Evaluating the Contribution of International Donor-Funded Programmes to Small and Medium Enterprise Development – Evidence from the USAID-Supported VEGA/BIZ+ Programme in Sri Lanka.

Small and Medium Enterprises (SMEs) are widely recognized as a critical driver of employment generation, income creation, and inclusive growth in developing and post-conflict economies. In Sri Lanka, international donor-funded programmes have played a prominent role in supporting SME development, particularly in regions affected by prolonged civil conflict. Despite the scale of these interventions, systematic evidence on their programme level effectiveness remains limited. This study evaluates the contribution of international donorfunded programmes to SME development in Sri Lanka, with specific reference to the USAID-supported VEGA/BIZ+ programme. Using a mixed-method evaluative design, primary data were collected from all 66 grant-recipient SMEs through a structured questionnaire and complemented by programme records and secondary literature. Quantitative analysis employed descriptive statistics, chi-square tests, and binary logistic regression to assess the relationship between donor interventions and enterprise performance outcomes. The findings indicate that donor-funded support particularly when delivered as integrated packages combining financial assistance, equipment provision, and technical support has contributed positively to sales growth, employment generation, profitability, and entrepreneur satisfaction. However, challenges relating to sustainability, cost-sharing capacity, access to follow-on finance, market integration, and post programme monitoring persist. Overall, the evidence suggests that donor-funded SME interventions can meaningfully contribute to post-conflict economic recovery and inclusive growth when programmes are holistically designed, context-sensitive, and closely aligned with national policies, institutional frameworks, and market ecosystems.

Small and Medium Enterprises (SMEs);

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