Tapping windows to open an upgrading platform for small ventures

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Tapping windows to open an upgrading platform for small ventures

Sri Lanka
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

Promotion of micro/small enterprises up to medium level by establishing a mobile enable information exchange system with SMS and digital content display via internet at banks and chambers to attract potential investors towards mobilizing equity while Creating a micro insurance system to overcome barriers of women entrepreneurs towards SME finance.

About Project

Solution: What is the proposed solution? Please be specific!

Although the Srilankan SME financing target women involvement, still there are seen and unseen barriers to overcome this issue. At the same time there is no methodology of promoting potential opportunities for micro and small entrepreneurs to upgrade their business activities with new equity partners and potential investors to find proper opportunities to become equity partners. This an unique opportunity for both entrepreneurs and potential investors to create healthy investment.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

We expect to reach 200 entrepreneurs and 200 potential investors during the first year and expect to establish 50 partnerships within first 3 year periods that would give a shop window for other to follow with the success stories. The most significant impact would be: 1. The opportunity for middle income level community to find a secure and reliable investment for their lifetime savings. LKR 170 million [1.7 million US$] would be invest in safe and reliable investments. 2. The above outcome would create 300 more employment opportunities creating around 360000 US$ household cash flow for 300 households enhancing their lifestyles. 3.Utilization of raw materials and expanded sales and market efforts would create indirect income generation opportunities for around 600 persons as suppliers, sellers and promoters creating another cash flow of around 400000 US$ annually for these indirect income generators. 4. The most significant social impact is creating an opportunity for savings of middle level income of public servants and pensioners to earn a justifiable income source other than the low interest saving opportunities in commercial banks. At the same time the changing of lifestyle of low income families’ by providing more direct/indirect employments as well as the opportunity for producers and service providers at rural level to obtain a justifiable price for their product &services.
About You
Organization:
social performence development centre
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About You
First Name

Samanthi

Last Name

Ratnayake

Your Organization

social performence development centre

Country

, NW

About Your Organization
Organization Name

social performence development centre

Organization Phone

094372289898

Organization Address

193,puskoladeniya,Giriulla,Srilanka

Organization Country

, NW

Organization Type

Private Institution

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Your solution
Country your work focuses on
If multiple countries, please list them here. If your solution targets an entire region, please select it below
Region(s) your solution focuses on:

South Asia.

Range of turnover in your target firms, in USD

$1-5 Million.

Average turnover in USD of your target firm

1000000

Number of employees in your target firms

5-24.

Average number of employees of your target firm

6

Specify the size, average and range of expected loans or investments in each target firm

We aim at 50 target firms within the first 3 years and each target firm we expect averege US$ 15000- ranging from US$ 3000-20000

What stage is your solution in?

Idea phase

Innovation
How does your proposed innovation leverage public intervention in catalyzing private SME finance?

Through the computer you can process business activity in order to increase the productivity and the quality by networking process and when it comes to the place where you can’t wire, the mobile technologies introduced. Hence we will make use of this trend and facilities to create a platform with easy access through internet, touch button screens and mobiles supported with required software to function as a stock market for SMES to disseminate data and information similar to the stock market to make aware the potential small investors who could become either share holders or partners of such enterprises which are looking for upgrading their enterprises from micro to Small and Small to medium. Alike the corporate sector which published their merits facilitating the transactions in the stock market that enable to finance their expansion and development activities, in most of the countries there is no such mechanism to reach the small investors who wish to earn a justifiable interest for their savings through a reliable source evaluated by themselves with relevant available, reliable and verified data & information. Most of the savings of middle income people /government servants/private sector employees come through pensions & gratuity funds, savings from expatriate employments, selling property or inherited funds etc;. At the moment the only solution available for them to earn on their savings is to deposit in savings accounts in financial institutions at very low interests. As a result in recent past most of these small investors were taken into ride by bogus investment and saving companies which offered very high interest rates and caused heavy losses to the depositors which now has become a national issue.
Hence crating interventions to open the windows of opportunities to create win win situation for both entrepreneurs and potential investors will enhance the growth of SME sector as well as creating a new market avenue for the people to earn more with reliable ventures with assurance. In our project we will establish an information network supported by software to cater the need of the SMEs and potential investors via mobile phones/internet/touch screens placed at development financial institutions to link the suitable partners in creating win win situation for the entire stake holders involve in this value chain. Daily updated information would be able to get easy access through SMS via mobile /CDMA phones. This would attract the public interest in searching for investment in SME sector as well as the entrepreneurs to obtain results to find a suitable partner or share holder in improving their existing enterprises. Web portal would be the main platform supported by mobile enable software system and touch screens that make easy access to public.

