Sri Lanka has a population of 21.69 million, with 49.3% males and 50.7% females. As of 2023, 19.2% of the population lives in urban centers, while 80.8% resides in rural areas (Trading Economics, n.d.). These rural areas are home to small, scattered communities that primarily depend on agriculture, fishing, and small industries. They often face challenges such as limited infrastructure and reduced access to services like transportation, healthcare, and education. Life in rural communities is simpler, with a close connection to nature and a slower pace of living.
Rural economic development focuses on improving the quality of life in these areas by enhancing infrastructure, creating job opportunities, and supporting both agricultural and non-agricultural industries. The goal is to foster sustainable growth and reduce regional inequalities, ultimately benefiting rural communities across Sri Lanka.
Key Components of Rural Economic Development in Sri Lanka
- Agricultural Advancement:
Agriculture plays a vital role in Sri Lanka’s economy, contributing 7-8% to the GDP and employing 25% of the workforce. However, rural poverty remains a significant challenge, with a poverty rate of 7.6%, far higher than the 2.1% in urban areas. Key factors influencing agricultural development include:
• Diversification of Agricultural Products: Sri Lanka has made strides in diversifying its agricultural output beyond traditional crops like rice, tea, and coconut. The country is a major exporter of spices, including cinnamon, pepper, and cloves, with tropical fruits like papaya and banana increasingly gaining international demand. For example, Sri Lanka’s cinnamon exports have risen significantly, becoming a global leader in the spice market. However, despite these achievements, Sri Lanka remains heavily reliant on traditional crops, especially tea, which accounts for 12-15% of export earnings. Smallholder farmers in rural areas struggle with inadequate infrastructure, such as poor transportation and cold storage, which hinders broader agricultural export growth.
• Technological Innovations: Sri Lanka has made progress in modernizing agriculture through the adoption of technologies like advanced irrigation systems, organic farming practices, and integrated pest management. One example is the government’s introduction of drip irrigation systems in drought-prone areas like Anuradhapura, which has helped conserve water and boost crop yields. Furthermore, organic farming is gaining traction, with organizations like the Sri Lanka Organic Agriculture Movement promoting sustainable practices. Despite these advancements, rural farmers face barriers, including limited access to technology, financial resources, and training. For instance, farmers in remote areas such as Moneragala often lack the means to implement modern agricultural practices, hindering widespread adoption of these innovations.
• Increased Export Earnings: Agricultural exports, particularly tea, rubber, and spices, are key foreign exchange earners for Sri Lanka. The tea industry is one of the largest globally, with key markets in Russia, the UK, and the Middle East. In 2022, tea alone accounted for 13% of the country’s total export earnings. However, Sri Lanka’s dependency on a few export crops exposes it to global price volatility. A downturn in the tea industry, such as the 2021 global price decline, can have a severe impact on the economy. To mitigate this, there are efforts to diversify exports, including a push to grow organic tea and explore new markets, but challenges remain, such as competition from other tea-producing countries.
• Government Support and Investment: The Sri Lankan government has implemented policies like subsidies, agricultural credit systems, and infrastructure development, such as improving rural roads and irrigation systems. In 2020, the government invested in upgrading irrigation facilities in regions like Kurunegala, which led to improved crop productivity. However, government support is often inconsistent. Delays in subsidies, inefficiencies in policy execution, and issues like corruption have reduced the effectiveness of these initiatives. For example, farmers in rural areas have faced difficulties in accessing subsidies for fertilizers and seeds due to bureaucratic delays and mismanagement.
• Agricultural Education and Research: Institutions like the Hector Kobbekaduwa Agrarian Research and Training Institute (HARTI) and agricultural universities have contributed to research and education. HARTI’s work on soil fertility management and pest control has led to improvements in sustainable farming practices. However, there is a gap between research and its practical application, particularly in rural areas where access to the latest innovations is limited. For instance, many smallholder farmers in regions like Kandy lack direct access to HARTI’s research outputs, hindering the potential benefits of such initiatives.
• Sustainability Focus: Sri Lanka has promoted sustainable agriculture through policies that encourage organic farming and reduce environmental impacts. For example, the government’s promotion of organic fertilizers and integrated pest management is aimed at reducing the harmful use of chemicals. NGOs, such as the Sustainable Agriculture Network, have also partnered with local farmers to provide training in sustainable farming techniques. Despite these efforts, challenges remain. Organic inputs are expensive, and farmers in rural areas often cannot afford them. Moreover, there is limited market demand for organic products, and conventional farming methods remain dominant because they are more cost-effective and familiar.
