Unleashing Sri Lanka’s Stock Market: The Case for Lowering Barriers for Young Investors

Sri Lanka stands at a critical economic crossroads.

After weathering a historic financial crisis, the country is showing robust signs of recovery, with GDP growth outpacing expectations and a rebound driven by strong performances in industry and services. Yet, beneath this recovery lies a persistent challenge: a significant portion of the population-especially the youth-remains vulnerable, with poverty rates still alarmingly high and household incomes lagging behind pre-crisis levels.

The Promise of the Stock Market in a Low-Interest, High-Inflation Environment

With benchmark interest rates at 8% and inflation recently turning negative due to energy price cuts but expected to rise again, traditional savings offer limited protection against the eroding power of inflation. For young Sri Lankans seeking to build wealth and secure their financial futures, the stock market presents a compelling alternative. By investing in regular dividend-paying and growth-oriented shares, individuals can potentially outpace inflation and benefit from the country’s economic resurgence.

A vibrant stock market does not just benefit individual investors. Increased participation boosts market liquidity, supports business growth, and, crucially, channels more revenue into government coffers through taxes on capital gains, dividends, and broker transactions. This creates a virtuous cycle, reinforcing fiscal stability and funding essential public services.

Barriers to Entry: Broker Houses and the Cost of Exclusion

Despite these clear benefits, many aspiring investors-particularly novices and young people-face daunting barriers to entry. Leading broker houses often impose high minimum deposit requirements to open trading accounts, a practice that effectively excludes those without significant upfront capital. This not only stifles individual ambition but also undermines the broader goal of democratizing wealth creation and deepening the capital market.

Globally, best practices show that zero or low minimum deposit requirements, as offered by platforms like Easy Equities and XTB, can dramatically expand access and foster a more inclusive investment culture. In contrast, restrictive policies in Sri Lanka risk keeping the market shallow and less dynamic, ultimately reducing potential tax revenue and stunting economic growth.

The Economic Imperative for Reform

Research consistently shows that well-functioning capital markets are essential for economic development. High liquidity, efficient trading, and broad participation are all linked to stronger GDP growth and improved living standards. When broker houses set arbitrary barriers, they not only limit their own revenue potential but also deprive the government and the nation of the full benefits of a thriving stock market.

“The value of businesses and the stock market size determine the economic growth of the country. The Sri Lankan government needs to maintain a peaceful, conducive environment for investors, ensure secure functionality of capital markets that will help implement socio-economic policies to promote better living standards in the country.”

• Thehani Egodawatte, Research on Capital Markets and Economic Growth in Sri Lanka

The Role of the Colombo Stock Exchange and Regulatory Authorities

The Colombo Stock Exchange (CSE) has a pivotal role to play. Without assertive oversight and a clear mandate to promote accessibility, the CSE risks becoming, as critics put it, “a tiger without teeth”-unable to drive the reforms necessary for national progress. Regulatory authorities must intervene to establish investor-friendly policies, standardise reasonable account-opening requirements, and ensure that broker houses align their practices with the broader interests of the country.

A Call to Action

Sri Lanka’s economic recovery is fragile, and the path to sustained prosperity requires bold, inclusive policies. Lowering barriers to stock market entry is not just a matter of fairness; it is an economic imperative. By empowering young people and first-time investors, Sri Lanka can unlock new sources of growth, boost government revenue, and build a more resilient, equitable society.

It is time for the authorities to act. By bringing broker houses in line with the needs of the people and the nation, Sri Lanka can transform its stock market from an exclusive club into a true engine of national development.