Contribution of small and medium enterprise to the economic development of Rwanda

_HUYE CAMPUS

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS

OPTION OF DEVELOPMENT ECONOMICS

ACADEMIC YEAR: 2013-2014

ASSESSMENT OF THE CONTRIBUTION OF SMALL AND MEDIUM ENTERPRISES TO THE ECONOMIC DEVELOPMENT OF RWANDA

(CASE STUDY: Huye water enterprise)

A dissertation submitted to the College of Business and Economics in Partial fulfillment of the requirements for the award of Bachelor's Degree in Economics.

Written and presented by Valens NYANDWI

UG: 11112257

SUPERVISOR: Mr. Claude BIZIMANA

Done at Huye, June 30^th2014

DECLARATION

I, NYANDWI Valens, hereby declare that this dissertation entitled « Assessment on the contribution of small and medium enterprises to the economic development of Rwanda » Case of Huye water enterprise, is my original work and has never been presented elsewhere for any other academic qualification at any university or institution of higher learning.

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Student name: NYANDWI Valens

Date: 18/ 6 / 2014............................................................

Signature: ............................................................

DEDICATION

To the almighty God, supervisor, parents, sisters and brothers,

To my classmates and friends

ACKNOWLEDGEMENT

It is with heartfelt gratitude that I first thank Almighty God; I believe that He has always been

with me, led my path and helped me to achieve my goals.

My thanks go to the government of Rwanda through the University of Rwanda- Huye Campus for grating me access to university education scholarship. Equally the faculty of economics and management observe mention tiresome efforts in searching for suitable lectures to prepare us for the challenges of this work.

.I would like also to express my appreciation to my supervision Mr. BIZIMANA Claude for his incomparable commitment during the course of this work. Although he had a lot to do, he was never too busy to receive me for advice.

I would like to express my appreciation to my family especially my Mum NAKABONYE Anne-Marie, My Cousin Mr. NYANDWI Alphonse, for sending me to school and inspiring me towards hard work, time respect, and tolerance.

To my friends here in I would also like to express my thanks Brother Jean Bosco BIKORIMANA and Mr. MUNYURASHYAKA Gerald for their incomparable advises, and others whose helping me to have another outlook on my dataset and for assisting me in reflecting data entry, processing, and analysis.

Finally, I am indebted to thank my classmates in four year Development Economics, my friends and roommates for cooperation we shared.

God bless you greatly!

