Sri Lankan Women on Small and Medium Enterprises: Why so few and how to have more.

Sri Lankan Women SMEs trend

Female participation in the labour force at 40% is significantly lower than for men (75%) in Sri Lanka, Also unemployment rates are significantly higher for women. There

is also a large gender gap in the share of women who are unpaid family workers, who account for 20.4% of women compared to 3% of men.

In Sri Lanka SMEs contribute about 45% of its gross domestic product and provide about half of the country’s jobs. Yet, among SMEs, only 25% of entrepreneurs are women. Their lower capacity contributes to a $350 million gender credit gap, according to the ADB. Capitalising on entrepreneurship to economically empower women and generate inclusive growth in Sri Lanka will require reducing various bottlenecks, especially access to finance.

SMEs role for the development

SME has been recognised as a major source of global economic growth and employment and women entrepreneurs have been acknowledged to play critical roles for bringing their ideas and capabilities towards successful achievement of the SME development in their countries. Prior literature indicated that capital, networks affiliation, education, training and counselling, and usage of ICT are important factors influencing the growth of women entrepreneurs.[1]

To benefit from economic opportunities and contribute to national growth, women in the Middle East need a level playing field. Educating women has not been enough to change social norms sufficiently, so much remains to be done. Women’s opportunities for work are far fewer than those of men, evident in the high unemployment among the relatively low share of women in the labor market—and even more in the concentration of educated women among those unemployed.

Leveling the playing field requires building an environment for these skilled women to create their own opportunities. This means addressing social norms about working women and promoting an environment where women can balance work and family. Progress on both fronts is an urgent need. The degree of job segregation remains high: most jobs are still in male-dominated sectors that may be seen as inappropriate for women. And the belief that men, as the traditional breadwinners, are more deserving of jobs is still widespread[2]

Claiming the position among the third world countries, Sri Lanka has the highest literacy rate in the South Asian Region. According to the statistics, females are more into education than males, but when focusing the attention on the prevailing labour market of Sri Lanka, the percentage of male in employments are higher than the females.

Women plays the key role in handling household activities. Yet their leadership role is not recognized by most of the societies. They are good team players in every aspect. In Sri Lanka, women are caged to their households. Most of the women claims that they have no time to engage in an employment as they are emotionally and mentally bound to their households. But some women break this cliché beliefs and engage in employments or start their own businesses, but the amount is less. Some women have identified that entrepreneurship build the social recognition of the person and as well empowers them economically. These businesses falls in the category of small and medium-sized enterprises.

What defines an SME?

Small and Medium Sized Enterprises can be regarded as the backbone of a country. They are spread all over the world. Generally they are the independent firms with a limited number of employees. But the number of employees differ from country to country. In United States of America, a small and medium-sized enterprise should not exceed 500 employees. The definition of small and medium-sized enterprises also differ from country to country as to the level of development they have achieved. In Sri Lankan context, a small and medium-sized enterprises should not exceed 300 employees and should not exceed a turnover of Rs. 750 million. 

The definition of the European Union on small and medium-sized enterprises is the category of micro, small and medium-sized enterprises is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro.

Sri Lankan government also recognizes small and medium-sized enterprises as the backbone of the economy, as it accounts for more than 75% of the total number of enterprises, provides 45% of the employment and contributes to 52% of the Gross Domestic Production. In Sri Lanka, Small and Medium Enterprises are classified into several sectors as, manufacturing, footwear and textiles, construction and engineering, power and energy, trading, beverages and foods, chemical and pharmaceutical and packaging.

SME Development, public and private intervention

The government and many non-governmental organizations provide services for women entrepreneurs and supports to uplift their businesses. Recently Asian Development Bank has given 12 million US dollars to the government from the Women Entrepreneurs Finance Initiative. The aim of this donation was to promote Sri Lankan Women entrepreneurs. Also, in 2017, the European Union has given a grant of Rs5.4 billion to improve the opportunities for women entrepreneurs with the aim of reducing the poverty in the Central hills of Sri Lanka. Business Development Service agents are non-financial services that provide a diversified services to different organizations and individuals including training programs, counselling programs, advices and many more facilities. They educate women on starting a business and to grow their businesses from micro level to small and medium-sized enterprises as financial support is not the sole factor that needed for the growth of a business.

Challenges

“In trying to increase the number of female-owned high potential startups, we basically boiled it down to three key things: access to finance, confidence, and a lack of role models or access to networks,” said Sinnamon. This statement is a general one for the female entrepreneurs.

 Access to finance is one of the critical components in growing female entrepreneurship. You know, across the globe 90% of funds are managed by men. Finance is regarded as the life blood of an organization. When focusing the attention on the challenges faced by the women who engage in employment, one of the main problems that can be stated is the financial issue.

