Contribution of small and medium enterprise to the economic development of Rwanda
par Valens NYANDWI
Universite Nationale du Rwanda - Licence 2013
Small and medium enterprise strength comes from the ability of smaller firms to react quickly and flexibly to adapt to market realities and to take advantage of opportunities that would not be an advantage to larger firms. Small enterprises grow to medium enterprises as they are increasingly able to develop the resources to expand out of their local economic system.
Thousands of small companies operating at the micro level, taking advantage of local resources and opportunities, form the base of a healthy economy by providing local services, jobs and supplying or processing for larger firms and markets. Although substantial supporting initiatives had been undertaken by the Government, they have failed to create the enabling environment necessary to develop the sector.
Key challenges include:
1. Limited resources and human capacity for previous initiatives meant they were unable to fulfill the mandate of SME development or to extend their services country-wide
2. Limited coordination and partnership in these initiatives meant that many ongoing activities, in the public and private sector, were not sufficiently connected and harmonized to maximize their potential for SME development.
3. A limited policy environment lacking focus and a prioritization of cluster and sector specific policies meant that the general policy environment was not targeted at SMEs
4. The structure of previous finance schemes, by placing them in large intermediary institutions with complicated application procedures and limited assessment capacity, meant the SMEs found them difficult to access.
5. The (low) quality and «one size fits all» approach for business development services meant that the private sector did not take advantage of them, though the current PSF model is working to address this constraint.
6. The general regulatory environment in Rwanda is structured toward large companies that have the time and resources to comply, making the existing structures a challenge to grow for SMEs.
7. Inadequate Infrastructure for rural SME development that inhibits implementation of innovative ideas and provision of services.
Evident in best practice policies and «lessons learned» in Africa, Australasia and Europe, a number of clear factors are required in order to enable success. These factors include:
Entrepreneurial culture is underdeveloped among Rwandans given the short history of business in the country and the absence of successful role models. Many Rwandans will not become entrepreneurs, but will contribute to the growth of business as skilled employees.
Skills development, as well as the promotion of entrepreneurship for those in programs that display entrepreneurial motivation, are already being addressed by TVET and PSF initiatives. However, as identified by the PSF capacity needs assessment, promoting a culture where those with the desire and energy to become entrepreneurs are nurtured and encouraged is integral to growth of the SME sector.
Whilst entrepreneurship has been introduced into the curriculum of numerous institutions, there is often not yet a practical element. By offering practical opportunities for young people interested in business to engage in entrepreneurship, they are more likely to engage in entrepreneurial activities.
A number of key policy strategies are required to achieve the aim of this policy objective.
They will be executed in collaboration with Ministry of Education and the Workforce Development Authority.
» Introduce a component of entrepreneurship training into school and TVET curriculums, both focusing on risk and innovation and also business skills such as financial management and marketing
» Introduce a youth entrepreneurship course for existing associations of out-of-school or vulnerable youth interested in starting their own business; the course would include training in business skills such as financial management, marketing, risk and innovation; this would be funded by the capacity building component of the SME fund.
» Implement a mentoring program for young people starting businesses via the BDS centers; leaders of local successful businesses should be recruited and trained in how to offer advice to young people
» Introduce talks on business related topics and visits by leaders in government and private sector targeting children from their early age, i.e. pre-primary and primary school
A number of key policy strategies are required to achieve this component.
» In each district with a BDS, develop a strategy on how to network with SMEs to determine their changing market information needs and how to best create tools for them to access this information.
» Comprehensive databases of market information to be made available at BDS centers
» Facilitate participation of SMEs in International Fairs and in Trade Missions.
» Develop and implement a program on preferential access by SMEs to Government procurement contracts.