THE IMPACT OF SMALL SCALE AND MEDIUM ENTREPRISES ON THE WELFARE OF PEOPLE: A CASE STUDY OF NAKULABYE SUBURB IN KAMPALA DISTRICT

LIST OF ABBREVIATIONS

SSEs                Small Sized Enterprises

SPSS               Statistical Package for Social Sciences

MSEs              Medium Sized Enterprises

SMEs              Small and Medium Enterprises

CMD               Center for Management Development

UBOS             Uganda Bureau of Statistics

GDP                Gross Domestic Product

OECD             Organization for Economic Co-operation and Development

ABSTRACT

The purpose of this study was to study the impact of small scale and medium enterprises on the welfare of people of Nakulabye suburb in Kampala District. The study’s objectives were to examine the impact of SMEs on employment generation, poverty reduction and income generation in Nakulabye. The study employed the use of cross section research design. The population of interest in the study included all SSEs and MSEs businesses in Nakulabye in Kampala.  The study adopted simple random sampling techniques to sample its respondents The sampling size of 50 respondents was. taken. Both open and close ended questionnaires were used for data collection. Reliability was ensured by using testing and re-testing methods and validity was tested through pilot study. The data was analysed using SPSS and Microsoft EXCEL softwares. The research utilized descriptive analysis, cross tabulation and the Ordinary Least Square Multiple Regressions. And the data was presented of frequency tables and pie charts. The study found out that is SMEs are the highest employers and their employment is a contribution to welfare creation whereby there is a moderate relationship between SMEs and employment. The study established that SMEs have effect on income generation which is the indicator of welfare whereby SMEs contribute highly to income generation depending on the responses in percentages. Lastly the study also established that all the factors in the dimensions have influenced poverty reduction in the area in regard to SMEs whereby factor “health conditions improved since I started up a business” has the highest percentage. The study recommends that the government should; estimate the categories of business and their contribution to employment, should impose low taxes on SMEs, set a fair minimum wage, set up training schemes for employees. In conclusion, the study established that the main socio economic indicators to peoples’ welfare in regard to SMEs in Nakulabye included; employment creation, income generation and poverty reduction.

CHAPTER ONE

INTRODUCTION

1.0 Introduction

This section presents background to the study, problem statement, purpose of the study, objectives of the study, research questions, scope and significance of the study.

1.1 Background to the Study

A small Scale business is one that is independently owned and operated and not dominant in its field of operation. Criteria such as sales volume and the number of employees in the firm are also used in assessing the size of businesses. In Uganda, the size of the business’ asset base is a major determinant. The pursuit of economic development has been a major goal of many developing nations of the world. Small scale and medium scale worldwide Have been recognised as engines of growth and development (Harper, 1984) and in many countries there has been some considerable effort to support them so as to create the necessary employment opportunities, income and productive capacity enterprises Developing countries are confronted with several problems such as high rate of poverty and unemployment which have continued to hinder the attainment of socio-economic development. For any nation to attain development, industrialization, gainful and meaningful employment are important indices used as a measurement of economic development. This is often depicted by income per capital, equitable distribution of income, the welfare and quality of life enjoyed by the citizen of that nation. (Wanyama, 1991).

The experience of welfare is a socio-economic phenomenon, actually requires no definition, since everyone knows or recognizes who has good welfare and one without. In general, those who are unable to fulfil their minimum nutritional needs due to inadequate income are considered to be with poor welfare. Thus poor welfare means the people who have nothing, lives in constant danger due to the lack of income and all basic resources that are essential for human survival. Mollie Orshansky explains poor welfare as, “To have poor welfare is to be deprived of those goods, services and pleasures which others around us take for granted”. It encompasses different dimensions of deprivation including inadequate income and denial of the basic necessities such as education, health services, clean water and sanitation (World Bank, 2007) that are required for a meaningful life. It manifests itself not only in economic deprivation but also in terms of an individual’s inability to access basic social amenities (World Bank, 1999), and denies its victims the most basic needs for survival, such as food, water, clothing and shelter (Gass and Adetunmbi, 2000).

The issue of poor welfare is a concern to Uganda and it has triggered renewed efforts by researchers in recent years to investigate into its causes that linked to human capital development. Reduction of extreme poverty has become one of the basic agendas of millennium development goals set by the World Bank and United Nations. However, the scenario of poverty is still persistent in developing countries including Uganda. Small scale and medium scale enterprises however have tried to address this problem through provision of employment and income and have increased the country’s GDP. The situation of Nakulabye’s SSEs and MSEs has not improved greatly compared to many other suburbs in Kampala and since they are the main source of income the welfare of the people in this area has not improved greatly. it is therefore one of the reasons as to why this study came up to analyse the impact of small scale and medium enterprises on the welfare of people of Nakulabye suburb in Kampala district

1.2 Statement of the Problem

SMEs contribute prominently to the welfare of people of Nakulabye through creating employment opportunities thus generating income for people. With this income parents are able to send their children to school, pay medical fees and so many other basic needs in life. However, despite the contributions of SMEs to people’s welfare, their operations are daunting and this has had a negative impact on their development and their potential to drive up people’s welfare. This as a result of their financial constraint that they face in operation and inability to meet collateral requirement for bank loans. Such constraints have daunted SMEs ability to improve welfare of people so people are unable to send their children to school, they resort to self-medication and their nutrition standard are affected. This however is not a choice people have made rather they are pushed to live such a life style because they earn little from their business (Abdul Malik, 2016).

