Youth enterprise in Sri Lanka | Daily News

Youth enterprise in Sri Lanka

Overcoming hurdles to take the leap into becoming entrepreneurs
Finance and Media Minister Mangala Samaraweera.
Finance and Media Minister Mangala Samaraweera.

The 2018 Budget speech, presented to Parliament by Finance Minister Mangala Samaraweera, featured the words “youth” or “young people” nineteen times. Specifically, there was an emphasis on youth enterprise or entrepreneurship, with an entire section of new policies and initiatives aimed at fostering the development of youth-led businesses. Clearly, the intention behind the speech—and the budget more generally—is to appeal to the sensibilities of young people in the country, to demonstrate to them that these new government initiatives have their back if they are to take the leap into becoming entrepreneurs.


Chairman, Youth Business Sri Lanka Samantha Ranathunga.

Chief Economist of the Ceylon Chamber of Commerce Shiran Fernando.

The question however is how far will this reach extend? And will this motivate greater entrepreneurship in the country? In reporting this article, we spoke with people from across various fields to discuss what processes young people have to go through today to start businesses. What we found is that these new policies and initiatives included in the 2018 Budget would be a welcome change from an environment currently seen as hostile to young entrepreneurs—but only if they are implemented efficiently and effectively.

How does the 2018 Budget Help Foster Youth Enterprise?

“If Enterprise Sri Lanka is to succeed,” said Finance Minister Samaraweera of the budget’s various policies aimed at reawakening the country’s entrepreneurial spirit, “the youth of our country must be made stakeholders of this national venture.”

“All our young people, whatever their social and education status may be, must be given equal opportunities to succeed and utilize their respective talents to the maximum.”

In this context, he spoke of three main elements to the government’s strategy of harnessing young entrepreneurs in the country to ensure that no youth will be left behind. First, he spoke of “13 years of education”—promising to invest in primary and secondary education “to ensure that young people will get 13 years of education irrespective of the outcome at O/Ls,” and emphasizing the necessity of vocational and skills training. Second, he spoke of “world-class university education”—promising to invest in university education with focus on modern curricula, research facilities and standardization.

Lastly, Samaraweera spoke of “market-oriented vocational training”—promising to invest in developing vocational training institutions to develop high quality market oriented training programmes. He elaborated that a common issue faced by youth today is that many lack the necessary skill set demanded by a competitive job market. So he outlined and detailed a forthcoming “Employment Preparation Fund” which the Ministry of National Policies and Economic Affairs will manage. This EPF will finance three to six month training programmes in specific skill sets demanded by the private sector. As well, he added that the National Youth Corps will receive more than Rs. 2 billion to strengthen its various skill development programmes.

Separately, he stated that the budget, from 2018 to 2020, will support the formation of 150 youth-centric startups. These startups will be supported by a comprehensive government package “which includes both non-financial and financial assistance including grants and the credit through the Enterprise Sri Lanka Credit Scheme to these companies.” The enterprise Sri Lanka Credit Scheme are a group of credit schemes with low interest rates in which the government will bear the interest subsidy.

Finally, acknowledging that the lack of capital or difficulty in accessing capital—due to both the cost and the requirement for collateral—have been main impediments for the development of startups, the budget proposes for the establishment of a Development Bank with an EXIM (exit-import) window, “to enable the much desired long-term financing for our private sector ventures.”

Current Hurdles for Youth Entrepreneurs

Youth Business Sri Lanka is a subdivision of the Chamber of Commerce, set up with the aim of promoting entrepreneurship among youth. Mentors are appointed to coordinate with new entrepreneurs on their projects to teach them about market, regulation, and business practices.

According to Chairman Samantha Ranatunga, also the Managing Director of CIC Holdings, young people are constantly facing problems with commercializing their projects and promoting them at a high level.

“The biggest issue for young entrepreneurs is to find collateral for their bank loans. The business ideas get stuck [when the bank loans aren’t attained] and they find it hard to move forward,” he said.

