Policy dissonance in enterprise development programming in Sri Lanka

Gayathri Lokuge, Atarah Senn and Anupama Ranawana

Type: Sri Lanka, Working Paper

Organisation: Centre for Poverty Analysis (CEPA)

Country: Sri Lanka

Date: 01/03/2019

Full summary

Since the turn of the century, there have been a series of deliberate policy attempts by Sri Lanka’s government to exploit the potential of and promote the small- and medium-sized enterprise (SME) sector.


SMEs are seen as the ‘solution’ to a range of post-war development challenges the country is facing. In a market economy where the state plays a minimum role in regulating the market, they are being advocated as a way to alleviate poverty, promote regional economic development and generate employment. However, clear analysis is lacking on the impact of these enterprise development programmes in Sri Lanka and their ability to achieve the expected results, especially in directly war-affected areas.


Through a qualitative in-depth analysis of 28 micro- and small-enterprises (MSEs) in the war-affected Batticaloa and Trincomalee districts, and of policy documents related to the sector, this working paper analyses the dissonance between the expectations and experiences of those who engage in enterprises, and the policy formulas, framings and assumptions in enterprise development policy in post-war Sri Lanka.


Key findings and recommendations:


  1. Continuities of war still shape the lives and livelihoods of men and women in the directly war-affected areas of the country.
    Development programming in these areas should take this impact into account in the design and implementation stages.
  2. Entrepreneurship is sometimes born out of a desperate need to survive rather than a deliberate choice that involves risk-taking, competition and innovation. Before developing policies and programmes to support SMEs, it is thus crucial to first understand the nature and motivations of these ‘survival’ enterprises and their specific needs.
  3. Outsourcing the ‘risk’ of failure or success to the individual entrepreneurs may lead to further vulnerabilities of men and women recovering from the prolonged war. Lack of sufficient attention paid to social safety nets and the nature of employment that MSEs create will exacerbate these vulnerabilities. Therefore, we recommend that social safety nets are put in place to target vulnerable groups directly affected by the war.