Recognizing viable SMEs sector economically, environmentally and socially: evidence from Sri Lanka

N.P. R. Deyshappriya^a* , G.H. Abeyweera ^b

^a*Senior Lecturer; Faculty of Management, Uva Wellassa University, Sri Lanka. Corresponding author's email address: ravindra@uwu.ac.lk

^bDean; Faculty of Management, Uva Wellassa University, Sri Lanka

Keywords: Small & medium enterprises, Enterprise Survey, Viable SME Types, SME

ARTICLE HISTORY: Received:24-Sep-2019, Accepted: 22-Nov-2019, Online available:23-Dec-2019

Contribution/ Originality

The study contributes to the existing literature by recognizing economically, environmentally and socially viable SMEs for both Uva and Central provinces of Sri Lanka while profiling the current SMEs in the provinces. Hence, this study enriches the current literature while focusing on SME related appropriate policies.

1. INTRODUCTION

1.1. Small & medium enterprises (SMEs): concept, definition and classifications

Since SMEs have been generally recognized as vital sector of enterprises, with potential to reduce unemployment, poverty and inequality, and simultaneously, increasing innovative abilities and confident competitive will among the industries. Entrepreneurship is a key to the success for SMEs as equally considered for any kind of business enterprise. The initiation or starting up of any business and making it grow into a sustainable and viable operational entity is chiefly due to the efforts of any versatile entrepreneur. Thus, it is important to have a comprehensive concept and clear understanding about entrepreneurship, at first. According to Bennet and Dann (2000) and Kouriloff (2000), identifying a clear definition for entrepreneurship is somewhat difficult, since researchers have used their own perspectives to define the word 'entrepreneurship', rather than keeping in view the traditional aspects or taking into consideration the inherent characteristics of the term itself. According to the psychological perspective, entrepreneurship has been defined in terms of attributes, values and traits attached to the term, while economists have considered it as financial matters, monetary benefits and growth of business. According to the viewpoint of management, entrepreneurship is perceived as a process of organizing existing resources in marketable products or services. Under this critical scenario, Gartner (1985) also stressed that there is no consensus on the definitions of entrepreneurship, despite the fact that the term has gained considerable academic interest. As Dzisi (2008) mentioned to state that definitions given by Schumpeter (1939), Gartner (1985), Vanderwerf and Brush (1989) and (1992) focused mainly on innovativeness, ability to risk and venture and the wealth creation abilities of entrepreneurs. However, Hofer and Bygrave (1992), Hyrsky (1999), Kao (1993), Timmons (1999) and Bennet and Dann (2000) emphasized that since 'entrepreneurship' is not a science and cannot be well-defined in any sense.

The key characteristics and main aspects of entrepreneurship as highlighted by Schumpeter (1934) and Kirzner (1979) are widely accepted in literature and are well summarized in Kao's (1993) underlying behaviour and conceptual beliefs of entrepreneurship. These are, in the first place seen as entrepreneurial behavior which involves the ability to identify new opportunities based on new ideas and approaches, turning them into something tangible. Secondly, entrepreneurs require an array of organizational and personal skills (interpersonal skills, self-understanding, leadership, conflict resolution, stress management and tolerance for ambiguity). And in the third place, there are consequences of entrepreneurial behaviour towards the entrepreneurs themselves and on the economy as a whole.

Furthermore, Dzisi (2008) further clarified the term called entrepreneurship for non-technical users and highlighted with clear perceptions that entrepreneurship is synonymous with business: its creation, and development of some new business, which grows gradually into successful and assumed to be in some way different from ordinary or everyday typical businesses. At the core of these concepts and definitions lies the fundamental notion of creating and developing new ventures and with the passage of time, achieves ultimate economic growth. Entrepreneurs are those entities (beyond inventors, bureaucrats and managers), who not only recognize opportunities, but also have creative abilities and practical skills to turn opportunities into ventures and commercial realities, which tend to grow, survive, and flourish to become within the range of successful businesses.

