MSME sector development vital for achieving sustainable development

Insights during Covid-19 situation

(Continued from yesterday)

By Dr. Tissa Ravinda Perera
Faculty of Management & Finance
University of Colombo
Email: ravinda@mos.cmb.ac.lk

Main problems faced by Sri Lankan MSMEs at present

The MSMEs cannot get even short-term credit facilities because the banks or financial institutions ask for securities. The use of traditional technology in some sectors of MSMEs is really a problem faced by them. The cost of production is also very high for the MSMEs in comparison to that of large scale businesses or the cost of imports. These businesses use mainly traditional types of skilled labour and they do not have technology based proper training. These businesses use lower level of expertise knowledge and scientific machineries, therefore the quality of the products are also low. It is difficult for these businesses to compete with large scale businesses since they are weak in many areas. The MSMEs have a lower production quantity and limited market, too. Hence, their turnover and income are also low and it may lead to failure, too. This is a serious issue faced by the MSMEs. In most of the MSMEs, the marketer, owner and manager are the same. Therefore, the business could face managerial problems in the short run and bankruptcy in the long run

Global trends in MSME Sector

The use of information technology, telecommunication, low cost and attractive products and service are some of the features of the modern MSMEs. The modern MSMEs also use social and digital media to attract customers and sell their products. They prefer online service to offline service.

Therefore, it is evident that the modern MSMEs are ICT-based and web-based businesses. They also prefer using credit and debit cards as the mode of receiving money than using hard currencies. The search engines, like Google and Yahoo have entered their day-to-day language. These things have also affected the Sri Lankan MSMEs.

Why MSME Sector need to be promoted in Sri Lanka?

There are numerous reasons why MSMEs should be promoted in Sri Lanka, the main being that they can be started with a lower capital. Therefore, it is very important for the country to look into this matter and help the MSME sector.

Sri Lanka has a relatively higher unemployment rate of 4.18%. This could be reduced by promoting MSMEs because the majority of them are mainly labour intensive. There is a trend in Sri Lanka that people migrate from villages to cities. This can be reduced with the help of MSMEs.

There is no need for expertise managerial skills for MSMEs to manage their affairs. Therefore, it is easy to start and run the business in any area.

There is a regional demand for many products and services. It is evident that many products and services are delivered from Colombo or cities to villages. This could be reversed if the country promotes MSMEs at the regional level.

Sustainable Development through SME Sector Development

The Sri Lankan MSME sector grows at 2.9% and it is very low compared to the global growth rate of 5.2%.

Therefore, the country must pay more attention to the development of the MSME sector due to many reasons. Sustainable development could achieved through the MSME sector. The present government should launch a programme like Enterprise if Sri Lanka is to develop the MSME sector.

The current situation is the best time for the government to initiate this change since this is the time where the MSME sector needs more support and the country needs more contribution from them..