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) have been highlighted as a key strategic sector in Sri Lanka because MSMEs play a major role in economic development. The objective of the study is to investigate whether Microfinance services impact the growth of micro, small, and medium-sized businesses (MSMEs) in the Service Sector operating in the Colombo district. Micro, small, and mediumsized enterprises (MSMEs) in the service sector operating in the Colombo district are the population. A sample of 250 MSMEs were selected using the convenient sampling method and the data were collected through structured questionnaires. Independent variable of the study is Micro-finance Services which is determined by Micro-credit, Micro-saving, and Micro-insurance. The dependent variable is Growth of MSME's. The results found that there is a positive relationship between Micro-credit, Microsavings, and Micro-insurance services with the growth of MSMEs in the Service Sector Colombo District. Further, Micro-savings have been the most contributory factor and Micro-insurance services were the least contributory factor for the firm's growth. Based on the survey data, the author has developed a multiple regression model. The study recommended that the government should further promote microfinancial services to develop the MSMEs in Sri Lanka.