CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
This chapter reviews relevant literature from various scholars regarding the impact of small-scale enterprises on the growth of towns in Uganda, with specific reference to Banda Parish in Nakawa Division, Kampala District.
2.1 Benefits of Small-Scale Enterprises on Development
The significant economic role of small and medium enterprises (SMEs) has attracted attention from international organizations and researchers seeking to promote economic growth through supportive public policies. Since the 1970s, scholars have attempted to explain SME growth. For instance, Farouk and Saleh (2010) noted that despite extensive research, no single theory fully explains why some SMEs succeed while others fail, highlighting the complexity of SME growth.
Biggeri et al. (1999) examined SME development in China, emphasizing the importance of human capital and enterprise clustering in driving regional economic growth. Their findings demonstrated that township and village enterprises significantly contributed to both rural and national economic development.
Halim et al. (2011) explored the internationalization of Malaysian SMEs and found that traditional models such as the Uppsala model and network theory remain relevant. Exporting was identified as the most common entry strategy, with profit maximization as the primary motivation.
Chittithaworn et al. (2011) identified key factors influencing SME success, including managerial skills, product quality, financial resources, market access, and external environmental conditions. Similarly, Alberto et al. (2013) emphasized the role of entrepreneurs’ understanding of marketing in shaping business performance.
Jones and Bartlett (2010) argued that business growth strategies focus on increasing sales within existing markets or developing new products. However, Nguyen et al. (2010) observed that some governments prioritize increasing the number of SMEs rather than improving their performance and competitiveness.
2.2 Challenges Faced by Small and Medium Enterprises
Poor Infrastructure
Infrastructure development remains a critical responsibility of the state (Kikonyogo, 2000). Efficient transport systems, reliable electricity, and strong communication networks reduce business costs and enhance competitiveness. However, many regions in Uganda still face inadequate infrastructure, limiting industrial growth and SME performance (APSF, 2010).
Bureaucratic Business Registration Systems
An effective legal framework is essential for business growth (Kauffmann, 2005). Complex regulations, high transaction costs, and inefficient administrative systems discourage small enterprises. In contrast, countries with well-developed legal systems provide a more supportive environment for SME growth.
Unfavorable Government Policies
Government policies play a crucial role in SME performance. Centralized systems and excessive bureaucracy often hinder local initiatives and limit access to financial and technical support (Richards, 2010; David, 2011).
Poor Financial Management
Effective financial management is vital for business growth. Many SMEs struggle due to poor record-keeping, lack of budgeting, and weak financial control systems. Proper planning and monitoring are essential to ensure sustainability and profitability (Ziegler, 1990; Stonner, 2002).
Lack of Structured Business Strategies
Strategic planning helps businesses define their vision, goals, and direction. Without clear strategies, SMEs face challenges in decision-making, growth planning, and adapting to changes in the business environment (Byaruhanga, 2005).
2.3 Relationship Between SMEs and Town Growth
Infrastructure and service networks are key drivers of economic development. They support trade, attract investment, and promote industrial growth (Ombura, 1997). SMEs play a vital role in job creation and income generation, contributing significantly to local economies.
Studies show that SME performance is influenced by both internal and external factors, including management capabilities, market conditions, and infrastructure (Yonggui et al., 2002). In Kenya, for example, SMEs accounted for over 50% of new jobs, although many fail within their early stages (Economic Survey, 2006).
Negative perceptions of SMEs also affect their growth, as clients often prefer larger firms due to perceived reliability (Amyx, 2005). Additionally, innovations such as mobile banking have improved access to financial services, enabling SMEs to operate more efficiently (Amin et al., 2008).
Business growth is influenced by factors such as ability, motivation, and opportunity (Chandler & Hanks, 2004). Performance can be measured through indicators such as employment levels, sales growth, market expansion, and entrepreneurial ambition (Rosa et al., 2006).
CHAPTER THREE
METHODOLOGY
3.0 Introduction
This chapter outlines the research methodology, including the research design, study area, population, sampling techniques, data collection methods, data quality control, and limitations of the study.
3.1 Research Design
The study will adopt a cross-sectional design using both qualitative and quantitative approaches. This design allows for comprehensive data collection within a short time frame and enables cross-verification of findings.
3.2 Study Population and Sample Size
The study will focus on business people in Banda Parish.
3.3 Sampling Techniques
Sampling involves selecting a representative portion of the population (Amin, 2005). This study will use purposive sampling to identify knowledgeable respondents, followed by simple random sampling to ensure fairness in selection.
3.3.2 Sample Size
Using Krejcie and Morgan’s (1970) table, a sample of 68 respondents will be selected from a population of 80.
3.5 Sources of Data
Data will be collected from both primary and secondary sources.
- Primary data: Collected through questionnaires administered to respondents.
- Secondary data: Obtained from books, journals, and published research.
3.6 Data Collection Instruments
The study will use questionnaires and interview guides. Questionnaires will collect quantitative data, while interviews will provide qualitative insights.
3.7 Data Collection Procedures
After obtaining permission, the researcher will conduct field visits, distribute questionnaires, and carry out interviews.
3.8 Data Quality Control
The research instruments will be reviewed and pre-tested to ensure validity and reliability.
3.9 Data Analysis
Collected data will be coded, edited, and analyzed using tables and graphs.
3.10 Limitations of the Study
Potential challenges include time constraints, language barriers, and respondents’ expectations for compensation. These will be addressed through proper planning and clear communication.
