The impact of financial management on the growth of small and medium enterprises. A case study: uganda simba telecom

Abstract

There is consensus among policy makers, economists, and business experts that small and medium enterprises (SMEs) are drivers of economic growth. A healthy SME sector contributes prominently to the economy through creating more employment opportunities, generating higher production volumes, increasing exports and introducing innovation and entrepreneurship skills. The dynamic role of SMEs in developing countries insures them as engines through which the growth objectives of developing countries can be achieved. It is estimated that SMEs employ 22% of the adult population in developing countriesl. United Nations Industrial Development Organisation (UNIDO) estimates that SMEs represent over 90% of private business and contribute to more than 50% of employment and of gross domestic product (GDP) in most African countries (UNIDO, 1999). A recent study conducted by Abor and Quartey (20 1 0) estimates that 91% of formal business entities in Uganda are SMEs, and that these SMEs contribute between 52 to 57% to GDP and provide about 61% to employment. One of the significant characteristics of a flourishing and growing economy is a vibrant and blooming SME sector. SMEs play a pivotal role in the development of a nation. They contribute to socioeconomic development in various ways; namely, by creating employment for a rural and urban growing labour force and providing desirable sustainability and innovation in the economy as a whole. Fayad (2008) propounds that most of the current multi-million dollar enterprises have their origin in SMEs. Nevertheless, SMEs in developed and less developed countries (LDCs), as in other countries, are still facing a number of difficulties and obstacles that are impeding and complicating their operations and growth.