- Infrastructure Development
Infrastructure development is crucial for rural economic growth in Sri Lanka, enhancing productivity and access to markets while fostering sustainable development. Key areas of progress include road infrastructure, irrigation systems, renewable energy, and digital connectivity, but challenges persist.
• Road Infrastructure: Significant improvements have been made in rural road networks, which have enhanced access to markets, healthcare, and education. These roads reduce travel times and transportation costs for farmers and rural entrepreneurs, boosting economic opportunities (Department of Rural Development, 2022). However, many remote areas still lack all-weather roads, particularly in regions like the North Central Province, where roads are impassable during the rainy season. This limits farmers’ ability to sell produce and creates regional disparities (Asian Development Bank, 2023).
• Irrigation Systems: The Mahaweli Project and other large-scale irrigation initiatives have significantly increased water availability, improving agricultural yields. Modern irrigation technologies, like drip and sprinkler systems, also enhance water efficiency (Ministry of Agriculture, 2022). However, smallholder farmers in remote areas still lack access to advanced systems, and outdated infrastructure leads to inefficient water usage, exacerbating water scarcity and environmental issues like soil salinity (FAO, 2022).
• Renewable Energy: Solar and wind power have provided off-grid rural areas with reliable electricity, supporting activities such as agro-processing (Sri Lanka Sustainable Energy Authority, 2023). Despite progress, high installation costs prevent widespread adoption, and some areas still experience power outages, hindering economic activities (Ministry of Power and Energy, 2023).
• Digital Connectivity: Expanding mobile and internet access has improved farmers’ productivity by providing access to market information and agricultural best practices (ICT Agency of Sri Lanka, 2022). However, digital connectivity remains inconsistent, with gaps in internet access and digital literacy, especially among older farmers (Sri Lanka ICT Industry Report, 2023).
- Skill Development and Education
Skill development and education are vital to rural economic growth in Sri Lanka, empowering youth and women to participate in the workforce. By focusing on vocational training and education tailored to rural needs, Sri Lanka can unlock the potential of its rural populations. However, challenges persist, limiting the full realization of these initiatives.
• Vocational Training Programs: The National Vocational Qualification (NVQ) system has made strides in equipping rural youth and women with essential skills such as plumbing, carpentry, and hospitality. The Vocational Training Authority (VTA) plays a key role in offering training programs to meet the demands of industries like construction and tourism (Ministry of Skills Development, 2023). These initiatives contribute to rural economic growth by improving employability and helping individuals secure better jobs. However, there is often a mismatch between the skills being taught and the needs of the labor market. Many programs are outdated, and access to training centers in remote areas is limited, hindering participation (UNDP, 2022). Additionally, a lack of emphasis on soft skills, such as communication and teamwork, restricts the effectiveness of these programs (Sri Lanka Chamber of Commerce, 2023).
• Women’s Empowerment through Education: Educational and vocational training programs have empowered rural women, enabling them to acquire skills in agriculture, textile production, and small business management. Programs like the Women Entrepreneur Development Program have fostered women’s participation in the workforce, boosting household incomes (Sri Lanka Women’s Bureau, 2023). However, cultural norms, domestic responsibilities, and mobility constraints still limit women’s access to education and employment. The absence of childcare services and limited access to financial resources further restrict their economic participation (World Bank, 2022).
• Collaboration between Educational Institutions and Industry: Sri Lanka has promoted collaboration between educational institutions and industries, offering on-the-job training and internships. This collaboration helps students gain real-world experience and better align training with industry needs, particularly in IT, agriculture, and tourism (Ceylon Chamber of Commerce, 2023). Despite progress, rural schools still lack the infrastructure to offer industry-relevant programs, and many graduates struggle to transition into the labor market due to insufficient support (Asian Development Bank, 2022).
• Access to Higher Education: Sri Lanka has expanded access to higher education in rural areas through scholarships, financial aid, and regional universities. These efforts have increased enrollment and helped rural youth pursue academic and technical qualifications (University Grants Commission, 2023). However, financial constraints and lower-quality education in rural schools remain significant barriers, hindering access to higher education (UNESCO, 2022).
