Micro and Small Enterprises have unique issues, which affect their growth and profitability and hence, diminish their ability to contribute effectively to sustainable development of the economy..
Despite the efforts by various stakeholders, lack of access to credit is almost universally indicated as a key problem facing them. These credit constraints operate in variety of ways in Uganda where undeveloped capital market forces entrepreneurs to rely on self-financing or borrowing from friends or relatives. It also forces them to rely on high cost short term finance which is also complicated. Large foreign companies are reluctant to establish local linkages with small enterprises because of product quality concerns.
This weak linkage between large and small firms is a problem for future small business development. Despite existing policies on financial support for small businesses, very few entrepreneurs receive financial help when they need it. They lack financial support as the number one constraint in developing their business. Small businesses consider procedures for securing business loans from banks cumbersome, and the collateral demanded for such loans excessive. Banks, on the other hand, defend their behavior by noting that most small firms that apply for loan do not present acceptable feasibility study or good business plan. Furthermore, many entrepreneurs do not even have a deposit account in a bank, a condition for advancing a loan to an applicant. To complicate the problem, there is no law to protect a bank against loan default.
It also appears that most small businesses in Africa follow the incremental stages of international expansion model. The reasons given for the favoring of gradual internationalization by small firms in Africa include: unsaturated domestic markets, reputation for low quality products, technological requirement for success in markets in developed economies, and difficulties in joining international supply-chain networks According to this model, firms typically begin with domestic focus and progress to experimental involvement, active involvement in foreign markets, and finally committed involvement. The problem with this approach is that gradual internationalization is no longer realistic in today's fast-paced global economy. Foreign companies now enter many formerly protected markets in developing countries in large numbers, increasing competition and driving down prices. As a result, young entrepreneurial firms have become born global companies that take on international expansion early in their inception.
We will identify micro-small enterprises that satisfy an economic or social need, to provide a quality good or service (one that the market is not adequately providing) at an affordable price, or to create an economic structure to engage in needed production or facilitate more equal distribution. We will disburse small grants to each business as we monitor how they are using it to formalize, improve product through branding and prepare them to the big market. These will be informal and struggling businesses with barriers but have the potential to grow upon formalization and will receive small micro-grants to help them take-off.
We will then bring them together into a big enterprise that will be jointly-owned and democratically-controlled .It will be based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity, as well as accountability and transparency. And, it must operate democratically, according to a set of principles—set by all parties—that include open membership, equal voting rights for each member regardless of how much is invested (“one person, one vote”), returns based on use, continuous education, and concern for the community.
This will create a system of interlocking linkage and ownership structures where businesses and other community-based enterprises will support one another by building linked supply chains, collaborating on projects, and sharing funding. These interconnections start slowly and will evolve organically as the big enterprise develops into a big corporation penetrating into national, regional and international markets. This type of cooperation will allow small firms to reap the benefits of economies of scale. The skills small firms develop and knowledge they will acquire in inter-firm linkage will lead to competitive advantage in the global markets.
The large enterprise will commit a few shares of the profit to a fund that will be used to support other struggling businesses started and employing young people.