This document is a dissertation submitted by Ntchindi Mkandawire for a Master's degree in Business Administration. The dissertation examines why small and medium enterprises fail in Malawi. It begins with an introduction that provides background context on Malawi's economy and challenges facing small businesses. The study aims to identify critical factors for success and failure of SMEs in Malawi, find practical solutions, and examine the government's role and impact of technology. The document includes a literature review, research methodology involving surveys, findings and analysis of survey results, and conclusions and recommendations.
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Why Small and Medium Sized Enterprises (SMEs) Fail In Malawi: A Case of Entrepreneurship
1. By Ntchindi Mkandawire E: ntchindi.mkandawire@yahoo.co.uk
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Why Small and Medium Sized Enterprises (SMEs)
Fail In Malawi:
A Case of Entrepreneurship
Master of Business Administration
Module: Dissertation
Supervisor: Jeff Taylor
Programme Director: Adam Burns
Student/Author: Ntchindi Mkandawire
Student Number:
Word Count: 13,542
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Dated: May 2017
Dedication: This work is dedicated to my late Father, Ntchindi Mkandawire Senior, who I
know would have been very proud of the man I have become and achieved at my age. The
paper is also dedicated to my loving and caring mother, Nelia G. Mkandawire for her
splendid believe and support in me. As a single Malawian parent, she has been be able to do
the impossible by fully educating me, sending me to the best colleges and universities for
both myself and my younger sister Temwa Mkandawire. Thank you for all the different
supports you’ve provided me with, especially times you put everything aside and prioritised
on my tuition fees. For that, i will never take for granted. I am forever in your debt. I love
you mom.
Acknowledgement: I thank God for his continuous guidance and protection that enabled me
not to lose sight of the task I had. Also, I would like to thank everyone who helped me in the
completion of this paper. The encouragements and motivation were indeed the driving forces.
I would like to thank my supervisor, Jeff Taylor, who guided me and pointed me in the right
direction, which has helped me a lot in the completion of this work. Lastly, I wold like to
thank everyone who participated and responded to the surveys I sent out. The results were
significant to the study.
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DECLARATION
This work has not previously been accepted in substance for any degree and is not being
concurrently submitted in candidature for any degree
Signed……………………………………………
Date………………………………………………
STATEMENT 1
This dissertation is being submitted in partial fulfilment of the requirements for the
degree of MBA.
Signed…………………………………………….
Date………………………………………………
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STATEMENT 2
This dissertation is the result of my own independent work/investigation, except where
otherwise stated.
Other sources are acknowledged by footnotes giving explicit references. A bibliography
is appended.
Signed……………………………………………
Date………………………………………………
STATEMENT 3
I hereby give consent for my dissertation, if accepted, to be available for photocopying
and for interlibrary loan, and for the title and summary to be made available to outside
organisations.
Signed………………………………………………
Date…………………………………………………
STATEMENT 4
I hereby give consent for my dissertation, if accepted, to be available on the university’s
IT system to those who have consent to use the system.
5. By Ntchindi Mkandawire E: ntchindi.mkandawire@yahoo.co.uk
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Signed………………………………………………
Date…………………………………………………
Abstract
Businesses form huge part of most if not all countries of the world. It helps in economic
growth and development as it is the base of any economy. This paper focuses on the issues
affecting Malawi. The research question for the paper is “Why Small and Medium Sized
Enterprises (SMEs) Failure in Malawi: A case of Entrepreneurship.” Key number of issues
have been discussed in the paper. This includes the background to business and
entrepreneurship as the study will also focus on individuals who started their own businesses.
Literature review on entrepreneurship is discussed in the paper, on such topics as failure and
growth of SMEs, challenges they face, impact of technology.
The research methodology chosen are both qualitative and quantitative methods. This will
help answer the objectives of the study. There are five objectives for this study name: The
study aims at addressing the critical factors that lead to failure among small medium
enterprises, address the critical factors that leads to success in small medium enterprises in
Malawi, search for practical solutions from existing Malawian businesses in order to solve
the less successful enterprises, find out Government’s role on entrepreneurship in regards to
SME’s, and E-commerce’s influence in the success or failure of SMEs in Malawi. Surveys
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will be used to carry out the research and their advantages and disadvantages include data
bias, cheap to conduct, unable to get back the questioners sent to the participants.
This is a very important issue that needs to be researched and addressed as there is evidence
where foreign investors successfully run their businesses in Malawi, yet young entrepreneurs
struggle to keep their businesses from growing. There needs to be a study on these critical
issues as SMEs are very important in a Malawian economy as they create job opportunities.
Furthermore, finding the main issues will help in coming up with better solutions.
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Table of contents
Contents
Why Small and Medium Sized Enterprises (SMEs) Fail in Malawi:.........................................................9
A Case of Entrepreneurship....................................................................................................................9
Introduction ........................................................................................................................................9
Background and country context....................................................................................................9
Size of the Economy......................................................................................................................10
Transport Infrastructure ...............................................................................................................10
Nature of the SMEs.......................................................................................................................11
Statement of the problem ............................................................................................................12
Research Objectives......................................................................................................................13
Structure of Dissertation...............................................................................................................13
Review of Literature..........................................................................................................................14
Business Growth ...........................................................................................................................14
SMEs Challenges to Growth..........................................................................................................16
Business Failure.............................................................................................................................19
Contribution of SMEs to Economic Development ........................................................................19
Impact of Gender of the Entrepreneur on Performance..............................................................23
How Women Entrepreneurs Benefit From Femininity.................................................................29
The feminine side of entrepreneurship ........................................................................................31
How Femininity Benefits Women Entrepreneurs.........................................................................32
Positive gender stereotypes and entrepreneurial intentions.......................................................32
The mediating role of relative gratification..................................................................................33
The moderating role of entrepreneurial self-efficacy between entrepreneurial intentions and
relative gratification......................................................................................................................34
The government and Small and Medium Sized Enterprises.........................................................35
SME Engagement with Technology ..............................................................................................39
Research Methodology.....................................................................................................................41
Introduction ..................................................................................................................................41
Population of the study.................................................................................................................41
Study Sample.................................................................................................................................41
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Sampling Procedure......................................................................................................................41
Research Instrument.....................................................................................................................42
Research Design and Administration of the Instruments.................................................................42
Data Collection and Analysis.............................................................................................................44
Data Analysis and Findings................................................................................................................44
Introduction ..................................................................................................................................44
Survey Results...............................................................................................................................44
What are the reasons to why Small to Medium Enterprises fail in Malawi? ...............................46
From your answer(s) above, can you please rank them, with 1 being the Most important answer
and 8 the least...............................................................................................................................47
What would be the possible practical solutions to SME failure ...................................................48
Has the Government of Malawi ever helped your business in any way or form?........................49
If you answered YES above, may you please a little more detail on how the government helped
your business? ..............................................................................................................................49
Please tell us how Technology can or has influenced your business............................................49
What recommendation(s) would you give to an aspiring entrepreneur on how to be a successful
businessman or woman in Malawi? .............................................................................................50
Please feel free to add more information you may have that might be useful to this survey in
regards to Small Businesses in Malawi .........................................................................................50
Conclusion and Recommendations ..................................................................................................51
Appendices........................................................................................................................................53
Appendix A: Survey Questions......................................................................................................53
Bibliography ......................................................................................................................................55
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Why Small and Medium Sized Enterprises (SMEs) Fail in Malawi:
A Case of Entrepreneurship
Introduction
Background and country context
Malawi is a country which is found in sub Saharan African with an estimation of 118,481
square kilometres. 21% of this estimated area is occupied by Lakes. Malawi is bordered to
the north and northeast by the Republic of Tanzania, South and south west by the Republic of
Mozambique and by Zambia to its west. Malawi has a population of 18.2 million people
(Journals.sagepub.com, 2017) with an annual growth rate of 4% according to recent
population and housing census which was conducted by the National Statistics Office. The
majority of Malawians live in the rural areas (85%). The literacy rate is at 66%. (Population
and Housing Census, 2016)
Malawi depends highly on agriculture, with 85% of the population recording farming as their
major or main source of income in the country. Its economy is still dependent on rain-fed
agriculture and has only one rain season which starts from November to April. It is thus
vulnerable to the impact of drought in the country. In recent years, the country had severe
drought that had significant negative impact on inflation, growth, trade balance and fiscal
deficit. The Malawian government thus undertook to import a lot of maize which is the main
staple.