• Technology and Digital Literacy: Initiatives to promote digital literacy, including computer literacy and coding programs, have expanded in rural areas. The expansion of internet access and digital learning platforms is making education more accessible (Sri Lanka Telecom, 2022). However, the digital divide remains a major obstacle, with many rural areas lacking reliable internet access and digital devices. This gap, combined with insufficient training for rural teachers, limits the potential of digital literacy initiatives (World Economic Forum, 2022).
- Economic Diversification
Economic diversification is essential for rural development in Sri Lanka, aiming to reduce reliance on agriculture and foster new income opportunities. By promoting sectors like rural tourism, handicrafts, and agro-based manufacturing, Sri Lanka can generate diverse income streams, provide employment, and strengthen rural economies. However, several challenges impede the full potential of these industries.
• Rural Tourism: Sri Lanka has seen growth in rural tourism, with initiatives to highlight the natural beauty, culture, and traditional lifestyles of rural communities. The government, alongside the private sector, has promoted agro-tourism, eco-tourism, and heritage tourism, showcasing regions like Kandy, Nuwara Eliya, and Anuradhapura. These initiatives have helped diversify rural economies by attracting tourists to engage with local farming, crafts, and wildlife conservation efforts (Sri Lanka Tourism Development Authority, 2023). However, infrastructure issues, including poor roads, limited accommodations, and lack of amenities, restrict the attractiveness of rural tourism. Furthermore, insufficient awareness and inadequate hospitality training for local communities hinder sector growth (World Bank, 2022).
• Handicrafts and Traditional Arts: Sri Lanka’s handicraft sector, including batik, pottery, and textiles, has gained recognition both locally and internationally. Government initiatives, such as rural craft villages, have supported artisans and opened up export opportunities in markets like Europe and North America (Ministry of Rural Economic Affairs, 2023). However, the sector faces challenges such as outdated marketing strategies, competition from mass-produced goods, and a decline in traditional skills among younger generations (UNESCO, 2022). To address these, efforts must focus on modern marketing, product innovation, and preserving traditional craftsmanship.
• Agro-Based Small-Scale Manufacturing: Agro-based manufacturing, such as food processing and textile production, has grown with Sri Lanka’s focus on value-added products. Smallholder farmers are diversifying into agro-processing, creating products like coconut oil and dried fruits (Department of Census and Statistics, 2022). Despite this progress, rural manufacturing struggles with limited access to modern machinery, financial constraints, and competition from larger producers (Asian Development Bank, 2023).
• Government Support and Policy Framework: The Sri Lankan government has introduced various policies to support rural economic diversification, including credit facilities, grants, and training programs. However, inconsistent policy implementation and a lack of targeted support for specific industries hinder the effectiveness of these efforts (World Bank, 2022). Strengthening infrastructure, improving access to credit, and enhancing coordination among government agencies are crucial to realizing the full potential of rural diversification.
- Market and Financial Access
Market and financial access are critical to promoting rural economic development in Sri Lanka. By improving credit access, supply chains, and cooperative networks, small-scale farmers and entrepreneurs can enhance productivity and achieve sustainable growth. While strides have been made in these areas, challenges persist in fully realizing their potential.
• Access to Credit: Sri Lanka has introduced several government-backed financial schemes, such as the “Agri-Loan” and “Smallholder Development Program,” which offer low-interest loans to rural farmers and entrepreneurs. Additionally, microfinance institutions and community-based lending groups have expanded, providing small loans to individuals traditionally excluded from formal banking services (Central Bank of Sri Lanka, 2023). These initiatives have helped small-scale farmers invest in modern equipment and enabled entrepreneurs to expand their businesses. However, access to credit remains limited due to collateral requirements, bureaucratic hurdles, and a lack of financial literacy. Many farmers and entrepreneurs still rely on informal, high-interest loans due to reluctance from financial institutions to lend to small-scale operations, which are seen as high-risk (World Bank, 2022).
