From Recovery to Sustainability

Impact investment is widely promoted as a strategy to link finance with social and environmental goals, yet its relevance and effectiveness in fragile economies remain underexplored. This chapter examines how micro, small, and medium enterprises in Sri Lanka’s Northern Province experience and reinterpret impact investment within conditions of post-conflict fragility, gendered legal exclusions, and limited access to formal finance. Using qualitative methods, including focus group discussions with entrepreneurs and ecosystem actors, the study uncovers persistent barriers such as collateral requirements, bureaucratic delays, and low literacy on investment tools. It identifies community savings and diaspora remittances as trusted alternatives that reshape how impact finance operates locally. Anchored in Institutional Theory and the Theory of Change, the chapter develops a localised pathway model that redefines readiness as relational and context-driven. The contribution lies in offering a framework that explains how global investment logics are refracted into inclusive, adaptive practices in fragile contexts.