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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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2.13. 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 clear definition of small and medium size enterprise

Lack of supply of raw materials as the most of these are imported from abroad

Lack of skilled workers

Small and medium sized or scale enterprises have problems of markets

Lack of equipments

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

Weak linkages to both forward and backward with large enterprises.

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:

§ Lack of managerial expertise,

§ Inability to afford clerical and professional help,

§ Lack of financial support,

§ High level of competition-limited or product range,

§ Absence of economies,

§ Government bureaucracy and complexity of legislation.

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. (

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)

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