Lankan women entrepreneurs need US $ 350mn in financing: World Bank

• IFC to extend US $ 15mn credit line to Senkadalgala Finance to be lent to WMSMEs

Sri Lankan women entrepreneurs are in need of US $ 350 million in finances, according to the World Bank Group’s private equity arm, the International Finance Corporation (IFC), which recently outlined a potential investment worth US $ 15 million in an effort to pique further investor interest in the area. 

“The credit gap for women entrepreneurs in Sri Lanka is estimated at US $ 350 million,” the IFC said.

To this end, the IFC has proposed to extend a US $ 15 million five-year loan to Senkadagala Finance PLC (SFCL) to provide financing to women-owned micro, small and medium-sized enterprises (WMSMEs) and the project is expected to directly fund around 2,500 such businesses, which would create between 1,500-4,650 new employment opportunities. 

The project, which is a first for the IFC, both in terms of financing women entrepreneurship and providing financing in local currency, is pending approval and would go to the IFC Board for a decision at the end of this month.

“This project is likely to incentivise banks and other non-banking financial institutions to launch funding programmes targeted at women. The availability of credit would enable the WMSMEs to compete and be part of the local or global value chains and grow their businesses by accessing domestic and foreign markets, which are not currently accessible,” the IFC said.

The World Bank, in its recent Development Update, said that small enterprises and especially the WMSMEs are facing difficulties in raising finances due to biases from financial institutions, as most WMSMEs do not have significant assets to pledge as collateral and even if they do, the collateral required is higher than the norm.

Of the total number of employers in Sri Lanka, just 10 percent are women, according to the Institute of Policy Studies (IPS). An IPS study published last September on WMSMEs in the spice and coir industries found that 53 percent of the obstacles in these firms were related to liquidity and other financial problems.

Further, less than 37 percent of women in Sri Lanka were engaged in economic activities, according to the Census and Statistics Department (DCS) survey for the third quarter of 2017, leaving a large portion of economic potential untapped.

Even among the economically active women, just one percent were employers and unemployment was higher among women than men.
Around 80 percent businesses in Sri Lanka are small and medium enterprises—led mostly by men—which are biased against employing females, according to the government.  

A DCS survey released last month showed that the top reasons for this situation, according to the employers, were family commitments and maternity duties of women, along with concerns related to dedication to work and absenteeism among women.

The government has been attempting to change the mindset of the employers with regard to female employment by promoting on-site day-care facilities and flexible working hours in the 2018 budget. 

On the other hand, increasingly WMSMEs are becoming a major source for employing women in developing economies, according to the IPS.
Following the IFC funding line, SFCL is expected to increase its efforts in the area.

“Over the next five years, SFCL is projected to provide in total 20,000 facilities to women-owned enterprises totalling approximately US $ 160 million,” the IFC said.

The project will also support SFCL to increase its branch network over the next five years, especially in rural areas where access to finance is a challenge.

“The combined economic activity would result in an increase in tax revenue to the state at a time where the fiscal position is under stress due to high debt servicing cost,” the IFC said.

SFCL, which has been an IFC client since 2014, is headquartered in Colombo with 90 branches and service centres spread across the island.
So far, the under regulated micro credit institutions have been lending to micro, small and medium-sized enterprises in rural areas to disastrous effect, where business owners are trapped in debt due to a lack of financial acumen and some have even committed suicide.

However, the IFC said that it would be providing technical assistance to SFCL with regard to WMSME lending.

“The company can leverage the IFC’s global understanding of best practices for these segments and further fine tune its product and underwriting framework,” the IFC said. (CW)