KAMPALA INTERNATIONAL UNIVERSITY

SCHOOL OF BUSINESS AND MANAGEMENT

CAUSES OF FAILURES OF SMALL BUSINESS

A CASE STUDY OF SMEs IN KABALAGALA AND KANSANGA

BY

IVONA N. MUZANILA

BBA/3906/31/DF

SUPERVISOR

DR. SUNDAY

b E,.sEA.. 7Jfri i7 JV
A RESEARCH llROPOSAt SUBMITTED IN PARTIAL FULFFILMENT

OF THE REQUIREMENT FOR THE AW ARD OF

BACHELORS DEGREE IN BUSINESS ADMINISTRATION

OF

KAMPALA INTERNATIONAL UNIVERSITY.

JUNE, 2006
 DECLARATION

This research is submitted as a partial requirement for the Degree in Business

Administration of Kampala International University.

To the best of my knowledge the material in the work has not been presented elsewhere

for academic qualification.

liGJ&~ Li-l/07/2,vo,c,
. ... -~ . .............. . ....... . .

Ivona N. MuzaniJa
APPROVAL

. submitted with the approval of

This researc h ts

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... I YI ·"1· / lCV.. 'trdJ,J--

A c-i r >-1..P l,..,,(l · · · · · · ·· · ·· ·

Supervisor , 11yr- Date:

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II
 DEDICATION

TO MY PARENTS

MR. NESTOR AND MRS. AUGUSTINA MUZANILA. Whose love and blessings have

been a source of inspiration, courage and stamina to undertake higher studies in pursuit of

knowledge, and to face the vicissitudes of an eventful life.

111
 ACKNOWLEDGEMENT

The researcher would like to express special gratitude to all those who were involved in

giving her advice for this research work.

Personal thanks go to Dr. Sunday who devoted his time in correcting this paper; special

thanks go to all business men and women who collaborated very well with me helped by

providing the required information on the subject, together with the staff of School of

Business and Management who through their useful Lecturers, I managed to grasp a

number of useful things to improve this paper.

I would like to thank my friend Baraka Issack who availed his computer to type this

dissertation, I highly acknowledge him.

I would also like to thank Mr. Turyahebwa Abanis for his cooperation he showed me.

Lastly, I would like to thank Mr. Mohammed Mambo Ali who assisted me for correcting

mistakes and also helped me whenever I needed his assistance. God bless him for being

too kind to me.

IV
TABLE OF CONTENTS Page

Declaration .................................................................................... .i
Approval. ...................................................................................... 11
Dedication ...................................................................................... Ill
Acknowledgement ........................................................................... .iv
Table of contents .............................................................................. v
List of tables ................................................................................... vii
List of abbreviations .......................................................................... viii
Abstract ........................................................................................ .ix

CHAPTER ONE
1.0. Background .............................................................................. 1
1.1. Statement of the problem ............................................................... 3
1.2. Purpose of the study ..................................................................... 3
1.3. Specific objectives ............................................................................... 3
1.4. Research questions ....................................................................... .4
1.5. Hypothesis ................................................................................ .4
1.6. Justification of the study ................................................................. 5
1.7. Conceptual framework ................................................................... 6
1.8. Scope of the study ........................................................................ 6
1.9. Limitations ................................................................................. 7
1.10. Operational definitions ................................................................. 7

CHAPTER TWO
2.0. Literature review ........................................................................ 8
2.1. Definition ................................................................................. 8
2.2. Types of small scale industries ......................................................... 9
2.2.1. Manufacturing industries .............................................................. 9
2.2.2. Feeder industries ........................................................................ 9
2.2.3. Serving industries ....................................................................... 9
2.2.4. Ancillary to large industries ........................................................... 9
2.2.5. Mining or quarrying .................................................................... 9
2.3. Characteristics of small industries ..................................................... 10
2.4. Rationale .................................................................................. 10
2.5. Nature of SSis ............................................................................ 12
2.6. Importance of small enterprises ........................................................ 12
2.7. Advantages of small-scale enterprises ................................................ 14
2.8. Some unique contributions of small business ........................................ 14
2.9. Objectives of small-scale enterprises .................................................. 15
2.10. Causes of failure of small businesses ................................................ 16
2.11. Remedial measures ..................................................................... 19
2.12. The Uganda Small Scale Industries Association .................................... 20
2.13. Conclusion ............................................................................... 21

V
CHAPTER THREE
3.0. Methodology .............................................................................. 22
3.1. Introduction....... . ..................................... 22
3.2. Research design ..... ............ 22
3.3. Population description ... . ·······22
34 Sampling design . . ....... 23
.3.5 Sample size .. . .. 23
3.6. Sampling procedure .. . ... 23
3. ~ Data collection ............. . . ............................................... 23
3 Primary data.................. . ................................................. 23
3 .12Secondary data ........................................................................... 24
3.8. Data collection instruments... . ................................................. 24
3.9. Data processing and analysis ............................................................ 24
3. 10. Expected results ......................................................................... 24

CHAPTER FOUR
4.0.Introduction .................... ..................................................... ....... 25
4. 1. Social characteristics of respondents... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... 25
4.2. Profile of small scale industries. ... ... ... ... ... ... ... ... ... ... . ...... 27
4.3. Problems encountered when beginning the business...... . ... 28
4.4. Labour... . ... ... ... .30
4.5. Business registration.. . .. 30
4.6. Operational problems... . .... 31
4.6.1. Limited capital (low income/ capital).. . .... 3 I
4.6.2. Limited (seasonal) market/ holidays.. . ..... 32
4.6.3. Power problem/ power shedding... . ... ... ... ... ... ...... ... . ............ .32
4. 7. Membership to societies/ organizations. . ... ... ... ... . .37
4.8.Government policies that hinder: the proper running and development of small
businesses.. . . ... ... ... ... ... .. . ... 3 7

