SEDD to accelerate growth for SMEs with BOC’s new loan scheme

By Tania de Silva

The Small Enterprises Development Division (SEDD) under the Youth Ministry is enhancing its support to develop the Small and Medium Enterprises (SMEs) across Sri Lanka with the new loan scheme from the Bank of Ceylon (BOC).

The Small Enterprises Development Division (SEDD) was established to support the growth and sustainability of SMEs in Sri Lanka, recognising their crucial role in the national economy. With a workforce of 1,057 employees and offices in each district, SEDD plays a pivotal role in supporting SMEs. The division utilises a robust Management Information System (MIS) to monitor and manage its initiatives effectively.

Director Sudheera Jayarathna said SEDD’s mission includes providing financial assistance, business development services, and capacity-building to ensure SMEs can thrive. SMEs contribute over 75% of all businesses in Sri Lanka and employ approximately 45% of the workforce. According to the Central Bank of Sri Lanka’s 2023 report, SMEs account for around 52% of the country’s Gross Domestic Product (GDP), highlighting their importance to the economy. They are also responsible for fostering innovation and driving job creation in various sectors.

SEDD supports SMEs through multiple avenues:

• Financial Resources to facilitate access to loans and grants.
• Training Programs offering workshops on business management, marketing, and technology.
•  Technical Assistance to provide expert advice on the industrie’s best practices and business strategy.

BOC established in 1939, has long been a cornerstone of Sri Lanka’s financial sector. Over the years, BOC has developed a comprehensive suite of financial products tailored to meet the diverse needs of SMEs, including term loans, working capital loans, overdraft facilities, and specialised loan schemes like the Thurunu Diriya loans.

In April 2024, BOC launched a new loan scheme designed specifically for SMEs. This scheme offers loans starting from Rs. 500,000, a significant amount considering the typical financing needs of small businesses in Sri Lanka. The initiative has already benefited 10,000 entrepreneurs.

The new loan scheme is introduced at a crucial time when many SMEs are recovering from the economic disruptions caused by the COVID-19 pandemic. This scheme aims to provide essential financial support to young entrepreneurs, enabling them to bring their business ideas to life. The broader impact includes driving economic development and job creation, nurturing a new generation of business leaders who can contribute to Sri Lanka’s economic progress.

BOC has a history of supporting SME development through various initiatives. For instance, the “Thurunu Diriya” loan scheme, launched in 2012, offers collateral-free loans to young entrepreneurs aged 18-35. This initiative has been instrumental in providing access to capital for numerous startups.

The “Manudam Viyamana” program is another notable initiative. Launched in collaboration with private sector companies, this program provides SMEs with training, mentorship, and financial assistance. Additionally, the BOC Rehabilitation Unit (BRU) offers specialised assistance to financially struggling SMEs, helping them regain stability.

The impact of BOC’s support is evident in numerous success stories:

1.  A textile manufacturer based in Colombo utilised BOC’s financial backing to expand its production capacity. This expansion led to the creation of 150 new jobs and increased the company’s revenue by 40% within a year. The company’s success demonstrates how financial support can drive growth and job creation.

2.  A tech startup in Kandy received funding through the “Thurunu Diriya” scheme to develop innovative software solutions. The startup grew significantly, leading to the development of a new software platform that attracted international clients and generated substantial export revenue.

3. EFL, a logistics company that started as a small business, expanded into an international entity with BOC’s support. The company now operates in multiple countries and provides employment to over 500 individuals. This growth highlights the transformative potential of financial support and capacity-building programs.

SMEs in Sri Lanka face several challenges, including limited access to finance, inadequate infrastructure, restricted market access, and a lack of business development services. According to the World Bank’s 2023 report on Sri Lankan SMEs, 60% of SMEs struggle with accessing credit, while 45% cite inadequate infrastructure as a major barrier. Additionally, the Asian Development Bank’s (ADB) 2023 study notes that only 25% of SMEs have access to reliable electricity, impacting their operational efficiency.

To address these challenges, BOC offers tailored financial products and collaborates with various stakeholders. For instance, the “Manudam Viyamana” program partners with companies like Unilever to provide training and resources, helping SMEs improve operations and market reach. Furthermore, BOC’s focus on digital banking solutions helps SMEs access financial services more efficiently.

Jayarathna advices aspiring entrepreneurs to understand their market, develop solid business plans, seek training and mentorship, and leverage financial and business support from institutions like BOC. He emphasised that viewing challenges as opportunities and managing resources wisely are crucial for long-term success.

“Key factors for SME success include access to finance, effective management practices, market access, continuous innovation, and adaptability to changing economic conditions. Building strong networks and seeking mentorship are also critical. The SME landscape in Sri Lanka is evolving with increased digitalisation, greater access to global markets, and a stronger focus on sustainability. Innovations in financial technology are expected to provide more opportunities for SMEs to thrive,” Jayarathna explains.