I it wasn’t for the natural disasters the country faces, the economic performance would have
at least been better as been the case recently.
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Size of the Economy
The size of both the economy and that of the private sector is rather small. The dominating
sectors are agriculture which contributes 35 to 40% of the GDP. In the agricultural sector,
tobacco, tea and sugar do represent about 83% of the total exports according to (ITC 2008
report on Malawi). 45 to 46% of the GDP is represented by the services sector. As of recent
years, economic trends have shown an increase in the GDP for the agricultural sector as a
result of good rainfall and fertilizer subsidy and an increase in the distribution and trading,
construction and mining sector.
There has been recent investments in the mining of heavy mineral sands and uranium in the
country. The country has very limited and mostly underdeveloped mineral resources.
However, a major uranium mining project which has been in operation since 2009 is reported
to be contributing an additional 5 to 11% of the GDP. Other than that, the only other
significant resource is the Fish from Lake Malawi. However, it is said that some species are
rapidly depleting (Assessment of SME Sector in Malawi by Deepening Malawi’s
Microfinance Sector Project, 2007).
Transport Infrastructure
The author of this paper would like to state that it is of vital importance to look into the
transport system of Malawi as the world of business or trade relies heavily on transportation.
With that being said, Lilongwe and Blantyre are the main airports in the country, with very
limited freight transport. The main roads between urban areas are reasonably maintained but
most feeder roads are not paved which results in poor access during the rainy season.
A great concern about Malawi’s geographical location is the fact that it is a land locked
country or nation. What this means for Malawi is that the transport corridors are therefore of
particular importance as that’s the link Malawi needs for it to have access to major ports of
South East Africa. There are only 3 important transport corridors; to Durban (South Africa),
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which goes via Zimbabwe and Mozambique; to Nacala and to Beira (Both Mozambique)
(National Export Strategy, 2005).
The above 3 corridors do account for close to 60% of all of Malawi’s export trade flows.
There also is an operational railway line from Southern Malawi straight to Nacala but the
route to Beira has not been operational for quite some time since the end of the civil war in
Mozambique. Both systems do require huge investments to be able to be restored to
operational use so as it can be utilised to its full potential (National Export Strategy, 2005).
As Nacala Port has recently been privatised and now owned by CEAR who owns the
franchise for the Mozambique and Malawi railways, it might result in the lowering of costs of
haulage, with planned governmental commitments and donors to improve the railways and
Port. Some Small Medium Enterprises use Tanzania and Kenyan Ports to the north.
Nonetheless, they are used by the tea sub sector. Some good percentage of the tea is
auctioned at Africa’s largest tea auction in Kenya. The Malawian government is said to been
very keen in developing the Shire Zambezi Waterway which will provide barge transport to
the Mozambique port called Chinde to Beira. One of the major inhibiting factors in the
development of the economy that has a huge impact in businesses mostly Entrepreneurs, is
the high transport costs.
Nature of the SMEs
A Small and Medium Sized Enterprise (SME) can be defined as a business that has about 300
employees. (The International Finance Corporation 2012). According to PECC finance
forum, (2003), for developing economies, an SME is thus known to be a business with less
than 18 employees.
The classification of SMEs by IFC is illustrated in the table below:
Table 1 Small and Medium Enterprises category
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Source: International Financial Corporation (2012)
Statement of the problem
Research by Dawood, Bowler & Page (2006), reported that about 39 percent of new business
businesses fail in their first year, 59 percent in their second year and 89 percent in their first
9th year in business. The paper will look to investigate thoroughly why this is the case and
provide possible solutions to tackle these problems.
The private sector, especially the small and medium sized enterprise (SME) sector is viewed
as the main engine that provides economic growth and development as it supports and forms
the main productive base of a country like Malawi. This is achieved through production and
supply of raw materials for value addition, job creation, revenue generation and the ability to
create a robust economy (Inclusive Business Hub, 2013)
Just like other African countries, the private sector in Malawi faces many challenges in
achieving meaningful developments. High unemployment rates, overpopulation, food
insecurity and the current economic downturn in Malawi has brought about debate in the key
private sector to consider commitments and efforts in regards to the sector mentioned above.
With such problems in Malawi, this is why a lot of young people are forced to be
entrepreneurs. They start their own businesses as there aren’t enough employers. With no
direction what so ever, these aspiring entrepreneurs get in deep misfortune just after a few
months of trading. One important factor that needs to be mentioned is despite the rate of
small business’s failure rate, foreigners from around the world e.g. China, Burundi, and other
Asian country fly into Malawi with a capital of around 4 million Kwacha, equivalent to 5116
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Euro, and expand their businesses to the point where they generate over close to a million
euros at the end of the year. The profits are later taken out of the country. As this happens,
Malawi born entrepreneurs fail to expand their businesses to huge lengths as those of
foreigners. This is a very huge issue that needs to be investigated in detail.
The founding father of economics, Adam Smith and other entrepreneurship scholars have
been more concerned with how, who and why of entrepreneurship rather than its impact with
entrepreneurship on development or developing countries (Bruton et al, 2008). This could be
argued that in todays’ economy, especially in developing countries like Malawi, it is
important to know the impact entrepreneurship has to a country.
Therefore, the purpose of this study is to find out why a lot of small businesses opened in
Malawi fail to grow and generate profits, just like how foreign investors do so. In order to
tackle this question, the following objectives will be considered.
Research Objectives
1. The study aims at addressing the critical factors that lead to disaster of Small and
Medium Sized businesses in Malawi.
2. Furthermore, it shall investigate the critical factors that lead to success in Small and
Medium Sized Enterprises in Malawi.
3. The purpose of the paper is to also find practical solutions or recommendations from
existing Malawian business owners in regards to the success of businesses.
4. Government’s role on entrepreneurship in regards to SME’s.
5. Ecommerce’s influence in the success or failure of SMEs in Malawi.
Structure of Dissertation
The following study will assess relevant literature (secondary) including journal, books,
surveys, reports and new research on entrepreneurship in regards to the chosen country,
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Malawi. From then on, the next phase will outline the research methodology used in order to
complete this paper i.e. strategy, design approach, data collection and sampling.
Further findings of the study will be presented and thoroughly analysed as it is primary data,
which included surveys, and interviews from different people who own or have once owned
and lost a small or medium business. Furthermore, the chapter following findings is
conclusions and other relevant recommendations for this entire paper.
It is also of great importance to mention that all the material used in this is referenced in the
Harvard referencing system.
Review of Literature
Business Growth
Growth is an important phenomenon in small businesses as their survival essentially depends
on a number of both internal and external environmental factors. Growth decreases the
possibilities of a small business going under (Rauch & Rijskik, 2013).
The growth of small businesses had been widely analysed within entrepreneurship that one
cause of this is most businesses fail to expand during their lifetime (Davidsson et al., 2010;
McKelvie & Wiklund, 2010) and Doern (2009) adds that small medium enterprises refrain
from growing.
Sometimes enterprises do not desire growth and yet on the other hand others desire slow
growth even though they themselves are successful compared to those that grow fast,
according to Brush, Ceru & Blackburn (2009).
The importance of small businesses is recognised in a number of African countries including
Uganda, Ghana, Ivory Coast, Nigeria, Kenya, Burkina Faso, Malawi as well as others. SMEs
are dominant in most of the mentioned countries, says Karungu (1999). In first world
countries like the United Kingdom and USA, small enterprises play an important role in the
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economy, with an estimate account of one third of industrial employment with a lower
percentage of output. However, in third world countries, where SME’s are dominant
economically, their prosperity is rather considered far more important than in first world
countries (Rwigema and Karungu, 1999).
