SME friendly tax regime needed - HNB DGM

Indunil HEWAGE

The banking sector and financial institutions should move from collateral based to cash flow based lending for the development of the SME sector in Sri Lanka, Hatton National Bank Marketing and Retail Banking Deputy General Manager Chandula Abeywickrema said.

Establishing an effective credit guarantee fund to support SMEs will also assist in expanding the SME sector in the country. Currently, around 80 percent enterprises in the country come under SME sector and 90 percent of employment opportunities are being created through the SME sector in the country, he said addressing the Association of Accounting Technicians of Sri Lanka (AAT) Annual Conference 2010.

Regulatory support for SME sector needs to be extended and benefits of the existing lower banking interest rates should trickle down to SME sector.

"It is timely to have a simplified and SME friendly tax regime for the betterment of the SME sector while developing a national policy and framework for the expansion of the SME sector in Sri Lanka. The SME sector needs to have a national action plan to achieve medium and long-term goals in SMEs while implementing an agency for national SME vision," Abeywickrema said.

"Many people engaged in the SME sector manufacture products and provide services according to their standards. Setting up an organization to provide expertise, know-how and financial support for the SMEs will pave the way to meet international standardization requirements in the SME sector".

He said effective measures have to be adopted to measure the SME sector involvement to the national economy, as currently the country is unable to measure the SME sector involvement to the national economy in a formal manner.

Identifying and exploring internal and external market opportunities while standardizing products and services in the SME sector are considered as vital mechanisms to achieve long-term sustainability for these ventures. Special emphasis should also be given to agriculture, fishery and services sector in the country.

He said the SME sector needs to develop business incubator programs such as forward sales and warehousing with participation of public, private and donor communities while moving from sole proprietorship of SME to public quoted company status.