Timely funds rekindle the spirit of entrepreneurship

by Sanath Nanayakkare

As a multilateral bank the Asian Development Bank (ADB) has supported the SME sector in the country for a long time with many lending products and capacity building assistance. The Island Financial Review recently had the opportunity to meet with beneficiaries of five SME projects recently supported by the ADB in areas of the southern province far away from the cities. It was clear that ADB’s timely funds were quintessentially empowering the spirit of entrepreneurship in the hinterland.

These five beneficiary SMEs were from Karandeniya, Ambalangoda, Habaraduwa, Elpitiya and Thalgampala. They are actively and full-time engaged in different businesses, namely; cinnamon quilling and processing, coir product manufacturing and exporting, Ayurveda product manufacturing and exporting, spice production/sales and Orthodox black tea manufacturing. There were two successful women entrepreneurs among them who had built profitable businesses while creating a significant number of jobs for the youth in their areas. The following is a brief account of each of the SMEs served by ADB funds.

Pradeep Premaratne in Karandeniya operates a small yet successful cinnamon quilling and processing facility at his house with the support of his wife. The Regional Development Bank (RDB) one of the 13 participating banks to whom ADB funds are routed through the Ministry of Finance, had given a LKR 1.5 million loan to Pradeep as a working capital facility. It was a collateral free loan at an interest of 11.5%. Pradeep and his wife who earlier made cinnamon sticks from 100 kilos of raw cinnamon trees today employ 5 – 7 workers and process 300-500 kilos of raw tree per day and supplies about 850 kilos of finished sticks to the market for export on a monthly basis. He said that his monthly earnings had increased by about four fold as a result of the ADB working capital loan.

M.C De Zoysa, Managing Director- M.C Enterprises in Idantota, Ambalangoda received an ADB loan of LKR 10 million through Seylan Bank for his coir product manufacturing and exporting business. He received the loan during the covid pandemic period and he described the loan as a great ‘prop up’ at the time. “During the pandemic, people in many countries started growing their own food and the demand for coco peat for garden plants saw a phenomenal increase. ADB working capital loan I received enabled me to expand my production and meet the increased demand. The profits I made were re-invested for purchasing new machinery. If not for the ADB loan, I wouldn’t have been able to take advantage from that situation.”

He exports 30- 50 containers of coconut and coir-based products per month to South Korea, the Middle East, U.S.A. and China. The factory provides 75 direct jobs and more than 3000 indirect jobs. Zoysa is planning to expand his factory space and install a transformer while exploring solar power solutions for his operations.

Woman entrepreneur Supuli Karunaratne, managing director at Nature Healing Ayur (Pvt) Ltd in Habaraduwa received a loan of LKR 4 million and a grant of LKR 1 million under ADB’s Women Entrepreneurs Finance Initiative to expand her business in herbal food supplements manufacturing and exporting. Today she owns a new capsule filling machine with the capacity to fill 3,000 capsules in one hour which has significantly reduced her manual workforce. She exports health supplement products to countries such as Switzerland, Lithuania, Japan, and the Maldives.

Woman entrepreneur Chandanie Samanthi, director at Thalgampala Thunapaha (Pvt) Ltd received an ADB loan of LKR 3 million as a working loan facility through Nations Trust Bank. “My company with the support of my husband and staff achieved 30% growth this year compared to Year 2021 and I expect significant growth in the next 12 months. I am planning to expand our outlets network to Colombo and Jaffna in the coming years. Now we produce about 3,000 kilos of spice per day and sell just about the same volume while having a surplus stock at any given time. We are striving to attract higher customer appeal for the brand each year and we will position Thalgampala Thunapaha as the best Sri Lankan spice brand by 2029.”

Anura de Siva, chairman/managing director at Marakanda Tea Factory in Elpitiya of Evergreen Group received an ADB loan of LKR 10 million through DFCC Bank in Galle as a working capital facility.

Evergreen Group Accountant Danuka Dassanayake said,” The total loan amount we obtained from DFCC was LKR 35 million. Out of that we obtained refinance of Rs. 10 million from ADB at an interest rate of 4.75%. The total funds were used for building our CTC factory and purchase CTC machinery. The ADB loan share reduced our interest cost significantly making a positive impact on our finances and making our journey easier.”

Senal de Silva, director of the Group said that there are 13 factories in the Group and they contribute 4% of the total national tea export volume. “We acquired Marakanda at a time it had been closed down. We have been able to turn it around to a better position but it is still the weakest in the Group. However, it remains resilient thanks to the strength of the Group. Marakanda faces the issue of procurement of good tea leaf from the area. Other than that everything is stable. Tea smallholders do not care about the fact that harvesting methodology has a huge impact on the quality of the tea and its grading as per export-market benchmarks. I think that the government has a role to play in creating awareness among them and to educate them on the right balance between quality and quantity when providing their yield to factories for processing. There is fierce competition among the tea factories to procure tea leaf, therefore, tea smallholders are tempted to cut corners because they can supply anything to the factories. This should be corrected through the intervention of the authorities,” he said.

Marakanda tea factory employs 70 workers on a daily basis while the Group employs a total of 1,500 workforce.

SME Line of Credit Project of the ADB has three tranches which provide USD 340 million of assistance to the SME sector commencing from 2016. The first disbursement of USD 100 million and the second disbursement of USD 75 million through additional financing have already been utilized. The third disbursement through another additional financing of USD 165 million is currently being utilized by the participating banks to provide further access to finance SMEs.