-skill’ and ‘up-skill’ their workforce, ‘re-tool’ and ‘re-deploy’ to meet new challenges. It is fundamental for us to develop an ‘entrepreneurial culture’ in Sri Lanka, especially to meet the challenges of the ‘new normal’ that is evolving. This will require career guidance, skills development, and creating awareness on best practices. 

The skills needed include communication, presentation, English, information and communication technology, business planning, risk management, marketing, good governance, regulatory compliance, financial literacy, earning money, spending money, saving money, resource utilisation, human resource management, networking, collaborating, sharing, social and environmental responsibility, being inclusive, and thinking out of the box. 

These are all vitally important skills for start-ups and SMEs to survive, switch, start, scale, or succeed as responsible entrepreneurs who can contribute positively towards rebuilding the countries’ economy – to ‘rebuild better’ – as a more ‘sustainable and inclusive’ economy.

Incentives for the informal SME to formalise

Most SMEs in Sri Lanka are based in the regions, and they are by and large informal. This vast and fast-growing informal sector SME is usually ‘extra-legal’ and contributes to multiple problems including widespread corruption and poor labour practices. They also create a grey/black economy that is troublesome and unmanageable. 

Furthermore, this informality prevents SMEs from access to the formal banking system and any Government relief schemes which are on offer through the banks. Fear of taxes, complicated regulations, bureaucratic registration processes, and widespread corruption, discourage many SMEs from formalising. Therefore, simplifying taxation, streamlining regulations, regularising registration processes, and controlling corruption are vitally necessary to encourage formalisation. 

The Government could incentivise this by offering to train and certify SMEs – to comply with the norms of good governance, regulatory compliance, financial literacy, and quality standards. Investors and banks could benefit from these certificates to provide SMEs with easier access to finance and other resources. In the context of the current crisis, where many SMEs will face a drop in business, or complete shutdown, and much of the workforce will lose their jobs, it is critical that SMEs are given a ‘hand-up’ to ‘re-skill/up-skill’ and ‘re-purpose’ to face the ‘new normal’. 

SME sector institutional capacity building

‘Formalising the informal sector’ is a priority in the developing world as it should be in Sri Lanka. It needs ‘Government will’ and ‘strong SME institutional capacity’ throughout the country that can influence and empower SMEs ‘to want to formalise’. 

Most district level chambers of commerce and sectoral associations in Sri Lanka do not have adequate capacity and funding to provide the necessary empowerment for SMEs. The capacity gap between institutions in the centre and the regions is wide. National and sector specific SME institutions should also be strengthened to collaborate with and provide the necessary support to SME institutions in the regions. 

The island wide network of vocational training centres should be continuously engaged with local industry through private sector institutions – such as chambers of commerce and sector associations and understand the labour market needs. National level chambers and associations, the central and local governments and NGOs should empower these institutions by collaborating on projects and sharing resources. The common ad hoc, short term, top-down, initiatives have failed to achieve desired results. Long term, collaborative initiatives with regular engagement in the regions is vital in developing regional SME institutional capacity. 

Tangible solutions through bottom-up initiatives with community buy-in

When reaching out to regional SMEs, it is critically important for us to first ‘build trust’ and get ‘community buy-in’ for development projects. This is done best by communicating in the local language – Sinhala and Tamil, and in collaboration with local institutions. 

Local institutions need to be well empowered and adequately funded to support local ‘bottom-up’ initiatives. This is key in providing ‘tangible’ solutions – a ‘hand-up’ for SMEs, as opposed to the traditional ‘hand-out’ that they currently expect, demand, and depend on. 

Networking

Most SMEs do not appreciate the ‘power of networking’. They prefer to remain in their own ‘silos’. Today there are powerful global networks that have resources – best practices, knowledge, technology, finance, markets, and inspirational ideas to support SME’s. In the Sri Lankan context, this will need translation and interpretation in Sinhala and Tamil. Here again, we need to build well networked and resourceful local institutions that can provide the necessary awareness, training, and knowledge.

Building a globally connected Sri Lankan entrepreneurial ecosystem

All stakeholders – start-ups, SMEs, investors, financial institutions, policy makers, educators, researchers, thought leaders, mentors, the media, and other service providers – coming together and building a local ‘entrepreneurial ecosystem’ that is globally connected, is a global best practice that needs to happen in Sri Lanka. 

‘Crowdsourcing’ globally for ideas, solutions, and resources is another global best practice that needs understanding. The Skills Development Fund Ltd. of Sri Lanka partners with the Global Entrepreneurship Network Sri Lanka, and invites all stakeholders to join in, to build a ‘powerful’, ‘inclusive’, ‘Sri Lankan entrepreneurial ecosystem’ that is ‘globally connected’, to survive COVID-19 and succeed. 

(The writer is Board Director, Skills Development Fund Ltd. and can be reached via e-mail [email protected])