Most researchers however have not done enough on studying welfare related issues regarding SMEs. The welfare of small scale and medium scale business owners in Nakulabye is still low as there is a general outcry on the access to health services, poor environmental quality, income distribution, poor labour conditions, and leisure time production factors as stated by Robbins (1934). The study therefore, sought to investigate the impact of small scale and medium enterprises on the welfare of people in Nakulabye suburb in Kampala district focusing on the objectives below.

1.3Objectives of the Study

This includes general objectives and specific objectives of the study.

1.3.1General Objective

To study the impact of small scale and medium enterprises on the welfare of people of Nakulabye suburb in Kampala District.

1.3.2 Specific Objectives

• To examine the effect of SMEs on employment generation in Nakulabye
• To investigate the effect of SMEs on household poverty reduction in Nakulabye
• To examine the effect of SMEs on income generation in Nakulabye

1.4Research Questions

1. Do SMEs contribute towards employment creation in Nakulabye?
2. Do SMEs contribute towards household poverty reduction in Nakulabye?
3. Do SMEs contribute to income generation in Nakulabye?

1.5Scope of the Study

This includes content scope, geographical scope and time scope

1.5.1 Time Scope

The research was conducted within a specified time-period, this included time for data collection, validation, analysis and report writing. The time scope of a research depended on a number of factors, such as resources, fund, manpower, accessibility to the information, subject, and so on.

1.5.2 Geographical Scope

This study covered Nakulabye a suburb in the metropolitan city of Uganda, Kampala targeting all owners of small and medium scale enterprises.

1.5.3 Content Scope

The study was about the impact of small scale and medium enterprises on the welfare of people of Nakulabye suburb in Kampala district. The study specifically focused on SMEs on poverty reduction, employment generation and income generation by SMEs in Nakulabye.

1.6 Significance of the Study

The contribution of SMEs to the social and economic advancement and development of any locality cannot be over emphasized. In Nakulabye, small scale and medium scale enterprises dominate and thus make significance contributions to the welfare, development and growth of the people in the area.  The significances of this study include the following:

The study will provide crucial insights to the policy makers and government into possible or feasible desirable patterns of growth to the SMEs. The study would also identify and analyse in its own operational consequence, the operational challenges that influence against growth of SSEs and MSE and how these could affect the welfare of the society.

The outcome of the research could uncover SMEs specific policies and programmes that can somewhat facilitate their growth and hence bring about better welfare. This could be beneficial to bodies and institutions whose work centre on growth of SMEs sector in particular and the informal sector generally.

The study will be useful in that it will widen or add on the already existing literature on the impact of SMEs on the welfare of the people, not only in Uganda but also in other parts of the world and the findings will be beneficial to other researchers carrying out related research

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This section presents the review of literature on the impact of SSEs and MSEs on the welfare of people. This will be studied in the context of theoretical views, conceptual frame work and conclusion of the literature.

2.1 Small and Medium Scale Enterprises

Small scale enterprises have been widely described by various researchers. According to Burns (1998), a small –scale enterprise is defined as that enterprise that employs 1 to 10 people and is managed by its owners or part owners in a personalized way and not through the medium of a formalized management structure.  The owner has overwhelming influence of the firm and his views determine activities of the organization. In support of this view, Balunywa 1998 says that small scale enterprises are usually sole   proprietorships, which are legally owned by one person, who controls the business and they have unlimited liability, where it is difficult to separate the owner from the business. However, Arteetey (2000) adds that small-scale enterprises are those enterprises that employ one to twenty (1-20) people largely operating locally, and depend on internal resources of capital.  They range from manufacturing, retail trade, and construction to commercial services. Empirical evidence indicates that small scale enterprises find it very difficult to diversify their risks, have divergent financial constraints, are very vulnerable to losing their customers and the risk of failure is very high (Murphy, 1990).

In Uganda small scale enterprises have been separated into broader categories of micro-enterprises and small enterprises.  Micro enterprises are defined as those employing less than five people, often family members, while small scale enterprises are those that employ a maximum of 50 people (Kloot.L 1999) however, notes that this distinction is not fixed as businesses often move from one level to another. But In a report by Ugadev/Accord (2000), small scale enterprises were defined as enterprises whose investment in plant and machinery does not exceed $10000 and whose number of permanent employees is less than 10 people, however, O’mara.C (1995), In study of medium sized manufacturing firms found that ownership and the size of the organization had an impact on the performance of the organization.  He found out that as a firm increased in size in terms of stock, sales, level of assets and more skilled employees, economies of scale in creating a positive impact on performance and employment of creation. Research depicts that like any other business, the financial decision is the one of the most crucial decisions for smallest scale enterprises.  Dixon J.R (1990), argues that the financial decision of any business is vital determinant of its performance and directly affects other decisions of the business like the investment decisions and working capital decisions as well as employment creation decisions. However, I agree with the findings of a report by Ugadev/Accord (2000) hence we can conclude that for the purpose of this research, small scale enterprises are those enterprises employing 1-10 people, as these are the ones that are trying to reduce fundamentally on unemployment problem.