Since different countries seek the tendency to define SMEs based on different formats and dimensions and thereby each country tends to evolve its own definition of SMEs. In the United State of America (USA) definition of SMEs varies by industries, as well. For example, SMEs in manufacturing sector should have 500 or less employees, while in trade and wholesale sectors should comprise of 100 or less employees. In contrast, SMEs in mining, quarrying and oil and gas extraction sectors are eligible to have up to 1500 employees, while SMEs in silver ore mining should have 250 employees. The Industry in Canada (2017) identified four types of SMEs considering the number of employees therein. Industries with 1-4, 5-99 and 100-499 employees are defined as micro, small and medium industries, respectively, whereas the industries with more than 500 workers are considered as large industries.

However, China has considered to include the number of employees, along with annual revenue, and their assets, as indicated in Table 3.1 in defining SMEs. In the European Union (EU), a similar system is used to define Small & Medium Enterprises. A business with a headcount of less than 250 employees is classified as medium-sized; and business with a headcount of less than 50 employees is identified as small, whereas any business with a headcount of 10 or less workers is considered as a micro-business. The European system also takes into account the business's turnover rate and its balance sheet. To be more precise, European Commission has actually considered three dimensions, such as number of employees, annual turnover, and total balance sheet statement in order to classify the definition of SMEs. (European Commission, 2005).

Since this study is based on the SMEs in Sri Lanka, it is crucially important to focus at this point on the conceptual definition of SMEs in Sri Lanka. Sri Lanka also considered to focus on two dimensions, such as the number of employees and the annual turnover in order to classify and categorize the SMEs into micro-level, small & medium level groupings. Under the present set of policy framework of SMEs in Sri Lanka, their definition is based on the number of employees and annual turnover, as mentioned earlier. In order to be qualified as a real SME, an enterprise must employ less than 300 workers and generate an annual turnover of less than USD... or LKR 4.41 million.

Table 1: SME classification in Sri Lanka

Source: Ministry of Industry and Commerce, Sri Lanka (2002)

Sri Lanka has also identified slightly different thresholds in terms of number of employees for manufacturing and service sectors. The current study applies SME classification indicated in table 1.

1.2. Problem statement and objectives of the study

It is a well-known fact that, SMEs' contribute massively to both Gross Domestic Production (GDP) and employment especially in developing countries. In Sri Lanka, as of 2014, SMEs which made up nearly 90% of enterprises (over one million SMEs), contributed 52% to the country's GDP and produced 45% of its employment (Ministry of Industry and Commerce, 2002). However, in terms of industrial development, districts such as Badulla, Monaragala, Matale and Nuwara Eliya in both the Uva and Central provinces have been recognized as 'lagging districts'. Figure 1 illustrates the provincial dynamics in ownership of industry in 2016. As the figure depicts, the Western province has been dominating the industrial sector, having 54% of total industrial establishments of the country in 2016.

Figure 1: Share of industrial establishments by province in 2016

Source: Authors' own creation based on DCS (2016)

The Uva province owned only 3.3% of total establishments in 2016, being the lowest industrialized province in Sri Lanka. Despite, Uva province had increased ownership of industrial establishments from 2.6% in 2013 to 3.3% by 2016, but is still behind both the Eastern and North-Central provinces. According to DCS (2016), the Central province has increased its share of industrial establishments by 0.7% which is negligible compared to the Sabaragamuwa, North-west, Northern and Eastern provinces. Therefore, it is apparent that the share of industrial establishments in both the Uva and Central provinces has been comparatively low. However, both provinces have enormous resources and diversified market base to cater for new industrial and enterprise options. Consequently, it is crucial to examine the possibility of expanding industrial and enterprise base through promoting SMEs in both provinces. In this regard, it is essential to recognize existing SME sectors while identifying environmentally, economically and socially viable SMEs for both provinces.

Hence, the main objective of this study is to recognize and profile the existing enterprise options in both Uva and Central provinces and also to observe environmentally, economically and socially viable SMEs for both provinces. The next section of the paper elaborates the research methodology followed by results and discussion. The conclusion and recommendations of the study are highlighted in the final section of the paper.

2. RESEARCH METHODOLOGY

2.1. Location of the research and study area

The current study focuses on both Central and Uva provinces of Sri Lanka and all two districts of Uva province (Badulla and Monaragala) and two districts (Nuwara Eliya and Matale) from Central province were selected as study area. Moreover, five Divisional Secretariat (DS) divisions from each district (altogether 20 DS divisions) were selected considering the distribution of current SMEs and also in consultation with relevant government officials in respective districts. Table 2 indicates the selected DS divisions against the respective districts and provinces.

