Problems with Youth Entrepreneurship in Sri Lanka

Sri Lanka is preparing for another general election. Vesess is a politically agnostic company, but we care about the well-being of our society. We thought this is a good time to bring up some important issues facing young entrepreneurs in the country, so that the next government—whoever that might be—could consider them when formulating their development strategies. We briefly discussed some of the technical problems earlier, but here we focus on broader issues.

And unlike our previous posts, I’m going to keep it rather academic so that you can look up the relevant research and come to your own conclusions. These are deep problems in need of long-term solutions, hence the more serious approach.

Launching a software product
Launching a product is not this easy in Sri Lanka.

Cultural Influences on Entrepreneurship

An entrepreneur’s perception of opportunities, and his/her likelihood to embark on new ventures in response to them—entrepreneurial intention—are affected by socio-cultural and economic factors. Starting a new technology business in Colombo is an entirely different experience from doing so in the Silicon Valley, because the social, cultural and economical environments are too different to be ignored based on the similarity of the industry alone. In fact, even in instances where economic variables affecting entrepreneurship are taken into account, there are variations across countries based on cultural factors (Hofstede et al, 2004). Some cultures have proven to be more conducive to entrepreneurship than others (Mueller & Thomas, 2001).

In developing countries like Sri Lanka, more entrepreneurs tend to be motivated by necessity rather than opportunity—i.e. they are ‘push’ entrepreneurs (Hessels et al, 2008). Push entrepreneurs are driven to start new ventures mainly due to dissatisfaction with their current circumstances, whereas pull entrepreneurs are primarily influenced by new business ideas, opportunities and their personal desires. The latter tend to be more successful than the former (Amit & Muller, 1995). Push entrepreneurship is also less likely to contribute to innovation, an especially relevant factor in the technology industry.

The pervading Buddhist culture in Sri Lanka has instilled an acceptance of the idea that life has inherently tragic dimensions—suffering, old age, sickness and death—that cannot be overcome through any amount of material success (Goulet, 1980; Obeyesekere, 1985). Thus, it is argued that Sri Lankans tend to find their primary sources of the meaning of life in socio-cultural values and beliefs that prioritise the collective over the individual (Nanayakkara, 1999).

Buddhist monk on his almsround
A Buddhist monk being offered food by devotees during his daily almsround. “Bhikkhu” literally means “beggar”, and the Buddhist ideal is to be dispassionate towards the world. Photo courtesy of Na Uyana Aranya, a place like no other.

In this context, individual need for achievement becomes a less important factor in entrepreneurial motivation compared to the need to satisfy a sense of social intimacy, and social power and relationships tend to become more influential elements (Gamage et al, 2003). For example, Schoof (2006) mentions how careers in the public sector are preferred to entrepreneurship in Sri Lanka despite the comparatively lower salary, because the job stability and social acceptance associated with a civil service job allows young people to negotiate better terms of marriage. Being successful in work, contributing to the society in a positive way, and enjoying a good family life are more important to Sri Lankan youth than having a lot of money (Hettige et al, 2004). Therefore it is not surprising that money and profit are not the primary motivating factors for Sri Lankan entrepreneurs (Weeratunge, 2008).

Youth Attitudes and Entrepreneurship Education

While Sri Lanka has been facing many difficulties with high youth unemployment for four decades (Arunatilake & Jayawardena, 2010), the interest in entrepreneurship among the youth remain low, and they have negative attitudes towards starting their own ventures or being business owners (Ibarguen, 2005). Studies have consistently found that Sri Lankans, in general, are not favourable towards business as an occupation (Weeratunge, 2010): the first national survey of public perceptions of business found that the majority of people believed that businesses exploited customers and destroyed cultural values (International Alert, 2005). These perceptions influence potential young entrepreneurs, as their entrepreneurial intentions are significantly affected by their families and friends (Ibarguen, 2005; Weeratunge, 2008).

The Sri Lankan education system does not promote or encourage entrepreneurship either. A new Entrepreneurial Studies course was introduced into the school curriculum in 2007 to address this need, but it has not yet yielded results (Weeratunge, 2010). While several public, non-profit and private youth entrepreneurship training programmes are available in the country, they are primarily targeted towards necessity-driven low- and middle- income rural youth to start micro or small enterprises, and not the opportunity-driven entrepreneurs who are more likely to start technology ventures. This is partly due to how entrepreneurship in Sri Lanka is generally associated with self-employment or owning a small business, which does not encompass the dynamic concept of entrepreneurship as a driver of innovation and value creation.

Graph showing rankings on Doing Business topics - Sri Lanka

Even for those who are interested, starting a business in Sri Lanka is not easy: the country ranks 104 out of 189 economies for the ease of starting a business under the World Bank Ease of Doing Business ranking, which is slightly below the regional average for South Asia. It also has the highest cost associated with starting a business in the region (20.7% of income per capita).

In the Sri Lanka Youth Entrepreneurship Roadmap (2004), ILO has identified three main disabling economic factors for potential youth entrepreneurs in Sri Lanka: lack of access to finance, lack of access to business support, and the outdated policy and regulatory environment. Most young entrepreneurs lack the collateral required for obtaining bank financing, and the Sri Lankan culture assigns great value to being debt free, which discourages them from seeking loans (Weeratunge, 2010). Until the launch of Lanka Angel Network (LAN) in 2012, Sri Lanka did not have a network of angel investors or seed funds that can help launch technology ventures. Unlike established and emerging technology hubs in the US, Europe and Southeast Asia, there are no startup accelerators or business incubators, which can guide and help technology businesses grow. All previous attempts at creating sustainable business incubators in Sri Lanka have failed, due to lack of proper programming and government support.

Lanka Angel Network startup incubator
But wait, LAN has launched a startup incubator. With $5 million raised for 20 startups already, they seem to be on a roll.

Despite the numerous negative sociocultural and economic factors, Sri Lanka still has youth who are interested in entrepreneurship. About 30 percent of youth consider self-employment their ideal job (Ibarguen, 2005), and 45 percent would consider business as a career option (Weeratunge, 2008). While only a few of them eventually go on to start their own businesses, it is from them that young technology entrepreneurs, like our own team, will emerge.

It is our job to point out these issues, but we also understand that no government can make overnight changes to fix them. It will take a concerted effort from both public and private sectors to come up with long term strategies that encourage youth entrepreneurship and drive technology innovation in the country. Hopefully this post would be a meaningful contribution—however small—in inspiring such an initiative.