Small and medium enterprises (SMEs) have been identified as an important strategic sector for promoting growth and social development of Sri Lanka. Over the years SMEs have gained wide recognition as a major source of employment, income generation, poverty alleviation and regional development. The SMEs cover broad areas of economic activity such as agriculture, mining, manufacturing, construction and service sector industries. In spite of various policy reforms and incentives offered by successive governments with the assistance of various donor agencies during the post liberalization period, the SME sector enterprises are less dynamic and underdeveloped as against large-scale enterprises in the national economy. The growth and expansion of SMEs are constrained by problems relating to both product and factor markets. Lack of institutional support and policy inertia has further reduced the potential contribution of SMEs to the national economy. This white paper attempts to address these issues within the current context of policy framework in Sri Lanka.

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