Ranatunga said that until now there had been very few government initiatives implemented to encourage startups, and thus appreciated the budget proposals put forward to empower entrepreneurs. However, he was skeptical of how well these proposals would be implemented.

He suggested that a proper program be formulated for small and medium entrepreneurs to make funding easier, test business ideas, identify affordable market supply, and conduct research.

“Sri Lanka is a country full of entrepreneurs but the older generation started with nothing. There was competition but it was less compared to the current context and the entrepreneurial market that exists now. The older generation focused on hard work and self-generation; there was no support from government. But the current generation needs it.”

He said that if the government could support the entrepreneurs on a structural level, it could produce even more successful entrepreneurs and make them contribute better.

In addition to lack of accessible loans, he also mentioned that in Sri Lanka there was a limited to nonexistent availability of venture capital.

“There should be five to ten angel funds,” he said. “Not just one.”

Another huge problem Ranatunga said was that young entrepreneurs faced the unavailability of office space.

“They cannot afford expensive office space. That needs to be considered by the government.”

Start-up Activity on the Rise

Access to finance is also a key concern in particular when trying to expand from a small scale operation, added Chief Economist of the Ceylon Chamber of Commerce Shiran Fernando as he agreed with many of the current hurdles facing young entrepreneurs delineated by Ranatunga.

“But we are seeing in particular in the startup space that there is increasingly more competitions, mentorships and investments by investors,” he said.

Still, he said he noticed an increase in innovation and entrepreneurship in Sri Lanka, and added that relative to five years ago, there was more visible activity in the startup and innovation space—even amongst the more established companies.

Fernando was impressed by the allocations made for credit schemes in the 2018 budget (both for startups and enterprises), as well as its IT initiatives. Emphasizing that youth do best in IT and tech-related industries, he said that such initiatives should be targeted well and operationalized during 2018.

From Engineer to Entrepreneur

The idea for Igniter Space (formerly known as Kids Ignite) came to Hasith Yaggahavita after he noticed that there was no advanced technology program to enroll his own kids.

Yaggahavita is an engineer in the Sri Lankan tech industry. He first initiated the program at his residence with the support of parents with a similar interest. Igniter Space was started in March 2016. In July 2016, its second market space was established in Narahenpita and later moved to other parts of the country.

According to, Yaggahavita, Igniter Space is committed to the cause of guiding the current young generation to become innovators and creators of technology.

“Children get broader exposure to technology and they use modern education systems and we teach different disciplines in combination,” he said.

He added that the drive for entrepreneurship was currently peaking. He further said that he did not depend on the government to initiate his idea.

“What I see now is that new tech-based startups are not solution-focused. Several new tech entrepreneurs first find the solution and then start looking for problems. Therefore, it hardly solve the existing problems. As a result, the business does not generate any revenue,” he said.

Yaggahavita pointed out that startups should focus more on products to turn their new ventures into a success. However, he said that real acceptance of start-up businesses was missing in Sri Lanka.

“When a young entrepreneur initiates a novel business idea and goes to a government institution or a corporation, the institution or corporation is hesitant to buy or use their products. Therefore, nobody knows how long those enterprises would last. Sometimes, the government is ready to accept the newly established startups based in foreign countries but not the Sri Lankan young entrepreneurs,” he said.

According to Yaggahavita, in Sri Lanka there are only two successful ways to establish their business. The first is to ride on investor money, build a huge eco system with millions of users, and monetize the user base. The second was to offer something to the users for which they are prepared to pay.

He believes that in Sri Lanka, the second way was the most sustainable, because it allowed the entrepreneurs to extend their market spaces once they were financially stable.

Still, like Ranatunga and Fernando, Yaggahavita feels that it was up to the government to do whatever it can to ease the process, if not fully facilitate it. And in this regard, all three remain skeptical of how well the proposals in the 2018 Budget would be implemented. 


 

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