Frequently Asked Questions



What is the social benefit? How is SEDCO a social enterprise?

SEDCO has a self-financing enterprise model but a social mandate. We were founded to fill service gaps and address structural economic constraints that affect disadvantaged rural communities. The following policies and systems have been developed to ensure social benefit:

Making Paper Making natural paper products in the Knuckles Range

  • Direct trade links must maximize returns to rural producers and increase their capacity to establish additional trade agreements.

  • Value chain investments must be assessed for financial viability, environmental impact and social benefit.

  • Value chain investments must have community ownership.

  • Partner community organizations must be democratic with a broad leadership and transparent financial management systems.

  • All business arrangements and contracts must be transparent to all of the involved parties.

  • Sewalanka's Research and Learning Unit will monitor social impact of SEDCO initiatives.

How does SEDCO make a profit?

SEDCO has three primary revenue streams: trading fees, returns on value chain investments and service provision. The enterprise model is intended to ensure the sustainability of SEDCO services beyond the period of conventional donor-funded projects and expand SEDCO services to a broader geographical area.

What does SEDCO do with its profits?

To date, all profits have been reinvested in improving SEDCO initiatives or expanding SEDCO services. In the future, returns may be paid to social investors with Board approval.

What do you mean by value chain investment?

A value chain is the system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Value chain activities transform raw materials into a finished product. At each activity the product gains some value.

SEDCO uses the term "value chain investment" to refer to an investment that increases the share of the value chain captured within a rural area, for example, facilities for input production, processing, packaging, storage, transport, or retail sales. Most value chain investments also require initial working capital and support services.

What do you mean by direct trade? Is it the same as Fairtrade?

Both direct trade and Fairtrade aim to help marginalized producers improve their market access, increase their returns and contribute to the sustainable development of their communities.

Fairtrade refers to a certification and labeling process and is dependent on consumer awareness and ethical consumerism. Most Fairtrade products are traded internationally and purchased by relatively wealthy consumers.

A direct trade link means there are fewer intermediaries between the producer and the consumer and a greater share of the value chain is captured by rural producers or retained within rural areas. This approach focuses on strengthening the capacity of producer groups so they are able to increase their bargaining power and establish additional trade agreements independently.

Direct trade is not dependent on consumer awareness and ethical consumerism. The majority of SEDCO's direct trade links have been domestic.

Why does SEDCO support producer groups and community initiatives rather than individual entrepreneurs?

As a national organization, we are committed to structural socioeconomic change. In most isolated rural areas of Sri Lanka, the majority of families are involved in primary production of a limited range of products. Focusing on sectors that involve a critical mass of rural producers increases the likelihood of facilitating regional-level change

How are 'community enterprises' different than traditional cooperatives?

Community enterprises have a transparent ownership structure of shareholding members. Shareholders hire a qualified manager to make operational decisions. In our experience, this ownership / management structure is more efficient than traditional cooperatives.

How is SEDCO different from a 'middleman' trader?

SEDCO focuses on increasing the capacity of producer groups to establish additional trade agreements. Rather than maximizing profits, SEDCO facilitates direct trade links to maximize returns to rural producers. In most cases, ownership of community products does not transfer to SEDCO. The company leverages a modest trading fee to cover institutional costs.

What is the relationship between Sewalanka, Sewa Finance and SEDCO?

The three institutions provide an integrated and complementary package of services.

  • Sewalanka is responsible for social mobilization, institutional capacity building, training, and sector-specific advisory services.

  • Sewa Finance provides wholesale loans to community organizations to increase their lending capacity and expand their revolving fund

  • SEDCO assists with direct trade linkages and value chain investments in community initiatives that enable rural producers to capture more of the value chain.

What is the difference between SEDCO services and microfinance?

Loan capital is not appropriate for all income-generating activities. Loan repayment is usually according to a strict monthly schedule that often starts immediately after disbursement, but a new enterprise can take months before it reaches its break-even point and begins to generate profits. New enterprises also require complementary support services. During the start-up period, it is difficult to repay loan capital.

SEDCO uses a venture capital model with a clear exit strategy. When the company invests in a promising rural enterprise, it acquires an equity share and has a vested interest in providing business advice and support services. When the enterprise reaches its break-even point, community shareholders begin to buy back SEDCO shares.

How can I get involved?

SEDCO is currently seeking partners and investors for institutional seed capital and expansion of the investment fund. This investment will enable us to scale up the successes of our value chain investment and direct trade approach. Only partners with a commitment to SEDCO's social enterprise model will be considered. Depending on the terms of investment, a partner could receive share ownership in the company. Substantial partnership could lead to Board representation.

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