Small Business Economics

Improvements to the Small Business Sector

Written by Samuel Muriithi for Gaebler Ventures

To improve the small enterprise sector a favorable climate must be created via a number of interventions. The required solutions are not simple applications but the general idea is to minimize the items of policy that tend to favor industries and discriminate against small enterprises.

Two primary solutions can be implemented so as to improve the small enterprise sector. Ensure that the inputs commonly required by the small firms are always available and efficiently used, and add to the range of marketing opportunities already present.

These two solutions cover a broad spectrum of inherent fundamentals. A breakdown of the same reveals some of the components that would make up a program designed to improve the small enterprise sector as follows:

1. The availability of credit

There are several adjustments that can be made by financial institutions so that small enterprises can be enabled to make more use of the credit facilities they offer. Some of these include a raise of interest rate ceilings, the introduction of refinancing facilities, adding to the quantity of intermediaries that allocate foreign exchange for investment, etc.

2. Issues to do with imported raw materials

In many countries introducing reforms to the importing licensing system is seen as a necessary step to improve the small enterprise sector. Rogue middlemen have and continue to make the most of loopholes in these systems by reselling their supplies at exorbitant prices to small enterprises which desperately require the imported inputs but lacking influence over the concerned authorities. Such small enterprises can do better with freer access to import markets.

3. About labor

To improve the small enterprise sector issues of labor must be addressed with an aim to increasing the skills and mobility of the labor force. Small enterprises can perform much better if their on-the-job-training efforts are supplemented by government vocational training programs, as well as advisory inputs from both their suppliers and customers. The government can also help by minimizing conventionally inflexible labor market issues especially to do with wages and salaries.

4. Utilities and buildings

The availing of industrial estates is part of a gradual and feasible plan to improve the small enterprise sector. More productivity can be attained if a wider replication of these programs is implemented, in accordance to the standards and specifications just right for the small enterprises that need these facilities.

5. The availability of technology and equipment

It is possible to motivate domestic technology and engineering firms by making alterations to policies that subsidize imported machinery. Making such changes will by extension do much to improve the small enterprise sector locally.

6. About markets

If the subsidies given to large scale industries were to be eliminated this would do much to level the competing field and thus allow for more small enterprises to present their products and services to the market. The same can also be done for the export market, say if import duty rebates are equally availed for small enterprises and large industries. Governments can also improve the small enterprise sector by giving business opportunities to the same, including aspects like the sub-contraction of repair services etc.

Samuel Muriithi is a business owner in Nairobi, Kenya. He has extensive international business experience in the United States and India.

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