Memoire Online - The role of SMEs in rwanda from 1995 to 2010

I Clotilde MUKAMUGANGA hereby declare that this dissertation entitled «the role of small and medium enterprises on Rwandan rural development» is my own work and it has not been submitted anywhere for the award of any degree.

DEDICATION

ACKNOWLEDGEMENT

I would like first to acknowledge and thank Almighty God for loving and blessing me since my birth until now.

I thank particularly Dr. Martin MUGENZI who devoted part of his time to the supervision of this work. His invaluable guidance contributed to the successful completion of this dissertation.

I recognize my late parents who cared for me since the time of birth .I would expend my thanks to all people and best friends, especially, my sister Dancille NIRAGIRE and her husband Mr. Olivier RWAKAZINA and their families who more contributed to the achievement of this dissertation.

Thanks go to my friends and colleagues classmates in the economic department especially my boyfriend Paterne RUKUNDO for making my student life enjoyable.

LIST OF ABBREVIATIONS

LIST OF TABLES

LIST OF GRAPHS

APPENDICES

ABSTRACT

The aim of this dissertation is to find out whether small and medium enterprises contribute positively on rural development in Rwanda. The task has been accomplished by designing the questionnaire and carrying out the interview questions, in order to know this role from 2005 to 2010.

Applying spss on questions addressed to the population around URWIBUTSO Enterprise, we test whether the Enterprise has the role in the area it is located. The results of the study show that the URWIBUTSO Enterprise has a great role on Rwandan rural development especially to the population around it. The results also show that the URWIBUTSO Enterprise reacted by giving much importance to the population around Enterprise.

CHAPTER I. GENERAL INTRODUCTION

1.1. Introduction

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. 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 (World bank, 1998; 1)

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 rural development. For the case of «URWIBUTSO» Enterprise which plays a great role as it benefits more than 3000 families in local and other areas, thus improving welfare of the population.

1.2. Background of the study

Since 1950, development theory has been evolving both in terms of how rural development is conceived and how it can be best achieved. By the early 1970 , a number of major actors in international development had begun to agree that rural development could not no longer be defined strictly in terms of economic productivity and efficiency, that to be effective and sustainable ;the majority of rural people had to participate in the process of the development on going change (Robert B. Charlick 1984:1).

Today, most development economists do assert that if development is to be realized and become self sustaining; it will have to start in rural areas (Todaro 2003:418).The core problems of wide spread poverty, growing inequality, rapid population growth and raising unemployment ;all find their origins in stagnation and often retrogression of economic life in rural areas (Todaro:2003,419).

It is therefore argued that the rural areas need to be the leading element in (over) all strategies at least for the vast majority of contemporary third world countries.

Rural development has therefore become a topic that attracted many researchers and international entrepreneurs that are working and designing policies to increase living standards of rural people through: education, health services, transport facilities, provision of clean water, creation of research centers and provision of income generating projects. Lack of these indicators for development causes underdevelopment, poverty is the ultimate outcome.

Small and medium enterprises are of great importance of economic development through mobilizing and providing economic activities such as agriculture, commerce and trade.

The Rwandan economy is based largely on rain-fed agricultural production of small, semi-subsistence and increasingly fragmented farms.

The country's population is over increasing. However the increase in population steadily weakens the poor households which depend solely on agriculture for their live-hoods as more Rwandan are cultivators (Rwandan Economy; lecturer notes, 2008: 4). Thus, there is a need for them to ameliorate their standards of living through policies mentioned above by different institutions such as small and medium enterprises.

Among these SMEs, we note that «URWIBUTSO Enterprise» started 1983 by a young and dynamic SINA Gerard with one employee as compared to 421 employees today; something difficult to imagine based on the fact that he only used local human capacity and resources to develop his business which now benefits over 3, 000 families. URWIBUTSO means«something to remember «or souvenir.

A lot of good crops are grown in the area such as: cabbages, pineapples, sweet potatoes, etc but among the leading crops include:

Passion fruit, Banana and pineapple plantations, Red and yellow pepper, Apple, grapes and strawberry, Cereal crops such as wheat, maize, sorghum for the bakery and kimaranzara restaurant.

Therefore, small and medium enterprises especially those located in rural areas contribute more on rural development.

1.3. Statement of Problem

Rwanda is landlocked and small country located between the eastern and central Africa. It has a total area of 26,338 km² of which 24950 km² (94.7%) is made of land and 1,388km² (5.3%) of water. Of the total land area, only 8,600 km² (32.7%) are suitable for cultivation, about 94% of this population live in rural areas where their work is principally related to agriculture and animal husbandry (91.1%). Rwanda's primary sector occupies the largest part of the population; it represents 33% of GDP (2006).

It is mainly made of a subsistence agriculture that is mainly dependent on rainfall, making the production highly volatile across seasons. But still, the rural area is where poverty is lagging.

Now, it is understandable that small and medium enterprises contribute positively on rural development basing on that, this study will focus on whether these Rwandan enterprises have significant role on rural development especially on the population around the enterprise.

1.4. Purpose of the study

The study was set to identify the relationship between small and medium enterprises and rural development in Rwanda.

1.5. Objective of the study

1.5.1. General objective

The general objective of the study is to find out whether small and medium enterprises contribute positively on rural development in Rwanda.

1.5.2. Specific objectives

1. To study the nature and characteristics of small and medium enterprises in Rwanda.

3. To identify the relationship between small and medium enterprises and rural development in Rwanda.

1.6. Research questions

1. What is the nature and characteristics of small and medium enterprises in Rwanda?

2. What is the role of small and medium enterprises on rural development in Rwanda?

3. What is the relationship between small and medium enterprises and rural development in Rwanda?

1.7. Hypothesis

Basing on topic under study the following hypothesis is formulated. In order to attain rural development in Rwanda, SMEs recruit workers thus increasing their revenues that enhance the increment of standard of living. They incite people in investing more therefore there is an increment of their revenues.

1.8. Identification of study variable

The study will base on both independent and dependent variables therefore the variables of this study include the following:

1.9. Scope of the study

This study of the role of small and medium enterprises on rural development is delimited in space, in time and in domain/field.

1.9.1. Scope in space

The study will intend to discover the role of small and medium enterprises on rural development in Rwanda as a subject matter and will be limited to a survey of selected small and medium enterprises in Northern Province (URWIBUTSO Enterprise: Agriculture)

1.9.2. Scope in time

The study will analyze the role of SMEs on rural development in Rwanda from 2005 to 2010.

1.9.3. Scope in domain/ field

1.10. Significance of the study

The result of the study will be to show how small and medium enterprises contribute much on rural development. It will help the researcher to acquire skills in the problem solving process and using these skills in the forthcoming researches if conducted.

It will help the researcher to know how theories applied in class are put in practical. The study will guide the interested future researchers; since it indicated realities pertaining the contribution of SMEs on rural development.

1.11. Interest of the study

1.11.1. Personal interest

Ø This study will enable the researcher to acquire deeply knowledge concerning the role of small and medium enterprises on rural development.

Ø Due to this study, the researcher will find the marks and obtain her bachelor 's degree in economics.

1.11.2. Social interest

Ø The population will know more about small and medium enterprises in Rwanda and their positive effects on rural development.

Ø Because the rural development needs to be improved, entrepreneurs will be incited through suggestions and contribute more on the society.

1.11.3. Scientific interest

Ø This research is helpful to other researchers because it motivates to conduct a research on this topic.

Ø The research will also help other students who do their researches in other domains.

