Abstract:
SME is the backbone of all developed and developing nations. So the
development of this sector is paramount important for any country irrespective
of their level of development. In this process, SME must gain satisfactory
support from Financial Intermediaries through providing necessary financial
facilities. However, the major obstacle for the development of SME in Sri
Lanka is that, the lack of financial assistance of financial intermediaries since,
there is a financial information gap exists between these two parties of
Financial Intermediaries and SME entrepreneurs. The main objective study is
to identify the reasons for prevailing financial information gap and make
possible suggestions to minimize that gap in order to strengthen the backbone
of the economy. Sample selection of the study confines to the SMEs cover
within the scope of the definition for SMEs by the Industrial development
Board of Sri Lanka. Sixty SMEs comprise thirty manufacturing enterprises,
twenty service-providing enterprises and ten wholesale and retail enterprises
located at Colombo administrative district and Horana AGA Division and
fifteen Financial Intermediaries (commercial banks) were selected. With the
help of quantitative research strategy, researchers concluded that, while SMEs
give priority to produce information relating to Income Statement and Balance
Sheet where as Financial Intermediaries prioritizes Cash flow information
when evaluating loan applications. So, there is a Financial Information Gap
exists between SMEs and Financial Intermediaries in Sri Lanka.