CHAPTER FIVE
5.0. Summary, conclusion and recommendations ...................................... 38
5. I.Summary of the findings .................................................................. 38
5 .2. Conclusion ................................................................................. 3 9
5.3. Recommendations ........................................................................ 39
5.3.1. An institutional framework ............................................................ 39
5.3.2. Financing plan .......................................................................... .40
5.3.3. Supporting services .................................................................... .41

Refere11ces ........ ........................................................................... ... 42

Appendix ........................................................................................ 43

VI
LIST OF TABLES Page

Table I: General information of respondents... . ................................... 26

Table 2: Main Source of capital... . ................................... 27
Table 3: Provides a profile of small scale enterprise ...................................... 28
Table 4: Problems encountered at the beginning of a business .......................... 28
Table 5: The size of employment by numbers of businesses .. . .. . .. .. . .. . .. . . ....... 30
Table 6: Business Registration...... . .................................... 30
Table 7: Entrepreneur's customers .......................................................... 33
Table 8: Knowledge on likely customers ................................................. .33
Table 9: Form of advertisement.. ............................................................ 34
Table 10: Amount of profit realized ...................................................... 34
Table 11: Knowledge about credit institutions ............................................. 35
Table 12: Summarizes the results ........................................................... 35
Table 13: Showing government assistance to small-scale industries ................... 36
Table 14: Membership of a society or organization ....................................... 3

VII
 LIST OF ABBREVIATIONS

SSEs Small-Scale Enterprises

SSls Small-Scale Industries

I
LSEs Large-Scale Enterprises l
SSBs Small-Scale Businesses l
LSis Large-Scale Industries f

U.S.A. United States of America

I
II
UK. United Kingdom

us$ United States Dollars

UgShs Uganda Shillings Ii

SMEs Small and Medium Enterprises
l
GDP Gross Domestic Products I
[

NGOs Non-Governmental Organisations l

r'
t

II
I

Vlll
 ABSTRACT

This studv was carried out to find the causes of failures of small and medium businesses

at Kabalagala and Kansanga.

Findings of this study show that the causes of failures of small scale businesses was

because of shortage of capital, premises, competition, limited (seasonal) market/

holidays and limited (seasonal) market/ holidays. It was found out that capital is the

major problem to most entrepreneurs ofKabalagala and Kansanga.

As a result, it is noted that more concerted effort is necessary by both the government and

the small-scale businesses to have a bright future and also to play their rightful role in the

economic development of the country.

In study, it is evident that small-scale enterprises have a vital role to play in the industrial

and economic development of Kabalagala and Kansanga. However, little can be expected

of them unless certain strategic measures and programmes are put in place to reactivate,

upgrade and restructure them.

IX
 CHAPTER ONE

1.0. BACKGROUND

According to New Vision Monday (April 25n1, 2005, p 48) for the third year running,

Uganda has been ranked among the most entrepreneurial countries in the world but this

entrepreneurial spirit is wasted if the Government does not do more to create an enabling

environment for it to thrive.

Uganda came second to Peru in entrepreneurial activity despite showing a rise in activity

compared to 2003 when Uganda was found to be the most entrepreneurial country by

European Union-Sponsored study.

"After Uganda had the highest Total Entrepreneurial Activity (TEA) of all participating

countries i11 2003, it ra11ks second c~fier Peru in 2004. " The Global Entrepreneurship

Monitor (GEM) report said.

In 2004 and 2005, the report showed that countries with lower per capita GDP have the

highest entrepreneurial activity than richer nations.

J

Out of the 33 countries ranked, US is in the 10th position, UK is ranked 16th while Japan I
tails at 33 rd position.
I
The report suggests that lower income countries have higher entrepreneurial activity

because their populations have fewer formal employment opportunities and lack a formal I
social security system. In Uganda, as in many poor countries, there was high level of f
opportunity entrepreneurship-motivated by a good business opportunity and necessity

entrepreneurship-motivated by an absence of other work opportunities.

However, in Uganda the ratio of necessity entrepreneurs compared to opportunity

,entrepreneurs is much higher than in the advanced economies.

"The assumption that a high rate of entrepreneurial activity automatically leads to

increased prosperity is too simplistic when confronted with the observed trends," the

report concludes.

A summary of the key findings shows that Uganda's TEA has risen from 29.2% in 2003

to 31.6% in 2004, indicating that almost every third adult Ugandan is an entrepreneur.

The informal sector dominates Uganda's business with only one in every three Ugandan

business (34%) registered while only 14% pay any form of government taxes excluding

market dues.

However, Uganda also recorded the highest rate of business failure with 30% of Ugandan

adults having closed down a business in 2004. This is the reason for the research to find

out.

Unlike most countries where men are far more entrepreneurial, Ugandan women are said

to belong to the most active entrepreneurs in the world.

The report shows that majority of Ugandan entrepreneurs representing 53% are motivated

by a good business opportunity while the absence of any work opportunities motivates

47%.

On a regional basis, eastern Uganda is ranked top entrepreneurial regional accounting for

41 % while central region follows with 26%, the west 19% and the north trails at 14%.

2
1.1. STATEMENT OF PROBLEM

Many people aspire and do sta11 small business in Uganda but this business does not last

for at least 5 years, many of the started business close down, therefore the problem is why

many small scale-business fail . Following this problem, government has tried to provide

a conducive environment for small and medium size businesses through establishment of

microfinance institutions which provide credit to small businesses.

There is no success that has been achieved concerning the failure of small scale

businesses. Small-scale businesses are still failing despite the efforts which have been put

in place.

The fear is that if the situation is left unchecked, the amount to be contributed to the GDP

and the million people estimated to be employed by small businesses could be foregone.

If the government will not come up with the way forward, then small businesses will

continue failing to operate.

