CAPITAL MARKETS
Compiled by Prashanthi Cooray
INVESTOR BUILDING BLOCKS
Manjula Mathews explores pathways to build a future ready investor base
Q: What key reforms do you think are necessary to strengthen and broaden Sri Lanka’s capital markets?
A: Simplifying tax policies – especially capital gains and withholding taxes – can reduce ambiguity and attract foreign and institutional investors. Introducing partial fund allocations from the Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF) into listed equities and unit trusts, under tight oversight, would inject long-term liquidity into the market.
And expanding the product base with real estate investment trusts (REITs), green bonds and derivatives, supported by clear regulatory frameworks, can cater to diverse investor needs.
At the structural level, demutualising the Colombo Stock Exchange (CSE) is essential to improve governance, enhance transparency, and position it for strategic partnerships and global competitiveness.
Improving access through digital onboarding and electronic know your customer (eKYC) procedures will drive greater retail participation. Encouraging SME listings with tailored requirements can broaden the corporate base while infrastructure upgrades – including real-time settlement systems and blockchain exploration – will boost efficiency and trust.
Importantly, introducing capital market fundamentals into the school curriculum will cultivate early awareness and financial literacy, creating a future ready investor base.
Combined with strong investor protection and grievance mechanisms, these reforms can build a vibrant, inclusive and resilient capital market, which in turn supports economic growth and private sector development.
Q: How can greater retail investor participation be encouraged in fixed income and equity markets – especially in a post-crisis recovery environment?
A: Investor participation in both equity and fixed income markets has been historically low with participation limited to less than 10 percent of the population. Lower financial literacy among the population is identified as the main reason behind this low level of participation.
Improving financial knowledge through targeted education is believed to be the fastest way to increase participation, especially since more willingness has been shown by people in the post-crisis period.
Proactive action such as leveraging technology and mobile platforms, community based literacy programmes, workplace financial education and encouraging the responsible use of credit can help improve financial literacy in the medium term.
Q: Where do you see opportunities for innovation within Sri Lanka’s capital markets – whether in terms of products, platforms or policies?
A: The most notable opportunity for innovation in Sri Lanka’s capital markets lies at the intersection of digital platforms and regulatory reform, supported by targeted product development.
Digitising investor access through AI powered eKYC, mobile first trading apps and data driven advisory tools can democratise participation, especially among younger and underserved segments.
Coupled with this, policy reforms such as streamlining tax structures, enabling partial pension fund participation and creating regulatory sandboxes may unlock capital, and encourage fintech innovation.
There is also growing demand for diversified investment products such as money market funds with ‘T+0’ liquidity, Shariah compliant offerings, green bonds, and environmental, social and governance (ESG) linked funds, which cater to evolving investor preferences.
Meanwhile, long-term potential lies in introducing REITs, derivatives and tokenised assets once foundational systems mature.
However, innovation must be inclusive and investor centric, supported by safeguards and financial literacy programmes, to build trust and engagement.
By aligning platforms, products and policy, Sri Lanka can drive higher participation, attract foreign capital, and create a more resilient, liquid and transparent capital market ecosystem that supports broader economic growth.
Q: How important is boardroom diversity and independence when it comes to responsible capital stewardship?
A: Boardroom diversity and independence are particularly vital in the finance sector. A mix of gender, backgrounds and experience leads to broader perspectives, and improves decision-making, risk oversight and long-term value creation.
As a woman in finance, I’ve seen how gender diversity helps challenge groupthink, and encourage more inclusive and balanced discussions.
Independent directors – those who are not tied to management – are also crucial: they help hold leadership accountable, and ensure that decisions align with shareholder and stakeholder interests.
In today’s dynamic financial environment with rising ESG demands and complex global risks, diverse and independent boards are needed. They foster trust, promote ethical behaviour and support sustainable financial performance.
At the core of good governance is having the right mix of voices at the table; and that must include women and other underrepresented perspectives.
Q: What advice would you offer to women looking to build leadership careers in the traditionally male dominated finance sector?
A: Women seeking to establish leadership careers in this field must exhibit genuine passion and a clear determination to achieve long-term success.
They need to develop expertise by acquiring strong technical skills through advanced education. Staying informed about financial markets, regulatory changes and technological advancements is essential for maintaining relevance and demonstrating subject matter authority.
Confidence is equally important. Women should actively contribute to meetings and assert their ideas clearly. They should be willing to advocate for their own career advancement and demonstrate a readiness to embrace leadership opportunities.
Additionally, networking within the industry provides exposure to opportunities and broadens influence.