2.2 Features of Small and Medium Scale Enterprises

Mohammed and Nzelibe (2014) opined that in a report publish in 1994 by the Center for Management Development (CMD) Lagos, noted that in order to create a clear picture of what SMEs is, certain characteristics associated with firms need to be identified and discussed. The report shows the following features of SMEs business: Ownership and Management to SMEs, the chief executive, generally participates actively in the decision-making process and day to day operation of the firm with little or no adequate specialist support, the chief executive can be known by all employees of the company or organization, the chief executive is the owner, founder and manager as well as the controller of the business. SMEs cut across the industrial sector although the majority is Agro- Allied and food processing. There are quite some wood products and product furniture, in non-metallic mineral, in plastic wares, in clothing, tailoring, and the rest. Considering the facts that they form a large pool of indigenous enterprise and technical know-how and a breeding ground for entrepreneurial management, the SMEs sector needs to be supported and prepared for the uprising in economic activities in Nigeria (Mohammed and Nzelibe, 2014).

2.3 SMEs and Employment Creation

Llewellyn (1985) observed that given the significant natural growth of labor force experienced in the majority of developing countries, the full employment commitment is translated into a growth commitment So that achieving high and reasonable steady growth in turn could become an informal or formal commitment.   They also noted that at Ministerial council meeting in 1961, the OECD countries recognized that rapid growth facilitated the harmonious development of the world economy, helped to promote a liberal world trading system, provided a necessary foundation for raising living standards and ensured a high level of employment.  But as Wang (1973) observed, many developing countries that had experienced high rates of economic growth had continued to encounter serious employment problems.

As for the case of Uganda although urban unemployment exists agricultural employers increasingly complain about chronic shortage of labour at peak periods.  The problem rather is job selectivity and the white –collar –job attitude among the job seekers as well as the slow growth in the number of jobs which yield what is regarded as adequate wage in relation to the number of people who are looking for such jobs. Today, Uganda continues to experience the problem of unemployment although accurate estimate of the unemployment is constrained by intricacies in determining the perceived high rate of hidden unemployment.  This problem is concentrated in the central region and in urban areas where 12% are unemployed which is so high compared to the 2% of rural population which is unemployed (UBOS, 2006).

Tayebwa (1996, 2004) defines unemployment as a situation where people are willing and available for work at the ruling wage rate but fail to find jobs. Tayebwa qualifies his definition for unemployment by looking at various form/ kinds of unemployment such as; under employment, cyclical unemployment, voluntary and involuntary unemployment, disguised unemployment as well as the natural rate of unemployment. Unemployment is defined as the situation where in an economy or in society the supply of labour is exceeding labour demand in a given period of time.  UBOS further defines the unemployed persons as these people with in the economically active population (14-64) years who are without work, available for work in the last 7 (seven) days but did not necessary take steps to search for work. For Uganda in particular, as per the 2002 population census, over 80% of the 17 million people were employed in pleasantly agriculture, about 3% in the industrial sector, about 1% is the civil service which 16% were totally un employed. Therefore, improving the working conditions, technology in the informal sector as well as in the agriculture sector could have substantial impact on productivity and returns derived from the sector which will boost employment and hence growth. In a bid to generate more employment, government has emphasized the following strategies so as to achieve its goals namely; agriculture modernization aimed at promoting more state led than private led investments, rural industrialization which will transform the rural areas and reduce rural urban migration, promotion of education and training through UPE and USE aimed at slowing down the illiteracy rate that limits people’s access to jobs, integration of the employment concerns into national planning processes promoting and supporting labour migration so as to enable Ugandans find some employment outside the country and also targeting the informal sector so as to boost small scale enterprise which can easily provide employment to the people of Uganda (UBOS, 2006),

The survey conducted in Bangladesh in 2003 reviled that there were approximately 6 million micro, small and medium enterprises (MSMEs), which included enterprises with up to 100 workers employing a total of 31 million people, equivalent to 40 per cent of the population of the country of age 15 years and above. About three quarters or more of the household income in both urban and rural areas is provided by the MSMEs (Abdul Awal Mintoo, 2006). Success story on contribution of SMEs to employment and general economy of Bangladesh was reported by Mehnaz Rabbani and Munshi Sulaiman (2004) they noted that SMEs in manufacturing and services combined have 19 percent share of GDP. A nationwide survey claims that Micro, Small and Medium Enterprises (MSMEs) value addition accounts for 20 to 25 percent of Bangladesh’s GDP ( Munshi Sulaiman, 2004).

2. 4 SMEs and Poverty Reduction

Findings from the four case studies from Centre for Human and Economic Studies Peking University Beijing, China (CHEDS), FUNDES Argentina, Aavishikaar Micro Venture Capital Fund, Mumbai India and Pacific Community, Francisco USA (PVC) conducted by GevevieveMelford and Michael Torrens (2004) in favour of Ford Foundation’s Affinity Group on Development Finance (AGDF)’s Small and Medium Enterprises Committee presented compelling evidence that strong and vibrant SMEs  can be a powerful and important conduit to economic gains for poor people. However, they also suggest that while healthy growth of the SME (as an enterprise) is a necessary precondition for social impact, poverty reduction cannot simply be assumed to result from all programs or policies that support SMEs

It should be evaluated that; which SMEs are served, how are they supported, and what poverty reducing actions are companies encouraged or required to take; Where along the SMEs’ value chain are poor individuals positioned to benefit (e.g. does the theory of change target employees, suppliers, or customers); What are the mechanisms that translate SME growth or stability into benefits for poor individuals; and Where is the program operating (e.g. are the SMEs located in broadly poor areas)?. From the study conducted by TulusTambunan (2008) supports the “modern” thesis that SMEs do not disappear in the course of income increases. Instead, they will grow along with LEs. SMEs in Indonesia grew annually not only in output but also in number of units. Creating a niche market is the first and most important one. Thus, they do not compete directly with LEs.