In Sri Lankan context, women are more likely to stay in households playing their role as a wife and a daughter. At most of the cases, if women engage in a self-employment, it is mainly because of the financial issues they face, but there may be some other causes such as lay off from the work or unemployment or unsatisfied with the current job in order to start a business, any person needs to have sufficient monetary supply.

So they need to apply for a personal loan. In most of the cases women do not have any property on their name to use as an assurance to get the loan. And also, bankers think that women are not trustworthy enough to give a loan. These factors hinders women in getting financial assistance.

Another challenge faced by them is the lack of skills and training. When engaging in a business, or starting a business, they need to have the management skills, particularly, conceptual skills, human skills and technical skills. Women lack in these management skills will not prevail in the business environment. The entrepreneur needs to have these management skills in order to thrive in the competitive business environment. An exposure to the industrial sector will mold these skills in a person.

The availability of the traditional technology is another challenge faced by the women entrepreneurs. Women are not very much familiar with the latest technology instead, they are more familiar with the traditional technology: manual recordings. The latest technology is widely available, yet they need a considerable amount of money to afford such facility. Though they get latest technology, they lack the knowledge in handling the technology properly and effectively.

Women entrepreneurs are not usually aware of the subsidies and incentives available for them. It is mainly because the there is no source of information flowing to them. They are lack in information. Their lack of knowledge on market information is a risk and as well as a disadvantage when dealing with the competitors and when attracting potential customers. Also the market information is vital in taking decisions regarding the business and making strategic.

Poor Infrastructure and utility supply is another challenge faced by them in starting a business. One of the basics to start a business is the good infrastructure and utility facilities. These are needed for a business to be carried out smoothly. So the scarcity of the infrastructure facilities will make them divert their idea on entrepreneurship.

Remedial measures

Women entrepreneurship should be appreciated and should be encouraged as that would be an added advantage for the economy. Therefore remedies should be sought to overcome these challenges faced by women entrepreneurs. In order to overcome the financial problem, banks should make necessary policies customized for women entrepreneurs. They should be given the priority in giving loans and other financial aid.

Sinnamon shares that access to finance is one of the critical components in growing women entrepreneurship. You know, across the globe 90% of funds are managed by men. When you look at seed and venture capital funds, which are critical to start ups, the people making the decisions about funding correlates with the gender of people getting the funding. Because of this, it’s vital that we grow the number of women fund managers on the venture capital side. This may sound soft, but funding available to women is determined by the gender of the people involved.[3]

Since the women entrepreneurs should be encouraged, the government institutes should make necessary arrangements like awareness programs to make them aware of the current market trend and equip them with the latest technological knowledge and the required skills. So that the women will get recognition in the society and will contribute to the development of the country while helping to minimize the unemployment rate of Sri Lanka. So there are several additional steps that need to be implemented to support women to have a stronger presence in the economy, including better financial literacy and access to finance

In addition, mentoring is another aspect that needs desperate attention. Indebtedness created in some parts of Sri Lanka, particularly in the north, is largely due to female entrepreneurs being lured into making bad financial decisions in limited ventures. For example, handing out sewing machines and chickens would provide little assistance unless they have market access, capital, skills and a way to understand how to run their businesses and expand. In fact, in studies done on successful female entrepreneurs, mentorship has been ranked above capital in importance, and often makes the difference between a sustainable model and a pipe dream. 

References

Bergthaler, W., Kang, K., Liu, Y., & Monaghan , D. (2015). Tackling Small and Medium Sized Enterprise Problem Loans in Europe. International Monetary Fund.

Commisson, E. (2016). User guide to the SME Defi nition. Luxembourg: Publications Office of the European Union.

Gašić, M. (n.d.). The role of women in small and medium-sized enterprises. Croatia.

(2017). National Policy Framework for Small Medium Enterprise (SME) Development. Ministry of Industry and Commerce.

Priyanath, H. M., & S. P. Premaratn. (2014). Government SME Development Programs in Sri Lanka: A Review in the Lens of Transaction Cost Economics. Sabaragamuwa University Journal, 59 -81.

(2018). Quarterly Report of the Sri Lanka Labour Force Survey. Department of Census and Statistics.

http://www.ft.lk/ft-view/Women-for-SMEs/58-653893

https://www.researchgate.net/publication/45258172_Improving_Women_Entrepreneurs_in_Small_and_Medium_Enterprises_in_Malaysia_Policy_Recommendations

http://siteresources.worldbank.org/INTMENA/Resources/Environment_for_Womens_Entrepreneurship_in_MNA-7.pdf

https://www.forbes.com/sites/michelleking/2017/12/07/three-ways-to-advance-women-entrepreneurs/#18f0e847d675

 S.Thanigaseelan,

Assistant Director,

National Human Resources Development Council of Sri Lanka.