Failure of Smes in Tanzania
MZUMBE UNIVESITY
DAR ES SALAAM BUSINESS SCHOOL
MBA CORPORATE MANAGEMENT
TERM PAPER – JUNE 2012
COURSE TITLE: THEORIES OF ENTREPRENEURSHIP AND SMALL BUSINESS DEVELOPMENT
CODE: BUS 5042
QUESTION: There are arguments that despite the importance of SMEs in all economies, particularly in the less developing countries, the SME sector is met with reluctance both by the government as well as individuals in the sector.
When SMEs fail, which is a very common phenomenon governments point fingers to SME entrepreneurs and vise versa.
(I) With practical examples, make a critical discussion on the reasons for the failure of SMEs in Tanzania
(II) Come up with possible solutions so that a vibrant SME sector in the economy is achieved
AUTHER: Sophia Mjasiri Emesu
SUBMISSION DATE: 15 June 2012
INTRODUCTION
Small and Medium-sized Enterprises (SMEs) play a major role in economic development through employment creation and income generation. SMEs are sometimes referred to as Micro, Small and Medium Enterprises (MSMEs). They cover nonfarm activities such as manufacturing, mining, commerce and services. There are different yardsticks of categorizing SMEs. Commonly used yardsticks are total number of employees, total investment and sales turnover.
In the context of Tanzania, MSMEs are those enterprises engaging up to 4 people, in most cases family members, with capital amounting up to Tshs 5 million. Majority of MSMEs fall under the informal sector. SMEs are formalized undertakings engaging between 5 and 49employees, with capital investment from Tshs 5 million to Tshs 200 million. Medium enterprises employ between 50 and 99 people or use capital from Tshs 200 million to Tshs800 million. (URT, 2002)
According to World Bank (2006); since Tanzania is characterized by low capital formation, SMEs are the best option to address this problem. SMEs tend to be more effective in utilization of local resources using simple and affordable technology. SMEs play fundamental role in utilizing
DAR ES SALAAM BUSINESS SCHOOL
MBA CORPORATE MANAGEMENT
TERM PAPER – JUNE 2012
COURSE TITLE: THEORIES OF ENTREPRENEURSHIP AND SMALL BUSINESS DEVELOPMENT
CODE: BUS 5042
QUESTION: There are arguments that despite the importance of SMEs in all economies, particularly in the less developing countries, the SME sector is met with reluctance both by the government as well as individuals in the sector.
When SMEs fail, which is a very common phenomenon governments point fingers to SME entrepreneurs and vise versa.
(I) With practical examples, make a critical discussion on the reasons for the failure of SMEs in Tanzania
(II) Come up with possible solutions so that a vibrant SME sector in the economy is achieved
AUTHER: Sophia Mjasiri Emesu
SUBMISSION DATE: 15 June 2012
INTRODUCTION
Small and Medium-sized Enterprises (SMEs) play a major role in economic development through employment creation and income generation. SMEs are sometimes referred to as Micro, Small and Medium Enterprises (MSMEs). They cover nonfarm activities such as manufacturing, mining, commerce and services. There are different yardsticks of categorizing SMEs. Commonly used yardsticks are total number of employees, total investment and sales turnover.
In the context of Tanzania, MSMEs are those enterprises engaging up to 4 people, in most cases family members, with capital amounting up to Tshs 5 million. Majority of MSMEs fall under the informal sector. SMEs are formalized undertakings engaging between 5 and 49employees, with capital investment from Tshs 5 million to Tshs 200 million. Medium enterprises employ between 50 and 99 people or use capital from Tshs 200 million to Tshs800 million. (URT, 2002)
According to World Bank (2006); since Tanzania is characterized by low capital formation, SMEs are the best option to address this problem. SMEs tend to be more effective in utilization of local resources using simple and affordable technology. SMEs play fundamental role in utilizing
References: 1. SME Development Policy 2002 2. Theories of Entrepreneurship and small Business Development handouts by H.P Ngowi (2002) 3. Entrepreneurship by Robert D. Hisrich, Michael Peters and Dean A. Shepherd sixth edition