Effect of Micro Finance Services on Growth of Micro Small and Medium Scale Enterprises (msmes) in Service Sector Operating in Colombo District

Abstract

The Micro, Small and Medium Enterprises (MSMEs) has been highlighted as a key strategic sector in Sri Lanka, serving as a catalyst for inclusive economic growth, regional development, job creation, and poverty reduction. Micro-finance is defined as a development tool that provides financial services and products such as very small loans, savings, micro leasing, and money transfer to assist the very poor in expanding or establishing their business. It’s mostly used in emerging economies where SMEs do not have access to other sources of financial assistance (Marguerite, 1998). Through a process of commercialization and privatization, the government has diminished its role as the economy's primary driving force. As a result, the emphasis has changed away from large-scale businesses and toward Micro, Small and Medium Enterprises (MSMEs), which have the ability to build local linkages for quick and long-term economic development. The organized private sector was tasked with spearheading following industrialization efforts. Incentives granted to encourage expanded engagement in various areas were aimed at solving and reducing challenges faced by industrialists in the country, resulting in increased participation in these industries. Incentives were given to encourage increased engagement in these sectors by addressing and reducing challenges faced by industrialists in the country, providing them more discretion in boosting their contribution to the national economy. There is no proper definition for defined MSMEs and different institutions defined in different ways to MSMEs. As defined in most cases, the number of employees and the value of assets are considered. Enterprise size by value of the asset as less than 1 million are micro, assets value between 20-50 million are medium, and more than 50 are large. (A. M.Adam & G.Tweneboah, 2008) And the department of census and statistics identify small industry as employees less than 10 and more than 10 are micro and small in respectively.