According to OECD (2004), SMEs contributed to over 55% of GDP and over 65% of total employment in high-income countries, account for over 60% of GDP and over 70% of total employment in low-income countries, while they contribute over 95% of total employment and about 70% of GDP in middle-income countries.  In low-income countries, especially in the least developed economies, the contribution of SMEs to employment and GDP is less than that of the informal sector, where the great majority of the poorest of the poor make a subsistence level of living. Therefore, an important policy priority in developing countries is to reform the policies that divide the informal and formal sectors, so as to enable the poor to participate in markets and to engage in higher value added business activities. In middle-income countries, formal SMEs contributed about 20% more to employment and GDP than the informal enterprises. Thus, in these countries, eliminating factors that discourage informal enterprises from entering the formal SME sector would also bring about gains in economic terms. This is evidenced by the fact that SMEs contribute over 3 times as much as the informal sector in both total employment (~65%) and GDP (~55%) in high-income countries, and that these countries are also taking initiative to bring as many informal enterprises as possible into the formal sector (OECD, 2004).

Literatures related to SMEs strategies for poverty reduction in African countries are widely scatted from North to South of the continent. Some of these studies, besides recognising various problems facing the sector, they support the policies related SMEs development. A study conducted by Joshua Abor and Peter Quartey (2010) titled Issues in SME Development in Ghana and South Africa observed that SMEs constitute a vital element of the development process, and their contributions in terms of production, employment and income in developing countries is widely recognized. Hence, interest in the role of SMEs in the development process continues to be high on the agenda of policy makers in the two countries.

Another study conducted in Alexandra, South Africa, it is observed that small businesses form a very significant part of Alexandra’s economic activity and are pivotal to its transformation process. Considering the socio-economic make-up of the community, small businesses can contribute greatly to poverty alleviation (Agupusi, 2007). Study in Nigeria conducted by Onuorah Patrick (2009) pointed that, there are enormous potentials and opportunities for SMEs in Nigeria to mature and play the crucial role of economy growth, poverty reduction, employment and wealth creation. This will entail having the government provide required supports and addressing identified problems. While the SMEs also need to change their attitudes relating to entrepreneurship development, government needs to involve the SMEs in policy formulation and execution for maximum effect.

In Botswana, Poverty reduction strategies, through strengthening Small and Medium Scale Enterprises (SMEs), was expected to results: enhancing their productivity; raising their employment generating capacities; and consequently placing higher incomes in the hands of the poor entrepreneurs provided that there are appropriate technologies to the enterprises and making sure that such technologies are adopted by the enterprises (M.S. Mukra, 2003).

2. 5 SMEs and Income Generation

There is a general believes that desire income generation in any country can be achieved through development of small and medium scale enterprises (Awosika 1997, Schmitz 1995).

Gunu (2004) and Aremu (2010) posited that Small Scale Enterprises provide income, savings, and employment generation. They are seen as veritable engines for the development of entrepreneurial capabilities and indigenous technology which will generate income in the country. Small and medium scale industries constitute the basis for industry and natural economy in many countries. It has been estimated that SME’s contribute over 22% of income   in developing countries (Daniel 1994).

The SMEs is often supposed to contribute to a more equal distribution of income or wealth. The SME managers and workers are in the lower half of the income distribution; promoting the growth of SMEs may lead to a more equitable distribution of income. SMEs contribute not just to income generation, but also income distribution which improved living standards, being close to substantial local capital formation and achieve a high degree of productivity and capability. The development of SMEs would therefore help spread income to more people. Since the majority of Nigeria SME owners is over 68 percent are living in rural areas, in narrowing the gap between urban and rural development and to monitor social inequities and rural migration (Pansiri &Temtime, 2008) promotion of the development of SMEs should continue to be a policy priority.

Many of the BIG funded projects set out to boost family incomes or smooth incomes over the year. Some sought to improve agricultural yields, others promoted additional business activity to supplement agricultural incomes or to raise urban incomes. Self-employment and work in micro enterprises is an important enabler of people’s labor force participation in developing countries. People from poor households often rely on the small scale sector for income which boosts household income, which in turn has a positive impact on child health indicators as well as school attendance Access to an income source also provides these people with greater autonomy over their lives. Informal sector employment which is home based allows women to engage in paid economic activity while managing household work (UNDESA 2010).

2.6 Conceptual Framework

According to Umar (1997) the concept of the small size firm on household welfare is a relative one and it depends mainly on both the geographical location and the nature of economy activity being performed.  This study however focuses on poverty reduction, income generation and employment as the key determining factors in improving welfare of households.

