By Chanuka Wattegama
Sri Lanka’s Fintech industry has a long way to go before reaching its full potential, compared to some of its more developed neighbours such as Singapore and Malaysia.
Startups.lk, which can be termed the digital ‘meeting point’ of Sri Lankan start-ups, offers information on only 31 start-ups offering fintech solutions among a total of 409 listed. Only a fraction of the fintech market is served by these firms.
Many Sri Lanka based clients still select international solutions either continuing the tradition or in the absence of the nature of the solutions sought.
HatchX, Sri Lanka’s first fintech accelerator, showcased seven selected fintech start-ups shortlisted out of 20 applicants. Hatch mentioned that the intention was not just to discover promising fintech start-ups, but rather it was also “to open a new door towards creating a transformation in the financial sector in Sri Lanka by bringing together all the
stakeholders playing a key role in the financial ecosystem.
The showcased start-ups are solving problems, including bridging the credit gap faced by the micro-SME sector, utilising machine learning and data analytics to help organisations make more accurate financial decisions, Sri Lanka’s first peer-to-peer lending platform, cashless payments and offering micro-insurance to the Sri Lankans (FT, 2021).
One of the main barriers against the development of fintech solutions in Sri Lanka is regulatory. To overcome this hurdle Central Bank of Sri Lanka (CBSL) has introduced a “FinTech regulatory sandbox”, a mechanism where the regulator is able to identify regulatory barriers that hinder innovations. Both foreign and local players can utilise it.
The applicants will be accepted to the sandbox continuously rather than on a group basis (cohorts). In order to enter the sandbox, an applicant should either be a CBSL licensed financial institution or a partner and have a solution that is tested in a lab and verified by an independent third party. CBSL may relax a regulation that hinders the product from
being released to the market based on the progress and success of the product/solution while in the sandbox. In a situation where a product successfully exits the sandbox and enters an undefined area, new regulations can be introduced (Dissanayake, 2021)
(Wattegama is a Director of Information and Communication Technology Agency of Sri Lanka. The content was extracted from a policy paper, titled ‘Digital Economy of Sri Lanka: National Goals and Lessons from the South’ published by ICTA and United Nations Conference on Trade and Development -UNCTAD)