Small and Medium Enterprises

Abstract

In this study the author will be analyzing the topic: do small and medium enterprises contribute significantly to the economic development of Sri- Lanka.

The report will include statistics on the small and medium enterprises, their growth rates, factors affecting their growth, independent and dependent variables, how they affect economic growth and what measures can be taken to improve their contribution to the economy.

Quota sampling; the production output rates of small and medium enterprises over the last ten years have been taken as the data sample forthe proposedresearch. This report concludes the factors and figures leading to justify those small and medium enterprises do have a significant contribution to the economic growth of Sri-Lanka. 

1. Introduction

The year 1952 was the beginning of SMEs in Si-Lanka when the World Bank and the Government decided to promote small and medium scaled businesses instead of large industries. Later in the 1960s the government drew their focus to developing SMEs for the single purpose of retaining foreign exchange by import substitution and to enhance employment (Daily FT, 2010).

Thereafter, in the 1977, SMEs took over the export market, which is actually when the SME became the backbone of the country’s economy (Daily FT, 2010).

In Sri-Lanka a small enterprise is one with 5-49 employees and medium-scaled enterprises are those which have 50-149 employees (Cooray& De Silva, 2007; Sumanasena, 2005). According to National Human Resources and Employment Policy(2012), small and medium businesses makeup around 80%- 90% of the Sri-Lankan economy. They are found all sectors of the economy. Notably, 80% of over 4700 odd exporters generating almost Rs. 8000 billion annually are SMEs (Daily FT, 2010).

1.1 Problem statement

Do SMEs contribute significantly to the economic development of Sri- Lanka?

1.2 Justification

As in most developed and developing nations, SMEs in Sri-Lanka play an important role in improving the economy and providing employment(Reddy, 1991:2). Encouraging SMEs will enhance the industrial output of a country and thereby increase the GDP and finally allow achieving a sustainable economic growth. Lately, the government has taken steps towards improving the support given to the SMEs. Some have benefited from these supports whereas some haven’t. It is essential to understand the role and significance of SMEs in economic development(Ministry of Traditional Industries and Small Enterprise Development, 2012).

1.3 Objectives

Main objective

To examine the SMEs contribution to the economic development of Sri- Lanka

Secondary