Independent variable                                                                       Dependent variable

CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction

This section gives an account of research design, data type and source, sample selection and size, data collection methods, study area and population, data processing and analysis, limitations and delamination.

3.1 Research Design

The researcher used cross section research design. The researcher used qualitative techniques to obtain descriptive and non-numeric data while the quantitative techniques was used to obtain quantifiable data

3.2. Data type and Source

The study used primary data. Data collected for a specific purpose were known as primary data. That data was obtained from owner’s small scale and medium scale enterprises in Nakulabye. The essence of obtaining such data was to ensure that the exact information wanted for the study was obtained

3.2 Population of the Study

Given the nation-wide spread of small scale and medium scale Businesses in Uganda, the population of interest in the study included all SSEs and MSEs businesses in Nakulabye in Kampala.

3.3 Sampling Techniques and Sample Size

The sampling frame for the study included all the SSEs and MSEs in Nakulabye. The sampling size of the research was 50. This was obtained using simple random sampling technique which is a probability sampling method which draws a portion of a population so that each member of the population has an equal chance of being selected. In other words, in a random sampling all possible samples of fixed size have the same probability of being selected. The sample size was selected using Cochran’s sample size formula. The formula for sample size was presented along with explanations as to how these decisions were made. The formula was as shown below;

 n_o

Where;

no is the sample size

Z is the level of significance to be 95% (Z=1.96 from statistical tables)

e is the desired level of precision to be 13.86%

p is the estimated proportion of SSEs and MSEs in Nakulabye which is 0.5 since it is unknown and q is (1-p) which also results into 0.5.

The sample size was calculated as follows;

n_o=

n_o=

     =

n_o=50

3.4 Data Collection Method and Procedures

The instrument employed for this study was a well-structured questionnaire. The questionnaires were administered by means of interview. The questionnaire was both open and close ended, the open ended questions gave the respondents freedom to decide the detail and the length of his/her answer. It enabled the respondents to give a more adequate presentation of his/her particular case and convey flexibility in his choice. The closed ended questions, however, was designed to keep the questionnaire to a reasonable length and this encourages response and validity in terms of the representativeness of the return.

3.5 Data Processing and Analysis

The Statistical Package for Social Sciences (SPSS) was used as an aid in the analysis. SPSS was preferred because of its ability to cover a wide range of the most common statistical and graphical data analysis. The collected data from the questionnaire was systematically organized in a manner to facilitate analysis. In order to establish the relationship between the independent and dependent variables, inferential statistics were used.

3.5.1 Welfare Model

The Ordinary Least Square Multiple Regressions was employed to analysis the various socioeconomic factors influencing people’s welfare in the study area. The model was as specified:

Y = Welfare

X1 = Household Income

X2 = Household head’s employment Dummy1 (1= SMEs, 0=otherwise)

X3 = Poverty level

e = Error term

3.6 Reliability and Validity

This section presents the reliability and validity of research instruments.

3.6.1 Reliability

Miller (2009), defines reliability as the extent to which a questionnaire, test, observation or any measurement procedure produces the same results on repeated trials. In short, it is the stability or consistency of scores over time or across raters. Reliability of the questionnaire was tested by pre-testing the questionnaire with a selected sample. The pre-testing assisted in enhancing the clarity of the questionnaire. A pilot study was conducted to find the instruments reliability and the procedures of administration. Reliability co-efficient was obtained by correlating the scores of odd numbered statement with the score of even numbered statement in the questionnaire. The researcher used test-retest to ascertain the coefficient of internal consistency or reliability. The instrument was administered twice to the same group of subjects at an interval of two weeks. The scores of the first and the second was correlated using Pearson product moment correlation coefficient formula

3.6.2 Validity

According to The Center for the Enhancement of Teaching, validity refers to how well a test measures what it is purported to measure. Validity is the accuracy and meaningfulness of inferences based on the research results. The researcher improved validity, by matching assessment measure to the goals and objectives and by making useful adjustments to the research instruments after the pilot study.

3.7 Ethical Considerations

Hammersley, and Traianou (2012), emphasizes that some of the most important ethical principles in educational research are; minimizing harm, harm include among others financial and reputational consequences for the people being studied; protecting privacy; this means to keep data confidential; and respecting autonomy; that is showing respect for people in the sense of allowing them to make decisions for themselves, notably about whether or not to participate. In this study the researcher treated all the gathered information with utmost confidentiality to safeguard the public reputation of organizations and people concerned. Informed consent was obtained by informing the respondents the purpose of the study and benefits of participation, so as to provide sufficient information so that a participant can make an informed decision about whether or not to continue participation.

3.8 Limitation and Delimitation of the Study

In spite of the methodological credentials associated with a case study the research findings of such a study cannot be universalized. Moreover, the study was conducted in only one of several suburbs in Kampala and the country at large and was, therefore limited in scope. Since a sample of the target population had only 50 samples that was chosen to participate in the survey, the procedure attests to an inability of the study to capture all members of the target population, which shortcoming constituted a limitation and delimitation of the study. Limited time and inadequate financial resources adversely affected the quality and outcome of the study.

CHAPTER FOUR

PRESENTATION, ANALYSIS, INTERPRETATION AND DISCUSSION OF THE FINDINGS

4.0 Introduction

This chapter presents the findings and discussions of the study. The data presented includes the profile of the business, information of the respondent, SMEs and employment creation, SMEs and income generation and SMEs and poverty reduction.