There should be great caution when viewing SME’s as small versions of larger organisations.
Generally, SME’s do experience a scarcity of resources such as time, human and financial
resources (Wong, 2005; Jun and Cai, 2003). Studies have identified a number of factors that
influence enterprise success and expansion. An important element (McGrath and King, 1996;
Rogerson, 2001a) that has a positive impact on a business’ growth is the actual depth of its
human capital. Human capital as a critical achievement factor has also been long-established
in a study conducted on African enterprises (Rogerson, 2001a), where it was determined that
most successful entrepreneurs are more likely have education and training beyond the
primary school level. The merit of such finding is based on the argument that that
entrepreneurs with a greater level of education and understanding are likely more able to
adapt to their businesses to the very changing business environment. A study conducted on
enterprise success factors in SME’s, it was rather concluded that a lack of managerial and
technical skills (Brink et al., 2003; Rogerson, 2008) obstructs on any business developments.
Other research was conducted on the failure of SME’s. The research revealed that failure in
these businesses was primarily due to lack of training and management skills. The findings
were confirmed by (Rogerson, 2008) 90% of a sample of 1000 entrepreneurs who believe
that SME failure is caused by management skills. However, taking into consideration of
management and training skills, it has been cautioned by Rogerson (2008) that skills are
rather not the only or even primary answer to the challenges being faced by SME
development.
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SMEs Challenges to Growth
Only very few businesses turn themselves into growth companies with much potential to
make a huge contribution to their economy. The main 2 reasons (Cambridge Judge Business
School, 2017), typically cited for such a struggle are;
1. Lack of access to capital
2. Limited managerial skills to strategically lead the business as it expands and goes
international.
The two reasons above are connected in the sense that SMEs are opaque to banks and other
investors as they report less than very large businesses and therefore the variability in
managerial capabilities across companies does cause huge risks to investors. For such
reasons, it prompts them to be conservative in investing or lending.
Reports from Harvard business review (2017) found that for 85% of company executives said
that the greatest barriers to achieving business growth lie inside the walls of the business
itself. Their analysis however showed something else, most of these reported barriers were a
result of complexity and bureaucracy that had accumulated. The likes of sense of urgency,
and general bloat of staff were the barriers other than any outside factors they thought they
might have missed (Harvard Business Review, 2017). The term for this is ‘Growth paradox:’
Growth does create does create complexity but at the same time complexity is the number
one killer of growth, be it business profits or market share. One cannot win on the outside, in
the marketplace, if you are losing the battle on the inside.
A direct link was made by Cant (2012) to the lack of advertising abilities and of business
failure and that of need for marketing skills and positive correlation between successes.
Jones (2009); April (2005); Morara & Moreithi (2009) Bowen, and Van Aardt (1997 agreed
with cant (2012), they argue that there are little skills in management in new entrepreneurs
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which can help them run the business smoothly and have the chance to compete with larger
companies. (Ramakumba 2014) and Rudjito (2003) state that the absence of suitable
expertise and low production capacity does hinder SMEs’ growth. It is thus claimed that if
output was to be bigger, the effectiveness of a current production process must be improved
and the way production is organized should be improved through innovation, says Monk
(1991). There is huge use of very old equipment in operations of business and do don’t have
transportation and communication infrastructure which doesn’t work well in this new
environment where most things are automated. This further leads to challenges of limited
marketplace access, says Cant (2012) and Rudjito (2013).
As much as most scholars feature MSE’s disappointment to the details stressed, Argent
(1976) does argue that failure cannot always be credited to owner’s life style, personality and
lack of business management skills. He adds that 90% of business failure flop because of lack
of appropriate financial procedures. Watson, Keasy, Storey and Wynarczyk (1987) argue that
if small businesses cannot find the right finance needed, brilliant ideas might be affected
which can later on lead to loss of potential growth for the country’s economy.
One of the major SME challenges in Africa is that the businesses are faced with the problem
of finding funds when they want to invest more into their businesses. They fail to come up
with good strategies for development that might capture the commercial services
requirements of small and medium entrepreneurs, according to McKee (2003); Klapper,
Allende & Sulla (2002); Olaiton (2006) and Bowen, Murara & Mureithi (2009). The inability
to secure funds is thus quoted as a major problem for Small and Medium Enterprises. As
capital structure and financial performance is generally not available, literature by different
scholars show that trader funds and getting money from the bank are main causes of outdoor
SME funding.
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A survey of over 650 Small and Medium Sized Enterprises whose outcomes were
summarized by Rodrigues (2003), admission to finance had been ranked as the second most
important constrain, especially for industrial and younger firms in the diversification and
creation of their economic activities. In the brackets of admission to finance, interest rates,
loan conditions, maturity, procedures and collateral requirements in lending were seen to be
the most important off-putting factors. Therefore, Small and Medium Enterprises cannot
access sufficient long term borrowing that can at least allow them to remodel operations
while on the other hand lack substitute sources of money other than the bank. Partly, as a
result, Small and Medium Enterprises do recourse to the use of informal loaning sources or
even worse, they stop to exist. Other academics debated reasons why it is tougher for Small
and Medium Enter to have access to debt financing. Berger and Udell (1995) found that
young and small businesses with mot times shorter banking relationships, do end up paying
higher interest rates and are thus more likely to be required to show collateral before given
access to loans. Peel and Wilson (1996) and Satio and Villanueva (1981) say that Small and
Medium Enterprises do have cheap access to funding and higher costs due to the information
asymmetries which is connected with different, smaller businesses. Moreover, Levy (1993)
made a conclusion saying limited access to banking institutions decelerates the growth of
Small and Medium Enterprises. According to Von Blottinz (2001), a survey which was
conducted among numerous monetary organizations and creditors which are complex in
giving SME finance gives indication that compared to the average of establishments with an
exposure to Small and Medium Enterprises, commercial banks heavily rely on the presence
of collateral, but also use the greatest diversity of means of assessing their risk. These are also
the toughest users of automatic and semi-automatic credit scoring schemes which in most
times do not work in the favor of small entities in need of finance from such lenders.
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Business Failure
There are a number of studies carried out to better understand business success or failure.
However, Van Auken (1993) stated that there are many questions that are still unresolved and
thus warrant additional exploration, and as agreed by Manning (1993) adding previous
studies do not at all provide with a unified and comprehensive explanation for SME failure.
There is no acceptable list that distinguishes SME success or failure. Previous researchers
have thus created discrepancies within the literature through reporting different variables as
the main contributing factors. The most common ones reported are management experience
and capital. However, some author’s research reports that there are discrepancies among the
studies on this topic. Cleary, there is no accepted set of reasons as to why SMEs fail or do
succeed. On the basis of lack of total agreement on why some fail, the different studies may
thus give a significant value in helping understand, predict, explain and control small medium
enterprise failure.
Contribution of SMEs to Economic Development
SMEs do play a major role in the economic growth and development of the industry. The
improvement of economic and social sectors of a country like Malawi are contributed by
SMEs through stimulation of large scale employment, investment, promoting
entrepreneurship and innovations, development of indigenous skills and technology,
enhancing exports and building base at different scales (UNIDO, 2000). An innovative and
competitive SME sector grasps out enormous promise particularly for developing countries
like Malawi, in terms of optimal employment of home resources, high income growth,
gainful integration through regional trade and investment, distribution and greater equity in
access (Maserira & Msweli, 2013). Furthermore, (Fida, 2008) agrees that SMEs not only
create employment for rural and urban growing labour force in Malawi, but also provide a
desirable innovation and sustainability in the economy. These businesses are seen as the way
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to accelerate the achievement of wider social economic goals (Cook and Nixon, 2000).
According to Longley’s (2006) findings, small businesses with less than 500 employees drive
the US economy. They do provide employment opportunities for almost half of the nation’s
work force. According to Ackah and Vuvor (2011), small businesses are considered very
important in many economies as they do provide jobs, as already reported by other authors
earlier, pay taxes, innovative and very quiet influential in countries’ participation in the
global market.