1.12. Organization of the study

The research work will be divided into five main chapters, chapter one will compose of the general introduction, background of the study, statement of the problem, purpose, objectives of the study, research questions, hypothesis, and identification of the study variables, scope, significance and interest of the study.

Chapter two will involve the review of relevant literature with reference to different sources of data, definition of terms and concepts and framework of the study.

Chapter three will concern with the methodology to be used in carrying out this study. Research designs, techniques of data collection and methods used.

Chapter four will focus on research findings, analysis and interpretations of data collected, these findings will be interpreted and edited in relation to objectives of study. Chapter five will deal with summary of findings, suggestions and conclusions of the study and areas of further research.

CHAPTER.II. DIFFERENT LITERATURES ON THE TOPIC

2.1. Introduction

This chapter broadly aims to review the existing literature to arrive at conceptual understandings. It expands on the definitions of the key terms according to different authors and these include: rural development, small and medium enterprises and their role (advantages).

It is logical that most of developing countries should be seeking to industrialize on the basis of their agricultural production. The output of crops and livestock is both their main source of wealth and their most obvious raw materials for industry. In many important cases, products which were formerly exported in their primary state are now being processed in varying degrees before shipment, so that the national economy gains the value added by processing.

In other instances, locally processed products are being sold on the domestic market as substitutes for imported goods. In both cases, the implication for a country's balance of trade can be highly important. At the same time, the new processing industries help to make more effective use of labor, and thus reduce unemployment. Agricultural development itself may be notably helped if the processing enterprises provide a new and reliable market for production. Also, major processing projects have significant linkage effects by promoting new business for service companies, transporters, traders and various others who are affected by its operations. Finally, there may be welfare benefits, such as the improvement of public nutrition that should follow the successful establishment of a milk plant.

Although the importance of stimulating agricultural processing industries on these grounds is well appreciated, there is not always a full understanding of the marketing and economic factors which vitally affect the success or failure of a project. It is a particular feature of most agricultural processing that the value added by the process is low in relation to the value of the primary commodity and the other modality used. (John: 167).

2. 2. Definition of the concepts

2. 2. 1. Rural development

Rural development refers to the transformation of rural areas from low to high standard of living. It includes agricultural development, establishment of rural industries and infrastructures. So policies for rural development should integrate all sectors in the rural areas. There is also need to integrate the rural sector into the overall economy. However, since agriculture is the major activity in most rural areas; its development would partly lead to rural development. The application of principles of economics to explain problems and solutions of rural areas in becoming an important area in economics.(Tayebwa, 2007:364).

According to Johnston: 1970, rural development is defined as it has evolved through time as results of changes perceived mechanisms and goals of development. A reasonable definition of rural development would be: development that benefits rural populations; where development is understood as the sustained improvement of the population's standards of living or welfare. This definition of rural development, however, has to be further qualified.

Rural development is essentially a part of structural transformation characterized by diversification of the economy away from agriculture. This process is facilitated by rapid agricultural growth at least initially, but leads ultimately to a significant decline in the share of agriculture to rural employment and output in the proportion of rural population to total population.

2. 2.2.Small and medium enterprises (firms)

Unfortunately, there is no single agreed definition of" small" firm. In fact, a firm considered to be small in one sector of business such as manufacturing, may be considerably different in size from one in, say, the road haulage business. In 1971, the Bolton committee, set up to investigate the small firm sector, attempted to resolve this problem by establishing both an economic and statistical definition of a small firm.

According to the committee, a firm was deemed to be small if it satisfied each of the following three economic conditions:

v It should have a small market share and thus be unable to influence its business environment.

v It should be managed by its owners and not involve a formalized management structure.

v It should not be a part of a larger business organization and can thus make its own business decisions. These conditions will vary from industry to industry.

ü Evidence suggests that the economic condition of owner management is not compatible with the statistical definition of a small manufacturing firm as being one with up to 200 employees. Managerial structures have been found to become more formalized when the number of employees exceeds 100.

ü Small firms tend to be specialist producers, operating in niche markets. As such, they may have a relatively large share of the segment of the market in which they are operating. The resulting market power gives them some control over price and profits.

A small package-holiday company may have a tiny share of the total market and yet, if it specializes in a particular type of holiday, such as for people with particular hobby, it may have substantial market power in that segment of the market.

ü The fact that there is no single criterion measuring smallness means that it is very difficult to compare like with like. Equally, the same criterion such as employment differs between sectors.

In recent years, EU's definition of small and medium enterprises (SMEs) has become widely adopted by researchers and is the basis on which all EU statistical data on SMEs are compiled.

Criterion	Micro	Small	Medium
Maximum number of employees	9	49	245
Maximum annual turnover	-	€ 7 million	€40million
Maximum annual balance sheet total	-	€5 million	€27million
Maximum % owned by one, jointly by several enterprises not satisfying the same criteria	-	25%	25%

This subdivision of small firms into three categories allows us to distinguish features of enterprises that vary with the degree of smallness. It also enables us to show changes over time in the size and composition of the small sector. However, we might still question the adequacy of such a definition, given the diversity that can be found in business activity, organizational structure and patterns of ownership within the small firm sector.

Failure to establish a clear definition of what is and what is not a small firm means that statistical estimates concerning the size of the small-firm sector are bound to be uncertain.

2.3. Growth of small businesses

It is commonly assumed that all businesses wish to grow. But is it true? Do small businesses want to become big businesses? It may well be that the owners of a small firm have no aspirations to expand the operations of their enterprise. Small businesses are frequently perceived to grow in stages. The number of stages may vary depending on the nature of the business and on how each stage is defined, but typically we can identify five.

Table 2.2: Management role and style in the five stages of small business growth

Stage	Top management role	Management style	Organization structure
1. inception	Direct supervision	Entrepreneurial individualistic	Unstructured
2. survival	Supervised supervision	Entrepreneurial administrative	Simple
3. growth	Delegation co-ordination	Entrepreneurial co- ordinate	Functional centralized
4. expansion	Decentralization	Professional administrative	Functional decentralized
5. maturity	Decentralization	Watchdog	Decentralized functional/products

In the initial stage, inception, the entrepreneur plays the key role in managing the enterprise with title if any formalized management structure. In the next, two stages we see the firm establish itself (survival stage) and then begin to grow. The entrepreneur devolves management responsibility to non-owner managers. Such non-owner managers are able to add certain skills to the business which might enhance its chances of growth and success. The fourth and the fifth phases, expansion and maturity, see the firm become more bureaucratic and rationalized; power within the organization becomes more dispersed.

This growth pictures of small business descriptive rather than explanatory. To explain why a small firm grows we need to examine a number of factors. It is useful to group those under three headings: the entrepreneur, the firm and strategy.

1. Entrepreneur: factors in the section relate predominantly attributes and experience of the individual entrepreneur. They include:

- Entrepreneurial motivation and desire to succeed: motivation, drive and determination are clearly important attributes for a successful entrepreneur.

- Prior management experience and business knowledge: previous experience by the owner in the same or a related industry is likely to offer a small firm a far greater chance of survival and growth.

2. Firm: the following are the key characteristics of a small business that determine its rate of growth. They include:

- The age of the business: new businesses grow faster than mature businesses.

- The sector of the economy in which the business is operating: a firm is more likely to experience growth if it is operating in a growing market.

3. Strategy: various strategies adopted by the small firm will affect its rate of growth.

- Work force and management training: training is a form of investment. It adds to the firm's stock of human capital and thereby increases the quantity and possibly also the quantity of the output per head.

