RUNNING HEAD: CHALLENGES OF SMES GROWTH 1
CHALLENGES of Small and MEDIUM ENTERPRISES Growth in ZAMBIA
Jack Susiku
University of Zambia
CHALLENGES OF SMES GROWTH 2
Statement of the Problem
Small and Medium Enterprises in Zambia face many challenges. The most researched
being lack financial empowerment but little has been done to look at the other factor like
lack of managerial skills, lack of information technology, effect of globalization, insufficient
financial reporting and internal controls. Most SME business in Zambia have to failed grow
not only because lack of finances but also because of lack of capacity building, according to
the research conducted by ILO on enhancing Zambian SME’s Competitiveness and access to
finance, 105 growth-orientated SMEs were trained by business development service
providers. SMEs received classroom training and individual follow-up counseling support to
better manage their businesses. All SMEs trained were able to develop growth strategies and
of the SMEs who received support: 50 per cent were able to access formal finance, while a
further 10 per cent saw how they could finance initiatives through retained earnings; 60 per
cent had hired more staff; 60 per cent had invested in new technology; from this we can see
that the missing factor in SME growth is Capacity building.
Significance
It is an internationally recognised fact that Small and Medium Enterprises (SMEs) play
an important role in the economic development of many countries. The aggregate contribution
of SMEs to national development cannot be over looked. According to UNDP (2004), MSME
have the highest capital: employment ratio and are a source of income for a broader layer of
the population. The development of SMEs is viewed as one sustainable way of reducing the
levels of poverty and improving the quality of life of households through wealth and job
creation. The contribution of SMEs to employment, growth, and sustainable development is a
widely acknowledged fact.
CHALLENGES OF SMES GROWTH 3
The finding of this study will help Small and Medium Enterprises, the government, and other
cooperating partners to focus on other factors like capacity building and technological issues
to foster the growth of SME’s in Zambia.
Research Objectives
To analyse the challenges and growth constraints faced by Small and Medium Enterprises in
Zambia.
1. Review the extent to which lack financial and internal controls systems affect the
SME growth
2. Analyse the impact of poor or lack of managerial skills on SME
Research Questions
How does lack of management skills and poor internal controls systems effect on growth of
SME business in Zambia
Scope and Limitations
The limitations to this study include the small sample size of 30 participants in relation
to the large number of SME’s business in Zambia. The small sample may reduce the credibility
and validity of the results. The reliability of the data collection instrument is questionable
because it is not standardized since it is a newly developed instrument by the researcher. The
sample size will be small to enable the study to be carried out within limited resources and
time.
CHALLENGES OF SMES GROWTH 4
Literature Review
Definition of SME
There is no acceptable definition of SME worldwide as economies of countries differ.
In Zambia Small and Medium Enterprises are defined as follows:
Small Enterprises
A small enterprise shall be any business enterprise registered with the Registrar of
Companies;
i) Whose total investment, excluding land and building – In the case of manufacturing and
processing enterprises, shall be between Eighty Thousand and Two Hundred thousand Kwacha
(K80,000– K200,000) in plant and machinery;