1.2. PURPOSE OF ESTU

The purpose was to find out the ma_Jor reasons which lead to failure of small-scale

business in Kansanga and Kabalagala in Uganda.

The firms which were looked at were 20 firms in Kansanga and 20 firms in Kabalagala.

The total of 40 firms was looked at

1.3. SPECIFIC 08.JECTIVES

► To identify factors or problems that generally affect most small businesses at

Kabalagala and Kansanga.

 r To find out what government policies hinder the proper running and development

of small businesses.

► To find out what steps the government has taken to help small businesses to

overcome their operational problems.

► To identify and recommend practical measures to rectify the situation.

1.4. RESEARCH QUESTIONS

► What are SMEs?

,- Why are they useful?

► What factors generally promote most small businesses at Kabalagala and

Kansanga in Uganda?

► What are the government policies that hinder the proper running and development

of small of small businesses?

► What steps the government has taken to help small businesses overcome their

operational problems?

,- What are practical measures to rectify the situation?

1.5. HYPOTHESIS

Most small businesses in Uganda fail due to limited capital and lack of easy access to

funds from financial institutions.

4
1.6. JUSTIFlCA TION OF THE STUDY

o Many of the developing countries including Uganda are adopting poverty

eradication programmes. One of the programs is through small-scale business

sensitisation; it has worked in the Tiger countries (Asian countries like Japan). It

has been proved it is only through small-scale enterprises that poverty can be

eradicated. It is against this thinking that this study is vital · in eradication of

poverty, as it will address issues that cause failure of the SSB.

o The study will be useful to entrepreneurs. It will help them know factors or

problems that generally affect most SSBs and overcome them. It will help them

follow practical measures in order for their businesses not to fail. Their businesses

should grow more and more.

o Academicians interested in the field of small-scale businesses will use research

findings as source of secondary data.

5
1.7. CONCEPTUAL FRAMEWORK

Causes of failures is an independent variable whereas small business 1s a dependent

variable.

Independent Variable Dependant Variable

Causes of Failures

Inadequate Financing

Inadequate Management

Burdensome Government Small

Business
Regulations and Paper Work

Inefficient Labour

Unsuitable location

Obsolete Technology

Source: Primary data; 2006

1.8. SCOPE OF THE STUDY

The study was carried out at Kabalagala and Kansanga in Uganda. It was carried to only

40 small businesses of which 20 firms were from Kansanga and 20 firms from

Kabalagala. It took one month beginning on 24 th May, 2006 and ended on 23 rd June,

2006. From 24 th M·ay, 2006 up to 8th June, 2006, it covered Kansanga and from 9 th June,

2006 up to 23 rd June, 2006, it covered Kabalagala.

6
1.9. LIMITATIONS .

o Language barrier. Some entrepreneurs do not know English. Therefore, it was

hard to collect information. Therefore it required interpreters.

o It was hard to know exactly population size of Kansanga and Kabalagala.

o Some entrepreneurs were not willing to give out information to the researcher and

others withheld some usefi-11 information because they did not know the reason

why the research was being carried out.

1.10. OPERATIONAL DEFINITIONS

Small business It refers to all businesses with start up capital of not more

than UgShs. 2,000,000/-.

Medium business It refers to all businesses with start up capital from UgShs.

15,000,001/- up to Ushs.30,000,000/-

Large business It refers to all businesses with start up capital from UgShs.

30,000,001/- and above.

Kabalagala and Kansanga These are suburbs of Kampala City in Uganda located at

Ggaba road 2 kilometres and 3 kilometres respectively.

Food kiosk It is a place where people eat from.

Independent Variable It is a variable that a researcher manipulates in order to

determine its effect or influence on another variable.

Dependant Variable It is a variable that attempts to indicate the total influence

arising from the effects of the independent variable.

Source: Primary data; 2006

7
 TWO

2.0. LITERATURE REVIEW

2.1. DEFINITION

The definition of small enterprises varies from one country to another. ln most of the

countries of the world, the criterion for defining small enterprise is related to the size

of employment.

For instance, according to Vasant Desai (1997), in U.S.A, small business is one,

which has employment of less than 500 people. In U.K, it is less than 20 skilled

workers, in Germany less than 300 workers, in Sweden and Italy less than 50 and 500

people respectively. In some countries both employment and investment are taken

into account. In Japan, the investment in industrial undertakings should not exceed

I 00 million employing not more than 300 employees. In South Korea, investment

limit is 2 lakh dollars and employment being 200 people (p.12).

According to Megginson et al. (2000), a small business ( or mom-and-pop

operation), on the other hand, is any business that is independently owned and

operated, is not dominant in its field, and does not engage in many new or innovative

practices (p. 11)

Khanka S.S (2002) defined a small-scale indust1y as one which is operated mainly

with hired labour usually 10 to 50 hands (p. 71- 72).

In Uganda, different definitions have been adopted. For instance, Commercial Banks

define Small Scale Industries as, those whose capital investment in machinery and

equipment does not exceed the value of US$ 300,000 (Ugadev Bank Ltd and Euro

Action Accord: ( 1988, p.1 ).

8
The majority of the small scale industries have machinery, equipment and tools of a

value of less than UgShs. 200,000 and within the range of the value US$ 109 to US$

24934 with monthly turnover of less than US $ 3640 ranging from US $ 364 to US $

22708 (Amajo Mary Et al (1989) p. l 0).

In the opinion of Enoch Biryabarema (1998), defines a small scale business as one

man's / woman's business or a small farmer having either fewer than I 0-20

employees or annual sales turnover of between UgShs 1,000,000/= and UgShs

50,000,000/=. It should have a registered name (p.9).