- The use of external finance: taking on additional partners, or, more significantly, taking on shareholders, will increase the finance available to firms and therefore allow a more rapid expansion.

- Export markets: even though small firms tend to export relatively little, export markets can frequently offer additional opportunities for growth.

What the above factors suggest is that, if a small business is to be successful and subsequently grow, then it must consider its business strategy, the organization of the business and the utilization of the individual s' abilities and experience.

2.4. Competitive advantage and the small firm sector

The fact that many small businesses do survive, and some manage to grow, suggests that they must have some edge over their larger rivals. The following are key competitive advantage that small firms might hold.

a. Flexibility: small firms are more able to respond to changes in market conditions and to meet customer requirements effectively.

b. Quality of services: small firms are more to deal with customers in a personal manner and offer a more effective after-sales services.

c. Production efficiency and low overhead costs: small firms can avoid some of the diseconomies of scale that beset large companies. A small firm can benefit from: management that avoids waste, good labor relations, the employment of a skilled and motivated workforce, lower accommodation costs.

2.5. Promoting small and medium enterprises

SMEs can play a much bigger role in developing national economies, alleviating poverty, participating in the global economy and partnering with larger corporations. They do, however, need to be promoted. Such support requires commitments by and between governments, business and civil society. (http/www.wbcsd.org/web/development.htm)

2.5.1. The government contribution

Like bigger companies, SMEs require a favorable institutional framework. Most are overlooked by policy-makers and legislators, who tend to target larger corporations. SMEs often miss out on tax incentives or business subsidies.

They suffer more than big companies from the large burden and cost of bureaucracy, as few SMEs possess the necessary financial or human resources to deal with this. (http/www.wbcsd.org/web/development.htm)

Build capacity

Governments can contribute to capacity building through the provision of vocational training, by creating municipal-level agencies for SME start-up development and management, such as «Enterprise Advice Bureaus», and by encouraging SMEs to engage with large corporations. (http/www.wbcsd.org/web/development.htm)

Implement inclusive reforms

Governments need to create the necessary enabling frameworks and relax the burden of regulatory measures. They must simplify business registration procedures and paperwork to make them cheaper, simpler and speedier. Efforts are also required to tackle corruption.

The World Bank report quoted below notes «reform expands the reach of regulation by bringing businesses and employees into the formal sector.» The same report also concludes that the greater a country's ease of doing business, the greater the number of jobs created in the formal sector «because the benefits of being formal (such as easier access to credit and better utility services) often outweigh the costs (such as taxes).» (http/www.wbcsd.org/web/development.htm)

Provide financial and tax

Incentives to encourage SMEs to join the formal sector, governments need to provide tax incentives for SMEs and subsidies similar to those available to large corporations or micro entrepreneurs, and to make provisions for start-up funds for SMEs. (http/www.wbcsd.org/web/development.htm)

2.5.2. The business and civil contribution

Building supply chain capacity

The many large corporations that source their supplies from developing countries require reliable suppliers. Large corporations can help SMEs become more viable business partners by providing training in basic skills such as management, bookkeeping, business planning, marketing, distribution, and quality control. They can assist through technology transfers, direct investment in infrastructure, and the sharing of knowledge.

This makes SMEs more competitive and facilitates access to credit. All of this can benefit the large corporations by creating more effective and inclusive supply chains. (http/www.wbcsd.org/web/development.htm)

Rationalizing procurement procedures

Many global companies use intermediaries to identify local suppliers. This can add an extra layer of cost to the operation, a financial outlay that rarely goes to the originator of the goods. It also adds time. By building relationships with SMEs, large corporations can cut out the middlemen. This helps drive down costs, hastens delivery and improves quality. (http/www.wbcsd.org/web/development.htm)

Strengthening local distribution networks

SMEs have local knowledge, understand domestic consumer demands, and have access to remote regions. By contracting local SMEs to sell and distribute their products in these markets, large corporations can help strengthen the sales capacity and income of local SMEs. At the same time, they can strengthen their own distribution networks and open up new markets for their products. (http/www.wbcsd.org/web/development.htm)

Improving standards

Global companies are increasingly asked about the operations of their suppliers, and thus can offer transparency along their supply chains. Large corporations can help their SME suppliers to comply with international standards such as ISO 14001. Such compliance can enable SMEs to compete in international markets while at the same time improving the overall quality of suppliers to large corporations. (http/www.wbcsd.org/web/development.htm)

2.6. Finance sector and SMEs

Small and medium enterprises (SMEs) make up an estimated 90 percent of businesses and over 50 percent of employment worldwide. A thriving SME sector can drive growth and jobs in developing countries. However, access to financial services for SMEs remains severely constrained in many emerging markets. The global financial crisis created a financing gap that particularly affected SMEs, making it more difficult for these enterprises to find the capital to grow their businesses and create jobs. Even as liquidity is restored to financial institutions, lending volumes remain depressed and SMEs still have limited access to financing.

The World Bank Group provides support for SMEs in two ways: we work primarily with private sector partners to target financial and knowledge bottlenecks to get finance and business support for SMEs. We also work with governments to create a better investment climate for SMEs. (Aliza Marcus, 2010)

2.7. The Importance of Agriculture in Development

Economist as early as the beginning of the 20th century observed that wealthier countries were characterized by a smaller portion of their output coming from agriculture and relatively less labor resources tied to the same sector.

They also noted that the process of development itself was characterized by a monotonic decline in the relative importance of agriculture and the primary sector in the economy, both in terms of GDP and employment.

One of the first economists to point this out was G. B. Fisher (1939). Later, this same generalization was formalized by Kuznets (1957), showing that this secular decline of the primary sector with development can be observed both across countries and across time. (Gustavo and stamoulis, 2007: 8)

Some economists argued that agriculture plays an important role in development. One of the first arguments in favor of the role of agriculture in development was placed by Lewis (1954) who suggested that «there are large sectors of the economy where the marginal productivity of labor is negligible, zero, or even negative.» Of course these labor resources are tied to the primary sector, and are a key ingredient for industrial growth, which will occur thanks to a growing labor force coming from the primary sector. Hence, the primary sector plays, although passive, an important role in development.

Later, Johnston and Mellor (1961), identified some active roles that the agricultural sector performs throughout the development path: i) agriculture provides food necessary for a growing economy, as food demand, although at a decreasing rate, grows with income (Engel's Law); ii) agricultural exports generate the foreign exchange necessary to import capital goods; iii) agriculture, as the larger sector in less developed countries, is the only sector capable of generating the savings mass that the non-agricultural sector needs for capital accumulation; and iv) a growing agricultural sector creates a larger local market for the non-agricultural sector. These Johnston-Mellor linkages still remain relevant for developing economies with a large primary sector.

Johnston and Mellor were perhaps also the first to note that successful industrialization experiences are usually preceded by periods of dynamic agricultural growth.

Although this does not amount to a causality link, the authors observed that countries that embark in a successful industrialization path, first experience fast agricultural expansion, fueled not by absorbing resources from the rest of the economy, but by rapid increases in productivity. (Gustavo and stamoulis, 2007:9)

Therefore, any successful rural development strategy will contain an agricultural development component; but they are not the same thing. While agricultural development aims at improving the welfare of populations through sustained improvements in the productivity of the agricultural sector, rural development aims at the improvement of welfare of rural populations through the sustained growth of the rural economy, which includes agriculture, but may not be its only component and not necessarily the most dynamic. (Gustavo and stamoulis, 2007:21)

2.8. How Small and Medium Enterprises can drive Africa's economies

The SME sector in Africa is characterized by a huge number of micro-enterprises. Most companies are small because the private sector is new, and because of legal and financial obstacles. At the other end of the scale, there are many large companies, which tend to be multinationals. But between these two segments very little exists - which is where the SMEs ought to be. There has been little progress on encouraging SME growth since the 1990s.

