The Impact of Natural Disasters on Micro, Small and Medium Enterprises (MSMEs): A Case Study on 2016 Flood Event in Western Sri Lanka

The direct and indirect impacts of natural disasters are devastating to business activities and their continuity. These catastrophic events have created a significant impact on Micro and Small and Medium-sized Enterprises (SMEs) in the Sri Lanka during the recent years. Micro and SME sectors can be considered as the highly vulnerable sections of Sri Lankan economy which impacted drastically by the flooding as they are relatively resource constrained and less resilient. Having a sound understanding of the adverse impacts of flooding on Micro and SMEs might useful for entrepreneurial resilience. This study sought to investigate the full range of impacts (short term and long term) experienced by micro and SMEs located in Western Sri Lanka following the floods of mid-2016. Hundred randomly selected flood affected micro and SMEs from Colombo district were surveyed for this study. Semi structured interviews were carried out in person with the business owners in order to identify their experiences on various types of damages, rehabilitation and re-establishment. One of the major finding was the micro and SMEs are vulnerable to flooding in four fronts: capital, labour, logistic and markets. Revenues have fallen below the expenditures suddenly and finding manpower was another serious issue as workers are the immediate victims of the flood. Entrepreneurs had to find out alternative or emergency logistic support to operate their businesses as flood has severely damaged to the public infrastructure system. A shift in market demand has occurred in the short-term with sharp increase in the demand for basic commodities while a dip in non-essentials. Furthermore, it was clear that the SME resilience requires partnerships and cooperation among the firms, government and other private organizations. It cannot be achieved by the business entity alone or by government on its own. Therefore, this study concludes with providing some recommendations on strategic policies to disaster risk reduction and disaster coping mechanism into the micro and SME sector in Sri Lanka.