Small and Medium Enterprises (SMEs) show an essential part in any economy through generation of employments, contributing to the evolution of GDP, begin on inventions and inspiring of other economic events. This area is said to be the backbone of all developed and developing nations. When analyzing the current support of this sector in the national economy, it is clear that the sector has not achieved wanted level of involvement when compared with other developed and developing countries in the region.

Research Problem:

What are the specific factors/reasons for people or individuals to engage in Entrepreneurship/self-employment activity? Is it due to poverty that makes SME as a choice available to them? Or the government policy through its welfare or subsidy that provide some enforcement for local people to engage in self-employed small scale Industry activity. Also there can be many other background factors such as personal characteristics of individuals such as personal traits, skills and risk bearing ability for engaging in small business to achieve their economic development goals. Considering the above background this research is therefore focuses on exploring and examining the factors determining the formation and effectiveness of SME on economic development in Sri Lanka.

Objectives of the Study

To examine the factors determining the success of Small and Medium Enterprises (SMEs) in Sri Lanka,

To develop possible policy choices on how to enhance the success of SMEs in Sri Lanka.


In our attempt to find the suitable methods for collecting the much needed information for our research one method is used. A qualitative analysis on previous researchers’ methodology (Secondary data) is applied and then the experience gained from SMEs economics related research projects undertaken in Sri Lanka is used. It is important for the researcher to consider various research paradigms while deciding on the methods to be used in the study.


Having understood the positive impact of SMEs development on economic growth, and many countries are putting a lot of efforts to develop this vital sector. But the contribution of SMEs to the national economy in Sri Lanka is still low when compared with the other developed and developing countries in the region. Therefore, there is an urgent need to further improve the inherent capacities and capabilities of these industries to be efficient suppliers.


Small and Medium Enterprises in Sri Lanka, SME Policies in Sri Lanka, Economic Development, Entrepreneurship, Small Scale Industry.

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