The determinants of financial performance of small and medium scale enterprises in Badulla District

Abstract

Small and Medium Enterprises are backbone of the economic growth in all countries. SMEs make up a large part of Sri Lanka's economy as well. There is limited information related to the relationship between socio-economic factors and the financial performance of small and medium scale enterprises in Badulla district. Therefore, the objective of this study is to attempt to investigate how for the determinants as socioeconomic factors influencing on the financial performance of small and medium scale enterprises in Badulla district. Simple random sampling method was applied to select 100 SMEs in Badulla district. The data were collected using structured questionnaires. Univariate and multiple regression analysis were employed in data analysis. Extents of the influence of Socio-Economic factors on SMEs were measured using two groups of variables Social and Economic factors such as Access to Infrastructure, Support of Family Members, Availability of Managerial Experience, Business Information Services (Social factors) and Access to Finance, Government Policy and Regulations, Macro-Economic Indicators (Economic factors). The results suggest that Social factors are found to have high influence on the performance compared to the Economic factors on the performance of small and medium scale enterprises in Badulla District. As personal factors, Age of the owner, investment level, experience and marital status of the owner are also having influence on the performance of SMEs Badulla District. It is recommended that the government should have attention to improve IT skills of SMEs owners because, of lack of IT skills of owners. To develop SMEs and improve their managerial skills, government should implement granting credit facilities, entrepreneurship training programs, counseling services and research and development in a spread and regular basis for Badulla District SMEs.