Abstract:
SMEs play prominent role in any economy through generating employments, contributing to Gross
Domestic Product (GDP), embarking innovations and stimulating of other economic activities (ESBA,
2011). This sector is said to be the backbone for all developed and developing nations. SME sector is
envisaged to contribute to transform lagging regions into emerging regions of prosperity (Ministry of
Industry and commerce, 2015). End of the local war in Sri Lanka, SMEs in Jaffna district have been
facing complex environment and the struggling to develop. At the same time SMEs have plentiful
opportunities to develop in the Jaffna district. There is need to identify the determining factors of
development of SMEs. Financial development, growth and customer development were already
investigated and empirically tested with the name of financial performance and market performance in
SMEs. Organization development explains one of the dimension as the employee development which
was not empirically analyzed in SMEs. Sustainable development reveals the social development which
is also unique concept for the SMEs. However these combination of development concept for SMEs
has still not been developed and empirically investigated in the SMEs in Jaffna district, which is the
gap of the study. There is need to study how these SMEs have been growing and developing by
managing external environment challenges and the internal environment weakness. Therefore, the main
aim of this study is to identify the determining factors of development of SMEs in Jaffna district.