The 2 authors above further explain that SMEs account for nearly 93% of registered
businesses in Ghana and therefore they do play an important part in the economic
development through the provision of employment opportunities, opening up of more
business opportunities, enhancing entrepreneurship and fostering creativity, just to mention a
few.
Nkwe (2012) holds the view that SMEs around the world have been identified as vital in
achieving industrial and economic development objectives and that SMEs are earmarked as
the cornerstones of developed and developing economies across the globe. Governments
themselves view SMEs as major sources of employment, economic growth and wealth
creation as founded out by Mutula and Brakel (2006). The development of this sectors does
contribute to generation of other potential entrepreneurs.
Apart from these contributions, Nkwe (2012) further explains that the sector offers linkage
development to large industries and essential for an efficient and competitive market. SMEs
support the rural economy through the provision of income generating activities and thus it
increases the rate of growth of real capita income, balance income distribution and improve
the stability of the economy. It has also been argued that SMEs offer a large part of the
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solution to other countries like Botswana where there are difficulties which are challenged by
marginalised group like disabled, youth and women (Acquah & Mosimanegape, 2007).
In addition, Monks (2010) analyses the contributions of SMEs even to countries which are
already developed, in addition to SME positive contribution to developing economies. The
table below shows the contribution made by SMEs to the developed economies across the
globe.
Table 2 SMEs contribution in established countries
Source Monks (2010)
In his paper, Kongolo (2010) stated that SMEs do play a significant role in the national
development as they contribute to the evolution of agriculture led economies to industrial
ones furnishing plain opportunities for activity processing which might generate sustainable
source of revenue and enhance the process of development. The term entrepreneurship,
defined as the development and growth of new businesses (April, 2005), as the creation of
MSEs by individuals is given the same term, whose main motivational factor is the proper
boosting of profits (Nieman et al, 2003), which later on becomes a basic and traditional
measure of business progression and triumph over time (Samuels, 1993). Unlike the other
huge entities, SMEs are thus mostly owned by people who are involved in the possession and
control, according to Zimmerman and Scarborogh (2002). The owner of the business is able
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to reach to their maximum potential as their businesses create opportunities for the trader to
be able to go independent and able to achieve things which are meaningful in his or her life.
However, it is important to state that even though a lot of researchers or authors seem to have
come up with similar information on SME contribution as evidenced above, the theory above
will be compared to the empirical data in the findings section. Thus the author of this paper
will not completely rely on other author’s research to come up with a clear picture, but will
rather depend on information collected and then analyse the data to come up with the big
picture.
Small and Medium businesses have the flexibility to quickly adapt and adjust to rapid
changes in the industry they do operate in. Contrary to the long held belief that they were
meant to serve the local demand, the new emerged situation has brought changes which are
thus favourable to investment structures and demand (FinScope Survey Malawi, 2012).
As a result, businesses are not only key to ingredients to the global production networks but
also are actively involved in innovation systems across the globe. Furthermore, the presence
of such businesses are an important channel for poverty alleviation by empowerment of
economic and participation by women in particular, the youth and the marginalised section of
the Malawian society.
SMEs have not received the necessary attention in most countries to enable them to start,
grow and diversify and that is the reason why they do face continued challenges over and
over again.
That being the case, SMEs are thus founded, owned and operated by individual entrepreneurs
and not times with little support from the public or any other sources. Yet, many companies
that exist in this modern day began as humble small businesses several decades ago. The
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situation being faced in Malawi is no different from this scenario. It is therefore of vital
importance to realise that the private sector is indeed a critical player for job creations,
growth and development of any country and that SMEs make up a critical and largest part
and hence the bedrock of the private sector not only in Malawi but other nations as well.
Impact of Gender of the Entrepreneur on Performance
Women’s role in economic development cannot be understated. Jiggins (1989) noted that
around 30% of rural households in the world are thus headed by women who contribute about
80% agricultural labour, produce around 60% percent of the food used up by rural
households and generate more than a third of household incomes through small scale agro
industry and trading, craftwork and casual labour. In Malawi, 59% of female proprietors
specified that their enterprises contributed 50% or more towards family incomes (Daniels and
Ngwira, 1993). However, concern about women’s participation in the economic development
process is rather relatively new. The frequently debated questions are whether women have
satisfactory opportunities to participate in the processes of productivity or are beasts of
burden who are the primary sufferers of exploitation as pointed out by Lele (1986).
Previous studies exist on the role of women in the development of the economy even though
this has leaned mostly towards the agricultural sector.
The role of women in the Small and Medium Enterprises has greatly improved over time in
Malawi. Malawi’s economy had been dominated by Europeans and Asians at the country’s
independence who specialised in manufacturing and commerce respectively. A lot of policy
changes occurred and have contributed to the expansion of women and local entrepreneurship
in the post-independence. In 1987, around 7% of the sampled enterprise were operated and
owned by women in Malawi (Malawi/USAID, 1987).
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However, in later studies, it was much more revealed on the importance of women in the
business enterprises. In 1992, a survey by Daniels and Ngwira (1993) showed that about
micro, small and medium scale enterprise about 45.5 % of proprietor happened to be women.
A more recent study further reveals that 34% of Small and Medium Enterprises were indeed
owned by female entrepreneurs, 35% by male entrepreneurs and 30% by married couples
(ECI & NSO, 2000). As Small and Medium Enterprises have the potential to reduce poverty,
the sector is receiving increased focus in the development policies which are stipulated in the
Malawi Poverty Reduction Strategy Paper, where is it singled out as one of the sectors which
has the utmost potential to achieve pro-poor growth where women are to play an important
role (GOM, 2002).
Women’s economic activities is well documented. Moses (1989) does argue that women are
responsible for three roles in society; reproductive and community management. For a very
long time only the reproductive role has been emphasized as women have been seen as home
makers primarily. Three has been unequal economic opportunities and inequalities in regards
to productive resources such as capital and control of their won labour and differences I
human capital which leads to differences in technical and managerial skills (Loscocco et al.,
1991).
Women entrepreneurs are thus over represented in manufacturing enterprises,
underrepresented in contract workshops and are absent in mass production in the garment
industry. McCormick et al. (1997:1102). Other scholars do argue that women are likely to
operate low technology and low risk industries such as petty trading and the gender division
of labour and gender types tend to demotivate women into low status and low income
commercial activities (Von Massow, 1999). Therefore, women tend to be employed I small
home based low capital enterprises which supply goods and commodities in low income
consumer communities especially in urban areas.
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Loscosco et al. (1991) does argue that the difference between men’s and women’s
socialisation, training and other experiences might lead to different outcomes in regards to
business performance. Female entrepreneurs face more obstacles in business success than
their male counterparts, and in a summary of the literature on performance and gender,
Zinger et al. (2005) noted that female owned SMEs’ level of performance were more modest
compared to those of males ones. Other scholars support the view that female owned
businesses perform worse than male owned ones in regards to sales revenue, assets, profit
margins and likelihood of business survival ; Rosa et al., 1996; McPherson, 1996; Daniels &
Mead, 1998; Mead & Liedholm, 1998; Daniels, 1999; Kimuyu, 2002); (Loscosco et al.,
1991).
The relative poor performance of female owned enterprises is thus attributed to a number of
factors namely; difficulties in accessing credit from the formal financial system, the lack of
capital, poor technical and managerial know-how, very poor access to markets and raw
material procurement problems, the unfavourable legal system, diversion of enterprise capital
to men and poor government polices together with insufficient institutional framework.
(Berger, 1989; Jiggins, 1989; Daniels & Ngwira, 1993).
Gender in development (GAD) provides an alternative approach and maintains that women
should never be treated in isolation but within a context of the social relationship of men and
women (gender) where women have been systematically subordinated. The approach shows
that women who are isolated disregard the real problem, their subordination to men.
