Impact of Pandemic on Finances of SMEs in Sri Lankan Construction Industry

Abstract

This study focuses on the impact of the pandemic on the financial aspects of Sri Lankan construction SMEs. The pandemic has significantly affected economies globally. Sri Lanka, a country whose economy mainly consists of SMEs, has faced adverse effects due to the preventive measures implemented to control the spread of the disease. Nearly 90% of registered construction firms in Sri Lanka belong to the SME category. Financial challenges or difficulties were encountered by construction SMEs even before the pandemic impacted Sri Lanka. Currently, most of the Sri Lankan construction SMEs are on the brink of bankruptcy, mainly due to the financial challenges brought about by the pandemic. This study comprises primary data produced from semi-structured interviews and secondary sources of data from the literature review. It has identified the financial challenges undergone by construction SMEs in usual manners, including limited access to bank credit facilities, lack of capital of the contractor, and lack of cash flow due to delayed payments, among others. Principally, there were several financial challenges created due to the pandemic, including barriers in obtaining credit facilities from suppliers, and the challenges that were usually present have intensified with the effects of the ongoing pandemic. In the latter part of this study, strategies that Sri Lankan construction SMEs have executed to survive in the industry are pointed out. Most SME contractors in Sri Lanka do not have positive perspectives on staying in the industry for the long term, given the financial challenges they have encountered with the current pandemic.