Sunday, September 19, 2010

Micro Enterprises in Uganda

The New Vision reports that Uganda is one of the easiest areas in Eastern Africa in which to start up a small or medium business. As of right now, 99% of the private businesses in Uganda are Small or Medium Enterprises (SMEs). The growth of the number of SMEs has done great things for the Ugandan economy including providing over 3 million jobs (many of these have been created because of the SMEs), contributing to 70% of the country's GDP and the taxes generated from these businesses have led to an economic development for the country overall. According to this report, ever $1 invested into a SME results in a $10 return-on-investment in the local communities.

Even though these SMEs are improving the country's economy, many of them are still failing because of a lack of funding. Most SMEs are only able to operate up to their 'maturity' level, in which revenues begin to level off. These businesses are then unable to further finance themselves so that they can make technological or other improvements to their business to help them expand because these would require additional funding. High interest rates, "lack of credit worthiness" and the lack of options banks give to SMEs for financing is to blame for the problem. According to the report, the banks are not allowing for long term investments in the companies.

This is an issue that Ugandan government is going to address if the country wants to continue growing economically.

By Brianna Howell

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