Therefore it does focus on the gender relations where measures are designed to help women
in the process of development. The approach endeavours to remove obstacles on women’s
accessibility to produce resources like employment opportunities and credit (Moses, 1993).
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A number of factors are associated with the shift of women from the agricultural; sector to
the service and industry sectors in Africa. To begin with, the ever growing population of
Africa has thus meant that the land resource which has for a long time been dominantly
owned by males cannot generate enough income for the households. Secondly, Gaidzawa
(1993) does argue that the pattern changes in the entrepreneurship have occurred mostly as a
result of economic recessions in Africa. For example, the 1970s and 1980s recessions did
erode the standards of living of the poorest as well as the middle class. Both the inflation and
devaluation of African currencies over time on the world markets has had significant effects
of pushing the population particularly women into intensified income generating activities
which are deemed both legal and illegal. Thirdly, both non-governmental organisations and
donor agencies have created women awareness in their contribution to economic
development with women having appreciated the idea that they can be self-reliant if they are
to engage themselves in income generating activities. In some cases, modernisation lead to
the loosening of the traditional values which have for a long time confined women to
household work only.
As women are limited when it comes to education and skills plus very few employment
opportunities, poor women in developing countries do turn to self-employment as a means of
supporting themselves and their family. Despite the increased efforts in the participation of
women in non-farming activities, other scholars argue that most women are in businesses of
retailing petty commodities like knitwear, pots and food stuffs (Gaidzanwa, 1993; Jiggins,
1989; Daniels and Ngwira 1993; Berger, 1989; Nyanda et al., 1995).
Below is descriptive data showing gender of business owners and their choice of business
sector.
Table 3 Data on Gender and choice of Business
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Source: Development Southern Africa
From the table above, it shows that women do perform worse than men. In respect to
profitability, the owner’s gender is not statistically significant even though businesses owned
by men tend to be more profitable than those owned by women. Both male and female owned
Small and Medium Enterprises perform better than SMEs which are jointly owned by males
and females. The gender insignificance in profitability contracts with other scholar’s
contribution with reports saying Small and Medium Enterprises owned by females are found
to be worse performers than those that are owned by men (Kimutu, 2002).
The only characteristic significant at the 1% level that affects the profitability of the
businesses in education. Profitability is thus significantly higher for those entrepreneurs with
higher education which is around 7.9% higher than those entrepreneurs without education. It
is then followed by those who completed junior secondary education which is at 4.1 above
those without education at all. Operation several enterprises, location of the business and the
industry in which the business operate have a significant influence of the profitability of the
business. The factor of owning multiple businesses is negative and statistically significant at
10% level. This negative relationship does reflect the disorganisation in time allocation
among the various business which may lead to managerial inefficiencies.
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Small and Medium Enterprises that do operate in a traditional market place and along
roadside or footpaths are the ones that generate more profits than those entrepreneurs who
conduct their businesses from home. The locations are important as they are places of high
demand transaction costs like transportation are thus minimal when compared with mobile
markets or commercial areas. The profitability tends to be significant and statistically high for
Small and Medium Enterprises that conduct business in industrial sectors such as retail of
beverages and food and retail of garments and footwear while profitability is lower in other
sectors such as manufacturing and leather, wood and pottery products and other
manufactured goods, restaurants and bars and services.
How Women Entrepreneurs Benefit From Femininity
The research on women entrepreneurs dos focus a lot on the problems or challenges being
faced women but largely ignores the possibility of entrepreneurial advantages of these
women. Using relative gratification theory and stereotype boost, there are attributes such as
affection, passion and understanding to entrepreneurship positively impacting women’s
entrepreneurial intensions.
Earlier studies on women entrepreneurs by other scholars viewed women’s ways of
conducting business such as approach to networking, which then prioritizes at maintaining
relationships over focusing on important business matters (e.g. Aldrich, 1989; Olm, Carsrud,
& Alvey, 1988), or women’s preferences to be able to balance family life and work as
disadvantage (e.g. Allen & Truman, 1992; Goffee & Scase, 1985); Buttner, 1993.
The majority of early studies on female entrepreneurs identified men’s ways of doing
business as the standard and credited entrepreneurial activity differences of men and
women’s nonconformity to such standard (Mirchandani, 1999).
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As of most recent studies, they have altered their approach researching female entrepreneurs.
They are thus refrained from viewing women’s way of conducting business as a disadvantage
and aimed at explaining the difficulties these women as faced with or reason why their
approach to how the conduct business is a lot more different from how men conduct theirs. A
number of readings argued that women entrepreneurs did have limited access to resources
(Boden & Nucci, 2000; Coleman & Robb, 2012; Carter & Williams 2003; García & Carter,
2009), or do have lower levels of self-efficacy when compared to males (Bandura,
Barbaranelli, Caprara, & Pastorelli, 2001; Gatewood, et al., 2002). Some more studies by
other scholars like Eddleston and Powell (2012) tried to explain that the different approach
women take in doing business are caused by gendered differences in the process of
socialisation, or by women’s preferences in pursuing both social and economic goals, as
explained by (e.g. Hechavarria, Ingram, Justo, & Terjesen, 2012; Meyskens, Brush, & Allen,
2011).
Entrepreneurship as a Traditionally Masculine Task
In most cases, entrepreneurship is traditionally considered as activity mostly suitable for men
(De Bruin, Brush, & Welter, 2006), and entrepreneurs are frequently viewed as having
masculine characterises and attributes such as risk taking and aggressiveness (Ahl, 2002,
Baron, 1999; Baron, Markman, & Hirsa, 2001; Fagenson & Marcu, 2001; Marlow, 2002).
Such negative gender stereotyping context leads to the interpretation that women as less
qualified as they do not possess masculine characterises (Ahl, 2006). Moreover, businesses
owned by women are likely to stay small, according to economic indicators (Jennings &
Brush, 2013), which is frequently used as another explanation in order to consider women as
less qualified entrepreneurs.
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The feminine side of entrepreneurship
Compassion, understanding, affection and being sensitive to the needs of others are the
several feminine traits which were previously absent from the definition of entrepreneurship
(Ahl, 2002). But, these have recently surfaced in the literature on entrepreneurship. These
feminine trait are evaluated to be more appropriate for female entrepreneurs than they are for
men (Özkan & Lajunen, 2005). These traits are considered as feminine traits based on the
society’s perception of what sort of traits are appropriate for women, based on Bem (1981).
The traits were thus identified as significant not only to venture creations bust also
performance of the ventures. Affection for example, which is referred to emotions and
feelings, is proved to be an important characteristic for entrepreneurs. Baron (2008) has
argued that business creation involves constructive affection, and Foo, Uy and Baron (2009)
and Baron and Tang (2011) did find that such trait predicts venture efforts and firm’s
innovation level.
Another Feminist trait is passion that has recently been explored in entrepreneurship
literature. Cardon, Zietsma, Saparito, Matherne, and Davis (2005) drew their attention to the
significance of passion in venture creation and noted that many entrepreneurs are very
passionate about their businesses that they thus refer to their businesses as their ‘babies’.
Cardon, Wincent, Singh, and Drnovsek (2009) have argued that passion is associated with
entrepreneurial role identifies and explained the mechanism through which passion brings
coherence to goal-directed actions and cognitions.
Social skills such as understanding and being sensitive to other people’s needs were also
identified as being important to entrepreneurship. Entrepreneurs are helped by these
competency skills and help interact effectively with possible venture capitalists, customers
and employees. The success of the entrepreneur is thus enhanced by the creation of
favourable reputation and direct personal contacts (Baron & Markman, 2003). Social skills
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are also found to be as important in regards to the performance of the ventures. Specifically,
Baron and Tang (2009) did discover that entrepreneur’s social skills such as social perception
and expressiveness are significantly related to the measures of new business performance.
How Femininity Benefits Women Entrepreneurs
Several characteristics have been found to be important to entrepreneurs and their businesses.
The following section will argue how the association of these feminine characteristics with
entrepreneurship (helpful gender stereotypes) impacts women’s intention to start and grow
businesses.
