Hinhalagoda lekamalage pulsi kavindya sandeepani ariyarathna

1.1. Overview of Small and Medium Enterprises 
The small and medium enterprises are being considered as engines of economic 
growth world wide. One of the most important roles of SMEs in this context includes poverty 
alleviation through job creation. The developed as well as developing countries are taking
extreme benefits from SMEs and that are capable to accelerate the economy of any 
country. It plays considerable responsibility in providing further employment and conversion 
of economy. It is also implicit that sectors conquered by SMEs are better able to develop
dynamic economies of scale. The roles of SMEs in the creation of productive employment are 
concerned with its position in the center of the range of sizes and resources intensities in a rising 
economy. Developing economies have started to focus on the crucial role that SMEs can play 
in their development (Maad & Liedholm, 2008) 

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1.1.1. Definition of Small and Medium Enterprises 
Small and Medium-Sized Enterprises commonly known as SMEs are independent firms 
which employ a fewer number of employees. The number of employees and definition of SME 
can be loosely changed based on the country in consideration. SME’s are regularly categorized 
based on the size of their employees and their financial assets. The vast majority of most 
businesses in the world are comprised of SME’s. According to (U.S. Consensus Bureau Data, 
2019) in 2016 there were 5.6 million employer firms in the U.S. 99.7% had fewer than 500 
employees moreover, 98.2% percent had fewer than 100 employees.
SMEs have played and continue to play significant roles in the growth, development 
and industrialization of many economies the world over.SME’s are given greater incentives and 
favourable tax and regulatory treatment as it is generally a greater difficulty in receiving 
financing. The only way to reduce poverty in a sustainable way is to promote economic
growth, through wealth and employment creation. In developing countries, SMEs are the
major source of income, a breeding ground for entrepreneurs and a provider of employment 
(UNIDO Report, 2003) 
U.S. Definition 
In the United States the definition of SME varies by industry and is often classified 
based on the (NAICS, 2007) which is an industry classification system for the North American 
region. To be eligible for targeted funding and government contracts a business must fit within 
the criteria in terms of revenue and number of employees (Ward, 2018).