Priority matrix for tea sector: Part 1

The tea sector’s value chain is intricately interwoven and deeply interdependent, as not in many other agricultural value chains

Enhancing the financial resilience and empowerment of stakeholders within Sri Lanka’s tea value chain is critical. By ensuring access to finance, improving financial literacy, building capacity, and offering a diverse range of financial services, we can achieve this. By doing so, Sri Lanka can aim to establish a robust support system for tea producers, processors, marketers, and associated businesses

The tea sector in Sri Lanka stands at a critical juncture, requiring a comprehensive and detailed analysis to identify and implement targeted interventions that will drive sustainable growth and improve public service delivery. This paper presents an evolving set of suggestions aimed at enhancing various aspects of the tea value chain—from empowering smallholders with technical knowledge and financial accessibility to connecting them with factories and markets through digital platforms. A key focus is on integrating these efforts with Government priorities, also as per draft Plantation Sector Policy, ensuring that the interventions both align with and inform the broader national agenda.

However, it is important to recognise the limitations of these recommendations. Due to constraints in resources, a complete and exhaustive analysis of the sector has not been feasible, and the lack of accurate and up-to-date data further hinders the development of fully informed solutions. Despite these challenges, the proposed interventions—particularly those involving targeted support from the Government and bilateral and multilateral donors—have been prioritised to address immediate needs based on the stakeholder consultations. These recommendations need to be updated periodically to reflect the evolving context and emerging opportunities in a rapidly changing world dynamic. 

This reciprocal approach seeks to strengthen the tea sector while aligning Government national policies with the practical realities faced by stakeholders. By focusing on actionable improvements as priorities, especially in areas such as factory modernisation, financial resource accessibility, and value addition, this paper aims to lay the groundwork for a more resilient and globally competitive tea industry in Sri Lanka.

The involvement of bilateral and multilateral donors, particularly in financing innovation and sustainability projects, is also crucial. These external stakeholders can provide both financial resources and global expertise, helping to modernise the sector. However, such support must be carefully coordinated to ensure that it complements government priorities and maximises long-term benefits for the tea industry as a whole.

This paper identifies the following broader areas as priorities:

Tea sector empowerment and financial services

Tea market research and strategic development

New technology and agronomic innovation

Tea plantation management and diversification

Tea value chain digital transformation

Tea sustainability and climate resilience

Tea sector institutional reform

Tea legislation review

Priority A: Tea sector empowerment and financial services

Stakeholder empowerment should be a top priority for the Government or any agency committed to supporting the tea sector. Because, the tea sector’s value chain is intricately interwoven and deeply interdependent, as not in many other agricultural value chains. While this interconnectedness provides the sector with significant strengths compared to other agricultural value chains, it also poses substantial risks. A disruption at any point in the value chain can have far-reaching and severe consequences, as some indications in the sector now suggest. Therefore, it is imperative to approach stakeholder empowerment as a comprehensive package that includes finance, support, guidance, and capacity development.

Enhancing the financial resilience and empowerment of stakeholders within Sri Lanka’s tea value chain is critical. By ensuring access to finance, improving financial literacy, building capacity, and offering a diverse range of financial services, we can achieve this. By doing so, Sri Lanka can aim to establish a robust support system for tea producers, processors, marketers, and associated businesses. 

A transformative program for the Tea Sector Empowerment and Financial Services Activities (TEFSA), is essential for uplifting and fortifying the financial well-being of all stakeholders in the tea value chain. Recognising the pivotal role of tea in the national economy and the livelihoods of millions, TEFSA must be dedicated to building a strong, sustainable, and inclusive support system for tea producers, workforce, and related businesses along the value chain. This theme is vital for fostering sustainable growth, ensuring economic and market stability, and promoting gender inclusivity within the tea sector. Also, this focuses on improving tea processing factories and green leaf processing for value added products through targeted financial support and business planning.

Financial aid, including Government-backed loans1, will enable factories to upgrade to modern, eco-friendly technologies, enhancing efficiency and product quality. Meanwhile, business planning services, such as financial management, financial literacy programs and access to market data, will empower processors to make informed investment decisions, optimising operations and ensuring long-term sustainability and competitiveness within the industry.

Access to finance:

It is crucial to prioritise enhancing access to financial resources for tea sector stakeholders, particularly smallholders, collectors, processors, and value-added providers—especially those historically underserved by traditional banking institutions—and must have an interconnected data bank for misusers/defaulters. By offering tailored financial products, such as low-interest loans, microloans, and emergency funds, this initiative ensures that these stakeholders have the necessary capital to invest in their operations, manage risks, and overcome financial challenges. Access to finance empowers them to improve productivity, expand their businesses, and achieve greater economic stability. 