SMEs are the engine for growth; unless and until Africa has significant numbers of companies in this segment it will continue to struggle. The ICF endeavors to make it easier for these enterprises, and in so doing all enterprises, to do business on the continent. n high income countries, SMEs contribute almost 50% of GDP. In low income countries the proportion is 16%. In Africa it is below 10%. In the Asia-Pacific countries 32-48% of total employment is in SMEs, and 60-80% of GDP provided by the sector. ( www.icfafrica.org )

· Contribute to employment growth at a higher rate than larger firms do, and in the longer term, they provide a significant share of overall employment.

· Give economies greater flexibility in service provision and the manufacture of a variety of consumer goods.

· Increase competitiveness in the market place and help dilute the monopolistic position of large enterprises.

· Encourage entrepreneurial skills and innovation and play important part in the provision of services in communities. ( www.icfafrica.org ).

2.9. SMEs as part of crisis recovery

The World Bank Group is stepping up its support to SMEs, both to help mitigate the impact of the crisis and to better position SMEs as leaders of economic recovery. IFC's bank capitalization and trade finance facilities seek to bridge financing gaps that could prove fatal for SMEs, and the World Bank is expanding lines of credit and partial credit risk guarantees targeting SMEs. (Aliza Marcus, 2010)

2.10. General Review of small and medium enterprises in Rwanda

Small and medium enterprises have been defined according to the size rate of turnover, activity, ownership and legal status. There is, however an emerging consensus that size (that is, a number of employees) may be appropriate defining characteristic, given the heterogeneity of enterprises. Small and medium enterprises may, therefore be defined as enterprises employing less equal 100 employees while entities with less than ten employees are categorized as micro enterprise.

Although this sector is largely un enumerated available estimates suggests that small and medium enterprises account for roughly 60% of the workforce and 25% of industrial output in value terms in Rwanda M. Nureldin Hussain (2000: 2)

Compared to large firms, they tend to use less capital per worker and have the capacity to use capital productivity. Small and medium enterprise employs workers with limited formal training and use local raw materials that would otherwise be neglected. They also mobilize the small savings of proprietors which tend to exist outside the formal banking system. Studies have shown that owners of small and medium enterprise have surprisingly high propensity to save and invest, even at quite low income levels. M. Nureldin. H (2000:2)

As given by Rwanda development indicators (2000:170), Rwanda is among the poorest countries which are still developing. This attributed to many factors which include among others, rapid population growth which is 8, 162, 715 million people being land locked country with surface area of 26, 338 square km² and small and medium enterprise contributes 20.5% to the GDP, mining 0.1%, manufacturing 11.6%, electricity and water 0.75%, construction 8.1% some examples of small and medium enterprise are Urwego community banking, La sierra Restaurant,

Tea factories as well as Urwibutso enterprise as given by Rwanda privatization manual (1998-2000:49) Rwanda government adopted the privatization policy to let the foreigners and local citizen to purchase some poor functioning enterprise that were controlled by government of which Urwego community banking s.a is among. However nothing much has been achieved. The contributions of domestic enterprise are still small and claim that it is too early to get involved in competition.

Rwanda has done everything possible to join Common Markets of East and Southern African states (COMESA) Kagera Basin Organization (KBO) East African Community (EAC) and join hands in free trade among nations. It is just analyzing the conditions and its capacity to support the idea to determine whether they are favoring the Rwandan economy. Rwandan privatization manual (1998-2000:49).

2.11. Rwandan rural sector

The Rwandan economy is dominated by agricultural activities and 90% of the population is based in rural areas. Due to this land scarcity, the primary sector is characterized by old plantations and the stagnation or decrease of the production. The majority of workers in this sector are independent (76, 81%) and family helpers (15,22%) with no required qualifications. The remunerated employment concerns only less than 6% of those involved in agriculture and stock farming. The salaries are not motivating especially to young graduates who chose to go for remunerated jobs in the modern sector. On top of this, the difficulty of access to land and loans should also pointed out as it considerably hampers the chances of integration in this sector and limits access to technological innovations.

It is an illusion to think that the modern sector alone will solve the problem of unemployment in the short term.

The size of the rural labor force justifies the establishment of rural employment alternative programmes. It is therefore imperative that diversified strategies of developing traditional employment should be initiated.

2.11.1. Problems of Rwandan rural areas

It is in rural area that malnutrition prevails and where there is the greatest poverty. This means that development of Rwandan rural areas is confronted with serious problems. In the government policy on agriculture, food self-sufficiency is one of the top priorities. Nevertheless, this food self-sufficiency is under strong constraints and handicaps, particularly from the massive rural population growth which consequently leads to a progressive reduction of suitable land for cultivation. This problem has been aggravated mainly by the mountainous nature of the country and by inappropriate management methods. Excessive division of exploitable land constitutes a challenge to maintaining the fragile food equilibrium and again makes the problem of food self-sufficiency more complicated (Jean MARARA: 1).

2.12. Definition of Small and Medium Enterprises in Rwanda

The Rwandan private sector has three many leading sectors in it. These are sub-sector of agriculture, sub-sector of industry and sub- sector of micro- business. The micro business sub-sector is the component of the Rwandan economy about which least is known.

Businesses are generally informal sector are mainly: the use of rudimentary equipments or tools, employment of members of the family and a small number of employees (35-100 including the owner).

Rwandan small scale business men or industrialists might be termed as explores and displaying the following characteristics:

The startup capital is owned the founder, no feasibility or market studies conducted with regards to the enterprise in this management of this type of the enterprise is very substantially dominated by the key figure of the founder.

ü These enterprises equipment quite often consists of reconditioned, second hand machinery.

ü This type of enterprise usually takes legal form of one-man business of limited partnership form (Minicom 1999: 3, 4).

Samuel C to et al (1990), a small enterprise is commonly thought of as local restaurant, beauty shops, florists, and television repair shops. Indeed these types of business do follow a common small businesses pattern. They often employee fewer than 35 people and to him a business is qualified to be small if it has one of the following elements: If the management is independent, that is if the managers are the owners of the business, if the venture capital is supplied by an individual or a small group of people controls the ownership, if the enterprise is small compared to relative size in its industry, if the area of operation is mostly local.

Wheelen and Hunger (1998: 284), a small business enterprise in an independently owned and operated, not dominated in its fields and does not engage in innovative practices.

In USA, the mostly commonly accepted definition of small and medium sized enterprise is one that employs fewer than 500 people and generate sales of less than 20 million USD annually.

In addition to that E.A Frohlich et al (1994: 12) has cited that, one approach of distinguishing small scale and medium scale operations uses fixed assets or the number of persons employed as a measure. This criterion differs from country to country and there is no universally accepted definition.

Definition by value assets and number of employees, worldwide statisticians and economists refer to criteria that are easy to measure. For instance, number of employees, sales and capital investment in developing countries, even energy inputs are size criteria. But the most frequent criterion is the number of employees, if the value of assets is taken as criterion, the 50,000 USD to 500,000 USD range be considered typically of small and medium enterprises.

If we define by number of employees in industrial economy context in most often means fewer than 500employees while in developing economies, it means not more than 100 employees.

According to definition provided by business act of 1953, a small and medium enterprise is one that independently owned and operated by and not dominated in its field of operations.

