The role of SMEs in rwanda from 1995 to 2010
par Clotilde MUKAMUGANGA
National University of Rwanda - A0 2011
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 ).
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)
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).