Determinants of Business Performance of Small and Medium Size Enterprises in Rwanda

Abstract

Small and medium enterprises (SMEs) are often identified as one of the most important strategies for enhancing the livelihoods of people in Rwanda. This research analyzed the factors influencing the performance of SMEs in the Musanze district in the Northern Province. A survey was conducted with 52 registered SMEs selected from three sectors of Musanze. The sample was obtained by using proportional allocation sampling where the number of SMEs within each sector was considered. Both quantitative and qualitative data from SMEs were collected using structured questionnaires. Factor analysis and bivariate correlation analysis were used to facilitate data analysis. The results of this study showed that starting SMEs incurred a mean annual net income loss of À185,965Rwf (À295US$). However, the average net annual income increased to 970,820Rwf (1540US$). There was a positive correlation between annual net income, business experience and asset size (p < 0:05). Three factors that determined the performance of SMEs are marketing and entrepreneurship skills, working environment and materials and infrastructure availability. Future policy interventions should consider these strategic areas for enhanced visibility of SMEs.

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