Redefining Sri Lanka's SMEs: Why we must separate businessmen from true entrepreneurs

IN Sri Lanka, the word “entrepreneur” has become a catch-all phrase, used indiscriminately by politicians, media, academics, banks, and professionals alike to describe virtually anyone engaged in small or medium-sized business activities.

- By Bharatha Subasinghe

While this may seem harmless, it masks a critical issue—an urgent need to distinguish between two fundamentally different groups operating under the broad Small and Medium Enterprise (SME) umbrella.

The problem with current SME and entrepreneurial labels

SMEs constitute over 90% of businesses in Sri Lanka and generate around 52% of employment. Yet, their contribution to national GDP stands at approximately 30%, a figure significantly lower than that of large enterprises. This discrepancy raises an important question: if most businesses are SMEs, why is their economic output relatively limited?

The answer lies in the diversity within SMEs themselves. Many operate as “typical businessmen”—enterprises primarily focused on survival, income stability, and maintaining a modest livelihood. They generally avoid risks, innovation, or aggressive growth strategies, and their economic impact is correspondingly limited.

On the other hand, a smaller segment represents “true entrepreneurs”—visionary actors who innovate, disrupt markets, and aim for scalability and value addition. These enterprises, though fewer in number, contribute disproportionately to economic growth, innovation, and job creation.

Lumping these two distinct groups together under the single SME label and calling both “entrepreneurs” is not only misleading but counterproductive. It obscures the unique challenges and needs of each segment, leads to misallocated government resources, and blurs public understanding of what entrepreneurship truly means.

Why distinguishing between businessmen and entrepreneurs matters

When policymakers treat all SMEs the same, support programs often focus heavily on survivalist needs—basic financing, minimal regulation, or general business skills training. While this assistance is vital, it misses the opportunity to nurture scalable, innovation-driven firms that could transform Sri Lanka's economy.