What barriers does your proposed solution address?

Asymmetry of information, Informality, Lack of collateral, Lack of financial capacity, Lack of SME access to skills / knowledge / markets, Unavailability of financial products tailored to SME needs, Lack of institutional capacity of financial intermediaries, High transaction costs for financial intermediaries to serve SMEs, Lack of competition / incentives for financial intermediaries to serve SMEs, Underdeveloped local capital markets (term local currency funding, exit options for SME equity), General barriers to SME development related to investment climate, Lack of financing to women entrepreneurs.

If you checked any of these barriers, describe how your solution addresses them

a) Asymmetry of information –Updated data and information of the proposed network with data & information would address this.
b) Informality –Our project will address the non existence of such formal interventions & network at the moment in the country
c) Lack of collateral – In obtaining finance facilities for expansion and development of the existing Micro and Small businesses, the lack of collateral plays the role of bottle neck as most of these Micro and Small entrepreneurs are coming from middle income levels whom are not having wealth to offer as a collateral. Further it is very difficult for them to find personal guarantees for SMES in obtaining financial needs. In our project this is the main issue we address as it promote public to become share holders or investors in developing the SME sector.
d) Lack of financial capacity- The primary objective of the project is to address this issue as the goal of the project would address this issue to overcome these difficulties faced by existing SME sector.
e) Lack of SME access to skills / knowledge / markets-The linkages and network we create in the project activities would enhance the effort of SMEs to acquire the required skills/knowledge/market through the partnerships they could be created as a result of this.
f) Unavailability of financial products tailored to SME needs – Once the partnerships would be created automatically this issue would be addressed.
g) Lack of institutional capacity of financial intermediaries- The individual approaches and partnerships that would create as a result of the project activities would be an ideal answer for this.
h) High transaction costs for financial intermediaries to serve SMEs- As this partnerships base on mutual trust, reliability and understanding about the type, methodology and the other factors like skills/technology and knowledge , the transaction cost would be negligible compare to existing financial transaction cost prevailing in the market.
i) Lack of competition / incentives for financial intermediaries to serve SMEs- The success stories would create competition for such enterprises.
j) Underdeveloped local capital markets (term local currency funding, exit options for SME equity) – Eventually along with the success stories, the system would be attracted and a capital market would be developed.
k) General barriers to SME development related to investment climate- The general barriers for SME development is Finance, Technology, knowledge, skills and Market access. Hence along with the networking process we could address these issues with confidence.
l) Lack of financing to women entrepreneurs-Partnerships we proposed would be the ideal intervention to overcome this issue.

Impact
Provide empirical evidence of your proposed solution's success/impact at present. If your project is in the idea phase, please provide evidence that speaks to its potential impact

The factors affecting for a SMEs to develop is obtain appropriate technology, Market development and financial needs. Most of the SMEs are entrepreneurs work hard to take the initiatives in establishing their enterprises with their savings, partnerships and loans obtain by financial institutions and other sources like leasing. Hence in expanding or developing their existing product and services are being inhibited by the lack of capital investment as bank insist collateral to provide this needs that takes long procedures and time along with high interests which the anticipated cash flows cannot absorb. There are no success stories at the moment as this proposal is in idea phase. But once explore the nature of existing partnerships we could see these subsequent partnerships created in some of the enterprises in expanding, found it had been done though either base on mutual trust relationships or friendships which are showing good results. Taking this example ,if we could create awareness along with actual data, information ,feasibility and potential assurance for the investors who wish to earn more on their savings and belongings, it would create an opportunity with a platform to enter in fulfilling their interests and needs towards investments. As everything depend on the mutual trust, once we could create that trust through the proposed system, the impact of growth of these SMEs would definitely add a significant share to National Growth indicators. Further the employment created would be enhancing the unemployment as well as poverty as most of the SMEs are base on rural economy.