2.2. TYPES OF SMALL SCALE INDUSTRIES

According to Khanka S.S (2002) p 73 small-scale industries can be classitiecl into

five main types as follows:

2.2.1. Manufacturing industries,i.e, industries producing complete articles for

direct consumption and also processing industries;

2.2.2. Feeder industries specialising in certain types of products and services, e.g

casting, electro-plating, welding,e. t.c;

2.2.3. Serving industries covering light, repair, shops necessary to maintain

mechanical equipment;

2.2.4. Ancillary to large industries, producing parts and components and rendering

services; and

2.2.5. Mining or quarrying.

9
2.3. CHARACTERISTICS OF SMALL INDUSTRIES

According to Vasant Desai (1997) (p.3-4), some of the characteristics of small industries

include the following:

❖ Capital investment is small.

❖ Most have fewer than 10 workers.

❖ Generally engaged in the production of light consumer goods, processing and

so forth.

❖ Virtually all of these firms are privately owned and are organised as sole

proprietorships.

❖ Most of the funds come from the entrepreneur's savings.

According to Khanka S.S (2002) (p. 77), some of the characteristics of small-scale

industry are below.

❖ The scope of operation of smal I industrial undertakings is generally localised

catering to the local and regional demands.

❖ Small units use indigenous resources and, therefore, can be located anywhere

subject to the availability of these resources like raw materials, labour, e.t.c.

2.4. RATIONALE

According to Shukla M.B (2003) the following are some of the main rationale to suppo11

SSls:

► The Factor Price A1·gument: It is commonly argued that for various institutional

reasons, labour used in large enterprise is priced well above the levels at which it

is used in small scale industries. The SSI sector which uses more labour and less

10
 capital per unit of output will have relatively lower costs as their training and

development costs are quite low (p.17).

► The Distribution of Income Argument: There are three ways in which an

economy with a larger presence of SSis would have a more equal distribution of

income:

1. Small units with a lower capital labour ratio would generally have a larger

share of value added accruing to the workers (p.246);

11. Entrepreneurial income could be expected to be more widely distributed

(p.246); and

111. The typical large wage differential between the small and large firms

implies that when the former have a larger share in total output more of

the income accruing to labour goes to lower wage groups i.e. there is a

more equitable distribution of labour earnings (p.246).

According to Khanka S.S (2002) some of the rationales of SSis are as follows:

,- Employment Argument: Due to scarce resources and abundant labour, the most

important argument advanced in favour of the SSis is to have a potential to create

immediate large-scale employment opportunities. Small-scale units are more

labour intensive than large units (p. 75).

► Latent Resources Argument: This argument suggests that small enterprises are

capable of mopping up latent and unutilized resources like hoarded wealth and

ideal entrepreneurial ability, e.t.c. However, Dhar and Lydall feel that the real

force of latent resources argument lies in the existence of entrepreneurial skills

(p, 75).

11
2.5. NATURE OF SSls

According to Shukla M.B (2003) Industrial units constitute small scale units, medium

scale and large scale units. This type of categorisation is generally based on the size,

capital resources and number of workers engaged upon.

Similarly village and Cottage industries are an integral part of the SSI sector. The

Planning Commission considers the Village and Small Industries Sector in its entirety

and its definition includes traditional sectors such as Khadi, village industries,

Handlooms, Sericulture, Handicrafts, Coir and the modern sector including power looms

and SSis.

Generally, distinction is made between SSis and cottage industries on two different

issues: ( 1) SSis are mostly located in urban centres as separate units but the cottage

industries are normally associated with agriculture and provide subsidiary employment in

rural areas; and (2) SSis produce goods with mechanized equipments partially of fully

but the cottage industries involve activities mostly by hand and are performed primarily

with the help of household workers (p.248-249).

2.6. IMPORTANCE OF SMALL ENTERPRISES

According to Enoch Biryabarema (1998), the importance of small-scale businesses

cannot be over-emphasised. The present level of development is dominated by such

activities as garages, workshops, maize-mills, restaurants, poultry, plantains, fishing,

cattle-keeping, and so on. For example in the Background to the Budget 1993/94 it was

estimated that the small-scale businesses in agriculture accounted for 70% of the Gross

12
National Product and 80% of the population employed. For this reason the SSBs should

be looked at favourably by economic planners (p.9).

In particular of the owners of the small -scale business enterprises keep proper books of

accounts and go about marketing their products/ services, they can manage their

businesses more effectively and efficiently and they can reduce business failures which

have bedevilled many small-scale businesses (p.9).

According to Vasant Desai (1997) the- following points demonstrate some of the

importance of small-scale industries.

❖ Innovative and Productive: It is the small units which are highly innovative

though they do not maintain their own research and development wings " ..... a

disproportionate share qf innovation success in business seems to come fi·om

'skunk works·. tiny groups that tend to out-pe,jorm the much larger labs that

r?fien have a cast r!f hundreds·. "(p. 4)

❖ Individual Tastes, Fashions and Personalised Service: Small firms are quick in

studying changes in tastes and fashions of consumers and in adjusting the

production process and production accordingly (p.4).

❖ Happier in Work: People who work in small enterprises are happier in their

work than those who work in large ones in spite of lower wages and poor

standards of safety, comfort and welfare facilities (p.5).

In the opinion of Shukla M.B (2003), some of the importance of SSis may be evaluated

on the following grounds.

❖ SSis are much more labour intensive than large scale industry. They provide

more scope for the employment of workers (p.248).

13
 ❖ The social cost of developing small units especially handicrafts and village

industries are lower (p.248).

❖ SSls are also sustainable as they are essential for combating poverty and

unemployment (p.248).

2.7. ADVANTAGES OF SMALL-SCALE ENTERPRISES

According to Vasant Desai (1997) small enterprise has distinct advantages both

economic and social. Some of these are:

11 Some SSis do not require a high level of technology (p.6).

11 SSEs in developing countries help to create economic stability in society by

diffusing prosperity and by checking the expansion of monopolies (p.6).

