By: Staff Writer
December 15, Colombo (LNW): Sri Lanka’s micro, small and medium enterprises (MSMEs) once again find themselves paying the highest price for a natural disaster, as Cyclone Diwah and the accompanying floods battered nearly one-fifth of the island, crippling businesses already weakened by years of economic turmoil. While the Government has now announced a new loan scheme to revive disaster-hit enterprises, the devastation has exposed a deeper, long-standing failure by successive administrations to build an effective financial safety net for the backbone of the economy.
According to complaints received by a special support centre set up by the Ministry of Industries, at least 13,698 businesses have been affected so far. The breakdown highlights the scale of vulnerability: 5,639 micro enterprises, 4,636 small businesses, 2,986 medium-scale firms, and 437 large businesses reported damage. Many of these enterprises are concentrated in flood-prone districts, where workshops, retail outlets, food processors, and small manufacturing units were inundated for days, destroying machinery, raw materials, and inventories.
For micro and small operators’ street vendors, cottage industries, repair shops, and family-run factories the losses are existential. Most operate on thin margins, with limited insurance coverage and little access to formal credit. Medium-scale industries, particularly in agro-processing and light manufacturing, face production halts and broken supply chains, further threatening employment in already fragile local economies.
The human toll of the disaster was equally severe. Cyclone Diwah inundated around 20 percent of the country, leaving 834 people dead or missing, with several areas hit by devastating debris avalanches that wiped out entire communities. For businesses, the tragedy translated into closed markets, displaced workers, and prolonged uncertainty.
Against this backdrop, the Government has unveiled RE-MSME PLUS, a new loan scheme to be implemented from 2026, aimed at reviving disaster-affected enterprises. The scheme offers three-year loans at a concessional 3 percent interest rate, with a six-month grace period.
Micro enterprises will be eligible for loans of up to Rs. 250,000, while small and medium enterprises can access up to Rs. 1 million. Several existing schemes including SMILE Phase III, eco-friendly financing, E-FRIEND II, and the earlier RE-MSME loan scheme are to be consolidated under this single framework, subject to Cabinet approval.
While the announcement signals policy intent, critics note a familiar pattern: relief arrives late, is debt-based, and often fails to reach the most vulnerable. During previous floods, landslides, and even the recent economic crisis, MSMEs complained of complex application processes, slow disbursement, and inadequate loan sizes that did little to restore operations. Many fear that by 2026, thousands of today’s affected businesses may no longer exist.
Cyclone Diwah has once again underscored a hard truth: without timely grants, insurance mechanisms, and rapid-response financing, Sri Lanka’s MSMEs remain trapped in a cycle of disaster, debt, and decline.