Table 2: Selected districts and DS Divisions in Uva and central provinces

Source: Authors' own compilation

2.2. Data collection and analysis

2.2.1. Enterprise survey

An enterprise survey was carried out to identify the types of SMEs and profile of SMEs in both provinces and also to closely examine their performance. The survey was conducted in both provinces covering four districts and 20 DS divisions. The sample size number was fixed as 320 SMEs the 320 enterprises were selected to ensure they represented enterprises run by women and youth both in rural and estate sectors. However, it was technically difficult to disaggregate the sample as rural and estate sector. Therefore, the DS divisions with plantation sector were considered as representing the estate sector while the other DS divisions were assumed to represent the rural sector. A structured questionnaire was utilized to collect data from 320 enterprises located in 20 DS divisions across four districts. Since there is no proper sampling frame, the sample size was decided based on the spread of SMEs and also in consultation with government and non-government officers in respective districts. It became necessary to apply the Snow Balling sampling technique in the absence of a properly updated list of enterprises at DS level, which made it difficult to apply a random sampling technique.

2.2.2. Focus group discussions (FGDs) and key informant interviews (KIIs)

It is important to note that FGDs and KIIs are used as the key sources of qualitative data in this study. The main objectives of the FGDs and KIIs are to obtain comprehensive and in-depth understanding about the MSMEs in both provinces and also from key national level informants. Similarly, FGDs and KIIs provided a crucial platform for policy oriented recommendations. Therefore, altogether 4 FGDs were conducted at district level along with 5 KIIs per district. 5 KIIs at district levels include KIIs with 2 government sector officers and 3 private sector officers.

2.3. Data analysis

The collected data was analyzed by using a descriptive approach in order to accomplish the objectives of the research. Thus, graphs, charts and table have been frequently used along with some direct quotations from the interviews and the desk review.

3. RESULTS AND DISCUSSION

3.1. District-wise current enterprise options and type of business - Survey based analysis

One of the main objectives of this study is to identify the diversified enterprise options available in the Uva and Central Provinces. Therefore, the enterprise survey conducted in four districts (Badulla, Monaragala, Matale and Nuwara Eliya) identified SMEs located in these districts. Table 3 summarizes the number (percentage) of currently available SMEs in four districts in terms of the size of the SMEs.

Table 3: Number (Percentage) of SMEs in four districts by size of SMEs

Source: Authors' own calculations based on enterprise survey, 2019

As Table 3 indicates, over 80% of SMEs surveyed in each district are performing at micro level. Particularly, Badulla accounts for the largest number (78) of micro level SMEs followed by Monaragala where 88.8% of SMEs are at micro level. In contrast, 20% of SMEs in Matale are Small level SMEs and in fact Matale has the largest number (15) of Small SMEs among all four districts. In addition to Matale, Nuwara Eliya and Monaragala also have Small level SMEs at 12.8% and 10% respectively. In contrast, Badulla as per the survey has only one Small scale SME. However, the survey was able to capture only one Medium scale SME which was in Monaragala.

Furthermore, table 4 indicates the distribution of SMEs in four districts across the main three economic sectors: agriculture, industry and service.

Table 4: Number (Percentage) of SMEs in four districts by size of SMEs and main sectors

Source: Authors' own calculations based on enterprise survey, 2019

It is interesting to note that SMEs in the industrial sector outnumber the SMEs in both agriculture and service sectors. 80% of Micro level SMEs surveyed in the Matale district are industry related and the percentages for Monaragala and Badulla districts are 71.8% and 56.4% respectively. A similar pattern can be seen for Small level SMEs as well. Agriculture sector accounts for the second largest share of SMEs in all four districts followed by the service sector. Nuwara Eliya has the largest share (35.3%) of agriculture based SMEs followed by 32% in Badulla. Service sector related SMEs, Badulla has the largest share (11.5%) followed by Nuwara Eliya (10.3%). It is apparent that most of the service related SMEs in both Badulla (Ella area) and Nuwara Eliya are attached to the tourism industry.