" The development of SSEs will create jobs in the rural areas of the developing

countries where unemployment and underemployment are high. This will help

in reducing the exodus of workers from the rural to the urban areas in search

of jobs (p.6).

2.8. SOME UNIQUE CONTRIBUTIONS OF SMALL BUSINESS

According to Megginson W .L et al (2000), small firms differ from their larger

competitors. Some major contributions made by small businesses that set them apart from

larger firms are as follows.

Smaller firms tend to;

14
 " Encourage Innovation and Flexibility: Smaller businesses are often sources of

new ideas, materials, processes, and services that larger firms may be unable or

reluctant to provide (p.13)

" Provide Greater Job Satisfaction: Small companies provide greater employee

job satisfaction. But the greatest satisfaction comes to those who own their own

premises (p.15).

2.9. OBJECTIVES OF SMALL-SCALE ENTERPRISES

Some objectives of SSEs according to (Vasant Desai 1997) are as follows;

" Attainment of self-reliance (p.8).

" Meeting a substantial part of the economy's requirements for consumer goods and

simple producer goods (p.8).

" Provides employment and a steady source of income to the low-income groups

living in rural and urban areas of the country (p.8).

Some objectives of SSEs according to Khanka S.S (2002) are as follows;

" To eradicate unemployment problem from the country (p.77).

11 To bring backward areas too in the mainstream of national development (p. 77).

11 To improve the level of living of people in the country (p.77).

Some objectives of SSis according to Shukla M.B (2003) are as follows;

" To meet the major part of the increased demand for consumer goods and simple

procedure's goods (p.247).

• To ensure a more equitable and justifiable distribution of national income to

society at large (p.248).

15
2.10. CAUSES OF FAILURE OF SMALL BUSINESSES

According to Megginson \V.L et al. (2000), some current problems facing small

businesses are:

❖ Inadequate Financing: Inadequate financing is the primary cause of new

business failure. It cannot be stressed enough that the shortage of capital is the

greatest problem facing small business owners. Without adequate funds, one

is unable to acquire and maintain facilities, hire and reward capable

employees, produce and market a product, or do the things necessary to run a

successful business (p.16).

❖ Inadequate Management: Inadequate management, in the form of limited

business knowledge, poor management, inadequate planning, and

inexperience, is the second problem facing small firms. Many owners tend to

rely on one-person management and seem reluctant to vary from this

managerial pattern. They tend to guard their position very jealously and may

not select qualified employees, or may fail to give them enough authority and

responsibility to manage adequately (p.16).

❖ Burdensome Government Regulations and Paperwork: Small firms are

subject to many of the same regulations as their larger competitors. These

regulations are often complex and contradictory, which explains why small

busmess managers tincl it so difficult to comply \Vith governmental

requirements (p l 6)

According to Khanka S.S (2002), one of the problems of SSls is the problem of

marketing. One of the main problems faced by the small-scale units is in the field of

]6
marketing. These small units often do not possess any marketing organisation. In

consequence, their products compare unfavourably with the quality of the products of the

LSis. Therefore, they suffer from comparative disadvantages vis-a-vis large-scale units

(p.81).

According to Shukla M.B (2003) the problems of SSls are as follows;

❖ Inefficient Labour: Labour is major but active player in SSis. But they lack

training and developmental opportunities in small-scale sector. So they are

unable to contribute as expected from them.

Professionals and technocrats are also not interested to join small-scale as this

sector is not ready to compensate them properly. So small entrepreneurs are

facing the constraint of inefficient labour force and unable to improve their

productivity (p.260).

❖ Unsuitable Location: Selection of location for the development of plants etc

also creates problem before the SSis. The choice of location is generally

governed by different consideration like availability of infrastructural facility,

the cost and tenure of acquisitions, availability of labour and the proximity of

markets. Small entrepreneurs are not properly trained in deciding about

suitable location. Actually, they select their location due to other

considerations like availability of cheap land, family business, sentimental

attachment to their tradition ancestral property, etc (p.261 ).

❖ Obsolete Technology: SSis lack latest technology as they do not have any

technological support from the Government and other technological institutes

and laboratories. (p.261-262).

17
According to Enoch Biryabarema (1998) the reasons why small-scale businesses fai I

can be due to inhibitive management styles, and inhibitive situations.

Firstly, there are inhibitive management styles that can lead to business failure. For

example, the owners/managers of many SSBs are not "risk takers". They fear going into

the unknown. Often they lack capacity and resources to carry out market research for new

or existing business to analyse risk, profitability and feasibility. Therefore, many do the

same lines of business and thus duplicating effort and do not enjoy the advantages of

economies of scale (p. 12).

Again many of the small-scale businessmen/women would not like to tell their success

story. They would prefer to humble themselves and to keep lying low or in the

background. They will fear buying a new car, building a good house, or undertaking

business expansion for fear of "public" opinion. The relatives, friends and business

associates may also instil fear in an enterprising small-scale businessman/woman by

telling him/her to watch his/her steps. Such tendencies begin to dampen his/her

effort/drive to succeed and can lead to failure (p.12).

There is a funny style referred to as "ostentatious orientation" when some

businessmen/women behave like chiefs. They start boasting workers and showing off all

the time. This gradually leads to extravagant expenditure and "ostentation" especially

when the individual is lucky and the business happens to show signs of success. This

style is also exhibited when the small-scale businessman/woman is related /friendly or

acquainted to persons in high authority.

He/she will claim to have "direct telephone hnes" with so and so. This makes him/her

very proud and will start thinking that he/she is above regulations and orders. Take the

18
example of a small-scale businessman/woman who will resort to political pressure rn

order to avoid paying taxes or a bank loan, holding a view that nobody can touch him/her

of connections with persons in high authority. Their "ostentatious orientation" can be

greatly strengthened when they manage to get protection from those persons in high

authority. They, therefore, continue to live in "wonderland". Because of their

domineering and pretentious style, those who deal with them such as workers, business

associates and bankers start to live them alone. Such a more start to spell out their failure

(p.13).