Authorized by this act, also small and medium business administrations (SBA) developed a detailed definition that takes into account such criteria as sales volume and a number of employees in the enterprise.

Incorporating these criteria into workable guidelines for use in developing loans the SBA as established the upper limits for small enterprises in this manner: Manufacturing firms 250 or fewer employees, wholesaling USD 15 million in annual sales, retailing and services 1 USD million to 5 USD million in annual sales depending on industry.

To explain it more, Martin W. Bukley (1994: 35-6) has put it out that, the most authoritative definition of small and medium enterprises came from Bolton committee report on an enterprise (report of the committee of inquiry on small enterprise, chairman J Bolton) which was issued in 1971. A small enterprise, it said, was generally one which employed less than 200 people as well as having three additional characteristics: A small share of market, owners worked and took a personal interest in business, not part of another (large) enterprise two years.

In case of Rwanda, Patrick Nugawera (1998) has revealed that there is about 170-200 organized, small structured industrial and service enterprise in the country (Rwanda).

2.13. Failure causes of small and medium enterprises in Rwanda

Richard Hodgetts (1982: 24-26) has asserted that the causes of failure of small and medium enterprises are as follows:

a. Some managers are incompetent: the major reason as to why many small and medium enterprises fail is incompetence of managers. The owners simply do not know to run the business.

b. The second most common reason why small and medium enterprises fail is unbalanced experience. By this, we mean that the owners do not have well rounded experience in the major activities of the business such as finance, selling and production. Due to lack of experience in one or more of these critical areas the enterprise gradually fail.

c. The third common causes of business failure include neglect, fraud and disaster. Neglect occurs when the owners do not pay sufficient attention to the enterprise. Fraud involves intentionally misrepresentation or deception. Disaster refers to some unforeseen happenings or act of God.

d. Another common cause of business failure is lack of managerial experience. The owners simply do not know how to manage people.

2.14. Problems encountered by small and medium scale enterprise in Rwanda

Garry (1981) as cited by KAWAKWA (2001: 15) small and medium scale enterprise, more especially those in developing countries have been handicapped by high costs of factors of production human resources that are not qualified and inexperienced, the absence of information of existing opportunities and potentialities, inadequacy national framework and institutional mechanisms for exports, low internal financing capacity and lack of entrepreneurship.

Nugawera (1998) has put forward the following the most important problems encountered by small and medium sized enterprises in Rwanda:

Lack of enough funds, competition from imported consumer goods especially after trade liberalization

However measures have been provided to overcome these problems. But Elliot (1976), puts it that, nobody has yet found solutions to all problems of small and medium sized enterprises because they have their origin in nature of man and kind of society in which he lives.

Martin.W Buckley (1994:36) has commented that it is obvious that small and medium sized enterprise face significant difficulties including:

By summing up the lack of basic skills required to organize and manage business is stalling the growth and development of Rwanda's critical Small and Medium Enterprises (SMEs) sector, a youth and female start up business expert has said. Joan Sanger, a Paris-based speaker said businesses are dying at infancy due to poor or lack of business plans by the owners and inability to anticipate the changes on the market. (New times: Alex Ngarambe,7 may 2010) .There are many reasons why the SME sector is so small, such as lack of skills, lack of investment environment, and banks' unwillingness to lend to risky clients. ( www.icfafrica.org)

Summing up, Sanger said that value addition in the business production should be emphasized to boost the quality of output and exports as well greater participation in the global value chain. (New times: Alex Ngarambe, 7 may 2010)

CHAPTER III .RESEARCH METHODOLOGY AND PROCEDURES

3.1. Introduction

Fred.N Kerlinger, (1964:700) stressed that the methodological research is a controlled investigation of the theoretical and applied aspects of measurements, mathematics, and statistics, and ways of obtaining and analyzing data.

Contentmporary English dictionary (1995: 231), defines methodology as a set of methods and principles that are used when studying a particular kind of work.

A method comprises of all intellectual process, an orderly system or arrangement that enables a researcher to reach on aspect of knowledge by using various techniques. This chapter intends primarily to highlight the methods and techniques that have been used in order to collect data for the purpose of carrying out this study.

It is primarily intends to make description and analysis of the role of Small and Medium Enterprises on rural development in Rwanda. For this reason, it will bear an exploratory aspect, especially because there has not been a similar study before.

This chapter gives a detailed presentation of the tools and techniques that were used to investigate the research issues in the field. It includes spelling out the area of the study and study population. It further describes the methods and techniques used in the choosing the sample size and selection instruments like questionnaire, interviews and documentation were used. It also includes data processing, analysis and problems that were encountered in this research, finally this chapter provides the back ground against which the findings and conclusions of the study were examined and appreciated regarding their reliability and validity.

3. 2. Research design

According to Churchill (1992:108) a research design is a framework or a plan for the study used as a guide in collecting and analyzing data. It is a blueprint that is followed in completing a study. He further defines a research design as a plan of action, for the purposes of this study; the researcher adopted a survey as his research design.

3.3. Sources of data

«A source is one of the materials that the researcher uses for collecting information during the investigation» (Paige Wilson, 1989:2). The sources of data are both primary and secondary data.

3. 3. 1. Primary data

«Primary data are those data collected to the specific problem or issue under investigation. Primary data are necessary when a trough analysis of secondary data is unable to provide satisfactory information» JoelR. Evan and Barry Berman (1995: 20), GilbertA. Churchill Jr(1992:182);he further argued that, primary data are collected to fit precise purposes of current research problem.

To evaluate the overall value of primary data, the researcher must weigh precision, currentness and reliability against high cost time pressure and limited access to materials. The main techniques of primary data collection were interviews and questionnaires given to the staff and population around the enterprise. Therefore, primary data were collected from respondents in the form of answers to the administered questionnaire as well as responses where interviews were applied.

3. 3. 2 Secondary data

Extensive study and review of published and unpublished documents, reports journals, newspapers and policy reports relevant to the study was used. Secondary datais «A data gathering method that makes use of pre-existing data» Richard M. Grinnell and Margaret Williams, (1990:228).

This technique is important because it reviews the literature and tries to canvas both global and national perspectives so that the researcher could have a comparative framework for analysis and evaluation (William, 1982:401).

Secondary data sources for this research work were drawn from the permanent file of some surveyed enterprises. The permanent file included among other documents and these includes the following: the statute, minute of managers, the manual of procedures and other documents considered necessary for this study.

3.4. Study population

William fox (1992:06) defines population as «a set of cases from which a sample is drawn and to which a researcher wants to generalize». He continues by asserting that population is data pertaining to all or almost all cases to which a researcher wants to generalize.

For any study to succeed, information needs to be representative of the population covered by the research questions. A population refers to the total number of elements covered by the research questions (Scott, Iet al 1998:307).

«Population can be defined as the totality of persons or objects with which a study is concerned». Grinnell et al (1990:118).

Christensen (1991:101) asserts that, population refers to all the events, things or individuals that are the objects of investigation. This research is made to study the relationship between small and medium enterprises and rural development in Rwanda, thus the researcher surveyed a selected unit (enterprise) techniqually determined. The population under study was comprised of stakeholders of enterprise.

3. 4. 1. Population determination

As it has been indicated above, given the width of this topic under study, the population is also wide as it is located in rural areas where agriculture dominates. Despite the fact that the population under this study is derived from a selected enterprise and this population is formed by cultivators working with enterprise.

3. 5.Sample size and selection techniques

The study must consider a sample size that is within the cost constraint but should provide the ability to detect an independent variable effect (Christensen, 1991: 372). Williamson (1982:113) comments on the sample size as being a phase of research, which is crucial because of its major impact on time and money that must go into data collection.

