Source of Finance And Business Performance Of Small And Medium Enterprises In Batticaloa District

Abstract

Small and Medium Enterprises (SMEs) play a remarkable role i1 any economy through generation of employment, contributing to the economic growth, embarking on innovations and stimulating other activities in developing economies like Sri Lanka. However, the performance of SMEs is still perceived as a moderate achievement. Access to finance is a key determinant for business start-up and growth for SMEs and they have very different needs and face different challenges with regard to financing. As compared to companies, small and medium enterprises have encountered limited access and utilization to financial resources at every stage of their development. In this context, this study is aimed to find out the impact of sources of finance on the business performance of SMEs and identify the most influential sources of finance that increase the business performance in an attempt to fill the research gup identified through literature review. The conceptual framework was developed with three variables related to this topic. The statistical population includes the owners of SME in Batticaloa district and out of which a sample of 395 respondents were selected using stratified random sampling method. Primary data which were collected through the structured questionnaire from 324 respondents. The results showed that there are positive significant relationships among internal sources of finance, external sources of finance and business performance of SMEs. There are significant impacts between internal sources of finance and business performance, external sources of finance and business performance of SMEs, and both internal and external sources of finance and business performance of SMEs. The study provides' insights to the Government, policymakers, SMEs operators, management consultant, entrepreneurs and financial institution regarding the relevance on the sources of finance and business performance of small and medium enterprises and enables them to finance the appropriate sources to maximize business performance of SMEs and allow them towards the development on economic growth'