CHAPTER ONE

GENERAL INTRODUCTION

• INTRODUCTION

The study is carried out with the objective of examining the Effect of Entrepreneurship Development on the Growth of Small and Medium Size Enterprises in Limbe Municipality. The study is divided into five main chapters. Chapter one is the General introduction which includes aspects such as background to the study, statement of the problem, main and specific research questions, research objectives, research hypotheses, the significance of the study (to the academic community, the state and management of small and medium size enterprises) the scope of the study, the definition of terms and to organization of the work. Chapter two looks at literature review deals with the conceptual, theoretical and empirical review. Chapter three looks at the research design, nature and source of data, variables and their measurement, model of specification, justification of variables, techniques of estimation, validation of results and ethical consideration. Chapter four deals with the presentation of findings (descriptive aspects, diagnostic aspects, diagnostic test results and results of specific objectives and the discussion of findings. Lastly, chapter five which looks at the summary of the findings, recommendation, conclusion and suggestion for further research.

1.1            BACKGROUND TO THE STUDY

Small and medium enterprises (SMEs) play a crucial role in global economies, contributing significantly to job creation and economic development. These businesses are vital for sustainable economic growth and are often a source of innovative solutions that impact economies positively (Lin, Varagayapu, Tadjeddine, & Yeoh, 2022). Small and medium enterprises (SMEs) are globally recognized for their intrinsic contribution to economic growth and creating employment opportunities thus serving as a tool to poverty alleviation. Both developed and developing countries comprehend that SMEs have become one of the key instruments to achieve sustainable economic growth. World Bank data (2022) posits that SMEs represent about 90% of businesses and more than 50% of employment worldwide.

The evolution of small and medium-sized enterprises (SMEs) in Sub-Saharan Africa has been marked by their significant contribution to economic development, job creation, and poverty reduction within the region. SMEs play a crucial role in driving sustainable growth and development in developing countries. These enterprises are essential for employment generation, innovation and social integration. SMEs account for a substantial portion of new jobs created in various sectors across the region. The growth of SMEs has been instrumental in absorbing a significant percentage of the labour force across Sub – Saharan Africa.

SMEs in Africa play a significant role in contributing to the region’s economic growth and development. SMEs account for an estimated 80% of jobs across the continent, making them a crucial driver of economic growth. In Sub-Saharan Africa alone, there are 44 million micro, small, and medium enterprises, with almost all of them being micro-sized businesses (Runde, Savoy & Staguhn, 2021). These enterprises contribute to the region’s GDP, with SMEs accounting for more than 50% of the GDP and providing   an average of 60% employment opportunities to residents (Muritii, 2017).  In addition to their economic impact, SMEs in Africa also contribute to the region’s social and environmental sustainability. They create jobs, support local communities, and contribute to the development of the region’s infrastructure. Formal SMEs contribute up to 40% of national income (GDP) in emerging economies. In many Asian countries, it has been estimated that SMEs contribute more than 90 percent of industrial output and create employment opportunities for 60 percent of the labor force (Veskaisri, Chan, & Pollard, 2007)

Although SMEs are vital instruments of economic growth in Sub-Saharan Africa, they face various challenges that hinder their growth and contribution to local economic development. Issues such as lack of access to finance, limited business skills, inadequate training, inaccessibility to markets and inadequate operating space have constrained the potential impact of SMEs on sustainable development within the region (Endris & Kassegn, 2022). SMEs encounter other constraints such as digitalization, internationalization, talent acquisition, and market expansion. To overcome these challenges, SMEs require tailored support that combines financial assistance with advisory services. Programs focusing on midsize companies within the SME sector have shown significant impact due to their ability to grow, contribute substantially to GDP and employment, and implement advisory support effectively (Lin, Varagayapu, Tadjeddine, &Yeoh, 2022).

Entrepreneurship development in Africa has undergone a transformative journey, marked by the emergence of young and tech-oriented entrepreneurs over the past decade. The integration of technology has become a defining factor in shaping African entrepreneurship, with digital infrastructure improvements enabling entrepreneurs to create innovative solutions, disrupt traditional industries, and reach previously untapped markets (Africa Development Bank, 2023). Entrepreneurship skills contribute to job creation, economic independence, and community development within local economies. Small businesses are significant drivers of job creation and employment opportunities, with small businesses creating a substantial portion of new jobs in various sectors. By honing skills related to business development, networking, and market positioning, entrepreneurs can not only expand their businesses but also contribute to local economic growth by generating employment opportunities within their communities. The ability of entrepreneurs to navigate regulatory challenges, compete with larger corporations, and access government support through financial assistance programs further underscores the importance of entrepreneurship skills in fostering the growth and resilience of small businesses in the economy (Treece, 2023).