While selecting the sample size of the study; the researcher purposely five respondents particularly; representing all staff members. Data is collected from selected respondents from the study population due to the reasons of necessary and convenience.

3. 5. 1. Stratified sampling

The study population was stratified into two strata, one stratum was comprised of staff members of selected small and medium enterprise and the one was comprised of the population around that enterprise. From these two strata, the researcher used both simple random and purposive sampling techniques as these enabled her to select respondents who could provide her with the information needed for the study.

3. 5. 2. Simple random sampling

Simple random sampling was used to select enterprise. Simple random sampling as defined by Baker (1988:148) refers to the situation whereby each individual case in the population theoretically has a chance of being selected for the sample. The simple random sampling technique is used to select enterprise.

3. 5.3. Purposive sampling

Bailey (1978:83) explains purposive sampling technique as a technique whereby the researcher uses her own judgment about which respondents to choose and picks only those who can best meet the purposes of the study.

n is the sample size, N is the size of the population, N_o is the sample size of a defined population, d is the error term that is estimated 5%, p is the estimated frequency of the sample with size n, while t is the figure obtained from the t-student's table.

Therefore, basing on the above formula, the researcher decided to use 95% as the confidence level of which Alain Bouchard says is more reliable. Thus, p=0.5, N= 45,000, d= 5% = 0.05, t=0.55

It was on this ground that the researcher selected 5 staff members and from the enterprise 30stackeholders of it. The researcher's intention was to ensure that the sample includes the elements that are directly relevant to the problem being investigated /studied.

3. 6. Data collection methods and instruments

The information from the primary data was obtained through a structured questionnaire and an interview schedule and documentary search was applied as to obtain secondary data.

3.6.1. Questionnaire

Kenneth D. Bailey (1987: 93) defines questionnaire as a list of questions generally mailed or handed to the respondents and filled in by her with no help to the interviewer. The questionnaire contained both open and closed ended questions were addressed to the respondents. With open-ended questions were kept to the minimum so as to enable the respondents to focus on aspect of the research. With open -ended questions, the respondents had to give personal responses or opinions in their own words whereas with close-ended questions, respondents were given different alternatives to choose from.

According to Kendall (1992:135), a questionnaire is information guttering technique that gathers information about; attitudes, beliefs, behaviors and characteristics from several respondents in the enterprise, who may be affected by a given phenomenon or system.

The whole process of distributing questionnaires was as follows: the researcher first contacted the managing director of the enterprise about the issue before the process started. At this stage, researcher gave the manager a pre-test questionnaire to fill. This helped researcher to test the understandability of the respondents in relation to questions asked. By the help of pre-tests, the researcher was able to identify the gaps in the questionnaire and made corrections where necessary.

After the pre-test questionnaires were collected and necessary corrections made, questionnaires were distributed to the respondents for filling. The questionnaire distribution protocol in the enterprise was organized in a way that facilitated the process of collecting them.

Here the researcher deliberately selected few of the staff members only from the enterprise and some of the population around it; to whom the questionnaires were given for both distribution and collection after being filled out. In a few cases, the researcher had to be personally present to aid the respondents' complete questions.

The advantages of close- ended questions are that the answers are standard, and can be compared from person to person. Therefore, are much easier to code and analyze; and often can be coded from the questionnaire, saving time and money. Further, the respondent was often clear about the meaning of the question and could often tell the answer for what was demanded.

3. 6. 2. Interview Schedule

According to Bailey (1978:93) an interview is an instrument that is not given directly to the respondents, but is filled in by an interviewer who reads the questions to the respondent. In case where the researcher had access to the respondents, she interviewed them and responses were filled in the interview schedule.

For better organization of the interview exercise,the researcher madeappointments with the respondents in order to have access to them.

During the interview process, the researcher had a list of questions that she read to the respondent' s responses, the researcher prepared a separate schedule as this would later facilitate the coding process.

3. 6.3. Documentation

Bailey (1978:266) defines documentary study as a careful reading, understanding and analysis of written documents for some purposes other than social research. They record of past events that are written or printed. Grinnell and Williams (1990:219) noted that documentation is the analysis of data that exist in boxes, in some enterprise's basements or hidden in the core of a computer. In this research, the researcher collected the already existing data, by finding them where they are stored or field. During the process of documentary analysis, the researcher some documents and after understanding and analyzing the relevance of texts to this study, she jotted them down on manuscripts and later typed them on a computer for compilation. The researcher reads documents such as manual procedures, newspapers and other publications.

3. 7. Data processing and analysis

«Data processing is concerned with classifying responses into meaningful categories called codes » (Roth, 1989: 58). It consists of editing, schedules and coding the responds. The data processing began with editing, coding and finally ended with tabulation.

Nachmias (1976: 143) assert that, data processing is a link between data collection and data analysis. It involves the transformation of the observation gathered from the fields into the system of categories and the transformation of these categories into codes and amenable to quantitative analysis and tabulation. Not all data can be presented in their entity. The variables to be presented are those most central to the goals of the study; generally variables include specifically in the research questions (Bailey, 1978: 321).

Data collected was really in arrow form. It was not easy to the researcher to present the findings of the study. Therefore, the researcher had technically processed data before proper analysis was done so as to become more meaningful for interpretation. Data processing was done in accordance with general and specific objectives of the research study.

After carrying out interviews with respondents and questionnaire were collected, they were edited and the information was arranged in a meaningful and organized form by coding it. The data were analyzed by using computer program SPSS.

3. 7. 1 Editing

According to Daniel and Gates (1991: 387), editing is the process of going through the questionnaire to ensure that the `skip patterns' were followed and required questions are filled out. Editing involves the inspection and if necessary, connections of each questionnaire or observation form; the basic purpose of editing is to impose some minimum quality standards on the raw data (Churchill, 1992:608).

3. 7. 2 Coding

According to Churchill (1992: 612), coding is the procedure by which data are categorized. Through coding, the raw data are transformed into symbols usually numerals that may be tabulated and counted. The transformation is not automatic; however, it involves judgment on the part of coder. Moses and Kalton (1971: 415), states that the purpose of coding in the survey is to classify the answers acquired were coded and tallies used to determine the frequencies of each response. Similar responses would be grouped according to their different categories. This helped the researcher to know for instance the percentage of responses on whether there is role of small and medium enterprises on rural development in Rwanda.

3. 7. 3. Tabulation

According to Selltiz et al. (1965: 406-407), tabulation refers to the part of technical process on statistical analysis of data that involves counting to determine the number cases that fall into various categories. Thus after eliminating errors, codes were assigned to each answer. This stage led to the construction of statistical tables showing frequency distribution of answers to questions addressed to respondents. The statistical tables were used to compare the number of occurrences of each answer to questions asked. Up to this level, it was through mathematical and statistical tables that the number of occurrence of each answer in relation to the questions asked was converted into percentages which made it clear.Each table was accompanied by explanations about the nature of relationship between the variables that were indicated in tables.

3.8. Study limitations

The researcher faced a number of problems, which would have affected the results thereof, had they not been greatly mitigated by remedies developed. These problems faced are as follow: Scarcity of the respondents, not having access to secondary data sources was yet another problem, and the most serious problem was time and financial constraints.

CHAPTER IV. DATA ANALYSIS AND INTERPRETATION

4.1. Introduction

This chapter deals with the analysis and interpretation of the data, discussion of the major findings of the study and their interpretations, percentages and frequencies were used as means of analyzing and interpreting the data.