3.2. Profile of the identified enterprises

Profiling the identified enterprise in four districts is important to understand the salient features and composition of SMEs. This allows for a comprehensive understanding of existing SMEs which in turn allows to evaluate their performance, limitations, challenges etc. Therefore, this section profiles the SMEs based on gender, age structure, educational attainment of the entrepreneurs, source of capital, average monthly income of SMEs and number of workers employed.

3.2.1. Gender composition of SME holders

Figure 2 depicts the gender composition of SMEs in the four districts of Uva and Central provinces. On average, the number of female entrepreneurs are lower than that of males and this trend is more pronounced in the Nuwara Eliya district, where our survey only captured only 17 female-headed SMEs (20%) as against 68 SMEs run by males. In fact, a majority of women in the Nuwara Eliya district is employed in the plantation sector, where there are only limited opportunities for them to become entrepreneurs. However, the gender gap in SME ownership is comparatively low in both the Monaragala and Badulla districts where 39 (48.1%) and 35 (41.7%) of SMEs are run by females.

Figure 2: Gender composition of SMEs in four districts

Source: Authors' own calculations based on enterprise survey, 2019

According to the survey results, in the Badulla district, the majority of agriculture based SMEs (72.0%) are run by males while a majority of the industry based SMEs by females (56.8%). However, an opposite trend is seen in Monaragala where a majority of females operate agriculture based micro SMEs (53.3%), while a majority of industrial SMEs are run by males (54.9%). In contrast, the gender composition for SMEs in the Nuwara Eliya district is extremely male-skewed and a majority of SMEs in all three sectors (Agriculture, industry and service) are owned by males while the proportion headed by females is very low.

Table 5: Gender composition of SME by type of business

Source: Authors' own calculations based on enterprise survey, 2019

Table 5 indicates that as per the survey findings, 62.3% of the businesses are run by males while only 37.7% are owned by females, thus showing a significant gender gap in the four districts. According to (Department of Census and Statistics, in 2016) female labour force participation in Sri Lanka was only 35.9% with male participation amounting to a high of 75.1%. According to table 05, apparel and bag and household items are the only business types where women are in the fore accounting for 70.9% and 57.1% respectively.

3.2.2. Age structure of SME holders

Table 6 summarizes age composition of SME holders in the four district based on the main economic sectors. It is apparent from the table that the average age of SME holders is between 40 - 50 years for any type of SME. The mode (29) indicates that a majority of agriculture related SME holders in the Badulla district is younger than that of rest of the districts.

Table 6: Age composition of SME holders in four districts

Source: Authors' own calculations based on enterprise survey, 2019

Similarly, a large age gap between maximum and minimum ages clearly indicates that the enterprise survey has representatively captured the views of entrepreneurs whose ages range from young adults to seniors.

3.2.3. Educational attainments of SME holders

The enterprise survey recorded the educational attainments of SMEs holders based on years of education. The average years of education of agriculture related SMEs varies between 10-13 years with the Nuwara Eliya and Monaragala districts accounting for the least educational level. Similarly, the survey revealed that the SME operators in the Nuwara Eliya district have the lowest educational qualifications, followed by the Monaragala district.

Table 7: Educational attainments of SME holders in four districts

Source: Authors' own calculations based on enterprise survey, 2019

Additionally, it is interesting to note that agriculture related SMEs in the Matale district has the highest average number of years of education (14) which is significantly higher that of the other three districts.

3.2.4. Average income of SME holders

Figure 3 illustrates average monthly income of the three types of SME holders in four districts. It should be noted that information related to income could be extremely subjective, thus the data presented in this regard should be used with prudence.

It was revealed that income of industrial related SMEs were higher in the Monaragala district compared to other two SME sectors. Income from industrial related SMEs was reported as the second highest in the other three districts. Agriculture related SMEs in the Badulla districts seem to be performing better as their income is the highest among the three sectors of SME. However, monthly income of agriculture related SMEs in other districts were revealed to be significantly lower than in the Badulla district.

Figure 3: Average monthly income of SME holders in four districts

Source: Authors' own calculations based on enterprise survey, 2019

According to the survey findings, service related SMEs in the Nuwara Eliya district earn almost double the monthly income compared to agriculture and industrial SMEs. In contrast, income of service related SMEs located in the Monaragala district is significantly lower while those in the Matale district attached to the service sector did not reveal their income levels.