Moreover, the entrepreneurial landscape in Africa is characterized by a strong emphasis on youth-led innovation, where the energy and creativity of the continent’s youthful population are driving entrepreneurship forward. With increasing support from educational institutions, mentorship programs, and incubators, young African entrepreneurs are conceiving groundbreaking ideas that are transforming into impactful ventures. The entrepreneurial ecosystem is maturing and expanding, with governments, private sector players, and international organizations collaborating to provide crucial support through incubators, accelerators, access to capital, and policy reforms that create a conducive environment for startups to thrive. This focus on social impact alongside profitability is leading to the rise of social entrepreneurship and sustainable business practices that address pressing challenges such as healthcare, education, clean energy, and poverty alleviation markets (Africa Development Bank, 2023).

Entrepreneurship skills play a pivotal role in influencing the growth of small businesses by equipping entrepreneurs with the necessary competencies to navigate challenges, foster innovation, and drive business success. These skills are essential for developing a growth-oriented business and enhancing its capabilities to achieve higher levels of success. Entrepreneurship education and training programs aim to cultivate entrepreneurship capacities and mindsets that promote creativity, innovation, and self-employment, ultimately benefiting economies by fostering economic growth and competitiveness. By enhancing skills such as strategic planning, financial management, marketing, and leadership, entrepreneurs can effectively steer their businesses towards sustainable growth and profitability (Cooney, 2012).

1.2   PROBLEM STATEMENT

The growth of small and medium-sized enterprises (SMEs) has a significant impact on a country’s GDP by contributing to economic activity, job creation, and overall prosperity. SMEs play a vital role in driving economic growth, with data showing that they contribute roughly 50% of total employment and 40% of GDP in developing countries (Liberto, 2023).

Small and Medium Enterprises (SMEs) play a significant role in Cameroon’s economy. In 2022, Cameroon’s GDP grew by 3.5%, aligning closely with the overall growth rate for sub-Saharan Africa. The importance of innovation through training enhances the performance of SMEs in Cameroon, with research and development (R&D) investments leading to notable productivity gains. Market research is also highlighted as a crucial factor for the success of SME start-ups in Cameroon, particularly in job creation, especially among the youth. The success of SMEs in Cameroon is vital to the economy due to their significant contribution to employment and overall economic activity (Clement & Tripathi, 2007).

The growth of SMEs in Cameroon has a direct impact on the country’s GDP. (Tsambou & Fomba, 2017). As SMEs expand and thrive, they contribute to job creation, income generation, and poverty reduction. According to the World Bank (2022), SMEs in Cameroon account for over 90% of businesses and contribute to approximately 35% of the country’s GDP. This highlights the significant role that SMEs play in driving economic growth and development.

One of the key reasons why SME growth is relevant to the GDP of Cameroon is its contribution to employment. SMEs are known for their labor-intensive nature, providing opportunities for individuals to gain employment and earn a livelihood. As SMEs grow, they create more job opportunities, reducing unemployment rates and improving the overall standard of living for the population (Usman , Husaain 2014). SMEs growth leads to increased income generation. As these enterprises expand, they generate more revenue, which translates into higher incomes for business owners and employees. This increased income not only improves the living standards of individuals but also stimulates consumer spending, further driving economic growth. (Djoumessi & Akinboade 2015).They also fosters innovation and entrepreneurship. Small and medium-sized enterprises are often more agile and adaptable compared to larger corporations, allowing them to innovate and bring new products and services to the market. This entrepreneurial spirit contributes to economic diversification and competitiveness, making the country more resilient to external shocks. (Benzidia & Makaoui 2020).

To fully harness the potential of SMEs and their impact on the GDP of Cameroon, it is crucial to provide support and create an enabling environment for their growth. These include access to finance, business development training services, infrastructure development, and favorable policies and regulations. By investing in the growth of SMEs, Cameroon can unlock their full potential and drive sustainable economic development. (Nowicka 2015). Moreover, It has been observed that SMEs related studies conducted in Cameroon focus on the central and Littoral regions of the country as they are most populated leaving other areas.

(Akinboade & Kinfack 2015). Therefore the study would investigate the impact of entrepreneurship development on the growth of SMEs in the Limbe municipality.

1.3 RESEARCH QUESTIONS

1.3.1 Main Research Questions

The main research question for this study is: What are the effects of entrepreneurship development on the growth of small and medium size enterprises in Limbe Municipality?

1.3.2 Specific Research Questions

The specific research questions for this study are:

• How does training in financial practices affect the growth of small and medium size enterprises in Limbe Municipality?

     2)  How do acquired managerial skills influence the growth of small and medium size enterprises in Limbe Municipality?

• To what extent does the acquisition of marketing skills relate to small and medium size enterprises in Limbe Municipality?

1.4   OBJECTIVES OF THE STUDY

1.4.1 Main Objective of the study

The main objective of this study is to find out how Entrepreneurship Development affects the growth of Small and Medium size Enterprises in Limbe Municipality.

1.4.2 Specific Research Objectives

• To examine the effect of training in financial practices on the growth of small and medium size enterprises in Limbe Municipality.
• To analyze the impact of managerial skills on the growth of small and medium size enterprises in Limbe Municipality.
• To determine the relationship between marketing skills and the growth of small and medium size enterprises in Limbe Municipality?