By Ruvini Jayasinghe
Creating a rich entrepreneurial culture is the collective responsibility of a nation and not the sole responsibility of individual entrepreneurs. It is in fact, the joint responsibility of all stakeholders from policymakers, financiers, service providers to the families of entrepreneurs.
Mrs. Samadanie Kiriwandeniya, who heads the SDB bank says that “We are not supporting the entrepreneur enough to build a substantial wealth for the country.”
In the following discussion, the Chairperson Mrs. Kiriwandeniya takes BMD through SDB’s role in the SME sector, which she identifies as the key platform for building an entrepreneurial nation.
The SDB bank : The SDB bank (SANASA Development Bank (PLC) was created in 1997, by the Federation of Thrift and Credit Cooperative Societies in Sri Lanka, to channel funds from financial markets to rural areas to improve household income, develop commercial ventures and support sustainable growth, creating a more inclusive economy.
The bank was a natural development of the SANASA Movement, which was established by re engineering the thrift and cooperative societies, in 1978, when about 40% of Sri Lanka’s population lived below the poverty line. With this percentage at 8% today, the bank has since diversified its portfolio into SME financing, treasury transactions, and transactional banking. The bank targets high growth and mobilizing capital, and its new strategic plan embraces new technology based approaches to deepening and excelling its efforts to deepen finance, especially to cater to SMEs in Rural Sri Lanka.
SDB bank with its link to a long history of community development process thinks that the main role of a development banker should be building the wealth of the nation, not only the balance sheet of their institution.
Mrs. Kiriwandeniya holds a degree in Sociology from the University of Peradeniya and a Masters’ Degree from the University of Saskatchewan, Canada. She has extensive experience in cooperative banking, gender streamlining and conflict management.
She grew up with the SANASA movement and was exposed to a culture of volunteerism, and an unstinted loyalty to the inclusive development ideology. Her father, Dr. P. A. Kiriwandeniya, is the pioneering leader of SANASA brand, who created a vision and a mission for a dying movement and mobilized I million membership around that brand. The process had been an inspiration for Samadanie and a natural training ground that guided her to choose a path that ensures the upliftment of the rural and informal sector of Sri Lanka. In a family of five girls who were all pursuing studies in science and mathematics, Samadanie’s deep-rooted interest and convictions drove her to choose social sciences for her academic studies.
She initially joined SDB bank for a short term, to assist the national leaders of SANASA group to strategize an island wide post Tsunami rebuilding response, gave leadership to implement some key projects that enabled the cooperative movement to rebuild their institutional capacities to provide better services to the community and enabled SANASA Development Bank to penetrate and deepen its financial services in the Eastern province, Northern Province and Southern Province.
Ms. Kiriwandeniya is serving the 7th year as the chairperson of SDB bank, and steered the bank through many challenges, both internal and external, to stabilize it as the fastest growing SME bank in Sri Lanka.
Q: Experts believe that developing a rich entrepreneurial culture is a key to developing our country. In your view what is an entrepreneur’s role in a nation/ society?
The main role expected by the economy of a country from its entrepreneurs is the creation of wealth. However this is not the sole responsibility of the entrepreneurs. I believe that it is a joint responsibility of policy makers, service providers including lending institutions, market makers and even the family of the entrepreneur. The entire stakeholder body should be mobilized to a single rhythm, if we need to create an entrepreneurial culture and a national wealth creation process, which I don’t see in Sri Lanka.
If wealth creation and nation building through real entrepreneurship is a national project, it requires a cohesive national long-term plan of about 20 -30 years. It should not be short term plans initiated by successive government to be shelved with the change of government.
If you see the way the country has been behaving in the last ten years, each time we have a budget deficit or payment deficit we have increased the sale of our human resource to cheap labour market or sold the most precious national resources. The entire country including the political leadership behave in an ultra consumption oriented manner. We neither produce enough to get us to strong bargaining position in the global market, we save the currency that we earn by selling our best assets for the use of a future generation who hopefully will be more intelligent as Sri Lankans.