Positive gender stereotypes and entrepreneurial intentions
The behaviour of an entrepreneur is an intentionally planned behaviour (Krueger Reilly, &
Carsrud, 2000), displayed through the acts of creating a business and engaging in growth
activities. Cognitions are known to play an important role in such intentions and are
important to the thoughtfulness of the complex process of entrepreneurship (Baron, 2004).
Stereotyping is among the cognitive products that might influence the individual when
creating entrepreneurial decisions (Guimond & Dambrun, 2002). Based on the stereotype
activation theory (SAT), cognitively making relevant stereotypes accessible in a particular
situation influences attitudes and actions (Marx, Brown, & Steele, 1999; Wheeler & Petty,
2001). The activation and its consequences are categorized based on the valence of the
stereotype for both negative and positive and the responses that follows the stereotype
(reactance vs vulnerability).
The possible response is vulnerable when positive gender stereotypes are present as these
boost theory asserts that when individuals are positively stereotyped, they are moved to
consistently act with those positive stereotypes. The result of that is enhanced performance
(Shil et al, 1999). It can be argued that the presence positive gender stereotypes do follow
positive responses from female entrepreneurs. This is the case as gender is a dimension of an
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individual’s public identity (Shih, Pittinsky, & Ambady, 1999; Wheeler & Petty,
2001).Therefore, positive gender stereotypes does cause women who are interested in starting
a business feel more confident about really starting one and as a result, the expectation is that
the business creation intentions will be enhanced. The argument above therefore leads to the
following proposition:
‘Positive gender stereotype relate positively to business creation intentions.’
The same argument might be made when a female entrepreneur does encounter positive
gender stereotypes in regards to business growth. The association of feminine characteristics
and traits with business growth has positive implications for the female entrepreneur. Positive
gender stereotypes does make female entrepreneurs interested in growing their businesses
feel more confident about doing so as a result of that, the expectation is that her venture
growth intentions might be boosted. Therefore, this argument leads to the following
proposition:
‘Positive gender stereotypes relate positively to business growth intentions.’
The mediating role of relative gratification
Positive gender stereotypes on intentions of entrepreneurs can be explained through relative
gratification effects. This is the state of feeling better off than others in the business
(Martin, 1981; Smith, Spears, & Oyen, 1994) which is based on the downward contrast with
the disadvantaged (Leach, Snyder, & Iyer, 2002). When the interpersonal context is salient,
exposure to a target that is in worse position does relate to the individual results in an
approach that the person assessing their situation as better than when the comparison target is
in relatedly better situation, says Smith et al. (2002) and Vennerman & Pettigrew, (1972).
When positive characteristics are thus attributed to a person based on her gender identity,
relative gratification is experienced by her as she perceives her situation to be better off than
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that of an out group member who in this case is a man. She does compare her situation to that
of a man and if she evaluates her state to be better off than his, she does feel relatedly
advantaged. Since she is stereotyped to have the characteristics necessary to perform the task
in this case, it is very likely that she would evaluate her situation as much better f compared
to that of the man, which might lead in experience of relative gratification.
As such, gender stereotypes that are positive about entrepreneurial ability of a female
entrepreneur place her in a privileged position. In other words, once she becomes aware of
gender stereotypes that are positive associated with business creation, her gender identity
does become salient to her and makes her evaluate her situations by comparing it to that of a
man who is in a similar situation. By means of this sort of downward comparison, she would
thus notice the differences and her advantaged situation. In this way, gender stereotypes that
are positive does increase women’s business creation intentions by generating relative
gratification experience. This argument leads to the following proposition:
‘Relative gratification mediates the relationship between positive gender stereotypes and
business growth intentions.’
The moderating role of entrepreneurial self-efficacy between entrepreneurial intentions
and relative gratification
Self-efficacy is rather a very important element of entrepreneurial activity (Arora, Haynie &
Laurence, 2011; Boyd & Vozikis, 1994). It does refer to the belief in one’s competence to be
able to plan and execute actions which are necessary to be able to manage prospective
situations (Bandura, 1978). Those people with higher levels of entrepreneurial self-efficacy
have very high chances of becoming entrepreneurs and running businesses (Markman,
Balkin, & Baron, 2002). Therefore, it can be argued that self-efficacy moderates the
relationship between business creation intentions and relative gratification. A female who
perceives her femininity as an advantage to her efforts on entrepreneurship is a lot more
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likely to from the intention to start a business if she also perceives that she has the skills and
competences to do so. This argument leads to the following proposition:
‘Self-efficacy controls the relationship between relative gratification and business creation
intentions like the relationship is stronger for females with higher levels of self-efficacy and
weaker for women with low levels of self-efficacy.’
Self-efficacy also plays an important role in the relationship between business growth and
relative gratification. A woman who des perceive her femininity as an advantage to her
venture growth effort is more likely to form the intention to actually grow her business if she
also perceives that she does have the necessary skills and capabilities to do so. This argument
leads to the following proposition:
‘Self-efficacy moderates the relationship between business growth intentions and relative
gratification such that the relationship is stronger for women with her levels of self-efficacy
and weaker for women with lower levers of self-efficacy.’
The government and Small and Medium Sized Enterprises
In the year 1996, the Malawi government did develop national policies to deal with industry,
competition, cooperatives and trade in order to assist or support the growth of Small and
Medium Enterprises’ sector. (Ministry of Commerce and Industry 1996).
The type of assistance to small businesses in Malawi were similar to that of many developing
countries. As it has been suggested in the table below, many Small and Medium Enterprises
assistance organisations were stated in the 80 and 90s and their starting dates reflected the
increased attention given to SMEs in the reduction of poverty during that time. Over time, the
pattern of services did change from an emphasis on training to credit and more recently, to
proper attention on small businesses and women.
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SME Support System in Malawi: Year Established, Services, Budgets, Employees and
Service Levels of the Organisations
Source: Kandoole et al. (1997)
The organisations funded by the government tended to have very huge budgets, employ more
staff and have greater countrywide coverage. However, Associations and other private sectors
organisations where required to rely heavily on volunteers and consultant in order to deliver
services, due to lower budgets and fewer staff members (Anon, 2017).
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Non-governmental Organisations had less capacity and therefore sustainability of their
services was dependent on member satisfaction and payment of fees and dues. Banks were
reluctant in providing services to the SME sector due to perceived higher default risk. (Anon,
2017)
Identification of Procedure Initiatives by Organisation and Sector
Source: (Anon, 2017)
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The government did offer services in order to achieve the strategy of increasing SME growth.
Most of the institutions were involved in more than one strategy and a few number of them
were involved in all of them, as seen from the table above.
In conclusion, as the Malawian economy does mature, cooperation from different
organisations are thus needed in order to achieve the database, infrastructure and institutional
reform strategies. The organisations are important as they provide and use the information
that might be contained in the national database. The institution reform strategy would be
achieved if the organisations were sustained. Achieving sustainability may be difficult as in
all cases the resources available would be less than those that are available to the government
supported institutions.
Furthermore, the government’s ability to effect the policy of the nation through the process of
governmental organisations were less direct. But as suggested in the table above, the
institutions did play an important role in the Small and Medium Enterprises service delivery.
The existence of a strong non-governmental sector with self-help initiatives were an
important factor in the health of the development of the nation, as in most developing
countries. For such reasons, the organisations in the table above were thus categorised by
sector. This includes organisations supported by the government as they receive most of their
operating budgets from the government with government staff serving as board members. An
effective country wide policy in order to reduce poverty and create job opportunities does
require focused and efficient effort from all of these institutions.
The government is the major customer for Small and Medium Enterprises more especially
those that supply seed and transport to the government’s fam input subsidy programme,
stationary, construction, cleaning and tourism services. Many businesses do struggle when
the political party they supported and supported them is no longer in the government for
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reasons like losing the election. This is so as the political party that award contracts to Small
and Medium Enterprises owners are directly connect to it. Moreover, the poor rural voters do
expect the people in politics to provide from them in exchange for votes when election time
comes (Inclusive Business Hub, 2017).