3.2.5. Average income by type of SME

Moreover, table 8 indicates monthly average income of SMEs by type of business. As per the findings, hotels and homestays account for the highest average monthly income (5,409.5 USD) followed by food and beverages (3,069.1 USD). In contrast, businesses such as making household items have the lowest monthly income.

Table 8: SMEs' average income by type of business (USD)

Source: Authors' own calculations based on enterprise survey, 2019

3.3. Viable Sectors for SMEs development in Uva and central provinces - qualitative evidence

The survey based quantitative analysis provided a detailed analysis on existing enterprise options in four districts along with a comprehensive profiling. However, the quantitative analysis based on the surveyed enterprises is not sufficient to determine economically, socially and environmentally viable SMEs for the four districts. Therefore the study was supplemented by well-structured interviews with experts in the four districts. The objective of this section is to highlight several viable SME development areas for each district based on the findings from the FGDs and KIIs.

3.3.1. Economically, socially and environmentally variable SMEs for badulla and monaragala

Table 9 and table 10 summarize the opinions given by the participants of FGD and KIIs on viable SMEs for Badulla and Monaragala districts. The study identified several enterprise sectors for SME development based on the inputs from the FGDs and KIIs as highlighted in the last column of each table. The recommended enterprise sectors are highlighted under each type of economic sectors such as agriculture, industry and services. Consequently, the study advocates to promote or start SMEs related to fruits and vegetable processing, green house planting, dairy related production and floriculture in relation to the agriculture sector in Badulla. Similarly, fruits and vegetable processing, herbal product processing and export crop processing are suggested for Monaragala. Considering the industrial sector, it is garment and apparels, handicrafts, ornaments and gem related products that are deemed more suitable for both Badulla and Monaragala while bottling water is seen as more viable for the Badulla district. However, those interviewed felt that the service sector is extremely limited in both districts and therefore only tourism is a likely candidate for Badulla. Solar panel based services appear to be an emerging area in the service sector of the Monaragala district.

Looked at from an environment and climate perspective, Badulla and Monaragala can be considered an agricultural area which has suitable factors for both plantation and consumption agriculture. Most farmers engaged in commercial agriculture, focus on vegetable and fruit cultivation, in addition to traditional paddy cultivation. Therefore, one of the main suggestions arising from the FGDs and KIIs was to promote fruit and vegetable processing industry in Badulla district. They highlighted how price variation can be beneficial to such industries as revealed below.

"During the low price season, farmers cannot sell their production at all. See, tomato prices these days, it is less than Rs. 0.055 USD per Kg at the field. Farmers cannot make any profit at this low price as they cannot even cover their cost. Therefore, there should be proper mechanism to collect these types of product when the prices are low and then process them to keep longer. For instance, if we can produce tomato pulp and supply to a company who produce sauce, it will be an appropriate solution for this issue" (FGD, Badulla)

Apart from product based agriculture, there is great potential to promote dairy related businesses.

"I highly recommend dairy sector for Badulla district. I have approximately 4000 farmer base in Badulla district. It is not sufficient for me now. I am supplying milk for 'Prima Stela', 'Pelwatta' and 'Malindu Yoghurt'. So, the current supply is not sufficient to fulfill the demand. We should promote and encourage new farmers to this industry" (KII with chairman of Ruwansiri Dairies (Pvt) Ltd., Welimada)

Moreover, floriculture industry is also important option for agriculture related SMEs. Despite the floriculture industry in Badulla being more self-employment oriented, there is a possibility of expanding the SME sector to bring it to medium scale level given the favorable environment factors. (FGD, Badulla). Looking at agriculture related SMEs in Monaragala, it is suggested to promote herbal product processing businesses. This is advocated based on forest areas in the Monaragala district being endowed with valuable herbal plants.

"All raw materials are taking from the Nilgala Forest. There is a higher demand for my products and I am distributing my products to Monaragala, Kandy, Kegalle, Galle and Matara as well." (Enterprise Survey, Monaragala).

