the growth of small scale businesses

Topics: Business, Poverty, Small business Pages: 11 (3839 words) Published: February 24, 2014
The dynamic role of small scale business in developing countries has long been recognized (Kayanula and Quartey, 2000). These small scale businesses can serve as engines through which the economic growth and employment objectives of developing countries can be achieved. However, for many years these rural enterprises have failed to grow beyond their micro enterprise nature and sometimes at best their small or medium size (Kayanula and Quartey, 2000). It is believed that private small scale businesses have significant and positive contribution to the growth and development of business sectors in the Ghanaian economy. Small scale businesses sometimes called small enterprises, a small scale enterprise is a business that employs a small number of workers and does not have a high volume of sales. Such enterprises are generally privately owned and operated sole proprietorships, corporations or partnerships. The legal definition of a small-scale enterprise varies by industry and country. This policy paper is based on a study carried out to determine the growth of small scale enterprises, which plays a critical role in entrepreneurship development. While large enterprises employ many individuals, small-scale enterprises employ few or no employee, in Ghana small scale businesses account for nearly half of the gross domestic product. Small-scale enterprises help stimulate local economies by providing local individuals with jobs, as well as products and services to community members. Moreover, such enterprises help diversify and grow their respective industries, as many women and minorities make significant contributions to the small business world. When there is a rise in small scale enterprises, countries may see reforms in basic rights. Small scale enterprises exist in almost every industry. They can range from mom and pop convenience stores to small manufacturing plants. Additional types of small-scale enterprises can include privately owned restaurants, law firms, inns, bakeries, architectural and engineering firms, dry cleaners and construction contractors. Despite the large contribution of small scale businesses in countries development and economic growth, their growth and development in developing countries were mainly inhibited by access of finance, poor managerial skills, and lack of training opportunities and high cost of inputs ‘Cook and Nixson, 2 (2000)’. Further studies conducted suggest that finance is the most important constraint for the small scale businesses (Green, kimuyu, Manus and Murinde, 2002). The small scale businesses have very limited access to financial services from formal financial institutions to meet their working and investment needs

However, the generation of self-employment in the small enterprises requires investment in working capital, at low levels of income, the accumulation of such capital may be difficult. Under such circumstances, loans can help the poor to accumulate capital and investment in employment generating activities “Hossain (1988)”. According to Grade (1984), loans enable the individual’s member or enterprises to enjoy the benefit of economies of scale and new technology. Availability of credit to small business and low income households could greatly enhance their economic strength and eventually break the vicious circle of low income, low saving, low investment and low income.

Most Small scale businesses provide subsistence living and they keep in the vicious circle of not being able to grow because the small profits they make are easily wiped out by family needs like school fees, sickness, introduction and wedding ceremonies. There is, therefore, the need to transform micro enterprises activities into small and medium enterprises so that they can grow and provide jobs for others. Technology has an important role to play in transforming small scale business activities. In order to acquire technology, the small scale businesses usually need to get credit....
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