4.1 Background information (Bio-data) of respondents

To complete the study, the study needed to explore the demographic information of respondents that included; age, gender and length of service at the organization. The results and are presented below;

Figure 4.1: Gender of Respondents

Source: Primary Data

The figure above shows that (30)60% of the respondents were male, (20)40% were female. This showed that majority of the respondents were male. This is because most small enterprises in Nakulabye are owned by men who were willing to answer the questionnaires.

Table 4.1: Age of Respondents

Source: Primary Data

The table 4.1 above indicates that 8(16%) of the respondents were between 20-29years, 13(26%) were between 30-39years, while 18(36%) of the respondents were in the age bracket of 40-49years and 11(22%) were between 50years and above. This implies that majority of the respondents were between 40-49years old. This is the most active group with experience thus, the information provided was based on experience.

Table 4.2: Level of Education of Respondents

Source: Primary Data

Table 4.1 above shows that 25(50%) had attained diploma, 23(46%) of them had acquired degree, 1(02%) of the study respondents had attained postgraduate, another 1(02%) had attained Masters degree. This implies that majority of the respondents had attained diploma holders. This is because most small enterprises do not require higher levels to education to be run.

Years worked at the organization

The years worked at the organization refers to the lifetime one has spent working with the organization ass its employee. The following results were obtained and are presented below;

Table 4.3: Time spent on the job

Source: Primary Data

Study results indicated that 35(70%) of the respondents had spent 0-3years, 14(28%) had spent 4-9years and only 1(2%) of the respondents had spent over 10 years. This implies that majority of the respondents had spent 0-3years working in small enterprises. This is because majority of small enterprises keep recruiting employees and a few who had spent enough time at the enterprises are the owners.

Business Profile

This section focused on form of ownership, nature of the organization either small scale or medium scale, registration status of the business period the business has been in existence and number of employees in the business.

Form of Ownership

Ownership of the business was classified into three sections i.e. Sole proprietor, Partnership and Private Ltd

Table 4.4 Form of Ownership

Source: Primary Data

From the table above, majority of the respondents were sole proprietors accounting for 40% followed by Private Ltd owners accounting for 34% and the least were Partnership with the lowest percentage of response 26%. This was the case because most of the small scale businesses in this area are too small to have more than one owner since all the responsibilities can be handled by one individual who in most cases is the owner of the business.

4.1.2 Nature of the Organization

The study targeted both small and medium scale enterprises since they have all most the same characteristics in operation and management.

Figure 4.2 Nature of the Organization

Source: Primary Data (2017)

From the figure above, majority of the business were small scale accounting for 58%. these included among others kiosks, groceries, retail shops and restaurants and bars while the medium scale enterprises accounted for 42% and they included hard ware shops, beer and soft drinks depots in Nakulabye.

4.1.3 Business Registration

Figure 4.3 Business Registration

Source: Primary Data (2017)

From the figure above, majority of the business interviewed were not registered accounting for 66% (N=330) and only 17 business were registered accounting for 33%. This is because these small scale businesses have low profits and their existence is illegal hence they fear registration and more or so the procedures of registration are long and expensive for theses SMEs to afford.

Existence of the Business

Table 4.4 Business Existence

Source Primary Data (2017)

From the table above, majority of the SMEs in this area had been in existence for years between 1 to 5 accounting for 50% then followed by those with 11 and above years of existence accounting for 30% and then those between 6 to 10 years accounting for 20%. This implies that small enterprises always fail in the few years of start-up.

Number of full time Employees by the SMEs

Table 4.5 Number of full time Employees by the SMEs

Source Primary Data (2017)

From the table above, majority of the SMEs in Nakulabye employ between 2 to 5 employees with a percentage of 48% of response then followed by businesses that have only one employee and the rest employ more than 5 employees with the lowest percentage of 18%

4.2 The Impact of SMEs on the welfare of people

The study focused on employment creation, income generation and poverty reduction as indicators of welfare. Each of the indicators was studied independently and the relationship between variables was also studied coming up with a welfare regression model.

4.2.1 SMEs on Employment Creation 

Majority of the respondents in SMEs agree that SMEs are the highest employers and their employment is a contribution to welfare creation.  Hence a correction was run to determine the relationship between SMEs and employment creation and the results are as below

Table 4.6: The relationship between SMEs and Employment Creation

Source Primary Data (2017)

From the table above, since the p-value (0.004) <0.05, the null hypothesis is rejected hence there is a significant moderate positive relationship between SMEs and employment creation. This literally means that as more and more SMEs grow, there is increase in job creation and with employment, people’s welfare is increased. This is in line with Munshi (2004) who reported that over 40 % of all the working class in Bangladesh are employed by SME s and he also noted that over three quarters or more of the household income in both rural and urban areas is provided by SMEs. SMEs accounted for the highest percentage in GDP in Bangladesh in 2006 and had the highest value addition.