Table 9: Economically, socially and environmentally variable SMEs for Badulla district

Table 10: Economically, socially and environmentally variable SMEs for Monaragala district

Source: Authors' own compilations based on FGD and KIIs

In the case of industry related SMEs, garment and apparel industry is deemed highly suitable for both Badulla and Monaragala districts. The key reason is both districts have excess skilled labour for garment manufacture as illustrated below.

"Lot of women in Badulla and Monargala districts worked for garment factories in the western province. Young women who worked for garment factories in Colombo and Katunayaka don't continue to work after getting married. They stay at their villages. However, they are willing to work if the factories are located closer to their village. Therefore, establishing garment factories in these districts are highly needed to provide more employment opportunities for unemployed skilled workers" (FGD, Monaragala)

Further, it was revealed that procuring sub-contracts from large scale garment factories would help to further develop and sustain the small and medium garment factories in these two districts. These sub-contracting opportunities help overcome the difficulties of securing direct orders.

Souvenir and handicraft production and ornamental and gem related handicrafts are also identified as suitable industry related SMEs for both Badulla and Monaragala districts. As an example, a village called Dickyaya in Meegahakiula has several groups of handicraft producers who produce a range of products. Therefore, there is a possibility of forming a souvenir and handicraft cluster based on that village and in turn facilitate them to expand their enterprise in a novel way. In addition to that, the Monaragala district also has several locations of handicraft manufacture including an innovative entrepreneur who creates gem studded portraits and handicrafts. He has already linked with the export market and also supplies to the domestic market.

Unlike the agriculture and industry sectors, service sector oriented businesses are extremely limited in both the Badulla and Monaragala districts. However, FGDs and KIIs conducted in Monaragala repeatedly highlighted the potential of establishing industries related to solar energy by taking advantage of the regular sunny days in the Monaragala district. In fact, solar based energy projects are widely popular in Sri Lanka and the government has also provided some incentives to promote these projects through national level policies. This study can only suggest that there is a possibility of having such projects in Monaragala but as mentioned in our limitation section, further specific research would be required before supporting such endeavours.

Additionally tourism has become the most vibrant service related industry especially in the Ella DS division in Badulla. However, the benefits gained by Ella has yet to be witnessed in the other DS divisions of Badulla, despite there being a number of scenic locations, waterfalls, heritage sites and colonial artifacts in these areas too.

"There is a massive tourism industry in Ella. However, Badulla has not been even mentioned as a tourism destination in the national map of Sri Lanka. So, foreigners haven't recognized Badulla as a scenic place. Therefore, most of the tourists who visit Ella just by pass Badulla and go to Bandarawela or Haputhale. This should be corrected at the national level, if we need to develop the tourism industry in Badulla" (FGD, Badulla)

Under this scenario, it is apparent that there is a potential to develop Badulla as a tourism destination by capitalizing on the tourist influx in Ella. Nevertheless, there should be a policy level intervention and also a strategy to develop tourism in Badulla.

3.1.2. Economically, socially and environmentally variable SMEs for matale and nuwara eliya

Table 11 and 12 summarize the opinions given by the participants of FGD and KIIs on viable SMEs for Nuwara Eliya and Matale districts. The study recommends to promote or start SMEs related to fruits and vegetable processing, dairy related production and floriculture for the agriculture sector in Nuwara Eliya. Similarly, fruits and vegetable processing, floriculture, mushroom cultivation, herbal product processing and export crop processing and paddy cultivation are considered more suitable for Matale. In relation to the industrial sector, value added dairy products, kithul based products, small garments and food processing industries are deemed suitable for Nuwara Eliya. Lacquer based products (largely a cottage based industry) and dairy based value added products are seen as important for SME development in the Matale district. In respect of the service sector, tourism and information technology are likely to be more conducive in both the Nuwara Eliya and Matale districts.

Table 11: Economically, socially and environmentally variable SMEs for Nuwara Eliya district

Source: Authors' own compilations based on FGD and KIIs

Table 12: Economically, socially and environmentally variable SMEs for Matale district

Source: Authors' own compilations based on FGD and KIIs

Vegetable cultivation was selected because the climate conditions in these two districts are most conducive and the Sri Lankan consumers have a high preference for produce from this region. The vegetable sector was selected since there were already many SMEs in both Nuwara Eliya and Matale districts engaged in the sector on a small and medium scale. Furthermore it was also the sector that received highest preference from stakeholders during KII and the focus group discussion.

