Sri Lanka's SMEs get chance to raise equity on liberalized board

ECONOMYNEXT - Sri Lanka's small and medium enterprises will have a chance to reduce leverage by selling stock on a liberalized marketplace with simpler regulation and lower costs, officials said.

The new 'Empower' board on the Colombo Stock Exchange is aimed at companies which have at least 25 million rupees in capital, are at least two years old and have clean audit reports.

"The SME Board of the Colombo Stock Exchange can play a crucial role in enabling such young companies to take their first steps into capital markets and raise equity funding to grow to the next level," Finance Minister Mangala Samaraweera said at the launch of the new stock board.

"The SME Board will provide the necessary flexibility to encourage the listing of small business and gradually expose them to the expectations of mature capital markets.

The launch of the SME Board is indeed a crucial step in the evolution and development of Sri Lanka’s capital markets.

Samaraweera said the government was keen to promote enterprenuership and SME, and there was a number of credit schemes with subsidized interest. An SME guarantee fund would also be set up. The Empower

Ranel Wijesinghe, Chairman of Sri Lanka's Securities and Exchange Commision said developing SMEs were a key aim when he helped develop an incentive framework to make the stock markets and industries take-off during the Premadasa administration.

"We transitioned from a closed and insular country, to an open and outward looking country, with an export led growth strategy in 1977, 41 years ago. but yet, the SME sector, has not achieved the level of growth so vitally necessary, for this yet Emerging Economy."

He said Sri Lanka's accounting professionals, banks and also lending agencies could play a greater role in enabling SMEs to tap capital markets.

At De Loittes in London, where he had worked at one time, provided advisory services to SMEs at a 60 percent discount he said.

State run Bank of Ceylon, where he was a director recently, would hold forums for business owners, he said.

Banks would themselves benefit from lowering leverage in companies, making them more viable.

Rajiva Bandaranaike, chief executive of the Colombo Stock Exchange said firms would only have a 75,000 rupee listing fee, no minimum float and had to provide 6-monthly accounts, instead of quarterly.

Prospectus could be provide digitally and did not have to be printed.

The firms had to work with a registered sponsor to help with the paper work. Governance rules were simplified but the firms had to have a audit and remuneration committee with an indepdent chairman preferably an accountant. (Colombo/July05/2018 - Update II)