Abstract:
Microcredit has become one of the most popular development strategies in developing countries as it has
been instrumental in the success of the small entrepreneurs. As a part of a survey conducted to examine the
contribution of one of the major microcredit programs in the Southern province, Sri Lanka, this study
endeavors to examine the impact of microcredit programs on the economic development of the small
entrepreneurs in the Southern Province, Sri Lanka. Four variables were selected to examine how
microcredit influences the economic development of small enterprises: increase in the employment; new
business commencement, developing the existing business, and generating considerably higher income. The
sample of the study consisted of 584 small entrepreneurs who have received the microcredit from one of the
leading projects in Southern Province, Sri Lanka. A formal questionnaire was developed to address the
economic developments of the small entrepreneurs selected in the survey. Kruskal Wallis test was applied
to examine whether the frequency test results differed among three districts. Study results revealed that
microcredit have significantly impacted to increasing the income of the small entrepreneurs regardless of
the district. In addition, it was found that the impact of microcredit on employment generation,
commencement of new businesses and development of the existing business is at moderate level.
