From 17th – 18th January 2020 in Jaffna, Kilinochchi and Mullaitive Districts
EFECS project conducted a financial need assessment under the consultation of W.M. Karunaratne, Value Chain Finance Specialist from 17th – 18th January 2020 in Northern Province. The objective of the assessment was to develop a feasible loan product for MSMEs in the Tourism Value Chain to meet the credit requirements of the actors in the Tourism Value Chain.
“As observed during the fact-finding mission conducted at Mullaitivu, Jaffna, Kilinochchi and Vavuniya, many service-oriented SMEs in the Tourism Value Chain require assistance to improve their existing capacities of businesses while a few SMEs expect working capital for production of different items and improvement of quality of such items” said Mr. Karunarathne.
Since existing facilities are not adequate or not up to the standards, they all accept the immediate need of modification and refurbishment of the existing facilities to meet the expectations of the tourists. In addition, number of proposals were presented at the Focused Group Discussions to ensure community participation that includes many start up projects.
During the above mission, 6 isolated SMEs that have potential to improve under the Tourism value chain have been investigated. Two of them are currently engaged in tourism related activities and other four do not directly involved and not link with the other chain actors in the Tourism value chain. Once the tourist arrival increases in the area, they would have an opportunity to provide their products or services for tourists.
Among those 6 MSMEs, Traditional Medical Centre in Mullaitive manufacturing drugs and treatments (service) had the requirement of constructing a building and maintains a stock of drugs. This treatment centre is popular among the local people and also foreigners known to the Doctor. Since this native medicine is used over hundred years and popular among local and foreign people, it has a potential to attract tourists.
Similarly, in the same category, Ayurvedic Medical treatment Centre in Jaffna has the requirement of putting up a show room and sales outlet for Ayurveda finished products. Construct a drug store, Spa Centre, Drug show room and sales outlet were included in the plan. This is a well-known Ayurvedic family having business operations in Jaffna and Colombo. Since the doctors are educated in India and have a good reputation, they have an opportunity to operate a Spa service centre and a Drug sales outlet for tourists.
Tourists Guest House in Jaffna has the requirement for refurbishment of existing rooms, washrooms and main hall. This entrepreneur is an experienced, educated and knowledgeable operator. He has sufficient business and needs to improve the quality of the service. Owner/operator is over 71 years of age and children living in overseas. Business is currently running profitably and has a potential to further improvement.
Financial Assessment was done for a Homestay in Jaffna that expects financing for refurbishment of entire building. It was seen that the reconstruction of rooms with attached washrooms is necessary. This homestay is not registered under Tourist Board and it was found that there is a need of giving knowledge to the owner/operator on hospitality industry. Currently, backpackers use the building for overnight stay. After refurbishment, he can provide accommodation for any kind of tourists.
A growth-oriented Cashew nuts production centre in Mullaitivu expects a working capital loan to purchase row cashew nuts in bulk during the season. He continues the business with a little capital around Rs. 0.6 million and High potential to sell value added cashew nut products to the tourists.
Under value chain financing, bankers consider the strength of connectivity among the chain actors and its impact for the successful operation of business activities of the relevant SMEs. Therefore, it is essential to identify the role of respective SMEs in the Northern Tourism Value Chain. If they do not have linkages with other actors and operate isolate, lending bank will consider such MSMEs as individual economic activities and will apply general terms and conditions accordingly in lending.
At the discussions, financial requirements of number of potential SMEs have been explained by the participants who are currently engaged in tourism related activities.
Accordingly, credit requirements of the potential SMEs in the North were recognised under While the Accommodation sector needs finances for the Improvements of buildings and rooms to suit with the Homestay requirements, Construction of hotel rooms (Guest houses) and Farms stays, Accessibility category requires financing for Purchasing of vehicles like vans, cars and three wheelers. In addition, purchasing of bicycles and motorcycles is also necessary to rent out to tourists who opted to travel alone.
In the amenity sector, a large number of activities and related income generating opportunities have been explained by the key resource persons attended at the Focus Group Discussions and Workshops. Supply of food items, specially sea foods, Fruits and fruit juice, young coconuts drinks, Palmyra toddy, other Palmyra based food products, Restaurants, Spa and body massage centres etc.
In addition to the other activities, beach activities and boat safaris are suggested the participants as they have a long beach area and number of islands around the province. They need to purchase boats and lifesaving kits etc to deep sea and whales watching in the sea.
Under the Awareness category, Travel information centres, Communication centres and internet cafes are suggested to make aware the tourists. In addition, provision of training for tourist guides is necessary to enhance tourism. Since wildlife is one of the tourist attractions in Sri Lanka, making provision/facilities to see the wildlife particularly wild elephants in the jungles is suggested as suitable investment opportunity under the Attraction category.
The participants of FGDs were very optimistic and strongly believe that tourism could be promoted with the available attractions in the province. They all need to improve the existing facilities to suit with the requirements of the tourist. Accordingly, it has been identified different credit needs of different stakeholders in the tourism value chain. Most of them need term loans with a longer repayment period and adequate working capital loans for a shorter period.
In considering the above facts it is suggested to develop a comprehensive loan product in consultation with SDB since majority of the chain actors require term loans with sufficient repayment period to repay the loans more conveniently.