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Contribution of small and medium enterprise to the economic development of Rwanda

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par Valens NYANDWI
Universite Nationale du Rwanda - Licence 2013

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2.1. Introduction

This chapter broadly aims to review the existing literature to arrive at conceptual understandings. It expands on the definitions of the key terms according to different authors and these include: economic development, and small and medium enterprises and their assessment.

It is logical that most of developing countries should be seeking to industrialize on the basis of their agricultural production. The output of crops and livestock is both their main source of wealth and their most obvious raw materials for industry.

In many important cases, products which were formerly exported in their primary state are now being processed in varying degrees before shipment, so that the national economy gains the value added by processing.

In other instances, locally processed products are being sold on the domestic market as substitutes for imported goods. In both cases, the implication for a country's balance of trade can be highly important. At the same time, the new processing industries help to make more effective use of labor, and thus reduce unemployment.

Major processing projects have significant linkage effects by promoting new business for service companies, transporters, traders and various others who are affected by its operations. Finally, there may be welfare benefits, such as the improvement of public nutrition that should follow the successful establishment of a milk plant. Although the importance of stimulating agricultural processing industries on these grounds is well appreciated, there is not always a full understanding of the marketing and economic factors which vitally affect the success or failure of a project. It is a particular feature of most agricultural processing that the value added by the process is low in relation to the value of the primary commodity and the other modality used (Clotilde MUKAMUGANGA, 2011 page 14).

This chapter presents the definition of key concepts, the general overview of SMEs, the preferred policies and objectives, need for development of SMEs, the tenth elements required for SMEs from ISO, advantages of SMEs, limitations of small business and the main causes of failure. The overall purpose of this chapter is to identify and assess the gaps that this study will fill and contribute approaches to the better performance of a sustainable economic development of Rwanda.

2.2. Literature search

A comprehensive literature search of published academic, peer reviewed professional literature using a variety of databases including journal articles, conference papers, books, dissertations and technical papers, both published and unpublished, was conducted. The main sources included libraries both public and university (University of Rwanda-Huye Campus) libraries and the internet sources of information.

Literature reviewed included:

i. Published journal articles, working papers and other theoretical publications on SMEs access to credit;

ii. Papers/articles found on the websites for economic development, development policy of SMEs in Rwanda, banks and other funders; and

iii. Papers/articles found on the websites for credit regulators and SME advocacy organizations.

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