Sri Lanka is not a state with a strong treasury. Sri Lanka also does not have big corporate global brands that can create wealth for the country. We have no brand names that can be marketed across the globe like for example: Toyota, Anchor, Nike, etc. Instead we have small SME businesses that can be made into sizable economies if correct eco system is developed. And that is why I think that building entrepreneurship is a country’s collective responsibility. I don’t think we can actually create entrepreneurs. In my opinion entrepreneurs are people who can take a calculated risk and pave a path for themselves and for another group of people to follow. We can allow and create spaces for such entrepreneurs to emerge and develop themselves.
Q: SDB bank has achieved a name for its services in the SME (Small and Medium Enterprises) sector. Do you consider developing entrepreneurship especially in the SME, the main task of a development bank?
A banks main role is providing financial services, may it be for commercial, retail or development purpose. We are a development bank with a commitment to grow local economy and empower communities. Working with entrepreneurs especially rural and the semi urban, exposed us to the many challenges faced by the entrepreneurs. They struggle to steer their way due to many systemic barriers. They lack market information to expand business, skills and guidance for market adherence, they have restricted access to the correct finance products and low interconnection within the value chain. Also they do not know where to position themselves in the value chains. In addition to that due to many other socio cultural and regional issues, their mobility and access is restricted. Therefore, merely providing easy access to finance is not the answer to building entrepreneurship in a sustainable nature. Actually, finance is the last of the requirements. Before that we should assess situations, markets, individual capabilities and their and our readiness to take the risk. We should provide a culture to support this risk taken by the entrepreneurs. We have to work as their partner and stakeholder in their enterprises.
Entrepreneurs do know the entire package available to them. They do not know if the enterprise will survive and be successful because they are not made aware of policy. For example, take a crop. If an entrepreneur grows a crop unaware of government’s trade policy, that is aimed at satisfying consumers, he may run into a problem of not being able to sell his crop as he would have to fight with imported crop that will be available in the market at a cheaper price. Since policy and service providers are not coordinated it fails to provide a culture for Sri Lankan entrepreneurs to take a calculated risk. We are not working as a team together, as a nation to provide that culture. Instead we call it as a high risk business and encourage people to move out from production process. This is why most of the young budding innovators and entrepreneurs think Sri Lanka is not where they should plan their future.
We have to accept the collective responsibility of a weak or non-effective system that makes entrepreneurs struggle and become unsuccessful or not reach higher goals and projections. We should have a national SME flagship program with a consistent policy, rather than a government flagship program which will change with successive governments who come into power. We as citizens, tax payers have a right to demand this from the state, and get engaged constructively to build it.
Q: Do you think banking sector is performing their role in this mission of developing Sri Lankan entrepreneurship ?
I think Sri Lankan banking sector is very much commercial or retail driven. Development banking is not understood or supported by the policy makers despite all the talking and policy documentations.
We should play a the role of the enabler, assisting entrepreneurs (who are unsophisticated, largely rural or semi urban people) to organize their finances in a better way, rather than expecting them to come with perfect business plans so that we can just provide finance for their projects. The interaction between the financier and the customer which is crucial in building entrepreneurship has to improve a lot, starting with the bankers being trained to not cut deals to make their targets, but really to understand the difficulties of their customers and to grow with them.
If we want to unleash the potential of the real Sri Lankan entrepreneurship to a globally competitive level, through real development banking, we should change our mindset and begin to think as citizens and not as corporates, or regulators, sitting in their own comfortable silos. Stakeholders such as bankers and chambers also have their own discussion separately. Therefore, we cannot understand where the country is heading towards.
This culture is slowly changing. For example, Ceylon Chamber of Commerce now have banks like us who are working largely with the stake holders who are at the mid and lower ends of the value chains, as their members. But I think this discourse should be more dynamic even in the regions, not only in Colombo. Only then we will get a collective tone and a rhythm to build entrepreneurship
To develop SMEs we have to get closer to the people, the entrepreneurs. The banking fraternity is more focused on fixing ratios and numbers etc. Of course, it makes sense for financiers, but they need to also engage with real people, and explain the process of strategizing their businesses, or selecting the right business. We should be engaging with people whose loans get rejected from the banks, which is about 40-50 percent of the SMEs.
I have engaged with some of these SME people in different forums. In most of these places, they are very negative about the banks. They say that no bank really understands their risks or actually supports them.
Now with the IT industry entering into some of these markets I think there will be more positives. The danger is that IT and mobiles will tap people individually, letting the human away and getting more services on online platforms. But whether customer is financially literate to select the products that are offered to them on these platforms is still questionable, when you look at the rising indebtedness due to over microfinancing that we see in every part of the country.
