Summary:
- Small and medium enterprises (SMEs), the backbone of Sri Lanka’s economy, bore a significant portion of the devastation.
- Preliminary assessments indicate that over 29,600 registered industries were affected, including 12,300 micro enterprises, 9,844 small enterprises, and 6,644 medium enterprises.
- Many businesses struggle with debt, lost income, and rebuilding costs without sufficient aid.
Cyclone Ditwah, which struck Sri Lanka’s eastern coast on November 28, 2025, stands as one of the most severe natural disasters in the country’s recent history. Bringing intense rainfall, widespread flooding, and numerous landslides, the cyclone affected millions of lives and caused extensive damage across multiple districts. Small and medium enterprises (SMEs), the backbone of Sri Lanka’s economy, bore a significant portion of the devastation. With flooding covering over 1.1 million hectares and exposing nearly 720,000 buildings, the cyclone disrupted business operations, supply chains, and livelihoods on a massive scale.
The SME sector in Sri Lanka plays a vital role in driving economic growth, employment, and innovation. As businesses grapple with the aftermath of Cyclone Ditwah, understanding the depth of its impact highlights the urgent need for targeted recovery support. This article explores how the cyclone affected SMEs, the challenges faced, and the steps toward rebuilding a resilient business landscape.
Cyclone Ditwah – Unprecedented Flooding and Infrastructure Damage
Cyclone Ditwah rapidly intensified before making landfall, triggering record-breaking rainfall that led to flooding in 20% of Sri Lanka’s land area. Districts such as Batticaloa, Ampara, Polonnaruwa, Colombo, and Gampaha experienced the worst impacts, with over 2.3 million people exposed to floodwaters. Landslides in the central highlands isolated communities and destroyed critical infrastructure, including roads, bridges, and power supplies.
Infrastructure damage directly hampered business activities. Over 16,000 km of roads and hundreds of bridges were affected, disrupting transportation and logistics essential for SMEs. Power outages lasted days in many areas, with 70% of key informants reporting the greatest impact on industrial and commercial facilities. Debris management became a major challenge, with thousands of tons of waste blocking access to markets and workplaces. These disruptions created immediate barriers for small businesses reliant on daily operations and local supply chains.
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SMEs: The Backbone Facing Severe Vulnerabilities
Small and medium enterprises form the core of Sri Lanka’s economy, representing over 75% of all businesses, providing 45% of total employment, and contributing approximately 52% to the country’s GDP. These enterprises span sectors like agriculture, manufacturing, retail, tourism, and services, often operating with limited resources and in vulnerable locations.
Cyclone Ditwah exposed the fragility of this sector. Preliminary assessments indicate that over 29,600 registered industries were affected, including 12,300 micro enterprises, 9,844 small enterprises, and 6,644 medium enterprises. Another report highlighted impacts on 13,698 businesses, with micro and small enterprises suffering the most. The International Labour Organization estimated that up to 374,000 workers were affected, with potential monthly income losses reaching US$48 million.
Many SMEs lacked adequate insurance coverage, reserves, or digital backups, amplifying their losses from damaged goods, equipment, and premises. Informal businesses, common in rural and flood-prone areas, faced complete shutdowns. Surveys revealed that 91% of respondents noted business impacts, with about one-third of formal and informal enterprises severely damaged or closed.
Direct Blows to Key SME-Dominated Sectors
The cyclone hit sectors where SMEs dominate hardest. Agriculture, a key area for small-scale farmers and agribusinesses, suffered massive losses. Over 530,000 hectares of paddy lands were flooded, leading to crop destruction and livestock deaths. The World Bank estimated agricultural damage at around US$814 million.
Manufacturing and retail SMEs faced flooded factories, spoiled inventory, and inaccessible markets. Energy disruptions halted production lines, while debris and contaminated water sources affected fisheries and food processing units. In urban areas like Colombo and Gampaha, dense SME clusters in trade and services reported extended closures due to building damage and transport halts.
Overall economic losses from Cyclone Ditwah were estimated between US$4.1 billion and higher figures, representing a significant setback for the nation’s recovery from previous crises. For SMEs, direct losses ranged from Rs. 50 billion to Rs. 85 billion in some estimates, underscoring their disproportionate vulnerability.
Path to Recovery – Challenges and Support Initiatives
Recovery for SMEs remains challenging amid material shortages, funding gaps, and ongoing climate risks. Many businesses struggle with debt, lost income, and rebuilding costs without sufficient aid. Pre-existing vulnerabilities, such as unstable incomes and high debt in affected households, complicate restart efforts.
Positive steps include government relief programs, low-interest loans, and grants for affected SMEs. International support from organizations like the UNDP, ADB, and IFC has focused on livelihood restoration, trade finance, and MSME capital injection. Community initiatives and sector-specific interventions, such as clearing paddy fields and restoring infrastructure, offer hope.
Building resilience requires better insurance penetration, disaster preparedness training, and digital tools for SMEs. Targeted support for women-led enterprises and informal businesses will ensure inclusive recovery.
Cyclone Ditwah has tested Sri Lanka’s SME sector severely, but with coordinated efforts, these enterprises can emerge stronger. Supporting SMEs is essential for sustainable economic growth, job creation, and poverty reduction in the post-cyclone era.
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