However, experience has shown that existing financial support programs have been less effective, often due to inadequate monitoring, inaccurate data, and borrowers’ lack of financial management skills, among other reasons. To address these issues, it is imperative to establish a digitalised loan effectiveness monitoring system. Additionally, financial institutions must ensure proper distribution of funds according to predetermined objectives and milestones. To facilitate this, the Government should develop a tracking system that aligns financial support with the tea sector’s production and productivity outcomes.

Key components:

Special financial products: Establish microfinance schemes and loan facilities tailored to the needs of smallholder tea growers and enterprises through a comprehensive product analysis considering the lessons learned so far. This will enable them to invest in better farming practices such as scientific and socioeconomical replanting, new planting, equipment, and technology.

Specialised financial institution: Create a specialised financial institution, (i.e. “Tea Bank”) dedicated to providing financial services to the tea sector. This financial institution would offer customised financial products, including savings, insurance, leasing, credit lines, group loans, and investment opportunities to the tea sector. The capital must be sourced from the tea sector and all stakeholders are shareholders. 

1.2. Financial literacy programs:

Another critical component of the stakeholder empowerment thematic area is the systematic implementation of comprehensive financial literacy programs that capture all eligible stakeholders via a digital database. These programs aim to equip stakeholders with the necessary knowledge and skills for effective money management and informed decision-making. Workshops, training sessions, and digital learning platforms teach participants important financial management skills such as budgeting, saving, investment planning, understanding financial products, and financing. This education enables individuals to make informed financial decisions, minimising their exposure to debt and allowing for more strategic investments in their future. 

This will also minimise the Government’s burden of providing continuous subsidies or cash support to important players along the value chain. According to industry experts, this training is required not only for smallholders but also for the link between farm and factory. It is crucial to emphasise that the monitoring and oversight of these activities hold greater significance than the actual actions.

Key components:

Tailored training: Develop and implement comprehensive financial literacy programs to educate tea growers, entrepreneurs and workforce on managing finances, budgeting, and investment strategies. These programs should be accessible and tailored to different literacy levels. Conduct regular workshops and training sessions to enhance the financial management skills of stakeholders, focusing on topics such as savings, credit management, and financial planning.

Group learning: Group learning represents an innovative educational model that acknowledges that a one-size-fits-all training approach is often ineffective. Instead, this model focuses on building the capacity of individuals based on their unique skills, interests, and capabilities. Participants are trained in specialised areas such as budgeting, financial planning, investment strategies, productivity enhancement, and ore, and then share their knowledge and experiences within the group. This encourages peer learning and facilitates a collaborative environment where diverse skill sets are leveraged for collective growth. 

The group learning model should be cross-sectoral, incorporating best practices from various fields to enrich the training process. For example, international experience highlights the importance of including areas such as digital literacy, data analytics, risk management, strategic planning, and leadership development. Emphasising these areas can further enhance the model’s effectiveness by preparing participants to navigate complex challenges and adapt to evolving industry demands. This approach ensures that knowledge is not only disseminated but also applied and expanded upon within the group, leading to more comprehensive and practical learning outcomes.

1.3. Comprehensive financial services:

In addition to loans and literacy programs, a variety of financial services customised to the tea industry’s demands must have a forward-thinking goal. Several nodes in the value chain recommended establishing a dedicated products and services to the tea sector. The new financial institution’s services may include promoting savings, insurance products, and pension plans meant to promote financial security and stability. For example, reasonable crop insurance protects tea growers from the financial effect of poor weather conditions or pest infestations, whilst savings accounts and pension plans assist workforce and entrepreneurs in creating a safety net for the future. These services are crucial for risk mitigation and better preparing stakeholders for both short-term and long-term financial issues. Another idea offered by key stakeholders is to establish a crisis fund to be used in the event of man-made or natural disaster.

Key components:

Insurance: Introduce insurance schemes to protect tea growers, entrepreneurs and workforce against risks such as crop failure, natural disasters, and health emergencies. This will provide a safety net and reduce vulnerability to unforeseen events.

Subsidies, incentives: Offer subsidies and incentives to encourage the adoption of sustainable farming practices, organic certification, and quality improvement measures for startups. These financial aids can help offset the initial costs and motivate stakeholders to invest in long-term sustainability, but they must be within milestone plans for an exit strategy.

Crisis fund for tea: Develop a Crisis Fund2 specifically for the tea sector to provide emergency financial assistance during periods of crisis, such as market downturns, climatic shocks, or pandemics. This fund would ensure the continuity of operations and support the livelihoods of those affected.

1.4. Promoting gender inclusivity:

Gender inclusion must be a basic principle of every tea-related policy. This actively works to ensure that women, who account for a sizable share of the tea sector workforce and have a higher potential to be entrepreneurs, have equal access to financial resources, training opportunities, and leadership responsibilities. This strategy supports gender equality by assisting female entrepreneurs, offering tailored financial solutions for women, and encouraging women’s participation in decision-making processes.

