MSME Industry in Sri Lanka

Below is a section of my Final Year Dissertion.  I copied this from a draft report and looking forward to discuss this topic futher.   
Study was conducted based on two key aspects and the following section would explain how the study addressed those two aspects that are the lack of information availability and the lack of financial proficiency.
2.1.1 Lack of availability of effective information
As mention in the introduction there few parties involving in the whole industry namely,

Since there are approximate five parties operating in the environment the study was design to obtain information on their services and activities towards to the MSME industry. Therefore in order to develop integration system for MSMEs and other bodies there should be a thorough awareness on what are available and what are needed for the end users that are the MSME businesses. Thus few site visits were organized in order to obtain first hand information of the industry.



Here are the companies and institutions visited in order to obtain such information.

Following are the visited organisations.

In the study some basic questioned were raised that were what do you have for SMEs and from the MSMEs what do you want from such supporting organizations.

In the Study some key aspects ware traced out that might lead to amplify the breach of these two sectors namely MSMEs and all other supporting bodies.



Those aspects from supporting body’s perspectives:
• Those governmental organizations have produced valuable information and other facilities for the industry and however most of the entrepreneurs are not aware of that due to the ineffective communication.




o Eg. Sri Lanka has the South Asia’s best ornamental fish manufacturing training centre and very few have obtained its services.



o Eg. Mushroom Training Centre offers comprehensive assistance for small scale businesses and however very few have made it fruitful.



• Supporting Agencies like Vidatha Centre have skilled and resource persons. However the information sources available for them would not lead to provide an effective service. There should be a better mechanism to make them thorough on the industry requirements.



• Financial Institutions have offered so many attractive business loan packages and still most of the MSMEs were not able to obtain such financial assistance. According t the bank due to the lack of planning and costing proficiency most of the business plan are usually rejected.



o When providing a bank loan the applicant must plan the payback procedure in order to make the bank convinced



o Since most of the applicants fail in satisfying such requirements and that would limit their scale in the long run.



• There are number of Non Governmental Organizations are operating in the industry in order to assist small scale businesses and they are pumping millions of money for such operations. However still most of the projects have not been as the industry is redundant.



o Trade fairs are one of the prime opportunities to hunt a potential business partner and however most of the local enterprises do not prefer to participate for such endeavors.



o In addition due to the lack of the proficiency in the internet technology most of the business opportunities are redundant as nobody is striving for it. Today internet has become the source of the business opportunities and unfortunately the use of such technology is still not as required in the local industry. Therefore Sri Lankan MSMEs always rest far behind the other MSMEs in the region.



• There are number of chamber operating in Sri Lanka and they organize training programs, workshops, exhibitions and trade fares. However according to their statistics very few have drew growing opportunities by participating for such programs.



o Chambers are known as umbrellas of the private sector and they usually organize lots of training and workshops. The participation of the local MSMEs are not sufficient to make a considerable difference in the industry.



• Local MSME often fail to derive their specific needs and therefore most of the times they would not be able to acquire the information they need.



Those aspects from MSME’s perspectives:




• The study was designed to participate to a training session organized for MSMEs in the Mushroom Development Centre in Ratmalana. During that session the study concentrated on the effective out come of the session. Even though session covered the technical knowledge it did not provide the business knowledge to carry on the business.



• Even though there are number of services available for the industry most of them are located in a centralized manner.



o Eg. There is no Ornamental Fish Training or any other related institute in Hambantota though that area contributes to the national ornamental fish production in a great manner.



• According to their examinations, they have found difficulty to obtain specific information regarding the business. Most of the governmental institutions have provided general information and that would have not led to make en effective impact in the industry. If a person needs to know about the particular subject he/she might find very difficult to obtain useful information that are directly addressing the subject.



• Most of the businessmen need to know about the potential market opportunities and most of the time governmental institutions do not provide that kind of information or service.



o Information available in the Vidatha Centre is not sufficient to make an effective impact on the industry as most of them are either out dated or less effective information.



o The efficiency of the governmental organizations have become a bottleneck for the industry



 Eg to register a proprietorship or a partnership a MSME will have wait at least half a month as it requires lots of documentations.



 Eg to register a limited liability company the average duration is at least one month in Sri Lanka where it is just one day in Singapore.



• In addition since there are number of governmental bodies for the same industry category people have found some difficulty to find out the exact location to browse the information.



• Even though the supporting entities have websites, more often there is no useful information.



• Even though banks are offering attractive business loans MSMEs have found very difficult to trace out their costing needs and other financial applications as expected by the banks. Therefore obviously most of them failed in applying financial loans.



As expressed above the fundamental problem is not the sources of information but the availability of information. Therefore that matter should addressed in the system in order to increase the availability of information even for those who are doing businesses out site the developed areas.



As addressed above the availability of the data is a key problem in the industry and more importantly that information should be in a categorized manner. Therefore the study further approached to develop a hierarchy for the MSME sector and that hierarchy is given below.



Finally it can be finalized that the main deficient section in the whole industry is the hub that enables to integrate the information sources and people those who require such information.


2.1.2 Lack of Proficiency in financial applications.




Basically better financial practices support MSME to experience high profit in the long run due to the better forecasting techniques and cost reductions. One of the main weakness of the local MSME is that they have ignored this long term benefits and that will result in diluting the company performances in the long run. This is one of the main reasons for the short life time of the MSME businesses. Every day number of new ventures started where many of them withdraw from the market within short time.



When it comes to the financial needs it is not only the money but the management of the costs and incomes. Therefore basically there are key areas that should be undertaken by a prospective venture in order to experience long term benefits.



Key financial areas to consider:



• Deriving a business idea into practice



• Developing a Business Plan for a new business or for an expansion of the business



• Maintain standard financial modules like Profit and loss account and the balance sheet



• Maintain days to day costs and records of other expenses (book-keeping).






To be Continued