Another inhibitive factor is conservatism and lack of foresight Many small-scale

businessmen/women fear admitting errors/ shortcomings. They would not like to learn

new techniques, ideas and new methods of doing things differently from what they are

used to (p.13).

They lack information on which to base decisions; they are constantly solving yesterday's

problems rather than looking forward. They lack foresight and their enterprises hardly

grow(p.13).

2.11. REMEDIAL MEASURES

According to Shukla M.B (2003) SSis are holding a very important place in the

industrial system of the country. Thus, suitable measures are necessary to remove these

bottlenecks in the optimum operation of SSis. These remedial measures are as follows:

❖ Effective Planning: SSis are required to conduct detailed survey of the

existing situations prevailing in small scale sector and draw productive

programmes for them. Without proper planning, they may be affected by

19
 improper location, inexperienced consultancy services, improper technology,

under-estimation of costs, etc. So SSl's are required to initiate effective action

plan for their survival (p.262).

❖ Improvement in Techniques of Production and Proper Technology: SSls

should try to improve their techniques of product and adopt modern

technology. Besides, SSis should keep themselves abreast of development in

technology. They should also try to give a lead if possible financially, in

research and development efforts. They should also believe in continuous

innovation and then they can remain in their business (p.262-263).

❖ Training and Development: SSis should make concerted efforts in

imparting proper education and training to workers engaged in this sector as

they are valuable asset of industry. Small Industries Associations should also

involve themselves in providing knowledge and skills required for them in the

changing environment.

❖ Effective Marketing Arrangements: SSis should focus on brand, product

and market development. They should try to remain in the market and special

thrust should be given on quality improvement programme.

2.12. UGANDA SMALL SCALE INDUSTRIES ASSOCIATION

This association brings together all the small-scale industrialists m the country for

promotion of small industries

20
2.13. CONCLUSION

It is worth noting that different people and organisations, which have written on small

businesses, have differing views. Many have given their views on the causes of small

businesses failure though to some extent they disagree with each other. However, what is

important now is to find a lasting solution to stop continuous failure of small businesses.

21
 CHAPTER THREE

3.0. METHODOLOGY

3.1. INTRODUCTION

This section mainly focuses on the methods, techniques and tools that were used in data

collection and data analysis.

The study was carried out between 24 th ApriL 2006 to 23 rd May. 2006 in Kansanu:a and

Kabalagala. In Kansanga it was carried from 24th April, 2006 up to 8 th May, 2006 and

Kabalagala it was carried from 9 th May, 2006 up to 23 rd May, 2006. Kabalagala and I,
Kansanga were chosen because of its convenience both in terms of time and financial

constraints.
I
I
3.2. RESEARCH DESIGN rI
The researcher used the combination of descriptive and cross sectional research designs. I
i

A descriptive research design was based on results from questionnaires and interviews of Ii
~

key informants from the selected sample population. The cross sectional aspect was dealt
f
with analysing the failure of small-scale businesses. If
i
3.3. POPULATION DESCRIPTION

The population upon which the study was carried out consisted of entrepreneurs of

small-scale businesses around Kansanga and Kabalagala.

22
3.4. SAMPLING DESIGN

The study used a combination of simple random sampling and stratified sampling

methods. Simple random sampling method was used because it was convenient to the

researcher given the time that was available and no costs incurred especiallv in terms of

trips. Stratified sampling method was also used because the population, which was to be

studied, constituted sub groups, which the researcher was interested in.

3.5. SAMPLE SIZE

A sample of 20 people per suburb was selected during the study. This lead the total

sample size to be 40 people in 2 suburbs. The total of 40 people respondents constituted

business owners.

3.6. SAMPLING PROCEDURE

Prepatory visits were made to the study areas to try and establish contacts with the

respondents (Business Community), and appointments were scheduled. The technique of

sampling was judgemental. The population was divided into sub groups before the

sample was drawn.

3.7. DATA COLLECTION

These included both primary and secondary data collections.

3.7.1. Primary data: The researcher made visits to small business owners in Kansanga

and Kabalagala. The study also covered property owners and market vendors. The

data was collected using questionnaire, as a research instrument. Also key

respondents were interviewed and these consisted of business people.

23
3. 7.2. Secondary data: The researcher further more supplemented primary data with

secondary sources of data from existing records such as publications from

libraries, newspapers, textbooks, past research and other related records. These

sources yielded valuable secondary data, which supported the primary source.

3.8. DATA COLLECTION INSTRUMENTS

The method of collecting data was based on self-administered questionnaires and

researcher administered questionnaires, oral interview and direct observation.

3.9. DATA PROCESSING AND ANALYSIS

The data that was collected included both qualitative and quantitative which was analysed

and processed to make it useful and understandable. Data was first classified, coded and

edited before was entered into the computer for accuracy and completeness. Tables were

used in analysis and the various questionnaires interpreted and analysed using

percentages and frequencies.

3.10. PECTED RES

The researcher expected to identify the various causes of failures of small businesses in

Kabalagala and Kansanga in Uganda.

The variation in the causes of failures of small businesses can have an impact on those

small businesses.

24
 CHAPTER FOUR

PRESENTATION, INTERPRETATION. AND DISCUSTON OF MAJOR

FINDINGS.

4.0. INRODUCTION

This chapter presents major findings and interpretation of the study. The main sources of

findings were based on questionnaire method. Interviews were also conducted to

supplement the questionnaires. These findings are presented in line with the relevant

variables, objectives of the study and research questions. Specific research questions

were drawn to analyze the failure of small-scale businesses.

4.1. SOCIAL CHARACTERISTICS OF RESPONDENTS

A total of 40 questionnaires were issued out to the respondents, 29 were completed and

returned. Some respondents were interviewed The table below shows general

information obtained in terms of age, sex, qualifications, and experience.