Table of Contents

DECLARATION i

DEDICATION ii

ACKNOWLEDGEMENT iii

LIST OF ABREVIATIONS viii

LIST OF TABLES x

LIST OF FIGURES xi

LIST OF APPENDICES xii

ABSTRACT xiii

CHAPTER I 1

1.0. Introduction 1

1.1. Background 2

1.2. Problem statement 4

1.3. Research questions 6

1.4. Study objectives 7

1.4.1. General objectives 7

1.4.2. Specific objectives 7

1.5. The research hypotheses 7

1.6. Identification of study 8

1.7. Significance of the study 8

1.8. Scope of the study 8

1.9. Organization of the study 9

CHAPTER II. LITERATURE REVIEW AND DOCUMENTATION 10

2.1. Introduction 10

2.2. Literature search 11

2.3. Descriptions and understanding of terms 11

2.3.1. An assessment 11

2.3.2. Meaning of SMEs and Economic development 12

? The definition of SMEs 12

2.3.3. Economic development 16

2.3.5. Growth and development 17

2.3.6. Regional policies of economic development 18

2.4. General overview of Small and medium enterprises (SMEs) 19

2.5. Popular types of small and medium enterprises 20

2.6. Factors needed for development of small and medium enterprises 22

2.6.1. Ten good things ISO standards can do for small and medium enterprises 23

2.6.2. Principles of good regulation for Small and Medium Enterprises 24

2.7. The importance roles of SMEs in the economy 24

2.8. Is it any correlation between Small and medium enterprises, business environment and 26

2.9. Limitations of Small and Medium enterprises in Rwanda 28

2.10. Preferred policy objectives for promoting SMEs in Rwanda 29

2.10.1. Policy objective 1: Promote a culture of entrepreneurship among Rwandans 30

2.10.2. Policy objective 3: Put in place mechanisms for SMEs to access appropriate business financing 31

2.10.3 Policy objective 4: Simplify the fiscal and regulatory framework for SMEs growth 32

2.10.4 Policy objective 5: Develop an appropriate institutional framework for SMEs development 33

2.11 General failure causes of the Small and medium enterprises and how to avoid them in the world? 34

2.12. Failure causes of small and medium enterprises in Rwanda 35

CHAPTER III: RESEARCH METHODOLOGY 36

3.1. Introduction 36

3.2. Research design 36

3.3. Source of data collections 37

3.3.1. Primary data 37

3.3.2. Secondary data 37

3.4. The study approach 38

3.5. Description of the study population 38

3.5.1. Sample size and selection technique 39

3.6. DATA COLLECTION TECHNIQUES 39

3.6.1. Interview technique 39

3.6.2. Questionnaires. 40

3.7.2. Coding 40

3.7.3. Tabulation 41

CHAPTER IV: DATA ANALYSIS AND INTERPRETATION 42

4.1. Introduction 42

4.2. Background of Small and medium enterprises to the economic development 42

4.2.1. The development of SMEs and their potential contribution to the world economy 42

4.2.2. Overview of the contribution of SMEs to the economic development of Rwanda 43

4.3. CASE STUDY: HUYE WATER ENTERPRISE 44

4.3.1. Presentation of Huye water enterprise 44

4.3.2. The Profile of Huye water enterprise 44

4.3.3 .HUYE water enterprise location 44

4.3.4. Mission of HUYE water enterprise 44

4.4. HUYE water enterprise's objectives 45

4. 5.The environment of Huye water enterprise 46

4.6. Juridical statute of Huye water enterprise 46

4.8. DATA ANALYSIS 48

4.8.3. Basic activities of Huye Water enterprise 48

4.9. Employment situation in Huye water enterprise 49

4.10. Investments level in Huye water enterprise 50

4.12 .Employees' annual income before and after working in Huye water enterprise 54

4.13. Respondents opinions about their categories according Ubudehe survey (household's categories). 55

4.14. Respondents views on the enterprise impact on welfare benefits 57

4.15. Respondents views on advantages derived from joining in Huye water enterprise 58

4.17. GENERALIZATION OF THE FINDINGS OF THE STUDY 59

4.18. Area for further research 60

CHAPTER V : SUMMARY, CONCLUSION AND RECOMMENDATIONS 61

5.1. Summary 61

5.2. Conclusion 62

5.3. Recommendations 63

5.3.1. For Government 63

5.3.2. For the Owner of enterprises 64

REFERENCES 65

APPENDISES 68

LIST OF ABREVIATIONS

UR-HC: University of Rwanda-Huye Campus

SMEs: Small and medium enterprises

MSMEs: Micro, Small and Medium Enterprises

CAN: Competitive Advantages of Nations

SOE: State-Owned Enterprises

TFP: Total Factor Product

Rwf: Rwandan Francs

UG: Undergraduate

EDPRS: Economic Development and Poverty Reduction Strategy

GoR: Government of Rwanda

GDP: Gross Domestic Product

GNP: Gross National Product

PSF: Private Sector Federation

NGOs: Non-Government Organizations

NBR: National Bank of Rwanda

NCR: National Credit of Regulation

BRD: Rwanda Development Bank

MINICOM: Ministry of Industry and Commerce

EAC: Eastern African Community

ISO: International Standards Organization

USD: United States Dollars

USA: United States of America

UN: United Nations

UNIDO: United Nations of Industrial Development Organization

WTO: World Trade Organization

WB: World Bank