HNB’s grassroots-first vision to spring-board Sri Lanka’s economic revival through its MSMEs

HNB Head of SME, K. Indravasan  

In the backdrop of a global post-COVID economic crunch, most Micro, Small and Medium Enterprises (MSMEs) have been pushed to their absolute limits. While a precious few were able to ride the waves of disruption and thrive in the lockdowns that followed, the vast majority were left with no way to reach their customers.  

In Sri Lanka, an SME is broadly defined as any enterprise that employs up to 300 people and has a capital investment of up to 1 Billion. The value of the sector can be appreciated when we also consider the fact that SMEs account for nearly half of all employment (48%) and more than half of GDP (52%), yet only 5% of these enterprises actually engage with the export sector.  

By comparison, India’s SMEs account for 29% of GDP and 48% of all exports, while South Korea – globally recognised for its vibrant SME sector generates 34% of exports from such enterprises. The gap between the level of development in the SME space for Sri Lanka relative to such regional economic powerhouses helps illustrate just how important it is for us to explore every avenue of boosting SME performance generally and exports specifically.  

Sri Lanka’s export sector achieved record-breaking performances, generating $ 1.16 billion in 2021. The vast majority of these earnings were generated by industrial exports, primarily from the apparel sector. Bulk agricultural commodities such as tea and rubber are among the next largest contributors to export earnings. In both instances, the majority of these foreign currency earnings accrue first and most to large, well-established firms. 

But in the emerging new normal, export growth will be essential to Sri Lanka’s economic stability. While every opportunity in the corporate sector is being carefully evaluated for investment potential, it is essential that we place a similar emphasis on the development of the SME sector broadly and SME exports in particular.   

Tapping into the power of people and tech   

At present, we see three priority areas that have the potential to accelerate SME development rapidly: Knowledge, Technology, and Female Participation in the workforce and management. Our most recent partnership with the USAID CATALYZE program is the latest in a long series of initiatives undertaken by HNB to directly address these issues.   

Part of the USAID Private Sector Development (PSD) project will strengthen partnerships with new or underutilised private sector firms and train approximately 250 of the bank’s MSME staff to provide niche technical expertise to evaluate and support SMEs especially covering priority sectors as identified by the project. 

HNB’s work with the program will be completely focused on SMEs from five target sectors: Tourism, Information and Communication Technology, Commercial Care, Apparel and Food Processing – particularly for high-value products like spices. During its initial stage, the four year project will increase the capacity and competitiveness of SMEs, ensuring access to finance and COVID-19 relief to adapt to the changes brought on by the pandemic.  

The value of an even playing field  

 MSMEs typically lack the training and tools necessary to compete with emerging business models that rely heavily on – if not completely – social media for marketing and brand-building and e-commerce platforms to deliver online shopping experiences. For most Sri Lankan MSMEs, even during the pandemic, they had to continue to transact in hard cash and canvas business either with established customers or with those in close physical proximity to their business.  

Those MSMEs that have survived all of the disruptions that took place up to now have demonstrated their resilience and adaptability beyond any doubt. However, we believe that with the right support, training and technology, we will be able to help the sector to get back on its feet by tapping into unprecedented new growth opportunities.  

If we can also encourage, incentivise, and facilitate such enterprises to use these tools to integrate themselves into regional and global supply chains by deploying their existing expertise to cater to new markets, the potential upside is immense.  

These are areas in which we feel HNB can easily and affordably create a much more level playing field for MSMEs. HNB has developed a vast suite of products and services specifically designed to bridge the most common gaps in capacity in pursuit of these objectives. These include robust services like HNB Business Banking: A one-stop-shop concept that offers a complete suite of personalised banking products and services on par with solutions used by large corporate organisations but scaled to meet the needs of a wave of dynamic and growing businesses.  

As a result, HNB is now assisting numerous MSMEs to automate payments completely, gain access to trade services, affordable lending and a wide range of powerful e-commerce and cashless payments tools, all designed to optimise costs and operating efficiencies and enhance competitiveness radically.  

Paired with enterprises whose products and services have the potential to capture extremely valuable export niches, Sri Lanka’s economic rejuvenation can be powered by vibrant grassroots growth led by its MSMEs.