• Supply Chain Improvements: Sri Lanka has made progress in improving agricultural supply chains through infrastructure development, including rural roads, transportation networks, and storage facilities. Public-private partnerships (PPPs) have been promoted to modernize agricultural markets and establish cold storage, reducing product spoilage and improving market access (Ministry of Agriculture, 2023). Additionally, digital platforms now connect farmers directly with consumers, reducing intermediaries and ensuring better pricing. However, inefficiencies in rural supply chains persist due to poor infrastructure, limited access to market information, and lack of organized transportation. Poor road conditions and the absence of cold storage facilities lead to significant losses, while farmers’ lack of market knowledge limits their bargaining power (Sri Lanka Chamber of Commerce, 2022).
• Cooperative Development: Cooperatives have become a key strategy to empower rural farmers and entrepreneurs. Organizations like Lanka Sathosa help provide collective bargaining power, shared resources, and access to training, enabling farmers to reduce input costs and secure better prices (Cooperative Development Department, 2023). Entrepreneurs also benefit from cooperative membership, gaining access to facilities, market information, and financial services. However, many farmers remain outside of cooperatives due to mistrust, lack of awareness, or limited opportunities. Management issues, poor governance, and financial instability within some cooperatives further undermine their potential (ILO, 2022).
• Market Access and Digital Platforms: The adoption of digital platforms has enhanced market access for rural farmers, allowing them to connect directly with buyers and access real-time price updates. Platforms like “eChannelling” and agricultural e-commerce sites have helped farmers access larger markets and secure better prices (Sri Lanka Information and Communication Technology Agency, 2022). However, the uptake of these platforms remains limited due to low digital literacy, poor internet connectivity, and lack of access to digital devices in rural areas. These barriers prevent farmers from fully exploiting the potential of digital tools, exacerbating the digital divide between rural and urban areas (UNDP, 2022).
- Policy and Institutional Support
Policy and institutional support are critical for fostering sustainable and inclusive rural economic development. In Sri Lanka, efforts to strengthen rural policies and local governance have been key to addressing regional disparities and promoting equitable growth.
• Rural Policy Strengthening: The Sri Lankan government has introduced programs like the “Grama Shakthi Program,” aimed at reducing poverty, enhancing infrastructure, and improving rural livelihoods (Ministry of Rural Economic Affairs, 2023). While these policies have promoted growth, inconsistent implementation, lack of coordination, and frequent policy shifts hinder their effectiveness. Regional disparities persist, and there is often a gap between policy formulation and on-the-ground impact (World Bank, 2022).
• Strengthening Local Governance: Decentralization initiatives, such as the “Local Government Development Program,” empower local governments to address community-specific issues (Ministry of Provincial Councils and Local Government, 2023). However, challenges like limited resources, capacity, and accountability undermine local governance and the successful implementation of rural development projects (United Nations Development Programme, 2022).
• Addressing Regional Disparities: Programs like the “North and East Development Program” target infrastructure and economic development in underdeveloped regions (Sri Lanka Planning Division, 2022). Despite these efforts, regional disparities persist, exacerbated by rapid urbanization (International Labour Organization, 2022).
Rural economic development is crucial for Sri Lanka’s long-term prosperity, as it directly impacts the livelihoods of a large portion of the population engaged in agriculture and small-scale industries. Strengthening rural areas not only promotes sustainable economic growth but also plays a pivotal role in reducing regional disparities and alleviating poverty. By enhancing agricultural productivity, fostering job creation, and improving living standards, rural development ensures food security, promotes equitable growth, and curbs rural-urban migration. Furthermore, it encourages sustainable practices such as organic farming and rural tourism, contributing to both economic and environmental well-being. Ultimately, focusing on rural development is essential for achieving a balanced and inclusive growth trajectory for Sri Lanka.
Sources:
• Central Bank of Sri Lanka. (2023). Annual report 2022. Central Bank of Sri Lanka.
• Ministry of Rural Economic Affairs. (2023). Grama Shakthi Program: Empowering rural communities. Ministry of Rural Economic Affairs.
• Ministry of Agriculture. (2023). Improving agricultural supply chains in Sri Lanka. Ministry of Agriculture.
• Sri Lanka Tourism Development Authority. (2023). Rural tourism: Opportunities and challenges. Sri Lanka Tourism Development Authority.
• Sri Lanka Information and Communication Technology Agency. (2022). Digital platforms for rural economic development. Sri Lanka Information and Communication Technology Agency.
• World Bank. (2022). Sri Lanka rural development policy note. World Bank.
• United Nations Development Programme. (2022). The role of local governance in rural economic development. United Nations Development Programme.