The Government plays a crucial role in creating a favourable policy environment for SMEs. This includes providing financial incentives, supporting infrastructure development, and implementing business-friendly policies. For example:

• The Government offers tax incentives such as reduced VAT rates for SMEs, which helps them reinvest profits and expand operations.
• Projects like the development of industrial parks and improvements in transportation networks benefit SMEs by reducing operational costs and enhancing market access.
• The National Policy Framework “Vistas of Prosperity and Splendour” outlines the Government’s commitment to supporting SMEs through various initiatives, including funding for innovation and technology adoption.

SEDD plans to expand its existing programs and launch new initiatives tailored to specific SME needs. Future plans include increasing collaboration with stakeholders to enhance the support ecosystem and leveraging digital tools to provide training and resources to a broader audience. SEDD is also focusing on enhancing its MIS to better track and analyse SME development outcomes.

The BOC is continually exploring new initiatives to support SMEs, emphasising innovative financial solutions and expanding access to resources. The bank aims to introduce more digital financial services, including mobile banking solutions and online loan applications, to make it easier for SMEs to manage their finances and access funding.

Digitalisation is a key trend shaping the future of SMEs in Sri Lanka. By adopting digital tools and technologies, SMEs can improve operational efficiency, reach new markets, and enhance customer engagement. The rise of e-commerce platforms has allowed SMEs to sell products online, expanding their reach beyond local markets.

For instance, a small-scale manufacturer in Galle leveraged e-commerce to access international markets, resulting in a significant increase in sales. Similarly, SMEs in the tourism sector are using digital marketing strategies, such as social media advertising and online booking platforms, to attract global customers and increase revenue.

Sustainability is becoming increasingly important for SMEs. By adopting eco-friendly practices, SMEs can reduce their environmental impact and appeal to environmentally conscious consumers. Innovations in renewable energy, waste management, and sustainable sourcing are providing new opportunities for SMEs.

BOC and SEDD are supporting sustainability efforts by offering financial products designed to promote eco-friendly practices. For example:

•  BOC provides green loans to SMEs investing in renewable energy projects or adopting sustainable practices. These loans support initiatives such as solar power installations and waste reduction programs.
•  SEDD offers training programs on sustainable business practices, helping SMEs implement environmentally friendly solutions and improve their overall sustainability.

The landscape for SMEs in Sri Lanka is evolving rapidly, influenced by several key trends. One notable trend is the accelerated adoption of digital technologies. SMEs are increasingly leveraging e-commerce platforms, such as Daraz and Kapruka, to reach broader markets and streamline their operations. According to a report by the Sri Lanka Association of Software and Service Companies (SLASSCOM), e-commerce has grown by 20% annually in Sri Lanka, reflecting a shift towards online sales and digital marketing. The integration of technology into traditional sectors, such as agriculture and manufacturing, is also gaining traction. For instance, tech-driven solutions like precision farming and automated production lines are being adopted to enhance productivity and reduce costs.

Jayarathna said the Government has recognised the importance of digital infrastructure and is investing in projects like the National Digital Policy, which aims to improve internet connectivity and digital payment systems. This initiative is expected to provide SMEs with better access to online markets and financial services, thereby supporting their growth and innovation. Additionally, there is an increasing emphasis on sustainability. SMEs are encouraged to adopt eco-friendly practices, such as waste reduction and energy efficiency, supported by green financing options from institutions like the Bank of Ceylon. This focus on sustainability is not only helping SMEs reduce their environmental impact but also appealing to a growing segment of eco-conscious consumers.

Furthermore, the Government’s policy of promoting entrepreneurship through tax incentives and support programs is expected to spur new business ventures and innovation. Programs such as the “Startup Sri Lanka” initiative provide financial grants and mentorship to nascent businesses, fostering a robust entrepreneurial ecosystem. As these trends continue to unfold, SMEs in Sri Lanka are well-positioned to leverage digital tools, embrace sustainable practices, and benefit from supportive Government policies, paving the way for a dynamic and resilient business environment.

Jayarathna emphasised, SEDD team is equipped to provide detailed insights into a variety of financial support options, tailored training programmes, and essential business development resources specifically designed to support SMEs across Sri Lanka. “Whether you require information about loan schemes, technical advice, or strategic guidance on capacity-building, they offer a broad spectrum of services aimed at helping your business not only overcome prevalent challenges but also drive significant growth. By reaching out, you will access crucial resources and expert assistance that are instrumental in navigating the complexities of the SME landscape and realising your business goals,” Jayarathna added.

For comprehensive information regarding opportunities available for SMEs, contact them at 070519519.