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Sri Lanka SME’s using ICTs get double the profits, information gulf blocks wider use: LirneAsia

ECONOMYNEXT – Small and medium enterprises in Sri Lanka can grow their businesses and make more profits by connecting to the internet and getting electronic payment facilities quickly, LirneAsia a Colombo-based information communications policy think tank has said.

There was a wide information gap about benefit of the internet between businesses that used internet and those that did not, while may were also unaware of mobile payment facilities that were already available.

Mobile phone firms, business chambers and policymakers had a role to play in increasing digital skills of SME and also making them aware of mobile financial services, LirneAsia said.

While 36 percent of persons between the ages of 15 to 56 in Sri Lanka had a credit or debit card, only 6 percent of the business could receive the payments.

The SME sector is estimated to be 75 percent of the total enterprises in Sri Lanka which contribute to 52 percent of the country’s GDP.

Higher Profits, More Revenues

A survey with 403 SMEs in 100 Grama Niladhari divisions in Sri Lanka by LirneAsia before the Coronavirus crisis had found that 60 percent of the SMEs did not use internet or social media for business.

That was an estimated 51,000 non-agricultural SMEs, which employed about 308,000 persons, and contributed about 31 percent to gross domestic product, LirneAsia said.

But SMEs that used of e-commerce had got twice the profit on average and 2.8 times higher revenue (800,000 rupees for high ICT users vs. 283,000 rupees for low ICT users).

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Connected firms also had a “more diverse and geographically distant set of suppliers and clients within and outside of Sri Lanka and better visibility through more diverse communications modes and practices, than SMEs that remain unconnected,” LirneAsia said.

About 79 percent of those surveyed had said they saw no need for it.

“These businesses are far removed from reaping the benefits afforded by getting online,” LirneAsia said.

“There is no perceived need for getting connected, especially among those who do not currently use the internet, indicating that many business owners remain unaware of the potential benefits of going digital.”

But after the Covid-19 pandemic lockdowns SMEs who deal in essential goods and services started taking orders over Facebook, WhatsApp, Viber and SMS and delivering products to their customers’ homes.”

Electronic Payments

SMEs that had not registered for electronic payments had faced issues in money transactions after the deliveries.

Only six percent of the SMEs have registered with banks to receive electronic payments while 36 percent of the population uses electronic payment systems.

Though mobile automated teller machines came to customers, the preference to avoid contact also created a preference for electronic payments.

Telecom service providers must provide electronic transactions services for the SME sector since mobile phones are the main form of connectivity, LirneAsia said.

About 65 percent of SMEs have dedicated contact number for their business and 85 percent of used a mobile number. Smart phones were used by 51 percent of SMEs.

Many however were unaware of mobile money services.

“Ninety six percent of SMEs do not use mobile money services, with 18 percent of those who do not stating that they do not know about the services,” LirneAsia said.

While more SMEs used mobile or Smartphones for business only 31 percent of the SME sector uses computer for business purposes.

“SMEs in the service sector tend to own computers more often than SMEs providing manufacturing and trade services,” LirneAsia said.

“Of those who do own computers, 86 percent have computers connected to the internet. Sixty seven percent of SMEs who use internet or social media also have a website.”

About 66 percent of service sector SMEs used the internet or social media compared to 42 percent for trade and 24 percent for manufacturing.

Information Gap

While 79 percent of SMEs that did not use internet denied any benefits, 90 percent of the businesses that used internet had said it was important for their business.

“There is an information gap between those who use the internet for business and those who do not..”, LirneAsia said.

With the public trying to reduce the human contact and look for more cashless options after the pandemic the research shows that SMEs must register to e-commerce services while financial, and mobile service providers must find solutions for cashless transactions.

“More SMEs really need to subscribe to electronic payment facilities and fast,” LirneAsia said.

“And banks and mobile service providers need to find ways to issue these subscriptions to both buyers and sellers with minimal contact.”

SME sector firms needed digital skills training programs on digital entrepreneurship with the help of guidelines, manual in three languages, supported by personnel, to set up basic web pages and engage on popular platforms and use mobile financial services, LirneAsia said.

Policymakers, Chambers of Commerce and the ICT industry need to help SMEs to get online, LirneAsia said. (Colombo/ July 05/ 2020)