Figure 4.4   Factors that influence Employment creation of SMEs

Source Primary Data (2017)

From the table above, majority of the respondents agree that welfare can be achieved through SMEs job creation and employment accounting for 70%.  From the study it was observed that size of the business determines the number of employees and this was accepted by 68% of the respondents in the study. SMEs are seen as viable engines of welfare creation since majority of the respondents agreed to this statement with 62%. However, though the SMEs employee more than other sectors, they pay less wages for the employees to access basic needs. SMEs do not provide opportunities for the development of skills and technology acquisition since a small number of respondents agreed to this. This concurs with (Harper, 1984) who concurs that Small scale and medium scale worldwide Have been recognised as engines of growth and development  and in many countries there has been some considerable effort to support them so as to create the necessary employment opportunities, income and productive capacity enterprises. Developing countries are confronted with several problems such as high rate of poverty and unemployment which have continued to hinder the attainment of socio-economic development. For any nation to attain development, industrialization, gainful and meaningful employment are important indices used as a measurement of economic development. This is often depicted by income per capital, equitable distribution of income, the welfare and quality of life enjoyed by the citizen of that nation.

4.2.2 SMEs on income Generation

Table 4.7 SMEs as the biggest contributors of Income Generation

Source Primary Data (2017)

From the table above, majority of the respondents agree that SMEs are the biggest contributors of income generation accounting for 60% of response while the rest do not agree to the statement. This is in line with Gun (2004) who lamented that there is a general belief that desire income generation in any country can be achieved through development of small scale enterprises. They are seen as veritable engines for the development of entrepreneur capabilities and indigenous technology which will generate income in the country.

Figure 4.5 Monthly profits for SMEs in Nakulabye

Source Primary Data (2017)

From the figure above, majority of the SMEs have profits between UGX 100000 to UGX 200000 accounting for 28%, followed by those with profits below UGX 100000 accounting for 20%.

Figure 4.6 Factors that influence income generation in SMEs

Source Primary Data (2017

From the table above, majority of the respondents, 66% agree that labour turnover has a great influence on income generation in small scale enterprises. According to the respondents, there are so many factors that lead to labour turnover, job dissatisfaction, low salary, alternative employment and poor employer training. Therefore, because of labour turnover, income generation reduces and this leads to poor performance of SMEs According to George and Jones (2010), the relationship between job satisfaction and turnover is stronger in all organizations. The relationship between job dissatisfaction and employee turnover is reciprocal to each other and this relationship is high when unemployment rate is low in the society, and similarly low when unemployment rate is high.  Profits which are net income after are also seen to have an influence on income generation in SMEs. This is agreed to by 64% of the respondents. Labour cost, mark up and net interest expenses have a little impact on income generation in SMEs since less respondents i.e. less than 50% agree to them as being positive contributors to income generation.

4.2.3 Factor that have influenced poverty reduction

Figure 4.7 Factor that have influenced poverty reduction

Source Primary Data (2017

From the table above, majority of the respondents i.e. agree that Taxes imposed to SMEs are so high that the returns from them are not enough to cover necessities of in life. This is agreed to by 74% of the respondents. This therefor suggests that the tax policy should be revised to reduce that tax burden imposed on the SMEs in order to allow the operators have outstanding profits to address the issues of basic needs to combat poverty and hence improve on their welfare. With SMEs, people are able to access shelter, clothes and other basic needs of a house as well as better health conditions. This is evident in the table above as majority i.e. 66% of the respondents agree to it. For all the above to be achieved, SMEs performance must be improved and this would be through investing more income in the SMEs as 64% of the respondents agree to this.  However, workers in the SMEs lack sufficient skills or qualifications to transition into higher learning opportunities.  These findings concur with (Mukra, 2003) who argued that in Botswana, Poverty reduction strategies, through strengthening Small and Medium Scale Enterprises (SMEs), was expected to results: enhancing their productivity; raising their employment generating capacities; and consequently placing higher incomes in the hands of the poor entrepreneurs provided that there are appropriate technologies to the enterprises and making sure that such technologies are adopted by the enterprises.

4.2.4 The relationship between Welfare, Employment, Income Generation and Poverty Reduction by SMEs

Table 4.8 Regression model showing the relationship between Welfare, Employment, Income Generation and Poverty Reduction by SMEs

From the table above, the regression welfare model is as stated below;

Y = a + b₁X₁+ b₂X₂+ b₃X₃+ e

Welfare = 0.409 + 0.407Employmet + 0.043Income – 0.142Poverty + 

There is a significant relationship between welfare and employment and income while with poverty, the relationship is insignificant. This is shown by the P- Values (0.000, 0.001) < 0.005 and 0.85 > 0.005 respectively from the table above. This therefor means that a unit increase in employment and income increase welfare while an increase in poverty reduces welfare. The R-Square value 0.759 indicates that the model is a good fit. This is in line with Umar (1997) who argued that the concept of the small size firm on household welfare is a relative one and it depends mainly on both the geographical location and the nature of economy activity being performed.

CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.0. Introduction

This presents the study in a summary and makes conclusions based on the results. The recommendations from the findings and areas for further research are also presented

5.1. Summary of the Study

From the study, the respondents who were sole proprietors accounting for 40 were the majority. Majority of the business were small scale accounting for 58% compared to medium scale. Majority of the business interviewed were not registered accounting for 66% (N=330). The SMEs in this area that had been in existence for years between 1 to 5 accounting for 50% were the majority

The results of the study show that more and more SMEs grow, there is increase in job creation and with employment, people’s welfare is increased therefore there is a significant moderate positive relationship between SMEs and employment creation. In addition, the SMEs are the biggest contributors of income generation and with highest the use of highest percentage in response, the study concluded that with highest contribution of income generation by SMEs, the people’s welfare is increased. More so, according to the findings, the respondents strongly agreed all the factors that has influenced poverty reduction in the area in regard to SMEs and this depicts an increase in people’s welfare.