How many firms do you expect to reach?

In the first year we expect to reach 2000 potential public investors/ 200 entrepreneurs and expect to establish 50 nos successful partnerships in developing and upgrading the SME sector.

What is the volume of private SME finance you aim to catalyze?

Promoting a Micro up to Small level we expect around minimum Rs. 1 million per enterprise and we expect to raise Rs 20 million for micro sector. In case of Upgrading small to medium sector need average Rs 5 million for an enterprise costing Rs 150 million.

What time frame will be required to reach these targets?

The first year will take to promote and introduce the idea along with awareness campaigns and data collection. We expect to achieve 10 partnerships within the first year and to reach the target of creating 50 successful partnerships will take 3 years as this being new interventions and need some time to establish. In stabilizing this it need hard and trustworthy approaches and interventions to convince the both potential investors as well as existing entrepreneurs on mutual benefits, technology application and good management practices & knowledge

Does your solution seek to have an impact on public policy?

Yes

What would prevent your solution from being a success?

Being a primary programme, the reluctant of entrepreneurs to reveal actual facts about their business due to exposure to tax and other reasons would be a bottle neck to address in developing the proposed partnerships as without actual facts, it is not that easy to convince an investor to create a trust to become a partner or share holder in that particular enterprise. Hence this is a very serious issue to be overcome with appropriate strategy. Further unwillingness of exposing their businesses for public also play a vital role in preventing reach the project goals.

Sustainability
List all the funding sources that are required for the sustainability of this solution

1. Creating awareness/training & Development-US$- 4000-We except to raise this via grant
2. Software to support the system-US$-15000-We expect to raise this via grant
3. Web development and digital content development/servers/SMS gate-US$ 5000-Via grant
4. Hardware-US$-8000-Via grant
5. Implementing Cost-US$ 9000- To be bared by the implementing organization [SPDC]
6. Operational cost-US$ 4000- To be bared by the organization [SPDC]

Demonstrate how your proposed solution has the capacity to graduate from dependence on public finance. What is the time frame?

Once we establish few success stories within the first year, we could reach the target of establishing 50 partnerships within 2 years. Once this is being achieved the system would automatically graduate from public finance along with partnerships, private funding and improved cash flows.

Demonstrate how your proposed solution will survive a potential loss of its largest private funding source

In this proposal we suggest to avoid large private funding, instead we promote partnership shares in the form of small funding by more partners. This strategy will avoid large scale private funding that could be a risk in case of a loss of such large funding source.

Please tell us what kind of partnerships, if any, could be critical to the greater success and sustainability of your innovation

The trust between the entrepreneurs and the potential investors are very critical in achieving the goals of the project.

Are there non-financial issues that could threaten the sustainability of your proposed solution?

• In promoting the project activities, the ideal places for public demonstration are financial institutions and Banks. As they too have financial solutions for fund disbursements in the form of loans, they may reluctant to allow us to place the touch button screens for providing the data & information regarding potential investments.
• Fear of exposure for tax due to the existing trend of nonpayment of taxes by the SMES will also play a role of barrier in providing actual facts and figures enabling potential investors to evaluate the enterprises for investment.
• Lack of legal coverage for such partnerships as the existing Company act of the country does not provide it.

Please tell us if your proposed solution aims to scale up through a high growth sector, expand immediately to multiple sectors, and/or scale up geographically

Although it aims to develop the SME sectors to develop, we could expect the eventual windows that would be opened to entertain high growth sectors following the trend to meet their needs as well as the interest of investors to provide private funding other than formalize services through stock exchanges. As this is still in idea phase we are not tin a position to make commitment and predictions as it is too early to arrive such conclusions. But the success stories and trend that would be popularized by that time may hit the high growth sector as well as opening this shop window for others to replicate it geographically and regionally.

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