Private equity financing could play a crucial role in the development of small and medium enterprises (SMEs) and social enterprises in Sri Lanka, Chairman, Lanka Impact Investing Network, Chandula Abeywickrama said.
Private equity investors could help to create, deepen and expand growth of small and medium enterprises. In addition to capital, private equity investors bring knowledge and expertise to the companies in which they invest, Abeywickrama said.
Speaking at the launch of a report on ‘Status of Social Enterprise Sector in Sri Lanka 2017’ last Friday in Colombo he said, SMEs operating in Sri Lanka are more likely to be credit constrained and are paying significantly higher interest rates. However, in the last five years, there has been a surge in social entrepreneurship across Sri Lanka following the end of the war.
“Nevertheless, social entrepreneurship can’t be powered unless there is conducive landscape for investing culture. Furthermore, entrepreneurship cannot be blossomed under a heavy debt culture in the country. We need to surpass that level where a high rate of interest regime moves to an impact investing culture.”
Abeywickrama further said that genuine SMEs have not been able to utilize World Bank, International Finance Corporation (IFC) or Asian Development Bank (ADB) financed SME refinance credit schemes due to various reasons.
He said a 70% of these funds are channeled through commercial and corporate businesses.
According to a social enterprise sector report in Sri Lanka, there is an estimated 6, 000 to 15,000 social enterprises in the country covering major sectors such as manufacturing, agriculture, cultural, creative and environmental protection sectors.
In addition, about 41% of social enterprises direct their surpluses towards achieving collective social or environmental aims and also there is a striking gender gap in social enterprises with 31% women in leadership roles in social enterprises compared to men which account for 69%.
The majority of the social enterprises have drawn upon external funding sources in their business ventures with 24% having accessed loans, 21% having received donations and another 21% report having received grants.
The report highlights some of the biggest barriers facing social enterprises as lack of awareness and understanding of social enterprises among the public, lack of targeted support for the sector from the government and other influential organizations in the areas of technical, managerial and financial support.
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