Home Features Mastermind Videos About Advertise Blog Network Contact
   

Have A Suggestion?
Toronto Salsa Classes / Toronto Salsa Lessons Email us your ideas on how to make our website more valuable! Thank you Sharon from Toronto Salsa Lessons / Classes for your suggestions to make the newsletter look like the website and profile younger entrepreneurs like Jennifer Lopez and Sean Combs!
Have A Suggestion?

Featured Ebook


ebook Famous Entrepreneurs - Modern Empire Builders


Featured Ebook

More Evan Carmichael
Have A Suggestion?

Sales Lessons From Starbucks And Dell

6.0 Constraints to small business growth: Entrepreneurship and Small Business Enterprise Growth in Uganda

 
African Accounts - Meet The Authors
Toka , Profile Toka
Profile
Grameen , Resource Grameen Foundation
Resource
African , Resource African Development Bank
Resource
United Nations , Resource United Nations University
Resource
African Accounts - Meet The Authors
6.0 Constraints to small business growth: Entrepreneurship and Small Business Enterprise Growth in Uganda
   

We recognise that small business has an important role to play in many economies. We must therefore understand what constrains them to be able to support them. Various studies (Kibera and Kibera, 1997; Thembe et al, 1997; Alila and McCormick, 1994) have enumerated the factors that are generally agreed on as the constraints to the growth of small business especially in the African setting. These include lack of market opportunity, access to finance, enabling environment, market information, and managerial skills. We have submitted that these are important, but probably not the only ones. We think entrepreneurship and culture are more important. We discuss some below.

• Lack of market opportunity In the poor countries, effective demand and consequently market opportunity is a constraining factor for small business and indeed beg business development. This may not be the case in the developed countries. Incomes are low in Uganda and there is low purchasing power. Consequently, even if there is opportunity to exploit, it may be difficult to realise because of lack of market.



Another aspect is the fragmentation of African markets both physically and culturally. For instance selling in Uganda with over 40 languages becomes a nightmare for salesmen. Whereas in the developed countries, the commonality of culture and language eases the selling process. The level of development itself imposes additional constraints to small enterprise growth. Because of usage of low level technology, small enterprises cannot compete with large enterprises that have benefits that arise from economies of scale.

• Lack of access to finance Most studies (Ngobo, 1995; Kibera and Kiberam, 1997; Chijoriga and Cassiman, 1997), point to finance as one of the key constraints to small enterprise growth. This is worsened by the absence of financial markets in the developing countries. Small enterprise owners cannot easily access finance to expand business and they are usually faced with problems of collateral, feasibility studies and the unexplained bank charges. This means that they cannot access finance to enable them to grow. In a study by Ngobo (1995), he makes a detailed analysis of finance as a constraining factor and includes collateral, interest rates, extra bank charges, inability to evaluate financial proposals and lack of financial management skills as hindrances to small enterprise growth. Under developed financial markets impose additional constraints. There are no financial instruments and no independent financial sources that is market driven.



• Low level technology Because of their smallness these enterprises end up using a cheap technology which is usually not top of the range. This results into high costs of production and un- competitiveness. For instance small enterprises cannot afford to use computers or even where they have a computer, to continuously upgrade their equipment. Therefore they cannot compete with large enterprises. This may not be the case in the developed countries where because of market opportunity and likely success due to environmental enabling factors, it is easier to secure new technology. Besides, this technology originates from the developed countries and unlike in the developing countries where it must be imported, it is relatively cheap.



• Enabling environment While many countries have acknowledged that small enterprises have an important role in their economies, not much effort has been done to facilitate their growth. They have to compete for finance, markets, personnel, and utilities like any other business unit (Mutazindwa, 1997), In a few countries especially India, there has been affirmative action to promote small enterprises over a long period. In Uganda, the Government has only paid a lip service. In fact, the Uganda Investment Authority (UIA) which was set up to promote investments in Uganda was not attractive for the small entrepreneur. The UIA would only support proposals from companies with more than US$50,000 to invest. The development banks in the country did not have programmes for small enterprises.

It is only the non-governmental organisations and specialised financial institutions that have come in to assist small enterprises (Balunywa and Sejjaaka, 1997). It is easier for a large enterprise to get land for industrial development and a licnece to operate the business than the small operator. Large enterprises get easy access to utilities than small enterprises. Consequently there is no enabling environment to promote small operators.

• Managerial Skills Many studies have pointed to managerial skills as the most important constraint faced by small business. At the formation stage a small owner is able to run a business but as it grows and ages, managerial demands arise. These are in the form of operational managerial requirements like production, sales, and finance, and most important is the ability to deal with them. Some owners have a hunch over these but in the long run they need to employ people. Some people believe (Harper, 1994) that entrepreneurial skills are part of managerial skills. I would wish to differ and go beyond that. Entrepreneurship is beyond management and not all managers are entrepreneurs.



To learn more about this author, visit Makerere University Business School's Website.

Like this article? Share it with your friends


Related Articles Related Articles
9.0 Conclusions: Entrepreneurship and Small Business Enterprise Growth in Uganda
  As the world turns global, many countries are emerging out of the abject poverty into wealth. South Korea and Singapore are classical examples. In the 1960's, South Korea's per capital GDP was similar to that of U...
References: Constraints of growth-oriented enterprises in the southern and eastern African region
  References
6.0 Constraints to small business growth: Entrepreneurship and Small Business Enterprise Growth in Uganda
  We recognise that small business has an important role to play in many economies. We must therefore understand what constrains them to be able to support them. Various studies (Kibera and Kibera, 1997; Thembe et a...
1.0 Abstract: Entrepreneurship and Small Business Enterprise Growth in Uganda
  It is now generally agreed that small businesses are one of the key engines of growth in many developing countries by contributing to employment creation. In this paper, it is argued that micro and small businesse...
The Nature of Growth Oriented Enterprises: Constraints of growth-oriented enterprises in the southern and eastern African region
  Categorizing an enterprise as "growth oriented" implies that there is an intention within the top management of the enterprise to grow. An initial assumption, when the current research was undertaken in 1999, was th...

Related Forum Posts Related Forum Posts
Do women limit their companies' growth? Do women limit their companies' growth?
What are you? Marketing to Small Business What are you? Marketing to Small Business
Biz Plan Competition Biz Plan Competition
Growth? Growth?
Re: Congrats Shri! Re: Congrats Shri!
Growing ... or not Growing ... or not
Lack of controls can hurt. Lack of controls can hurt.
What Helped You Succeed in 2007? What Helped You Succeed in 2007?

 
About the Author


Makerere University Business School
(Visit Makerere University's Website)
The Makerere University Business School (MUBS) is at the centre stage of Business and Management Education in Uganda. It is the leading institution in providing business and management education at the certificate, diploma, Undergraduate and Postgraduate levels and a benchmark for other institutions both nationally and regionally. It also facilitates professional development, promotes entrepreneurship and is a leading business Management research institution in Uganda.
Have A Suggestion?

View Author's Video
Become An Author

Free Downloads


Makerere University Business School's

Complete
List Of
African-Accounts
Articles


First Name
Last Name
Email
 
If you enjoyed this article, get Makerere University Business School's Complete List of African-Accounts Articles For FREE!
Become An Author