Developing Small and

Medium Enterprises
(SIVIEs) in Sri Lanka:
Key Issues and
Remedies
The creation of a business-friendly

Dr. SARATH BUDDHADASA

Managing Director
Business Consultancy Services (Private)
Limited

environment
1.

that

maximizes

the

growth potential of SMEs has not yet

been realized in this country. Yet
these SMEs have a crucial role to play
strengthening

in

the

economy.

Supporting the growth of S MEs in

post-war Sri Lanka has become very
critical

in

achieving

the

socio -

economic goals of the country while

a
ddressing key issues such as
employment,
Introduction
The
Small

and

level

Medium

Enterprise (SME) sector in any

contributor

achieving

sector as a key strategy for Sri

economic

Lanka's future development.

prosperity. Every developed

the SME sector for effectively
meeting their socio-economic
demands

through

the

SME

sector as a key strategic effort,

integrated with other sectors.
Orienting the SME sector at
macro

level

economic

achieving

goals

responsibility
government
other

for

hand

is

the

of
while
the

the
on

the

business

community is required to play a

pivotal role as a user of the
opportunities

created

in

the

process.
The purpose of this article is to
assess the prevailing macro

SME

framework for utilizing the SME

towards

country is still dependent on

for

suggest an integrated holistic

given country has to be a

positive

environment

growth in this country and to

2.

Importance of SMEs in
economic development
The importance of Small and
Medium-sized Enterprises
(SMEs) for the major world
economies has long been
recognized. They are more
responsive to market demands
and are perceived as an
important means of job
creation. There are three
urgent issues in the role of
SMEs that need to be
addressed in middle income
countries like Sri Lanka.
First, dealing with high levels of
poverty

and

unemployment.

The growing disparity between

Bankers Journal Januar

the growth rate ofGDP and of

sized enterprises because they

employment

been

are the custodians of job

witnessed in most countries.

creation and growth. The

Second, the need to sustain

importance of SMEs in the

higher levels of employment

modern

generation in the agriculture

economic development is, of

and rural sectors. Third, the

course, now recognized the

issue of dedicated protection

world over including Europe

and support for SMEs. The on-

and in particular EU countries.

going economic globalization

It

has changed the perception

wisdom that a vibrant and

of governments with regard to

healthy economy depends on

their policies towards SMEs in

the competitive advantage that

their respective countries.

can

has

is

economy

generally

be

gained

and

accepted

from

distinctive importance
As seen from the above
explanation, the SMEs'
contributions
to growth, job creation and
social progress are highly
valued

strong

and

in

dynamic

the
of a
SME

sector.
Based

on

the

above,

it

is

realized that SME development

will result in overall economic
development of a country while

Page 6

addressing the most pressing

socio-economic issues such as

and the SME business is regarded

poverty,

as an essential element in a

unequal distribution of income,

successful

etc.

formula

for

unemployment,

achieving economic growth.

The development of SMEs is a 3.
sine

qua

non

industrialization
therefore,

of

development
society.

Newly

in

of
and,

sustainable
a

modern

industrializing

countries are encouraging the

growth of small to medium

Sri Lanka's economy

and SME environment
The creation of a businessfriendly environment that
maximizes the growth potential
of SMEs has not yet been
realized in this country. Yet these
SMEs have a crucial role to