CMA Sri Lanka Budget proposals for promotion and development of MSME sector

In Sri Lanka, MSMEs comprise more than 75% of enterprises and account for 52% of GDP, 45% of employment, and a meagre 5% in exports

The CMA Sri Lanka SME Development Committee comprises members from professional bodies, commercial banks, chambers of commerce and industry, and industry experts who have been meeting since April 2020 to find solutions and support the SME sector. One of the main recommendations made was to revive the SME Credit Guarantee Institution which was appearing as an approved project in the ADB project proposals since 2019 which was approved by the Cabinet of Ministers and was launched in June this year. 

The annual conduct of the UN MSME day conference 2021 with the latest one on 27 June 2025 with the participation of 11 commercial banks and two finance companies with their SME customers totalling 250 with a competition to judge the best SME projects nominated by the banks. 

The Budget proposals made for the development of the MSME sector which would generate employment to around 100,000 unemployed persons are given below: 

1. Setting up of the National Credit Guarantee Institution should benefit entrepreneurs and start up projects:

We are very happy to see the launch of the National Credit Guarantee Institution in June this year and wish to suggest that action be taken to grant loans to entrepreneurs, and start up projects with special reference to women.  

2. The setting up of export houses to promote and develop MSME exports

The committee also wishes to recommend the setting up of export houses to promote exports of MSMEs. We suggest that the Export Development Board should grant the necessary approval to these export houses which will have recognition as exporters linked to MSMEs and also for banks to consider them for financing at favourable interest rates. The export houses will market the products and services of MSMEs and SMEs in overseas markets and will mainly support local farming and fishery communities, local suppliers – producers – manufacturers, export villages, service providers such as IT and suppliers of technical skills with international buyers in the global market to increase the MSME contribution towards national exports from the present 5% to 15% within 3-5 years. The registration with the EDB will give official recognition to the export houses and it is requested that EDB supports them when organising international exhibitions and this status will also assist them in obtaining bank facilities for undertaking exports. 

3. Definition for MSMEs 

a) It is suggested to revise the present definitions to fall in line with the depreciation of the currency which has resulted in the price of most goods increasing substantially including capital goods, raw materials, wages, etc. It is suggested to increase the upper limit of turnover of medium sized enterprises officially to Rs. 1,000 million which is similar to the Central Bank classification.

4. Suggest that an MSME Development Act be enacted with the object of promotion and development and enhancing the competitiveness of Micro, Small and Medium Enterprises (“MSME”) similar to other countries to give necessary support to this most important sector.

The Act should be a single legal framework acting as a one stop shop for all activities of the SMEs including registration, governing and providing protection to small industries and its employees throughout Sri Lanka. The National Board established under the Act shall have power to implement various schemes and policies for upliftment of the SME sector and as a result the SME sector to be made a major contributor of industrial production and exports. The Act should as a necessity make the MSME sector a vibrant and dynamic sector of the Sri Lankan economy and which will provide protection to the SME sector. We will be able to provide necessary assistance to formulate the MSME Development Act. This will immediately result in the establishment of a large number of new projects throughout the country with the support of commercial banks, finance companies and the National Credit Guarantee Institution. 

5. Support in accounting, financial and cost management, digitisation and e-commerce for marketing 

The maintenance of proper books, accounts and cost records is recommended as this will enable the business organisations to determine their costs, prepare proper accounts, run profitably and to gradually advance from Small to Medium sized enterprises. Digitisation will support accounting while marketing aspects could be expanded using e-commerce. Maintenance of financial and cost records should be made mandatory and will also assist the banking sector when lending to the SME sector to provide loans with no additional security and lower interest rates. 

6.Building entrepreneurship 

Support be given to building entrepreneurship at all levels and this will enable creating decent jobs and improving livelihoods, small businesses also depend more than ever on an enabling business environment, including support for access to finance, information, and markets. The Grameen concept from unemployment to entrepreneurship should be implemented to promote job creation and innovation.

7. Linking small business with bigger companies

This is currently been practiced by some big companies and this has assisted in the technical, marketing and financial support for MSMEs. This will also result in reducing the costs of big companies and providing affordable pricing to the society. Hence this should be supported by the Government by getting banks to give priority for such projects and getting the big companies to support the MSME sector.

8. We give a quote from the United Nations which is supporting MSMEs worldwide: “Let’s not forget that these enterprises, which generally employ fewer than 250 persons, are the backbone of most economies worldwide and play a key role in developing countries”. In Sri Lanka, MSMEs comprise more than 75% of enterprises and account for 52% of GDP, 45% of employment, and a meagre 5% in exports.

9. The UN General Assembly has declared 27 June Micro-, Small and Medium-sized Enterprises Day, to raise public awareness of their contribution to sustainable development and the global economy. CMA Sri Lanka SME Development Committee has been celebrating this event annually by organising conferences along with the banking sector and their SME customers which have been very successful. 

We recommend that the Government officially declares 27 June every year as Micro-, Small and Medium-sized Enterprises Day to recognise the major role played by MSMEs for the development of the economy of Sri Lanka. 

We do hope that our Budget proposals will be implemented in the current Budget to bring benefits to the MSMEs and the society. 

(The writer is President, CMA Sri Lanka, and Chairman, CMA Sri Lanka MSME Development Committee.)