Bhathiya Barukanda
As entrepreneurship gains increasing attention in today’s economic landscape, we had the opportunity to interview Mr. Dhanuka Liyanagamage, Director of the National Enterprise Development Authority (NEDA). With over 18 years of experience in investments and finance, Mr. Dhanuka Liyanagamage has held key managerial positions in both the public and private sectors. He previously served as the Managing Director and CEO of Alerics Dairy Products Ltd. and currently, works as a visiting lecturer at several leading state and private universities. As Director of NEDA, he is committed to cultivating entrepreneurship and supporting SMEs in Sri Lanka.
The Role and Responsibilities of National Enterprise Development Authority (NEDA)
NEDA is established under the Enterprise Development Act No. 17 of 2006, dedicated to supporting both existing and aspiring entrepreneurs. The primary goal is to cultivate an entrepreneurial mindset among individuals while facilitating business development through various initiatives. Key areas of focus include providing technical assistance, market access support, and enabling financial opportunities such as loans and capital facilities. NEDA’s mandate is to enhance the knowledge and capacity of SMEs, thereby contributing to national economic growth through entrepreneurship.
Current Initiatives and Projects of National Enterprise Development Authority (NEDA)
Traditionally, the education system and societal expectations have guided students toward employment rather than entrepreneurship. However, with the government facing challenges in providing sufficient job opportunities for university graduates and skilled professionals, there is an increasing requirement to promote entrepreneurship as a viable career path. NEDA is at the forefront of this transformation, emphasizing the importance of creating entrepreneurs who, in turn, generate employment opportunities.
Brain into Business: a program designed to encourage university students and graduates to transition into entrepreneurship rather than seeking traditional employment. By leveraging their knowledge and skills, these young individuals with higher education have a 20% greater chance of successfully establishing and sustaining a business. By harnessing their intelligence and innovative thinking, NEDA aims to build a new generation of entrepreneurs who will drive economic growth and employment creation in Sri Lanka. And also, NEDA is actively involved in a number of strategic programs that support entrepreneurship, such as, MSL Logo and Trade Fairs: These initiatives focus on bolstering local businesses by giving them branding support and market exposure; B500: A project aimed at developing and scaling up 500 high-potential businesses to significantly contribute to Sri Lanka’s economy.
Policy Proposals for the Enterprise Sector
NEDA is now working on fostering an “entrepreneurial frenzy” by creating a supportive ecosystem. In Sri Lanka, such an ecosystem has been somewhat lacking, and its development is essential for sustained entrepreneurial growth. Just as trees flourish in a well-balanced forest environment, entrepreneurs require a nurturing environment to thrive. This involves policy decisions and strategic planning, an area where NEDA plays a critical role.
The government has set an ambitious goal to transform Sri Lanka into an entrepreneurial nation. Currently, only 3% of the working population are entrepreneurs, a significantly lower figure compared to neighboring countries such as Bangladesh (7%) and India (11.6%). To achieve developed country status, Sri Lanka must increase this figure to at least 10% within the next 3-5 years. In response to this challenge, the government has tasked NEDA with leading policy initiatives to support this transformation. For example, NEDA has put up two important policy proposals to promote entrepreneurial environments in advance of the 2025 national budget, which is expected to be released in March or April. One of NEDA’s most important duties is to develop these rules, which will guarantee that business owners get the assistance, tools, and chances they need to thrive.
Venture Capital Concept
One of the two proposals presented by NEDA to the government is the introduction of Venture Capital as an alternative funding mechanism. While credit facilities are widely discussed as essential for entrepreneurs, reliance solely on loans can pose financial burdens due to repayment obligations and interest rates. Venture Capital provides an alternative route by allowing entrepreneurs to secure funding through equity capital. Instead of taking on debt, entrepreneurs can seek investment from potential investors in exchange for equity in their company. However, many entrepreneurs fear losing control of their businesses when bringing in investors. To address this concern, NEDA has proposed a government-led venture capital initiative that facilitates the introduction of investors to promising entrepreneurs. With government intervention, entrepreneurs can feel reassured that investors will eventually exit the business, allowing them to retain ownership in the long term while benefiting from the initial capital infusion. This approach ensures a win-win situation for both entrepreneurs and investors, cultivating a more dynamic and supportive business ecosystem.
New Financial Opportunities from the State Banking System to Boost Entrepreneurship
Traditionally, banking revolves around two key components such as net capital and debt. While banks prioritize profitability, a sustainable economy depends on the success of businesses. Therefore, in recent years, banks have been offering low-interest provisions and specialized loan schemes to promote entrepreneurship. The government, in collaboration with institutions such as the National Enterprise Development Authority (NEDA), has introduced several financial assistance programs. Additionally, international organizations, including the Asian Development Bank and the World Bank, have implemented loan schemes focused on the SME sector, providing financial support at competitive interest rates with extended repayment periods.
The entrepreneurial ecosystem is gradually strengthening now, but business owners also should bear a responsibility to ensure loan repayments. The reluctance of banks to approve loans stems from the fact that these loans originate from depositors’ funds. To balance risk and encourage responsible lending, banks have introduced various structured loan schemes with manageable interest rates. Furthermore, the government has announced its intent to revive the development bank concept, reinforcing its commitment to long-term economic progress. This initiative aims to provide more accessible financial resources to aspiring entrepreneurs, ensuring sustainable growth and development within the business sector.
The Role of Incubation Centers in Entrepreneurial Development
Most of the time, at the initial stage entrepreneurs face challenges such as lack of capital, access to necessary machinery, and the high cost of commercial spaces. For instance, renting a business space in Colombo at market rates can be prohibitively expensive for start-ups. To address this, incubation centers have been established to provide affordable opportunities for new businesses. These centers operate on a Public-Private Partnership (PPP) model, where the government collaborates with private organizations to facilitate business growth. Entrepreneurs can access shared resources, including essential machinery, at reasonable rental rates. This enables them to manufacture and sell products without the immediate financial burden of purchasing expensive equipment. The incubation period may typically last one to two years, allowing businesses to establish themselves before transitioning to independent operations. Once a business reaches a stage where it can afford its own equipment and infrastructure, they can exit the incubation center and continue their growth independently. In an effort to further support entrepreneurs, NEDA is working alongside the government to develop space incubation centers, ensuring that start-ups have access to necessary facilities and resources to succeed in a competitive business environment.
BY – Waruni Jayathunga – Investigator – HARTI – DevPro Women Entrepreneurs Development Project