Such a mentality has led to many Small Medium Enterprises owners crumbling when they
invest in politics which has thus proved to be a short term career for most people in Malawi.
Instead, they should have been investing their time and finances in their business.
Corruption, both in the government and outside it is a worrying factor. Even though most
Small and Medium Enterprises do not like to have anything to do with corruption, it is the
small businesses themselves that are perpetuating corruption, that is to say, the evading of tax
and win construction and maintenance contracts for Malawian roads even though they
completely lack the capacity to conduct an outstanding job for the project (Inclusive Business
Hub, 2017). Instead, they should be encouraged to operate their small businesses ethically
and deliver high levels of service or products to its clients in a timely manner.
SME Engagement with Technology
Technology has had a significant impact many businesses at a global level (Iansiti &
Lakhani, 2014). For small businesses, the spread of technology is a significant opportunity
and also a very serious threat. The opportunity comes from the ability of the small businesses
being able to access technologies that were only available to large companies and able to use
these to compete in the markets (Mele, 2013).
A paper by Cataldo and Mcqueen (2014) which did challenge the thesis which was proposed
by Carr (2003) who argued that that the adoption of ICT by companies was no longer
sufficient in providing a source of competitive advantage as these technologies were
beginning to become a commodity. The authors said where the adoption and use of
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technology is very low, the Small and Medium Enterprises that have used such technology
can thus secure a competitive advantage over their competitors. However, in situations where
the industry is already well established in regards to technology adoption and use, Carr’s
thesis does hold and any investment in technology is most unlikely to yield an advantage
which is competitive. The paper is rather largely descriptive in nature. It does focus on the
practical administration outcomes. It further concludes with clear set of different
recommendations for owners or founders of Small and Medium sized enterprises. They doe
highlight the need for business owners to assess whether the industry they are operating in is
or isn’t making full use of technology.
By adopting technology, Malawian Small and Medium Sized Entrepreneurs could have
access to markets they never would have been able to access if it wasn’t for technology, e.g.
having a business website and be able to post their products on the internet. That way, they
can reach a much wider audience.
Furthermore, the use of technology in a business might help in quick and easy way of
processing payment, with having a customer paying for goods or the services online or use of
an alternative payment method called TNM Mpamba and AIRTEL Money by Telekom
Networks Malawi (TNM ) and Airtel respectively, which are the top 2 big network providers
in Malawi.
With that in mind, it is important to take into account such theories and studies by other
scholars when tackling the problems being faced in Malawi and able to compare theories with
empirical data.
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Research Methodology
Introduction
The following chapter describes the procedures and methods which were used in the study
and how the questionnaire survey was taken. The chapter will also involve the population of
the study, sampling procedures, study sample, nature of research instruments, research design
and instrument administration and the collection of data.
Population of the study
The research population was Small and Medium Sized Enterprises in the main regions of
Malawi name; Lilongwe (The capital city), Mzuzu and Blantyre. These cities were chosen as
there are a large number of SMEs in them and also the ease of accessibility. As such, it
helped in having a representative for the study. A concern to this is the fact that there might
be difficulties that might be encountered in large populations as one of the samples selected
might notgive enough data needed for the study due to the size of the population, which is
impossible to tell until they have filled in and submitted the survey (Gregoire and Valentine,
2008).
Study Sample
The research did focus on SMEs in the following sector; Food Industry, Fashion, Farming
and Transportation. The businesses used in this paper will be chosen from the different
sectors above. The reason for this is so there should be different answers or opinions from
people who have different businesses and hence a clearer pictures of what’s going on.
Sampling Procedure
A simple sampling procedure was used in the selection of the respondent SMEs. Th reason
for this type of random sampling choice was to assure that SMEs have equal chance of being
selected. In addition, this will helps in calculating how accurate the sample does reflect the
chosen population from which the sample is drawn.
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Research Instrument
In consideration of the research question and its objectives, the study thus found it
appropriate to make use of unstructured questions and questionnaire in order to speed th
process of collecting data up. This was an advantage as business owners would complete the
survey designed at their own free time other than having to schedule a meeting or video call
with them, which would have taken a long time as business owners are very busy people, as
evidenced when the author tried to get in to contact with once business owner whose in the
stationary business, who the author physically knows, but was unable to have a meeting with.
More to that, the author of this paper is currently in Ireland, and not in Malawi, which is quite
far, hence a challenge.
Research Design and Administration of the Instruments
The research design of the project was intended for answering the research question and
research objectives of the study and literature from other scholars who, in the past, wrote
about similar papers, and not forgetting the financial limitations and time (Bryman & Bell
2011). The Survey used for this research was designed from scratch by the author through a
website called ‘Survey Monkey.’
After the designing was complete, the survey was sent out to the population using 3
mediums, through a web link, social media and through direct emailing, as seen from the
picture below;
Survey Monkey Share options
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Source: Survey monkey
Out of the 7 data collection given by survey monkey, only 3 were used. This decision was
made as they are the quickest way of sending out the survey. In regards to the web link, the
link was sent through WhatsApp messaging app service, posted on twitter, Facebook wall
and on the author’s LinkedIn page. An alert was set that made the author of this paper aware
every time a survey was completed. This helped in tracking down who had not completed the
survey yet. Further, the survey was designed in a way that it first started with easy multiple
choice questions. This reason was made in order to increase the responses from people. Other
open ended questions followed which required the respondents to answer in any form. This
gave them the opportunity to voice out their opinions fully (Bryman & Bell 2011).
It should also be noted that even though the author this paper owns a few small businesses
too, he did not fill out the survey for this project. The reason for this was to avoid being
biased when answering the questions. This would have affected the outcome of the survey.
Both qualitative and quantitative research methods were vital to this paper as the objectives
of the research needs both methods in order to attain the results needed (Sanders et al., 2013).
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Data Collection and Analysis
The main method of data collection used were the surveys. Even though the survey are
known to be more used in academic research, it is argued that it is difficult come up with a
very good and focused survey that does address the research objectives. There is only a single
chance to get the results right. Therefore, a poor designed survey might lead to a collection of
irrelevant information, which might influence outcomes of the survey.
Data Analysis and Findings
Introduction
The following chapter will describe the analysis of the data that was collected. A total of 12
respondents responded to the survey. The analysis will compare the literature with the data
findings as the research was carried out to tackle the research question and the objectives of
the study which are listed below:
1. The study aims at addressing the critical factors that lead to failure of Small and
Medium Sized Enterprises in Malawi.
2. Furthermore, the following study investigates the critical factors that lead to success
in Small and Medium Sized Enterprises in Malawi.
3. The purpose of the paper is to also find practical solutions or recommendations from
existing Malawian business owners in regards to the success of businesses.
4. Government’s role on entrepreneurship in regards to SME’s.
5. Ecommerce’s influence in the success or failure of SMEs in Malawi.
Survey Results
As stated above, only 12 people filled the questionnaire. The number is way below the one
that was expected for this study as the survey was sent to over 30 people. 3 data collection
methods were used which include a web link sent through WhatsApp, Facebook and
LinkedIn and Twitter. According to the results, 11 respondents used the web linked share
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using the mediums mentioned above. Only 1 respondent used a direct social media method
and zero people used the email invitation method.
Survey Monkey Results
Source: Survey Monkey
The first 2 questions were personal questions (See appendix A) which asked the name of
individual and second one asking them the type of business they own.
Key: Green =Males, Blue =Females
58.33
41.66
Gender
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From the figure above, it shows that from the 12 people that completed the survey, only 5
were men while 7 were women. To compare this with the theory by other scholars, they
stated that most SMEs are owned by men. Disregarding the number of participants in the
survey, the survey shows that more women are starting their own businesses as more women
filled the questionnaire than men.
In regards to question 2, the survey showed that most people were involved in different
sectors including Afro business which focused on crop and animal husbandry, Cosmetics,
Jewellery, Hot dog, Farming, Retail, Stationary and convenient stores.
