Poverty Alleviation: Support for Self-employment, Small and Medium Enterprises – Part 4

Among most families, unemployment is the main reason for poverty.

4 mins read
According to the World Bank, while urban poverty halved during the period since the war concluded in 2009, rural poverty declined by less than five percentage points and poverty in the estates sector increased significantly— making this sector the poorest in the country. [ Image Credit: Redcross Lanka]

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Self-employment would be an answer for people with high-demand skills, such as carpentry, masonry plumbing, electrical works, etc. People in those categories can find wage employment as well. The people genuinely interested in self-employment may have already received help from the plethora of existing micro-credit programs by financial institutions and NGOs. However, self-employment opportunities will never come to a saturation point; new market niches may arise due to leaving the trade by the present operators, economic growth, product diversification, etc. It would help a certain percentage to get out of the poverty trap. Also, some would grow as small and medium entrepreneurs who can supply wage employment to others. Therefore, an aid programme for self-employment must continue. After a careful study, the Samurdhi banking system must be restructured as a funding system for self-employment without duplicating with commercial banks. However, beneficiaries of Samurdi Bank should only expect to be with that system for a while until they can integrate with the mainstream. Samurdi banks should also avoid elevating their loan schemes to meet the demand of emerging self-employed aspiring to be entrepreneurs. They must be encouraged to seek assistance from commercial banks and integrate with the mainstream without entangling in the Samurdi culture. Otherwise, the focus of the Smurdhi Bank on self-employment will disappear and be neglected.

Small and medium enterprises

The employment guarantee scheme is only a stop-gap measure until people find a decent permanent income. Wage employment in the mainstream economy is the answer for most people who do not have the resources and potential to be self-employed or small/medium entrepreneurs. The generation of such sustainable, gainful employment must be expected from the private sector. The poverty alleviation initiatives must trust small and medium-scale enterprises to generate a substantial percentage of such employment. Finance is only one aspect of support required to promote enterprises. They need technology transfer, vocational training, entrepreneurial skill and management training, targeted infrastructure, information, marketing facilities, linkages with major industries and enterprises aiming at local and export markets, etc. Most consumer items, intermediate goods, tools, and equipment are imported today. Sri Lanka must identify a series of such items that can be produced locally at a reasonable price in acceptable quality and provide tariff protection and concessions for a specific period, giving them a breathing space to establish sustainably. Foreign investors must be encouraged to establish large-scale industries that would subcontract or outsource the production of some components to local small and medium industries. Small and medium enterprise development should be an integrated, well-focused package instead of a series of isolated programs.

Provide Employable Skills

Among most families, unemployment is the main reason for poverty. As discussed before, school leavers at all levels have no employable skills to meet their aspirations. Even the rural youth are aspiring for modern sector employment that enables a decent lifestyle and wish to be something other than subsistence-level farmers like their parents. Meanwhile, there is a shortage of skilled labour in many fields of the economy, especially at the technicians’ level. Therefore, the tertiary education system must restructure to provide high-demand skills in the local and global markets.    To that end, acquiring a diploma in an employable skill matching the labour market’s demand and individual aspirations must be compulsory for all school leavers after DCE(O/L) and GCE(A/L). Instead of expanding government-owned institutions, the private sector should be encouraged to conduct training programs while retaining the regulatory and quality assurance aspects (curriculum development, examinations, etc.) with the government. A scholarship program should be introduced for the children of low-income families to provide equal opportunities. Further, a loan scheme must be introduced to meet their travelling and other living expenses and should be limited to acquiring employable skills.

Relocation of Isolated Poverty Pockets.

When I was the Director of Matara District IRDP, the Swedish International Development Agency, the funder for the program advocated for participatory planning and development targeted to the poor. To this end, the project designed a component called the Backward Village Development Program, later renamed the Intensive Village Development Program. Those are isolated villages due to various social, economic, and geographical reasons that can’t integrate into the mainstream of development; hence, the whole village is in absolute poverty. The project developed participatory planning and implementation tools. It implemented multiple activities to satisfy the identified village needs, including infrastructure, social amenities, and income generation activities such as home gardening, cottage industries, etc.Most of the items they made under the employment generation programme could not compete with the imported items with better finishes and relatively low prices. Even the small marketable surplus of home gardens could not sell due to locational disadvantages.

With several years of involvement in those backward villages, the quality of life has been improved marginally due to social welfare and infrastructure provided by the project and the production of home gardens, but their income poverty remained unchanged. Income-generating activities supported by the project did not help much to reduce income poverty. As discussed under self-employment experience, only a small percentage of households crossed the poverty line. Even the unit cost of welfare and infrastructure was much higher than in typical villages. Providing infrastructure inside the village had no meaning for geographically remote villages if they couldn’t connect with the rest of the country. However, the project’s involvement helped to prevent further deterioration of living conditions, but the objective of sustainable poverty alleviation was not achieved.

It was apparent that the socio-economic problems of such communities couldn’t be resolved within isolated, unviable settlements. Solutions are ideally found outside the village. Perhaps instead of investing in those settlements, the project should have relocated those people to suitable areas where facilities can be provided at low cost, and people can join the main streams, find wage employment, and enjoy other social infrastructure. However, the project involvement created many assets to encourage people to remain in the same village, entangled in the poverty trap.

The above is only one example, but most of our poverty alleviation and rural development strategies prevented rural-urban migration, and we are proud of that. But the other side of the story is that villagers have been discouraged from looking for better opportunities outside the village and encouraged to stay in the village, engaging in survival strategies with fundamental needs at a low level of equilibrium. The historical process of rural development has created highly complicated economic, political, social, and environmental issues in rural areas compared to urban areas.

As discussed above, Sri Lanka has many poverty pockets, and most poor people are found in such settlements (in hilly terrains, flood and earth-slip-prone areas, elephant corridors, geographically remote locations, small hamlets sandwiched between estates, etc.). Poverty in such places will never be resolved within the same village. Like in China, Sri Lanka must consider relocating such unviable settlements or encourage the next generation to leave such settlements. In some instances, providing roads and transport facilities to the village could be an interim solution, enabling the villagers to access employment, health, education, marketing, and other service sector facilities available outside the village (townships in proximity) instead of providing those within the same village at a high cost. Then, the next generations would migrate to better areas, allowing the natural death of such unviable human settlements.

To be continued

Sirisena Amarasekara

Sirisena Amarasekara is a Sri Lankan public servant and diplomat. He is the former Sri Lankan High Commissioner to South Africa, Mozambique, Namibia, Zambia, Zimbabwe, Lesotho, Angola, Botswana, and Eswatin. He had functioned as the secretary to the Prime Minister on two occasions, and as the secretary to the Cabinet of Sri Lanka. Having completed more than 50 years of public service, Amarasekara is one of the most senior Sri Lankan public servants.

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