25
Table I: General information of respondents

Variable Respondents Number of Percentage

respondents .
Age 18-24 years 5 17.2
25-29 years 7 24.1
30-34 years 10 34.5
35-39 years 4 13.8
Above 40 years 3 10.4
Sex Male 17 58.6
Female 12 41.4
Qualifications Primary level 1 3.4
Secondary IO 34.5
Certificate holder 7 24.1
Diploma level 6 20.7
Bachelor degree 5 17.3
Others (Specify) - -
Source: Primary data; 2006

Table I above shows 58. 7% of the respondents are above 29 years of age, this is a good

sample because most of them are mature enough to operate the business. Hence they are

able to give sound information. 58.6% of the respondents were male and 41.4% female.

The table also reveals that 62% of the respondents finished primary level education,

secondary and have certificate qualifications, this percentage shows some weakness in

the management of business because this group of respondents do not kno-w exactly how

to manage their businesses. While 38% have diploma and degree qualifications. This

group of respondents can manage their businesses very well because of the level of

26
education they have. Again this implies that these respondents are able to give sound

information.

Table 2: M:1in Source of c~it;1I

------···--· ---------~------------- - - -
------~-- ··---

Source of capital Frequency Percentage

Loan capital 8 27.6
Personal saving 16 55.2
Capital from relatives 3 10.3
Others 2 6.9
Total 29 100%
Source: Primary data; 2006

Table 2 above shows that 55.2% of the respondent's source of capital is personal savings,

this implies that many business persons are still using their personal savings and it shows

that the government has not done enough to help small businesses. 27.6% is from loan

capital, I 0.3% from relatives and 6.9% from other sources.

4.2. PROFILE OF SMALL SCALE INDUSTRIES

The researcher found out that there a lot of small-scale industries m Kabalagala and

Kansanga. In particular the following businesses were identified:-

] . Photocopying.

2. Stationery such as photocopying work, type written work, gifts.

3. Internets services such as Internet surfing, computer maintenance and training.

4 Shops such as fcir foods. beverages. etc.

5. Boutiques such as clothes. shoes. makeups, etc

6. Saloon such as for male and female

7. Food kiosks

27
Table 3: Provides a profile of small scale enterprise

I
Business Frequency-7 Percentage
\

-Photocopying 7 24. I
Stationery 4 13.8

Internet services 2 6.9

Shops 5 17.2
Boutiques 5 17.2
Saloon 3 10.4
Food kiosks 3 10.4
Total 29 100%
Source: Primary data; 2006

From table 3 above it can be seen that the photocopying is the most predominant with

24.1 %, followed by shops and boutiques which are 17.2% respectively, followed by

stationery which is 13.8%, followed by saloon and market vendor which are 10.4%

respectively and the least of the table is internet services which is 6.9%.

4.3. PROBLEMS ENCOUNTERED H BEGINNING BUSINESS

Table 4: Problems encountered at the beginning of a business

Problems Percentage of respondents

1st Problem 2nd Problem 3 rd Problem

Capital 69 20.7 10.3
Premises - 65.5 34.5
Competition 17.2 34.5 48.3
Source: Primary data; 2006

Table 4 above sho'.vs that 69% of respondents indicated that capital is their maJor

problem. Shortage of it is a major problem because it stops them from investing in a

28
particular asset, for example adequacy of raw materials, proper equipment, extending

credit to their customers and producing high quality finished products. This is a ma_1or

cause of failure of small businesses

65.5% of the respondents indicated that premises are their second problem. Businesses at

Kabalagala and Kansanga are highly congested. Therefore, proprietors find it very

difficult to get the place where to place the business. 48.3% of the respondents indicated

that competition is their third problem. Most proprietors when they were beginning their

businesses, they were facing high competition from other businesses. This is because

most of them are targeting students. This is also a major cause of failure of small

businesses.

In addition to this list, there are a host of other factors which were identified as problems

met while beginning the business. These include the following:-

o Buying equipments.

o Market strategy.

o Price determining.

o Language problem.

o Personal harassments i.e. insult.

o Lack of experience on the job.

o Bad debts.

o Cultural diversify (different backgrounds).

29
4.4. LABOUR

Table 5: The size of employment by numbers of businesses

Size of employment (Persons) Frequency Percentage

None 5 17.3
1-3 13 44.8
4-6 7 24.1
7-9 4 13.8
10 & above - -

Total 29 100%
Source: Primary data; 2006

Table 5 above shows that 44.8% of businesses in Kabalagala and Kansanga employ 1-3

persons. 24.1% of businesses employ 4-6 persons. 13.8% of businesses employ 7-9

persons. There are no businesses employing 10 persons and above in my research. 17.3%

of businesses do not employ any person.

Research results are in agreement with one of the characterists of small-scale industry

that they employ small numbers of persons. It was also indicated by the respondents that

all of them offer pay, which is above government rates.

4.5. BUSINESS REGISTRATION

Table 6: Business Registration

Nature of Company Frequency Percentnge

Registered Company 10 34.5

Unregistered Company 19 65.5

Total ",O
.id/ 100
Source: Primary data; 2006

30
Table 6 above shows that respondents whose businesses are registered with the Registrar

of Companies were 35.5%, while 65.5% of the respondents have not registered their

businesses. It is thus evident that the majority of the businesses are not registered. This is

yet another area where the small-scale enterprises require assistance.

When respondents were asked why they had not registered their businesses, they

indicated that

a. It was expensive m terms of terms of money costs to have ones business

registered.

b. 1t was expensive in terms of time, because the procedure involved is lengthy.

c. There was a fear among the respondents that when the business is registered, it is

likely to be subject to many more taxes; an indication that fiscal policy may have

far reaching effects on small-scale enterprise.