If the market for vegetable produce is widened, it will increase the bargaining and negotiating power of the producers. Further it was suggested that compost making could be promoted and use of organic fertilizer made easily available to ensure that the vegetables produced are chemical free in the Nuwara Eliya and Matale districts.

"Nuwara Eliya vegetable has a great demand. New technology needs to be introduced. Most of the hotels and buyers look forward to buy organic vegetables. Promoting organic fertilizer production and introducing ICT into the vegetable SMEs could further develop this industry" (KII-Nuwara Eliya)

Floriculture was identified as a viable enterprise in both the Nuwara Eliya and Matale districts. There is a great demand for cut flowers from Nuwara Eliya for its quality, variety and quantity as it can be grown in open fields as well. In Matale, growers are engaged in pot flower cultivation. In both districts flowers are grown at a commercial level in poly tunnels. Anthuriam flowers are recommended for both districts and also the Gerbera variety because it is high in demand by the buyers. Cut flowers are distributed to all parts of the country but the majority of the bulk distributions are made to Colombo, Matale, Kandy, Kalutara, Galle, Matara, Panadura, Negombo, Maharagama, Gampaha, Kurunegala etc. Floriculture is also a sector that women and young girls can easily become engaged in for their economic empowerment, in both districts. The SMEs currently lack the know-how and technical capacities required to grow cut flowers.

When it comes to the service sector, tourism has been identified as a viable business sector by KIIs and FGDs in both districts. Tourism has the potential to provide many job opportunities in the hotel and travel trade as there is significant tourist traffic in Nuwara Eliya relatively to the Matale district.

"The Municipal Council (MC) Nuwara Eliya launched a program to improve the quality of the tourism industry. Developing the Cincita ground and Golf grounds are some initiatives under taken by MC. River crossing or river walk, adventure tourism, cycling, and mini airport are some of the other projects planned." (KII - Mayor Nuwara Eliya).

3.3.3. Major areas related to tourism

3.3.3.1. Accommodation

There are a few five star hotels available within city limits of Nuwara Eliya. such as the Grand Hotel, Heritage Tea Factory Hotel, Araliya Green City etc. which attract high end tourists. Heritage Kandalama Hotel, Amaya Lake, Hotel Sigiriya are some of the well-known hotels in the Matale district. In addition, there are a large number of hotels, guest houses, restaurant and home stays available in both districts. The possibility of providing a home stay experience should be explored more and the necessary support and guidance provided to those homestay operators willing to provide such an experience. During the field discussions it was also noticed that big hotels in Nuwara Eliya see this as a threat to the sustainability of their industry. And they expect the tourism board to intervene and develop policies, set standards or grading systems in this regard. On the other hand, the people who were engaged in the homestay business complained that unplanned constructions have affected the natural beauty and the scenic landscape of Nuwara Eliya. Another threat highlighted during the field survey are the guest houses started by the Chinese in Nuwara Eliya. China Garden is an example and there are more guest houses managed by Chinese. If this condition grows Chinese tourists will stay on in such locations. This indicates there is a requirement for a policy level intervention. The Tourist Board and Hoteliers Association, Nuwara Eliya, need to check if these claims are factual and take steps to ensure that the homestay and hotel industry are not affected.

3.3.3.2. Culturally attractive places

A large number of Indian tourists visit Seetha Eliya, Hanumar temple in Nuwara Eliya captivated by the sites historical and cultural beliefs. Moreover, Adam's Peak is another important site with a high cultural value among all the communities in Sri Lanka.

"Annually 300,000 including local and international tourists visit Adam's Peak. But accommodation, hygiene foods, sanitary facilities are very minimal level. Environment pollution is the biggest challenge we face. We have visualized name boards and dissemination campaigns to create awareness among local tourists. An information center also needs to be established to provide information related to the different places attract tourists". (KII, Ambagamuwa).

Further, Aluwihara rock temple, Kavatayamuna temple, Makdovel Fort, Keppetipola Walauwva, Muththumari Amman temple, Matale Jummah Mosque are some of the culturally famous places in the Matale district.

