Return to capital in small firms


Published 12.12.17
Photo credit:
Nimanka Mahesh

Investment in small firms led to monthly returns of 6% in Sri Lanka. However, the growth prospects for most of them remain unchanged.

Chris Woodruff (Oxford University) finds that when an investment is made in small enterprises in Sri Lanka, the returns are high, at 6% per month. However, on average, this growth is not sustainable as enterprises do not change their dynamics; they do not scale-up operations or increase employment. This points to the need for selection of small firms, that have the potential to grow, to invest in.