5.2. Conclusion

The study established that SMEs are the highest employers and their employment is a contribution to welfare creation whereby there is a moderate relationship between SMEs and employment. The study established that SMEs have effect on income generation which is the indicator of welfare whereby SMEs contribute highly to income generation depending on the responses in percentages. The study also established that all the factors in the dimensions have influenced poverty reduction in the area in regard to SMEs whereby factor “health conditions improved since I started up a business” has the highest percentage

5.3. Policy recommendation

The government (policy maker) should estimate the categories of business and their contribution to employment to guide efforts, policies to development strategies and support programs for Small and Medium sized Enterprises.

The government should impose low taxes accompanied with tax holidays on SMEs as an incentive and this can lead to an increase in SMEs creation and profits of existing SMEs.

Setting a fair minimum wage for the employees mainly to access all basic needs and also motivating the workers when they are at their jobs.

The government together with SMEs should start up training schemes for the employees so that they acquire more and enough required skills and technology.

Availing financial services for instance easy access to loans; which are responsive to SMEs.

5.3.1 Areas for further research

Further study should be on the individual indicator of welfare in regard to SMEs such as employment creation, income generation and poverty reduction since this research focused on all the variables at once

Research should be done on other areas since this was based on a case of Nakulabye suburb in Kampala district and therefore the findings might differ.

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APPENDIX

Appendix 1: Questionnaire

I am a Bachelors student at Kyambogo University carrying out research on the impact of small scale and medium enterprises on the welfare of people: a case study of Nakulabye suburb in Kampala district. Your business has been randomly selected for the purpose of participation in the study.  It is my humble request that you assist me by filling the questionnaires as accurately as possible.  The answers and opinions given will only be used for academic purposes.

I take this opportunity to thank you in advance for your co-operation.

Section A:

Profile of the Enterprise

1. Date(s) of interview: ………………..

2. Forms of ownership:

(i) Sole proprietor        [ ]

(ii) Partnership             [ ]

(iii) Private Ltd            [ ]

3. Nature of the organization

(i) Small                       [ ]

(ii) Medium                  [ ]

4. Is your business registered?

(i)Yes                                       [ ]

(ii)No                          [ ]

5. How long has your business been in existence?

(i)Less than 1 year          [ ]

(ii) 1 – 5 years                 [ ]

(iii) 6 – 10 years              [ ]

(iv) 11 – Above years     [ ]

6. How many full time employees does it have?

(i)Less than two              [ ]

(ii)Between 2 to 5 years [ ]

(iii)More than five Years [ ]

Information on the respondent

7. Indicate your gender

(i)Male                     [ ]

(ii)Female                 [ ]

8. Indicate your age group

(i) 18 – 30 years        [ ]

(ii) 31- 40years          [ ]

(iii) 41- Above years [ ]

9. Indicate your highest academic qualification?

(i)Primary education                [ ]

(ii)Secondary education           [ ]

(iii)College education                          [ ]

(iv)University education          [ ]

(v)Any other

10. For how long have you worked in this business?

(i) Less than 2 years                 [ ]

(ii) 2 to 4 years                         [ ]

(iii) 4 to 6 years                        [ ]

(v) 6 years and above               [ ]

Section B:

SMEs and employment creation

11. SMEs create employment opportunities to majority of the people in this area?

(i)Yes                                       [ ]

(ii)No                          [ ]

12. Job creation and employment are the contributions of small and medium scale enterprises in welfare creation

(i)Yes                                       [ ]

(ii)No                          [ ]

13. Listed below are the factors that influence employment creation of SMEs. With respect to your enterprise, please indicate the extent to which each of the factors has influenced growth of employment by ticking as appropriate against given alternatives.

Key:

Strongly Agree (SA), Agree (A), Neutral (N), Disagree (D), Strongly Disagree (SD)

SMEs and income generation

14. SMEs are the biggest contributors of income generation in your area

(i)Yes                                       [ ]

(ii)No                          [ ]

15. What is your monthly profit from your business?

16. With respect to your enterprise, please indicate the extent to which each of the factors has influenced income generation in your SME by ticking as appropriate against given alternatives.

Key:

Strongly Agree (SA), Agree (A), Neutral (N), Disagree (D), Strongly Disagree (SD)

17. What could be done to increase SMEs profitability in your area?

…………………………………………………………………………………………………..…………………………………………………………………………………………………..

SMEs and Poverty Reduction

18. SMEs have an Impact on poverty reduction in Nakulabye

(i)Yes                          [ ]

(ii) No                          [ ]

19. With respect to your enterprise, please indicate the extent to which each of the factors has influenced poverty reduction in your area in regard to SMEs by ticking as appropriate against given alternatives.

Key:

Strongly Agree (SA), Agree (A), Neutral (N), Disagree (D), Strongly Disagree (SD)

THANK YOU FOR YOUR TIME