An equity fund to provide crucial seed capital for deserving Small and Medium Enterprises (SMEs) is likely to bear fruit following discussions between a dedicated group within Chartered Accountants of Sri Lanka and the State Minister of Money, Capital Markets and State Enterprises Reform Nivard Cabraal.
During the discussions, Cabraal has extended support to the Chartered Accountants by saying that he will take steps to establish suitable equity funds to support these entrepreneurs in providing seed capital and the professionals assigned by CA – Sri Lanka SME Task Force who work with these entrepreneurs.
The fund will be managed by a group of independent prominent innovative professionals. The Minister requested the delegation to develop a concept paper and assured an early implementation of this needy proposal.
The breakthrough follows a delegation of the CA – Sri Lanka SME Task Force meeting State Minister Cabraal organised by AAT – Sri Lanka Vice President Sunil Wanigabadu.
The delegation raised the point that there was no institution or effective system to support the SME sector which had very attractive business plans and did not have adequate seed capital.
The Minister, who promotes the right balance of debt equity ratio and advocates bringing equity capital to Sri Lankan businesses rather than debt, assured the finance professionals of his commitment for this national need. He invited CA – Sri Lanka SME Task Force, financial professionals and CA – Sri Lanka and AAT – Sri Lanka to develop an institutional framework in this direction.
The CA – Sri Lanka SME Task Force was established by the Institute of Chartered Accountants of Sri Lanka (CA – Sri Lanka) to develop the business acumen of the SMEs and to enhance their ability to better access to finance and contribute to national development in partnership with AAT Sri Lanka.
The Task Force conducts a unique mentoring program to develop SMEs selected by SDB Bank which works as a partner to this program facilitated by regular visits to the business establishments of those entrepreneurs by the members of CA – Sri Lanka and AAT – Sri Lanka which also joined the program.
These finance professionals work with the entrepreneurs for a period of one year on voluntary basis. This is the first time in the history that the finance professionals came forward voluntarily to contribute to the national development through the development of SME sector. This unique development concept could be expanded in the Asia pacific region and other parts of the world.
The delegation was headed by CA – Sri Lanka SME Task Force Chairman Lakshman Abeysekera. The other participants were AAT – Sri Lanka Vice President Sunil Wanigabadu, CA – Sri Lanka Council Member and CA – Sri Lanka SME Task Force Alternate Chair Anoji De Silva and Senior Chartered Accountants and the members of the CA – Sri Lanka SME Task Force Harsha Gunasena and Ajith Alahakoon.
Minister Cabraal is a past President of CA – Sri Lanka, South Asian Federation of Accountants and served as a pioneer member and Vice President of AAT – Sri Lanka at the inception of the organisation.
The Minister was impressed with the innovative initiatives by finance professionals towards national development through development of SME sector where 52% of the GDP contribution and more than 45% of the employment is generated.
CA – Sri Lanka President Manil Jayesinghe and CA – Sri Lanka Vice President Sanjaya Bandara and the Governing Council have a vision of developing the SME sector in Sri Lanka, especially rural agriculture-based communities, which is shared by AAT – Sri Lanka as well.
The SME Task Force is promoting cashflow-based lending to the SME sector against collateral-based lending. The mentoring program would establish a governance framework for SMEs and create social capital for entrepreneurs to be eligible for capital both loans and equity.