The State of FinTech in Sri Lanka
Formerly known as Ceylon, Sri Lanka is an island close to Southern part of India in the South Asia. It shares its maritime border with India in the northwest and Maldives in the southwest. Known for its abundant and unspoiled beauty of nature, the country has been attracting tourists since time immemorial.
Ravaged by 30 years of civil war, which ended in 2009, the country has been on the path of economic development since then. According to the department of census and statistics of Sri Lanka, its total population in 2012 was 20.35 million out of which 9.8 million were males, and 10.50 million were females. About 40% population was in the age group of 15 to 39. On January 1, 2016, Sri Lanka’s population was expected to be 20.77 million.
Sri Lankan economy touched USD 74.94 billion in 2014 recording a growth rate of over 7.5%. According to the Central Bank of Sri Lanka, the country is progressing towards becoming one of the fastest growing economies in South Asia. It has successfully controlled inflation (3.3%) and unemployment (4.3%).
The service sector of Sri Lanka has shown at the growth momentum of 7.1% (of GDP) in the first half of 2015 while it was 4.2% in the first half of the previous year.
Experts believe that long-running war and the rise of Indian information technology in the world have overshadowed Sri Lanka’ achievements in the field of IT, BPO and knowledge services.
Startup Scene in Sri Lanka:
Sri Lankan startup scene is all about local technical talent and their initiatives as the country has hardly grabbed the attention of the western world for investment or the exchange of technology.
Sri Lanka, which has produced some quality startups, competes with Malaysia or Singapore. The startup scene is expected to look up with returning diaspora who had gone to various countries in search of a decent job due to civil war in Sri Lanka. Today these people are coming back with valuable global experience and want to bring change in their country.
Some of the top startup firms are wOw.lk, Ikman.lk, Takas.lk, Island Cricket, MyDeal.lk, YAMU, ThePapare.com, Roar.lk, Carmudi.lk, IdeaBeam, LankaPropertyWeb.com, Shopping.lk, Wasi.lk, MyStore.lk, AutoLanka.com to name a few. These startup deals in areas such as online shopping, classified website, food and leisure guide, content platform, etc.
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Reports say that some startups have been able to grab the international attention of late. For instance, iHelmet, which produces an intelligent helmet that can provide useful information about road safety to the rider, has recently won $500,000 in an international competition. Vgo, a cloud-based platform for taxi and logistics companies, also looks promising in the country.
The prospects of foreign investments look promising in the light of the fact that Sri Lankan economy is doing quite well with annual growth of 6.4% in 2015. Angel investors are also coming together under the banner of the annual Lankan Angel Network reunions, and this can augur well for the beginning of the startup scene.
How big is the FinTech pie in Sri Lanka:
The use of financial technology can be seen in the areas such as mobile money or credit & debit card in Sri Lanka. Some projects of multi-channel banking strategy have been started. However, the financial service sector of Sri Lanka is yet to utilize the benefits of the expansions of its information and communication technology.
While in other advanced economies, cash and cheques have been replaced by cash-free payments method, Sri Lanka is gradually trying to popularize card payment in place of cash. Companies like Dialog Axiata PLC, which provides a unique service of ?eZ Cash – Money in your Mobile,’ have been trying to improve customer experience with innovative technology for past several years.
In another significant development, Merchant Bank of Sri Lanka & Finance PLC (MBSL) has taken the service of Signature? core account processing platform which will help in the operational expansion of the bank. Interblocks (Pvt) Limited launched the multi-currency internet payment solution, iWallet and iPay WAP (Wireless Application Protocol).
Status of policy regulations in Sri Lanka for startups:
The central bank of Sri Lanka revised financial regulations to award the license to Dialog Axiata PLC (Dialog), a mobile network operator (MNO) to launch eZ Cash. Besides mobile money and some online payment platforms, Sri Lanka hasn’t felt the need to relax regulations to support Fin-tech because this sector is yet to grow. However, tech experts say that regulator should protect the interest of consumers by adopting the pro-fintech approach and by driving consistency and standards in regulations.
Other economic laws are helpful in bringing money in the country. The legislation in Sri Lanka encourage foreign direct investment and permits 100% foreign ownership across all economic sectors. The bilateral protection agreements with 28 countries and double taxation avoidance agreement with ten countries can play a crucial role in helping the growth of startups in the near future.
Incubation scene for Startups in Sri Lanka:
Since the startup ecosystem is yet to take off, traditional incubators and accelerators are absent. However, software houses such as Calcey Technologies, Creative Solutions, etc are producing good talent. Some entrepreneurs also rely on online resources for technical courses. Besides these, The MIT Global Startup Labs and the Singaporean accelerator, JFDI, have been running education programs which provide some mentorship to the self-driven entrepreneurs. Local players such as Startup Sri Lanka and SLASSCOM often try to compensate the absence of incubators by organizing global support and guidance to startups.
The Information and Communication Technology Agency of Sri Lanka (Private) Limited (ICTA) – a government-owned company ? often provides financial support to startups to participate in international technical events such as Mobile World Congress etc.
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Sri Lanka doesn’t have a co-working spaces like the ones in Singapore and Malaysia. Neither has the co-working cultures grown among the professionals. The country’s capital ? Colombo ? needs to have large co-working spaces with good internet connections so that entrepreneurs can assemble and exchange ideas, feel experts.
Current status of financial institutions in Sri Lanka:
Various statistics say that financial inclusion is satisfactory as about 70% to 82.5% household has access to financial institutions for basic facilities such as savings and loans. Since the disruptive technology is yet to come of age in Sri Lanka, Banks have not threatened anyway. Neither they are in a hurry to adopt innovative technology to increase their customer base.
Opportunities in Sri Lanka for Startups:
The growth of the internet, mobile, and communication technology suggest that Sri Lanka has enormous opportunities for FinTechs. A survey conducted by the department of census and statistics of Sri Lanka shows that computer literacy is on the rise. While in 2006-07, the computer literacy was just 16.1%, in 2015, it has gone up to 27.1%. The age group of 15 to 19 has the highest computer literacy rate of 58.7% in 2015. An occupational group such as professionals, technical, associate professionals, clerks and clerical support workers are among the most computer literate groups in the country.
In 2009, while 11.4% people has desktop or laptop, the figure grew up to 24.4% in 2015. Sri Lanka is witnessing a phenomenal growth of mobile and internet connections and it’s emerging as a potential regional hub for information and communication technology.
According to the data provided by the Telecommunication Regulatory Commission of Sri Lanka, since the introduction of mobile broadband connections in 2009, its annual growth rate is 96.5% in the past six years. Similarly, the use of internet connections has also witnessed an annual growth rate of 68%.
Another report by a central bank suggests that 113 mobile phones and 13 fixed landline per 100 people were available in Sri Lanka in 2015. Reports also suggest that the growing interest among internet surfer is for e-commerce. Social media holds the second position.
The expansion of telecommunication presents an abundant scope for the emergence and quick growth of financial technologies. Further, Lack of quality assessment of the financial sector also presents an excellent opportunity for innovative technology to chip in and change the way people bank in the country.
In Sri Lanka, there is a ready-made ground available for financial technologies to emerge and grow as at one hand; both banked and the unbanked population is looking forward quality banking experience, broad coverage of telecommunication has already provided a required infrastructure. What it needs is a pro startup policy and investment from the government at various levels.