How does your proposed innovation leverage public intervention in catalyzing private SME finance?
Co-operative enterprise efforts in Sri Lanka were successful from 1965 to 1975 until restrictions on import commodities hampered the economy in mid 1970’s. Then, economic reforms in the early 1980s swung to the other extreme emphasizing the free market as a solution to all problems. This took over the entire society, widening the gap between the rich and poor. Today, the approach to poverty reduction with regards to financing, from the grassroots to national levels, micro credit and international projects all depend on loans and debts. It ignores the need for capacity building and partnerships.
Partnerships and collaborative investments are needed in order to develop the economy in a more sustainable way. The National government initiates partnerships as well as collaborative efforts for larger enterprises. This project focuses on micro-enterprises and low-income communities. The project encourages collaboration and partnership between the private sector as represented by Chambers of Commerce, and poor communities as a way to develop skills needed to run a business, and leverage the Chamber’s purchasing power. The partnership in Kurunegala has been catalyzed by the VanLanka Community Foundation operating under the umbrella of the Sustainable Cities Foundation, and would assist in the skills training and capacity building efforts.
The initial grant is needed to provide training, and seed money to start up the pilot business. The commodity retail business will then create a revolving fund that can be used for other investments, and/or activities of benefit to the community but not necessarily profit-driven. There are already several Chambers of Commerce around the country interested to see if the model would work. If the pilot project is successful, the public investment is focused on the training/capacity building, while the private finance would come in the form of a loan for the start-up of the business i.e. the initial purchase of the wholesale commodities and shop rental.
What barriers does your proposed solution address?
Informality, Lack of collateral, Lack of financial capacity, Lack of SME access to skills / knowledge / markets, Unavailability of financial products tailored to SME needs.
If you checked any of these barriers, describe how your solution addresses them
The solution addresses the informal nature of micro-enterprises, their lack of collateral and unavailability of loans to start up this kind of business. Most importantly, it addresses the lack of skills, knowledge and access to markets through the partnership between the Chamber of Commerce and the youth group.