Catalyzing Small and Medium-sized Enterprise Venture Capital in Sri Lanka

Abstract

Small and medium-sized enterprises (SMEs) are the bedrock of Sri Lanka’s economy. Comprising 75% of all active enterprises, Sri Lanka’s SMEs provide 45% of employment and contribute 52% to its gross domestic product. Creating an environment conducive to SME growth is integral to achieving equitable economic growth in Sri Lanka. Against this backdrop, this paper seeks to evaluate the viability of supporting the SME sector by improving access to equity or risk capital. This paper assesses SME demand for equity, reviews international precedents of government support for SME capital, and provides an analysis of fund structuring considerations. It presents recommendations for a government-initiated venture capital fund for SMEs in Sri Lanka.