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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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2.12. 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:

ü The vast majority of them are self made men.

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 Most investment in this group is speculative

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).

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