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

LIST OF TABLES

Table 1 Difference between SMEs and Large Company 2

Table 2 Difference between SMEs and Large Company 21

Table 4.3 Educational level located in Huye water enterprise: 49

Table 4.4 Huye water enterprise Investment level 51

Table 4. 5 Respondents by age group and sex: 52

Table 4.6 Beneficiaries views about their achievements 53

Table 4.7 Households annual income before and after joining in Huye water enterprise 54

Table 4. 8 Respondents by households' categories 56

Table 4.9 Respondents views about Huye water enterprise impact on their wellbeing 57

Table 4.10 Do you find advantages in that the project has piloted your sector than non-piloted?. 58

LIST OF FIGURES

Figure 4.1 Organization structure of HUYE water enterprise 2

LIST OF APPENDICES

Appendix: Interview guide (Questionnaire) addressed to Respondents (beneficiaries of

Huye water enterprise) and Questionnaire addressed to technical staff of Huye

water enterprise

ABSTRACT

The aim of this dissertation is to assess on the contributions of small and medium enterprises to the economic development of Rwanda, this has been done considering Huye water enterprise as a case study. The task has been accomplished by designing the questionnaire and carrying out the interview questions, in order to find out these contributions in economic development of Rwanda.

Firstly, there is consensus among policy makers, economists, and business experts that small and medium enterprises are drivers of economic growth. A healthy SME sector contributes prominently to the economy through creating more employment opportunities, generating higher production volumes, increasing exports and introducing innovation and entrepreneurship skills. The dynamic role of SMEs in developing countries ensures them as engines through which the growth objectives of developing countries can be achieved.

It is estimated that SMEs employ 22% of the adult population in developing countries (UNIDO, 1999). The United Nations Industrial Development Organization (UNIDO) estimates that SMEs represent over 90% of private business and contribute to more than 50% of employment and of gross domestic product (GDP) in most African countries (UNIDO, 1999).

In Rwanda, the SME sector, including formal and informal businesses, comprises 98% of the businesses in Rwanda and 41% of all private sector employment.(Report of MINICOM, June 2010). The SME sector has the potential to lower Rwanda's trade imbalance but however, SMEs in Rwanda face a myriad challenges including limited access to finance, high energy costs, inadequate skills and training, low levels of societal trust as well challenges with contract enforcement.

CHAPTER I

1.0. Introduction

Small and medium enterprises play predominant roles in the economies of most of the developed and developing countries, especially in Rwanda, and impact significantly on employment creation, income distribution, and dispersion of industries.

The importance of the SME sector and the informal sector is acknowledged internationally, defining SMEs as challenging task, and then every country has its own definition.

There is no single, uniformly accepted definition of a small firm (Storey, 1994). Firms differ in their levels of capitalization, sales and employment. Hence, definitions which employ measures of size (e.g. number of employees, turnover, profitability and net worth) when applied to one sector might lead to all firms being classified as small, while the same size definition when applied to a different sector might lead to a different result.

Rwanda is one of the poorest countries in the world; it is landlocked with low industrial production. Its economy is almost based on agricultural productivity since 92% of the population occupies the agriculture sector (MUKAMUGANGA Clotilde, 2011, The role of small and medium enterprises in Rwanda from 1995 to 2010, NUR). It located in central Africa. Since 1991, the existing literature has shown the declining trends of incomes, savings, employment resources, famine, high population growth rate and general drop in the standards of living of people.

The Rwandan economy faces a complexity of problems, which are rooted in socio-economic structure and history of violence and injustice. Hence the low agricultural productivity, famine and frequent droughts; high population growth, low human resource development, high transport costs and environmental degradation contribute tremendously to the structural problems which led to huge macroeconomic difficulties.

Besides, social problems, which culminated into 1994 Genocide in Rwanda and caused the destruction of Economic and social infrastructures, the human resource base and the general productive apparatus and systems, were also affected by the war .Hence the destruction of the social fabric, the loss of people's confidence and trust in each other increase more the poverty and vulnerability of the Rwandan people especially in rural areas.

In this context, the Government's ultimate objective is to create a new social, political and economic framework that must address the problems of the country. The government of Rwanda has developed a policy that promote the creation of alternative ways of attaining high incomes, employment, a policy which encourages entrepreneurs to contribute more positively to economic development in the country. Entrepreneurs are encouraged in implementing small and medium enterprises which play a paramount role on economic development. (MUKAMUGANGA Clotilde, 2011, The role of small and medium enterprises in Rwanda from 1995 to 2010, NUR).