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The role of SMEs in rwanda from 1995 to 2010

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par Clotilde MUKAMUGANGA
National University of Rwanda - A0 2011

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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.

Small business, does however, suffer from a number of significant limitations.

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/

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/

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/

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/

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/

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