Assessment Of Factors Influencing The Failures Of Small And Medium Sized Businesses In Uganda: A Case Study Of Kisoro District
No Thumbnail Available
Date
2024-07-25
Journal Title
Journal ISSN
Volume Title
Publisher
King Ceasor University, Institutional Repository
Abstract
Small and medium-sized businesses in Uganda face tremendous challenges to success. Their growth is comparably lower than in other developing countries in Africa, and even large firms in Uganda barely represent dynamism in the economy or market competition between them (Hernandez, Lothrop, Loyola, Blackman, Stephan, Molini, Kochanova & Sullivan, 2013). Such challenges consequently result in a high number of businesses failing, with a very small contribution to the economy. This fact is supported by the Ugandan Ministry of Economy statistics of tax revenue, which reveal that the small and Medium-sized Enterprises (SMEs) only contributed 5% to the total Gross Domestic Profit (GDP) in 2011. Over the years, the Ugandan government has been committed to its responsibility to implement programs to encourage, support, and promote SMEs. Nevertheless, the government continued to implement other measures in support of entrepreneurial development. One noteworthy measure is the inclusion of entrepreneurship as part of an ongoing secondary school curriculum reform. Although this is a great effort, Uganda ranks between the first and fifth country with the highest rate of business failure in the Global Entrepreneurship Monitor (GEM) reports, since its first inclusion in GEM studies in 2008, until the last research conducted in 2014. Data indicate that in 2008 Uganda had the highest rate of business failure (23.4%) amongst countries participating in GEM for that year (Bosma et al., 2009), and in 2013, out of 70 countries Uganda was the second economy with the highest rate of business failure (24.1%), compared with the South African rate of 4.9%, Ghana 8.3% and Nigeria 7.9%, scoring considerably .however, some factors should concern all Ugandans because of the detrimental effects of business failures to the economy and society in general. Despite the above problems, the Ugandan economy in general witnessed very high growth rates (Herrington, 2014). Thus far, the country continues to face massive developmental challenges which include a diversifying economy, unemployment, and inequality in the living conditions of the population to a large extent The foregoing sub-optimal performance can be partly attributed to Uganda's poor management of the implemented policies and the lack of in-depth understanding of the overall factors about the failure of businesses in the country. Da Rocha (2011) and Herrington (2014) attribute the high rate of business failure to Uganda's failure to sustain the entrepreneurial environment for proper entrepreneurship development. Venter et al. (2008) argue that a favorable entrepreneurial environment to increase and encourage viable entrepreneurship activities in an economy should include: proper physical and commercial infrastructure, favorable socio-economic conditions, simplified business rules and regulations, an education and training program, institutional support, and political stability. Small business failure has resulted in unemployment, poverty, non-diversification and poor development of the economy, low contribution to GDP, wastage of resources, and financial detriment to entrepreneurs and lenders.