3.3.3.3. Attractions

Natural water falls such as Devon, St. Clair, Mount Vernon, Lovers leap etc. Haggala botanical gardens, Victoria Park, Gregory's lake, Worlds End, Ambewela farm, Horton bridge are very popular among local and international tourists. Sigiriya, Sembuwatte Lake, Riverston, Bambarakiri Ella, Hunnasgiriya water fall, Knuckles mountain range, Spice gardens, Wasgamuwa national park are also attractive locations to tourists.

There is a potential to develop the lacquer industry in the Matale district. Those interviewed felt that this industry could be linked to the tourism value chain via community tourism if new machinery and technologies are introduced. Moreover, food processing, supply of fresh fruit and vegetables, transport, provision of services to hotels, guest houses, restaurants, homestays etc. are some other business activities that could generate employment.

4. CONCLUSION AND RECOMMENDATIONS

This study mainly focused on SMEs established in Uva and Central provinces of Sri Lanka, with clear and simple objectives, so as to include the profiling of current options of prevailing enterprises by recognizing the viable SME sectors for their significant development in three different aspects, like economically, environmentally and socially. The study was conducted in Badulla, Monaragala, Matale and Nuwara Eliya districts in Uva and Central provinces of Sri Lanka. An enterprise survey was however, carried out to collect information from 329 entrepreneurs located in 20 DS divisions. Moreover, some qualitative tools such as, FDGs, KIIs and desk research were also used to gather information related to SMEs in the targeted districts. As per the findings of these surveys, over 60% of the overall 329 entrepreneurs were male-dominated, showing that the patriarchal values still prevailed in these provinces. Nevertheless, some significant signs of change with several initiatives of multiple organizations were clearly visible, targeting women empowerment. The average age of SME holders spanned between 40 to 50 years of age. Again, SME holders in Nuwara Eliya district had the lowest educational qualification, followed by Monaragala district, while SME holders in Badulla and Matale districts showed the highest educational attainments.

According to the findings of the survey, over 80% of the overall SMEs in each district presented the micro level category. However, Badulla district accounted for the largest number of micro- level SMEs, followed by Monaragala district. The number of industrial sector SMEs is larger than SMEs placed in the agriculture sector and the services sector. Again, the findings of the survey showed that about 80% of micro level SMEs in Matale district belonged to the industrial related SMEs, while 71.8% and 56.4% of micro level SMEs are situated in Monaragala and Badulla districts, respectively. The study succeeded to recognize ten main types of businesses, which included agriculture, faming and dairy industry, food and beverages, arts and crafts, garments and apparel, and bag production.

The study further suggested to promote SMEs relating to fruits and vegetables processing, flori-culture, dairy related productions and green- house planting, in terms of agricultural sector improvement in Badulla district. Fruits and vegetables processing, herbal products processing, and export crops processing had been recommended for Monaragala district. In the industrial sector, garments and apparels, handicrafts, ornaments and gem related products are deemed as viable options for both Badulla and Monaragala districts, and given its natural resources, bottling water was strongly recommended to be preferred in Badulla district. However, currently the services sector is almost limited in Badulla and Monaragala districts, and as such only tourism and solar panel based industries are recommended for these two regions. With regards to the Central Province, SMEs related to fruits and vegetables processing, dairy related productions and flori-culture are outrightly suggested. Moreover, herbal products processing and export crops processing are likely the most appropriate options for Matale district whilst, Kithul based products are better suited for Nuwara Eliya district. Given the reasonable supply of skilled labour in Nuwara Eliya district, it is assumed and suggested that small garments are most suitable for industrial SMEs in this region, while lacquer, cement and concrete related industries would prove to be the most viable options in Matale district. As far as the services sector, tourism and information technology sectors are concerned, it is suggested that Nuwara Eliya and Matale districts are the best choices. KIIs and FGDs indicate that there is a strong potential in the tourism sector, wherein the local communities (including women and youth) could participate without hesitation. Since the current study recognized the number of district-specific and viable SME sectors, it is strongly recommend to facilitate such SMEs by providing low-interest loans, necessary technical skills, smooth and simple business registration process, tax incentives and proper market opportunities for an adequate growth and long-term stabilization of their businesses.

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