This chapter thus examines the empirical evidence and establishes the ground up on the research questions were answered before drawing conclusion. The analysis was made on the responses of 30 respondents from urwibutso enterprise. The responses were analyzed and interpreted to draw conclusion. The data were therefore presented in the form of descriptive, statistical tables and percentages. This chapter is composed of two sections: the first section highlights the profile of urwibutso enterprise while the second section attempts to analyze data collected, interprets it and presents the various findings from the research in form of answering research questionnaire in order to relate it with the study objectives and hypothesis.

4.2. Presentation of urwibutso enterprise

After identifying and locating geographically urwibutso enterprise, we will analyze its mission, its objectives, its historical, its evolution, its organization and its management, then its role on Rwandan rural development especially around it.

4.3. Urwibutso enterprise's historical and evolution

Urwibutso enterprise started in 1983 by a young and dynamic SINA Gerard with one employee as compared to 421 employees today. It uses local human capacity and resources to develop business which now benefits over 3000 families. Urwibutso means something to remember. The started with a small shop located half way the journey to Ruhengeri or current Musanze and the bakery started working in 1985 at Nyirangarama.

At first SINA Gerard offered free beef stews and bread to travelers and drivers with the aim of allowing them to taste his products. Later in 1993 after 10 years in business experience, SINA Gerard legally registered his business under the name of URWIBUTSO delivered from people who taste his beignet or andazi.

At embyonary stage, war and 1994 genocide disturbed the commercial activities of enterprise during two years. In 1996, the enterprise diversified its activity portfolio and is oriented towards agro pastoral activities (passion fruits, banana and pineapple, red and yellow pepper, cattle farming, pig). In 1998, as producer of great quantity of fruits particularly passion fruit, commercialized at a weak price on national market, the producer has taken a decision of introducing his proper little unit of production of commercialized juice under the mark «AGASHYA».

In 1999, the carpentry workshop opened in urwibutso with the major aim of developing skills of the local people engaged in carpentry. Enterprise urwibutso provided trainings to over 200 workers in carpentry workshop. Today carpentry workshop competes with other companies once there is bidding for any market nationally and many occasions, they have been successful.

In 2002, the enterprise began the production of banana beer called «AKARUSHO» and the conditionnement of natural honey.

In 2003, the enterprise introduced on the market red and yellow pepper called «AKABANGA»

In 2007, the business of Urwibutso enterprise was certified by the International Standard Organization (ISO) hinged on achievement of adding value to local raw agricultural products such as fruits and vegetables.

The major focus however, was to produce and process organic fruit and vegetable product in Rwanda.

4.4. Status of urwibutso enterprise

Urwibutso enterprise is a private enterprise and individual one, totally of SINA Gerard. Its characteristics confer to the status of individual enterprise.

4.5. Geographical situation

Urwibutso enterprise is located at Nyirangarama in Bushoki sector, Rurindo district, Northern Province (in past Kigali ngali), near by 45km from Kigali town on roard Axe of Kigali-Musanze-Rubavu.

4.6. Principle mission of urwibutso enterprise

From its creation, the owner and founder of urwibutso enterprise has as principal mission of industrial valorization of local agricultural production. Due to valorization of local matter; which the owner of enterprise thinks to play a great important role in rural areas and bring important contribution to rural economy.

4.7. Objectives of enterprise

All enterprises such as small, medium or great have necessarily to fixe objectives to achieve. It is in regards that urwibutso enterprise has fixed major objectives that we can classify in two categories:

Economic objective pursuit by enterprise is justified by its considered true interest center. Then, enterprise wants to maximize the production in order to satisfy the potential demand and insurer rational management which contribute to the reduction of its charges, keep and ameliorate the quality of its products, maintain good image in front of actual consumers, develop the competence in front of its personal, maximize the profits, etc.

The chosen economic objective is in the same orientation with the Rwandan government which actually consists of population's food auto-financing in order to fight against food insecurity in the following ways:

To procure taxes to the state in considering commercial surplus and diversification of rentability judged activities for enterprise.

The social objective of urwibutso enterprise is to generate the revenues to the rural population of the region by introducing selected seeds, encouraging that population to form and join associations with the cooperation, solidarity and creativity sprit. The urwibutso enterprise plays a role in job creation for local population according to the capacity and competence of each of it which fight against rural urban movement.

4.8. Basic activities of enterprise

Items

Occupied area (ha)

Annual production (T) per ha

Total production per year

Fruit horticulture

1. Passion fruit farming

2. Strawberries farming

3. Pineapple farming

4. Banana farming

26.50

6.00

4.50

2.50

6.8T

50T

20T

180.20T

18.00T

225.00T

50.00T

Vegetable horticulture

1. Pepper culture

2. Other vegetable cultures

2.00

2.20

15T

30.00T

33.00T

Cereal crops

1. Wheat, Maize, Sorghum

15T

60.00T

Items	Quantity
1. Cow farming	15
2. Goat and sheep farming	62
3. Pig farming	268
4. Chicken farming	3567
5. Other birds	142
6. Rabbit farming	214
7. Fish farming	2 ponds
8. Bees keeping	12 modern beehives

As shown in graph 4.2, a large percentage (76.7%) of respondents is that cultivators who have 0-1ha of cultivable land which is small for using it in the business because this land is from heritage as people of that region have more children and is confirmed by 46.7% of respondents, but they try to reduce them since the implementation of Government policy which encourages Rwandan people not exceed 3 children. This shows that the big problem in rural areas is the scarcity of cultivable land and to solve it, people have to well use available land by tracing terraces to avoid erosion, using organic fertilizers in order to increase the production and those people need to diversify their activities thus raising their income. For Enterprise to resolve this problem; it purchases land in order to obtain raw materials that will allow it to hire more workers, thus there will be a low level of rural urban movement and will procure a revenue to that rural population.

As it is indicated by graph 4.3, the Enterprise Urwibutso encourages population around it to diversify plants they cultivate, this is shown by (23.3%) of respondents but more of them (36.7%) cultivate strawberries because of favorable land and season for it, but there are who cultivate it and other cultures in yellow color on the chart. This diversification allows enterprise to reduce risks of missing raw materials and increase the revenue to the population who brings them. This diversification allows Enterprise to hire more workers for the transformation of the diversified fruits. It in this regards, that Enterprise Urwibutso plays the role of job creation and rising up population revenues which is one of its objectives.

The above graph 4.4 discloses that 46.7% (in red color) of the respondents argued that they deal with Urwibutso Enterprise few years because the Enterprise becomes complex recently due to insecurity in that region and 1994 genocide. But there is a problem of misunderstanding of that people about Enterprise's objectives.

Table 4.3: Does enterprise urwibutso help in as regards better farming practices?


Answers	Number of Respondents	Percentages
yes	28	93.3
no	2	6.7
Total	30	100

The above table shows that 93.3% of respondents argued that Enterprise helps them in as regards better farming practices as it is the government program in vision 2020 in order to solve food insecurity problems, this shows the importance of encouraging SMEs to implement agricultural policies in rural areas as a great number of farmers live in that region.

