In The Raw

Southern Spring

By Indrajit Samarajiva⋅October, 2009 ⋅  Email This Post ⋅  Print This Post ⋅ Post a comment

Small Business People : They are ready and willing to grow.

Small businesses more than mega projects will develop this country, create jobs and lift people out of poverty. Infrastructure is important, but any return on investment will come from the innovation and energy of Sri Lankan entrepreneurs.

The value is not in the infrastructure, but what the infrastructure enables us to do. I visited small business people in Hambantota, Kegalle, Kandy and Anuradhapura and they are ready and willing to grow. Investing in them should be a mega project of its own.

Hambantota
The Hambantota district more than any other is known for its mega projects. A port, airport and many buildings are planned. However, the regular people there also need investment. I met a ceramics manufacturer named Prasad Narathota. He learned his trade as a driver and eventually set up his own shop. As the north and east open up they’re seeing a brisk trade of souvenirs at festivals, but he needs investment to meet demand.

These type of businesses require very small investments. In this case less than a million rupees to convert his kilns from gas to kerosene, cutting his firing costs in half. These are small investments that can be recouped quite fast, but it is too small to get decent interest from the banks and too big for micro-credit. In effect, these opportunities often fall through the gaps.

Kegalle
In Kegalle there are number of cottage industries that are ready to grow as well. In this case the investments are even smaller. Indika Ranasinghe is in the paper and board business and he wants the machinery to begin recycling his own paper. Priyantha Sisirakumara makes jewellery in the annexe of his home and wants to purchase the raw gold and silver to make his own designs. These people have the skills and drive to succeed, but not the access to capital.

These small businessmen are the most compelling business cases, but also the hardest to address. The amounts they need are too big for micro-finance and too small for most banks. Another type of financial instrument may be required for them to grow and enrich the economy while at the same time limiting risk for investors.

Kandy
Kandy is already one of the biggest and best known cities in Sri Lanka, but it too has room for growth. The Kandy Chamber of Commerce is looking for investors to set up a convention center for regional business and trade fairs. People in the center currently need to go to Colombo or BMICH for these purposes, but Kandy already has the infrastructure to house and support something similar locally.

Kandy also has a variety of other business people ranging from Mr. D.H. Swarnathilake making measures, scales and scientific equipment for schools to Mrs. Mumtaz Chondon and Mr. R.S. Balanathan making textiles and clothes. The latter is looking for investment to recycle plastic rather than importing it. This environmental ‘green’ business seems to be a common desire among many business people and makes for an attractive ethical investment.

The textile industry is one of the strongest in Sri Lanka and takes many different shapes. There are people like Mrs. Chondon who operate small workshops out of their homes, producing quality shirts, shawls and bags for sale in Colombo and Kandy. Then there are large scale factories like Mr. Balanathan’s Ko Lanka which employ tens of people and have many looms. The latter is trying to scale up his operations by building a dying plant to produce his own yarn. He said he is even willing to set this business up in the east, though he has available land in Kandy.

Anuradhapura
There are a variety of intelligent people and successful businesses in Anuradhapura, but they complain about lack of deeds to their land. This prevents them from borrowing against fixed assets and investing in their businesses. What happens instead is that capitalized individuals from Colombo come and take money out. One member of the chamber said that it takes 48 steps to obtain a deed and that he himself has been waiting 5 years.

However, businesses do continue to operate, even if they can’t grow to their full potential. One business is Himalee Curd. You may know their ubiquitous product already. They are trying to expand while creating livelihood for local farmers using scientific methods. We met two graduates from the University of Peradeniya who spoke of new ways to feed and care for buffalo so that they remain productive and profitable, even in the rainy season. This company is looking for investment to purchase productive buffaloes, train farmers in their care and then recoup the investment through increased production of curd.

Conclusion
All these businesses have one thing in common, which is that they are hopeful. What they lack, however, is investment. Some of the ventures are honestly risky and the reason they don’t get capital is because they don’t have the actual collateral to back it up. In the Anuradhapura cases however, this is as much through government inaction as any fault of their own. In the cases of very small businessmen like in Kegalle, Hambantota, etc we seem to need something for in between micro and regular finance to make the most of their initiative.

In all, however, Sri Lanka is open for business. These people will keep operating and innovating regardless. Some will make large profits in the post-war boom and some will fail, but they are all opportunities for investors to make money while helping the country. Mega projects aside, this type of activity is the life blood of the country. We just need a bit more capital circulation for the economy to really start kicking.

For more info on or to invest in these projects please visit www.bizpact.org.