What are the reasons to why Small to Medium Enterprises fail in Malawi?
From the figure above, most people said that the main reasons of why most businesses fail
are due to the difficulties in getting loans from financial institutions and the lack of adequate
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cash flow. These two were followed by having the government not helping SMEs enough in
the country. These three reasons are vital to this study as this is what the study mostly
wanted to investigate. With that in mind, the primary data does confirm what the literature
reported earlier on.
From your answer(s) above, can you please rank them, with 1 being the Most important
answer and 8 the least
On this question, it was designed in a way that allowed the people to rank the answers they
answered in the previous question as to which reasons carried the most weight. The results on
this were rather close. No support from the government was the main reason according to the
survey, followed by Level of entrepreneur's education and early work experience, then
difficulties in securing loans and management skills.
The literature reported that the main reasons to business failure in Malawi and Africa as a
whole was due to difficulties in getting loans and no or little help from the government. From
the survey, it does show that the main reason is mainly due to little or no help from the
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government, followed by level of education and background, then difficulties in securing loan
and management skills of the entrepreneur. The empirical data seem to be different from the
literature once again. Not getting enough help from the Malawian Government on the other
hand, seem to be a common factor here. But then again, the other reasons shouldn’t be
ignored as different businesses do operate in different sectors and in different parts of
Malawi.
The level of education and entrepreneur’s background is an important reason. This is so as
when an individual is well educated in Malawi, their chances of making it better in life are
very high. Such people are seen as successful as they also secure good jobs. Therefore, with
good education background, it can help the entrepreneur in good decision making or
strategies on how to run the business, compared to someone whose never had prior
experience before or little education. Such people might end up making poor managerial
decisions or easily given a bad deal without even knowing it.
What would be the possible practical solutions to SME failure
This question was designed to allow people to fully express themselves on how they thin the
SME failure in Malawi can be solved or reduced.
Out of 12 respondents, 8 of them had a similar answer, rather one word that stood out. The
word that stood out was Training. They have suggested that there should be formalised
entrepreneur training in Malawian schools as it is not prioritised in them. Training will teach
these people on how to handle financials and make smart investments. Other few people
suggested the provision of loans to entrepreneurs.
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Has the Government of Malawi ever helped your business in any way or form?
Out of the 12, only 3 people had help from the Malawian government, representing a
percentage of 25. This shows there isn’t enough done to reach huge number of entrepreneurs
who desperately need government’s help.
If you answered YES above, may you please a little more detail on how the government
helped your business?
This question wanted to find out what type of help the government had given to these people
to understand what type of help they are giving out to ‘lucky’ entrepreneurs. From the 3
people who had help, they said the government helped provide a loan for their business,
while the other said it helped set minimum prices on products. Lastly, the government helped
in introducing grants, support service institutions such as Malawi Bureau of Standards. With
such information, it can be concluded to say government’s help is there in Malawi. But, it
does not reach most people who need it most. The help is limited.
Please tell us how Technology can or has influenced your business
Technology does provide many benefits across a wide range of business processes and
transactions. This can improve information and knowledge management of the entrepreneur
and can also reduce transaction costs. Technology can also be used to improve the
communication outside of the business in terms of connecting with the target market out there
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through marketing on social media and television. With these benefits from technology, the
question above wanted to investigate how it had influenced people’s businesses.
From the responses, over 41.3% of the entrepreneurs said technology has helped them in
marketing of their products, with the rest giving different answers such as helping in
delivering with more exceeding precision and excellence from management, purchasing and
production, reduced cost of doing business, able to expand product category from e.g.
stationary to technology related products, and good for storing data as papers may be easily
stolen or damaged even though technology has its disadvantages of data corruption and
hacking, but still is fast at processing information most of the times.
What recommendation(s) would you give to an aspiring entrepreneur on how to be a
successful businessman or woman in Malawi?
On question 9, the question was designed to ask for advice from these entrepreneurs which
they might give to someone who’s new to business. The majority of the respondents
answered this question by giving more psychological advice such as not being afraid to take
risks, perseverance, having to love what you do, being creative and thinking outside the box,
patience, and being brave and execute and lastly develop passion for service to humanity as
success is in how much one has served the world, and not how much money on accumulates.
Please feel free to add more information you may have that might be useful to this survey
in regards to Small Businesses in Malawi
Most respondents said the government and non-governmental organizations should
implement initiatives on entrepreneur awareness from a young age and not having people
go to school just to study in order to be easily employed. Due to the increase
unemployment in Malawi, it is only wiser to start a small business as this is the solution
to being successful in the country. One must devote their time, be creative and unique in
order to stay competitive and successful.
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Conclusion and Recommendations
Small and Medium Sized Enterprises have contributed heavily to the Malawian economy
in ways of creating employment for a large number of the youth and others, thereby,
helping in lowering down the unemployment rates. They also have contributed
significantly in the generation of foreign exchange for the country and the growth of the
GDP.
It is therefore important to identify the key issues leading to the failure of SMEs in
Malawi and come up with workable recommendations to address the issues.
Based on the analysis made from both the literature and primary research in this study,
the following recommendations are made with respect of both the research question and
research objectives;
1. Banks and other financial establishments should come up with well-designed services
and products that might adequately meet the financial needs of the SME sector in
Malawi.
2. The Malawian government must provide incentives and ready market for SMEs. It
must help through waiving of taxes and the granting of subsidies to small businesses.
In the procurement of services and goods, the Malawian government must first of all
consider SMEs and put domestic products first in its purchases. This will accord the
SME bigger market for the services and products.
3. There should be a study of SMEs in the school syllabus of tertiary education as this
will help in boosting the sector. Tertiary students should be taught to be rather more
entrepreneurial and in addition, give them the necessary support and structure so as
they can be able to contribute in the building of the small business sector and the
development of the nation at large.
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4. Training needs and workshops of entrepreneurs should be enhanced in Malawi.
Working together, the government and the private sector can establish extra
managerial and SME training centers for Malawian SMEs. Such actions might
sharpen their managerial competencies and at the same time, enhance both business
and personal outputs.
5. SMEs should be encouraged to take advantage of the advancement in technology in
order to improve their output and also increase final product or service value. They
should be educated on benefits, uses and assisted in the usage of technology in order
to produce better quality products that match global trends.
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Appendices
Appendix A: Survey Questions
PAGE1 Page Logic More Actions
+ Logo
UNIVERSITY OF WALES
Research on the Failure and Success of Small-Medium Enterprises (SMEs) In
Malawi-Entrepreneurial focused
By Ntchindi Mkandawire (MBA)
+Add Page
Title
1.Full Name (Confidential)
2.What type of business do you own or run?
3.What are the reasons to why Small to Medium Enterprises
fail in Malawi? (Tick all that apply)
Due to little or no government role in promoting/helping entrepreneurs in Malawi
Difficulties in securing a loan
Level of entrepreneur's education and early work experience
Entrepreneur's family and ethnic background
Psychological profile of the entrepreneur
Management Skills of the Entrepreneur
Lack of adequate cash flow
Unable to handle success
Other (please specify)
QUESTION BANK
Search for questions
Recommended Questions
Previously Used Questions
BUILDER
THEMES
LOGIC
Summar
y
Design
Survey
Collect
Responses
Analyze
Results
Score my Survey Preview & Test Print Next
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4.From your answer(s) above, can you please rank
with 1 being the Most important answer and 8 the
Due to little or no government role in promoting/helping entrepreneurs in
Malawi
Difficulties in securing a
loan
Level of entrepreneur's education and early work
Entrepreneur's family and ethic
background
Psychological profile of the
Management skills of the
entrepreneur
lack of adequate cash
flow
Unable to handle success (Over excited with the new money they have, money they
never hadbefore
5.What would be the possible Practical solutions to
failur
6.Has the Government of Malawi ever helped your
in any way or
7.If you answered YES above, may you please a little
detail on how the government helped your
8.Please tell us how Technology can or has influenced
busines
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for
you...
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