By: Staff Writer
January 26, Colombo (LNW): As Sri Lanka grapples with the aftermath of recent cyclone disasters, micro, small and medium enterprises (MSMEs) are emerging as one of the most severely affected yet least resilient segments of the economy. These enterprises already weakened by years of economic turbulence now face mounting losses from damaged infrastructure, disrupted supply chains, and shrinking access to finance.
MSMEs account for over 75 percent of registered businesses in Sri Lanka and provide nearly 45 percent of national employment. In cyclone-hit regions, particularly those dependent on agriculture, fisheries, and informal trade, thousands of small businesses have seen operations grind to a halt. Flooded workshops, destroyed inventories, power outages, and logistics breakdowns have translated into immediate income losses and long-term recovery challenges.
Access to affordable credit has become the central bottleneck. Even before the disaster, many MSMEs struggled to secure formal financing due to weak collateral, limited credit histories, and high borrowing costs. Post-cyclone, the risk perception surrounding small businesses has intensified, making lenders more cautious at a time when liquidity is most urgently needed.
Against this backdrop, the International Finance Corporation’s (IFC) newly announced $166 million high-impact investment program takes on added significance. The financing package channeled through Nations Trust Bank, Commercial Bank of Ceylon, and National Development Bank aims to expand access to finance for small and medium enterprises, with a focus on women-owned businesses and agri-based enterprises that are disproportionately affected by climate shocks.
The IFC support includes a $50 million loan, $80 million in risk-sharing facilities, and $36 million dedicated to trade finance. By sharing risk with local banks, the program is expected to unlock lending to MSMEs that might otherwise be excluded, particularly in disaster-affected regions where recovery capital is critical for restarting operations and preserving jobs.
IFC officials describe the initiative as counter-cyclical designed to stabilize the private sector when traditional capital retreats. This approach is crucial in a climate-vulnerable economy like Sri Lanka’s, where extreme weather events are becoming more frequent and costly. Strengthening MSMEs is not just an economic imperative but a resilience strategy, helping communities absorb shocks and rebuild livelihoods.
However, analysts caution that financing alone will not be sufficient. Faster insurance payouts, disaster-responsive loan restructuring, and targeted government relief are needed to complement multilateral funding. Without coordinated policy support, many micro and small enterprises risk permanent closure, deepening unemployment and slowing regional recovery.
As Sri Lanka moves from economic stabilization toward sustainable growth, the cyclone’s impact on MSMEs underscores a hard lesson: climate resilience, financial inclusion, and private-sector recovery are now inseparable. How effectively this financing reaches the ground may determine whether small businesses survive the next storm or are swept away by it.