Women’s equal participation not only complies with international gender empowerment norms, but it also provides economic benefits to families that never consider family labour as a source of savings for factors such as productivity and increased household profit. This emphasis on gender inclusion not only benefits women, but it also adds to the broader economic empowerment of communities, as women are frequently important drivers of household financial management and community growth as community leaders.

Key component:

Gender inclusivity: Targeted financial services and empowerment programs will promote gender inclusivity, ensuring that women in the tea sector have equal opportunities and support to thrive.

Priority B: Tea market research and strategic development

Sri Lanka’s tea sector needs to enhance its market presence and drive strategic growth. In-depth market research, targeted promotion, and forward-looking initiatives can achieve this. The goal is to build a competitive, sustainable industry that aligns with global market demands by adapting to international trends. Strategic planning must integrate a thorough analysis of these trends to ensure effective alignment.

This strategy moves beyond traditional promotional methods, focusing on modern approaches that resonate with Gen Z consumers and a rapidly evolving digital environment. To achieve this, a public-private partnership (PPP) funding and management model is recommended, fostering collaboration and shared responsibility among key stakeholders across the tea value chain. Sole Government intervention may not be enough for Sri Lanka to effectively pioneer new market expansions. The thematic focus should also be on innovative financing mechanisms that draw support from multiple stakeholders committed to market growth.

Also, many key stakeholders have expressed interest in searching for new dynamic pricing models between the factory and the smallholder. These models would better reflect actual production costs and adapt to shifting market dynamics along the tea value chain. Continuous research, involving academic institutions and other experts, is crucial to creating a reasonable and sustainable pricing formula. Furthermore, the tea industry regulations should incorporate this innovative pricing methodology, which allows for periodic adjustments in response to evolving market conditions.

Key components:Market research:

Marketing strategy: Conduct comprehensive market research to gather insights into consumer preferences, trends, and behaviours. This will help tailor products and marketing strategies to meet market demands.

Competitive analysis: Perform competitive analysis to understand the strengths and weaknesses of Sri Lankan tea in comparison to global competitors. This will inform strategic decisions and positioning.

Niche markets: Identify and explore new market opportunities, both domestically and internationally, to expand the reach of Sri Lankan tea and derived products for higher values.

Tea promotion:

Brand identity: Develop a strong brand identity for Sri Lankan tea, emphasizing its unique qualities, heritage, and sustainability. This will enhance its appeal in global markets.

Digital marketing: Launch targeted marketing campaigns to promote Sri Lankan tea in key markets. Utilise digital marketing, social media, and traditional advertising to reach a wider audience.

Connecting the dots: Continue to participate in international trade shows and events to showcase Sri Lankan tea and build relationships with potential buyers and partners.

Strategic development:

Public-Private joint ventures: Establish a PPP model to fund a “Tea Market Research and Strategic Development Unit/Entity”, ensuring shared ownership and collaboration among tea stakeholders, including growers, processors, exporters, and government agencies. The PPP model will promote shared ownership and collaboration, leading to more effective and inclusive decision-making processes.

Taxation and CESS: Explore funding mechanisms similar to CESS3 (a levy on tea exports) to generate resources for market development and strategic initiatives. Instead of imposing individual taxes on stakeholders in the tea sector, implementing a common CESS would be a more attractive and equitable solution. This sector-specific CESS would streamline contributions, ensuring that the financial burden is distributed collectively across the industry rather than targeting individuals. By dedicating the CESS exclusively to the tea industry, the funds generated could be reinvested into essential areas such as research, development, sustainability initiatives, and capacity building—ultimately enhancing the sector’s overall growth and competitiveness.

Moreover, the CESS could serve as a strategic tool to promote digitalisation within the tea industry. By offering tax concessions to tea smallholders who adopt digital trading platforms and use digital applications for tracking income, the CESS would incentivise digital adoption. This would not only boost efficiency and transparency but also ensure that income data collected through digital systems is recognised by relevant authorities, fostering a more inclusive and modernised tea sector.

Price formula: Develop new models for price formulation based on actual production costs, ensuring fair pricing for growers and competitiveness in the global market. Price formulation models will enhance the economic resilience of the tea sector, protecting it from market volatility and ensuring long-term viability.

(The author is a Digital Agriculture Strategy Expert, a former top agriculture and policy specialist for the Sri Lankan and US governments, is currently leading a number of agriculture sector policy and digitalisation initiatives locally and internationally. His considerable experience combines policy formulation and the use of digital tools to improve efficiency and sustainability in the agricultural sector.)