Moreover, cinnamon producers are confronted by the uncertainty of making repayments due to seasonality of income. According to Indrani, cinnamon oil producers earn an income for half a year, as cinnamon trees are chopped during a selected period in a year. During the six months where oil cannot be produced, they have to look for other work. Therefore, they are unable to obtain loans from banks. “When we do not have work, it is difficult to pay interest during that period.” Once, when she failed to settle a loan, she decided to go abroad as a housemaid again. “I went abroad in 2008 once more to settle my bank loans and returned in 2011.” Indrani is thinking of obtaining a loan from bank to expand her business but is cautious. “We can repay any amount but we need support during off season or relief from making the full monthly repayment, when we do not earn from our business.”
Better Access to Finance
An important avenue to promote inclusive and sustainable development outcomes includes accelerating gainful participation of WMSMEs. They are known to be an important source of employment and poverty reduction, especially for women. WMSMEs have been identified as the backbone of developing economies and constitute a major source of formal and informal sector employment of women. Therefore, it is important to strengthen this sector and improve the participation of these enterprises througheasy and affordable access to finance. It is crucial to design loans to cater to the needs of WMSMEs, improve outreach of the formal institutions, increase commitment by banks to assist WMSMEs, reduce administrative procedures, and provide alternative ways to build credit with institutions.
It is especiallyimportant to design loan schemes that cater to the needs of WMSMEs. The IPS study identified two agro-processed products with high potential for women’s economic participation. Due to seasonality in harvesting and processing of these goods, loan schemes should be shortened from one year to a few months to reduce entrepreneurs’ burden in repayment.
To overcome the low outreach of formal financial institutions, mobile services should be introduced that can disseminate available loan programmes, particularly for those who reside in remote areas. Eventually, mobile banking would be useful for the repayment of loans.
There is a need to scale up lending and commitment to assisting WMSMEs across all branches amongst the financial institutions. While the services such as SME banking are set up at head offices, if the local branch managers of financial institutions find lending to MSMEs unprofitable, they tend to serve other customers,namely largercompanies and entrepreneurs. Such situations can be avoided by close monitoring and supervision to assess the progress of special programmes targeting micro and small enterprises in Sri Lanka, while strengthening the capacity and skills of managers for SME-focused lending and appraise methods. These efforts need to be complemented by providing training on financial management to WMSMEs.
In addition, there is a need to incentivize lending to WMSMEs. For small amounts that MSMEs seek, the administrative procedures, including paper work, can be reduced.buy ventolin online buy ventolin online no prescription
The formal financial institutions try to reduce lending risks by securing collateral or guarantors, which itself is a big hurdle for WMSMEs. Alternative ways to allow WMSMEs to build credit within the institution are needed, such as gradually increasing the amount of small loans, as proved in microfinance. Although Indrani is single-handedly running her business, she is happy, as she is able to balance her housework while working at the distillery, which she wants to expand with time. “I can look after my family while working in my hut. Sometimes, I keep the boiler on and go to school to pick-up my children. My expectations are to upgrade and expand my business and be a good mother to my children, and a caring daughter to my old age parents. I’m sure I can fulfill my responsibilities as a mother and as a daughter while doing my business.”However, WMSMEs like hers need better access to finance to invest, expand, and operate their businesses, which are the backbone of Sri Lanka’s economy. . (Janaka Wijayasiri is a Research Fellow and Dilani Hirimuthugodage is a Research Officer at the Institute of Policy Studies of Sri Lanka (IPS).