Source : Survey, July 2011 The above graph 4.5 shows that the Enterprise helps rural population by mostly organizing workshops as it is represented by 63.3% (pink color) of respondents and there are other represented by yellow and sky blue colors represented by 13.4%, which include some are done (over one suggested answer for example: offering fertilizers and selected seeds) and all are done (organizes workshops, offers fertilizers and selected seeds). This gives added information on the importance of Urwibutso Enterprise that it plays in the area where it is located in and this helps Rulindo District to achieve expected performance contracts. Table 4.4 what amount of money do you get each season from your occupation with urwibutso enterprise (agriculture)?
Answers	Number of Respondents	Percentages
0-100000	11	36.7
100001-200000	11	36.7
200001-300000	3	10
300001-400000	4	13.3
400001-500000	1	3.3
Total	30	100

This table shows that more people who deal with Enterprise gain money in the interval of 0-200000frw, this amount of money is used in home needs as it is shown by 30%, 13.3% use it to invest in commercial trade, 13.3% keep it to build houses, 20% invest in agriculture and 6.7% pay school fees of children are shown in the table 4.5 below. After, the remained money is saved in bank as it is shown by 36.7%, 26.7% save elsewhere and 6.7% save at home but 30% do not save are shown in the table 4.6. Thus, there is a need of sensitizing people about interest of saving at bank.


Answers	Number of Respondents	Percentages
invest in commercial trade	4	13.3
used for home needs	9	30
kept to build a house	4	13.3
invest in agriculture	6	20
paid school fees of children	2	6. 7
Total	25	100


Answers	Number of Respondents	Percentages
at bank	11	36.7
At home	2	6.7
elsewhere	8	26.7
I do not save	9	30
Total	30	100


Answers	Number of Respondents	Percentages
yes	27	90
no	3	10
Total	30	100

The above table presents the overview of whether urwibutso enterprise offers saving services too. From the views of the 90% of respondents agreed that urwibutso enterprise offers this service by advising them about saving but they are few in saving then urwibutso and government have a great work of sensitizing that people, on the role saving.

The table below 4.8 shows that 70% of respondents argued that, it offers them services by advising about saving, 13.3% of them say that, it offers saving services by charging a certain amount and 6.7% argued that it offers them services by advising about saving and by charging a certain amount and is repayable after a certain period because they not understand importance of saving (all above are done).

Answers Number of Respondents Percentages by charging a certain amount 413.3 by advising about saving 2170 all above are done 26. 7Total27100Source: Survey, July 2011 Table 4.9: Does Urwibutso Enterprise help you in as far as regards health care?
Answers	Number of Respondents	Percentages
yes	27	90
no	3	10
Total	30	100

Depicted from the table above the respondents responded on whether enterprise helps in as far as regards health care, the 90% agreed that enterprise does it by offering them all suggested answers where 53.3% confirmed that urwibutso helps them by offering health insurance, advising them about family planning and fighting against HIV/AIDS. Offering health insurance is represented by 23.3%, advising them about family planning is represented by 3.3% and fighting against HIV/AIDS is represented by 10% and are shown in table below 4.10


Answers	Number of Respondents	Percentages
get health insurance	7	23.3
get advices about family planning	1	3.3
fight against HIV/AIDS	3	10
a, b and c are true	16	53.3
Total	27	100

Table 4.11: Is Urwibutso Enterprise helping the poor in the area of education?

Answers

Number of Respondents

Percentagesyes30100Source: Survey, July 2011

Depicted from the table above the respondents responded on whether Urwibutso Enterprise is helping the poor in the area of education, the 100% agreed that enterprise does it by offering them all above (School fees, School materials and Adult education) suggested answers in questionnaire; they are shown in table below 4.12. Mr. SINA Gerard realized that you can never achieve sustainable development without education to the future generation and hence established 3 levels of academic progression that include one nursery school, primary and secondary schools which is one of government policies in order to attain vision 2020 objectives.

Table 4.12: if yes how?

Answers

Number of Respondents

Percentagesall above30100Source: Survey , July 2011

This education service offered by Urwibutso Enterprise makes the population becoming intellectuals in their daily activities dominated by agriculture and people become good decision makers and understanding well programs of the government.

Note: all above represents school fees, school materials and adult education.

Graph 4.6

The graph 4.6 indicates that respondents views on changes in daily life since working with Urwibutso Enterprise; more of them agreed that most of suggested answers are done and is represented by 36.6%. Changes of nutrition (6.7%), bought your cow (6.7%), built your house (10.0%), paid school fees (13.3%). 16.7% argued that all suggested answers are done. That 36.6% and 16.7% of respondents highlights the role of Urwibutso Enterprise in the area where it is located in as the daily life of people around it has positive changes and is in the line of government policies.

Respondents were allowed to respond only one suggested answer to each question. Those who responded some of these; are those who responded for example: changes of nutrition and paid school fees or bought a cow. Those who responded all are done; are those who did all suggested answers. Respondents who answered others are those who responded non suggested answers.

CHAPTER V: SUMMARY, CONCLUSION AND RECOMMENDATIONS

The aim of this chapter is to present a summary of the study, general conclusion and recommendations for improvement and areas for further research. The general objective was to assess the role of small and medium enterprises on Rwandan rural development. Findings on the role of Urwibutso Enterprise as a small and medium enterprise on rural development have been based on some of objectives presented in the earlier chapter and on the conceptual framework about role of small and medium enterprises in Rwanda. Views from other authors have been cited to provide a strong background for studying the effectiveness of small and medium enterprises on rural development and the case study of Urwibutso Enterprise was appropriate.

There were 30 respondents in total. The study shows that the rural development in Rwanda is highly dependent on the intervention of small and medium enterprises positively.

Further, findings show that all sampled respondents were equally distributed questionnaires, regardless of their sex, qualification and experience at work. Thus the data got was of good quality and representative for the research. The characteristics of respondents show that a big number of Urwibutso Enterprise's stakeholders have dealt with it from 0-5years.

Further still, analysis shows that small and medium enterprises especially Urwibutso Enterprise have increased food production thus reducing the problem of food insecurity, rural-urban movement and increasing value addition to local production, job creation by diversifying its activities, local population literacy by introducing school containing three academic levels, adult education for those who had not attaint and left school; these elements show the strong change in rural area around it. All in all, findings indicate that small and medium enterprises accompanied by other approaches like infrastructure improvement can lead to rural development in Rwanda. Basing on the results of the study; the following conclusions are put forward:

Due to the fact that Rwandan economy depends on Agriculture with 90% of working population in Rwanda are mainly employed in this sector, including 23% in urban areas and that 89% of that population are classified as self employed (typically family members working in family farms) with this percentage of people engaged in primary sector, the Rwandan government should invest much in small and medium enterprises in rural areas for more development.

It has been proved that Urwibutso Enterprise satisfies the stakeholder's needs as they cultivate according to the needs of Urwibutso Enterprise which also wants to satisfy its customers needs.

Lastly but not least, one can conclude that small and medium enterprises lead to rural development in Rwanda, by using factors that greatly influence rural development like income of people, education level, investment level and so on.

In addition, it can be said that the objectives of the study were successfully achieved. Findings and conclusions were found in line with the interpretation of the data.

The research was carried out on the role of small and medium enterprises on Rwandan rural development with reference to Urwibutso Enterprise. Thus we bring certain recommendations:

Reinforce the capacity of MINAGRI in cultures diversification, to maintain agricultural actual politic of financing small and medium enterprises which are agro-based enterprises, to give favor on public and private investors in rural areas which depend highly on agriculture.

To negotiate with funds donors favorable conditions for financing projects, to inspire or follow example of innovative industries of developed countries for being competitive in the region, to maintain its politic for products of quantity and quality, to negotiate with public authorities, aid (subventions, tax exemptions etc), to maintain its facilities to shareholders, maintain and increase quality services where is possible.

To diversify their cultures for gaining more money and to continue well utilization of gained money for their development.

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The role of SMEs in rwanda from 1995 to 2010

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