Q: SANASA is well known for its micro finance programme. Do you see any difference in micro finance and SME finance?
Yes. There is a very clear difference. Other than the size of the enterprise, SME customer is very different from micro finance customer.
Micro finance customer who is engaged in a business is at a start up level with limited skills and very small business plan that enables he or she to survive in the periphery of the economy without falling into the poverty bucket. They are rarely engaged in one business for a long period, and have a tendency to drop the business if a better income opportunity comes along, such as migration, regular pay, etc. Micro financing (if it is done to develop the customer) is therefore a starting tool to enable people to find a breathing space to start thinking about a better future. SME financing on the other is about supporting a person who takes a risk and engages with the market with a sizable business. It is about facilitating to create jobs and wealth, and enabling the risk takers to think long term.
SANASA movement started with a micro finance driven development program. It has today become one of the best micro-financing models. We have assisted nearly one million people directly to manage their small economies. We have not restricted to entrepreneurs. We have provided finance to all needs of the community. But we have realized that we need to move into a more focused SME financing programme if we need to create wealth and build the rural economy.
As I mentioned earlier there is a clear difference between micro enterprise development and SME development. I think we have run the full circle in microfinancing in the country and it is high time that we focus on SME. The danger I see is that the SME support services have not done the differentiation and treat both customers in the same manner. This is why people are talking about subsistence, philanthropic approaches, spoon feeding when it comes to SME development. We should start looking at small and medium entrepreneur as critical partners, not as beneficiaries of restricted low cost funds.
Our bank’s strategic focus going forward will be on graduating its microfinance clients to the SME level. If we do that it will filter more wealth to a larger number of people. This will reduce the polarization and create a more cooperative, inclusive economy. SDB has invested heavily to train our staff for this mission and we have re engineered our core systems and processes to support this. We are also looking into partnerships with other organizations that can add value to our customers.
Q: How can we improve our level of support to entrepreneurs?
We need to look critically at our own selves and have a clear focus. Not all business people are entrepreneurs. Some engage in business but they are not entrepreneurs while others have entrepreneurial capabilities but are not even aware of it. We need to analyze our customers to understand who has the capacity to go far.
We need to evaluate our own products and see if they are suitable for the entrepreneur. We need to study our communication to see if it is discriminating or inclusive. We need to also ensure that services are available to entrepreneurs when they need it and where they need it.
Bankers should create adequate liquidity among ourselves to fund this sector. We have platform problems, product problems, liquidity problems that we need to sort among ourselves. All of us can do better, especially policy. Policy becomes a policy only when it is implemented. This country has so many policies, developed by very high profile people, in documents. If we can have one single, simple, policy as a country, for entrepreneurship development we will succeed better.
Q: What are the unique products SDB bank has created to build entrepreneurship?
Our work with youth and women entrepreneurs is special. Both these segments have problems unique to them and their vulnerabilities need to be recognized seriously when developing products and services. We have two specific products for them called Uththamavi for women and Jawaya for youth. The speciality of these two products is that they are products bundled in a programme that offers a package of finance and non finance services. We create these programmes with the partnership of SANASA movement, which is a unique opportunity we have. These customer value propositions were developed through a 40 year development experience of SANASA movement and the 20 year experience of SDB bank. With these two programmes we can confidently support our women and our youth to build a better future by banking with us.
If you look at todays customer base, both the women and youth are largey engaged in the informal market, without a stable income base. Because of this they do not have the luxury to plan long term. Meanwhile the country is aging with no solid balance sheet. This is a clear push factor for our labour force and innovators to move out of the country leaving old and mediocre group of people to build this nation. We neither have proper pension schemes, and the health costs will be very high. Geriatric care will be a major challenge due to high cost and restricted HR.. A large number of our woman workforce are migrant workers or employed in the apparel sector and on retirement they will lose their social connections and will be isolated.
We have to prepare these women now when they are earning money. Most insurance agents also approach men. Most of the women do not even have life insurance. We need to encourage women who are now in the productive age to start planning for their retirement. Although these are not financial issues, these are going to kill the finances that they have. And these will create longer term financial and non-financial issues to the country. bmd