4.6. OPERATIONAL PROBLEMS

Some of the problems business persons are facing when running their businesses are

indicated below:

l. Limited capital (Low income/ capital).

2. Limited (seasonal) market/ holidays.

3. Power problem/ power shedding.

4.6.1. LIMITED CAPITAL (LO\V INCOME/ CAPITAL)

Many business persons face a problem of limited capital The capital they have is limited

in such a way that it is not enough at all for their business operations. This is one of the

31
major causes of failure of small businesses. Therefore, entrepreneurs need to be provided

with loans by banks and financial institutions so that they increase on their capital they

have.

4.6.2. LIMITED (SEASONAL) MARKET/HOLIDAYS

This is another problem entrepreneurs face while operating their businesses. Since most

businesses at Kabalagala and Kansanga are targeting students, during holidays they have

no ·market. They have no one to sell their products to and therefore their businesses

become idle until when students open the university. At the time when students are on

holidays, business persons have no where to get money from and end up consuming what

their savings. This is again another cause of failure of small businesses.

4.6.3. POWER PROBLEM/ POWER SHEDDING

Power problem / power shedding is also another problem encountered when running a

business. This is a major problem to those businesses which use electricity to operate like

photocopy, food kiosks, salon and internet cafe. When power is off, they cannot operate

their businesses. This is also a major cause of failure of most businesses.

It was observed that most problems encountered when running a business differ from

those problems encountered when beginning the business, whereas when beginning the

business the major problems were capital, premises and competition, in that order, when

running the enterprises the major trouble lay is limited capital (low income / capital),

limited (seasonal) market/ holidays and power problem I power shedding.

32
Table 7: Entrepreneur's customers

Customers Frequency Percentage i

Students 25 86.2
Ge11eral Public 4 13.8
Total 29 100(% I

Source: Primary data; 2006

Table 7 above shows that 86.2% of their customers are students and 13 .8% of the

customers are the general public.

Respondents were also asked on how they get to know their customers. The response is

given in table 9.

Table 8: Knowledge on likely customers

Frequency Percentage
,.,
Newspaper advertisements .) 10.3
Friends' contacts 22 75.9
Commission agents/ brokers 2 6.9
i
Exhibition -
Others 2 6.9
Total 29 100%
Source: Primary data; 2006

Table 8 above shows that 75.9% of the respondents get their customers through contact

with friends. I 0.3% of the respondents get their customers through newspaper

advertisements. 6.9% of the respondents get their customers from commission agents /

brokers and through other means respectively.

Table 9: Form of advertisement

Advertisement Frequency Percentage I

Yes 19 65.5
No 10 34.5
Total 29 100 1%
Source: Primary data; 2006

Table 9 above shows that 65.5% of the respondents advertise their products and 34.5% of

the respondents do not advertise their products. This shows how a big number market

their products and services.

Table I 0: Amount of profit realized

Profits Frequency Percentage

Very profitable 2 6.9
Profitable 14 48.3
Made a loss 7 24. l
Break-Even 6 20.7
Total 29 100 1%
Source: Primary source; 2006

Table 10 above shows that 48.3% of the respondents made profits, while 24.1% of them

incurred losses. 20.7% of them their businesses were at break-even and 6.9% of them

their businesses were very profitable.

Asked in which areas the proprietors require assistance. The majority of them indicated

that they need assistance to obtain more capital in a form of loans.

34
Table 11: Knowledge about credit institutions

Credit institutions Frequency I Percenta1:-

Yes 22 75.9
No 7 24.1
········-~7'' ----
Total ! 29 iOO'½i
I
Source: Primary data; 2006

Table 11 above shows that 75.9% of respondents know about the existence/ availability

of credit institutions and 24.1% of them were not aware of them.

34.5% of the respondents indicated that they had approached the Bank for small loans

and advice yet 65.5% indicated that they had not approached the Bank for assistance.

Hence there is reluctance on the part of the small-scale entrepreneur to seek credit from

Banking Institutions. Many of them are skeptical about their ability to pay back borrowed

funds; especially in a situation where the possibility of making profits is not high.

Table 12: Summarizes the results

+------·- -------·~---·
Organisation Frequency Percentage
Ministry of Labour -
City Council 26 89.7
,.,
Small Scale l ndustry Association .) 10.3

Others - -
Total 29 100%
Source: Primary data; 2006

Table 12 above shows that 89. 7% of respondents received officials from City Council.

These were mainly enforcement section who came to check on licenses, income tax,

health of workers, e. t. c. 10. 3 % of respondents received officials from Uganda Small

35
Scale Industry Association who came to know how the business is going on. No officials

came from Ministry of Labour and from other officials.

Table 13: Showing government assistance to small-scale industries.

Government assistance Frequency Percentage I

i

Yes '[0 34.5

No 19 65.5
Total 29 100(¼)

Source: Primary data; 2006

Table 13 above shows that 65 5%of respondents were not rece1vmg the required

assistance from the government. The other 34.5% indicated that they were receiving help

from government. 65.5% of the respondents require assistance as regards provision of

loan facilities form banks and financial institutions, and facilities like electricity from the

government.

Record Keeping:

The respondents were asked whether they keep records of their business. All respondents

said they keep records of their business, which is very good and encouraging. Each

businessperson should keep his / her records of his / her business for the purpose of

knowing whether the business is making profits or losses.

36
 4.7. EMBERS TO SOCIETIES I ORGANISATIONS

Table 14: Membership of a society or organization.

I Membershin of societv / I Frequency I Percentage· 1

I organization I
1yes l 0,
[ I
. No 13 44.8
Total 29 100%
Source: Primary data; 2006

Table 14 above shows that 55.2% of respondents are members of a society or

organization but 44.8% of respondents are not members of any society or organization.

4.8.GOVERNMENT POLICIES TH HINDER E PROP RU ING AND

DEVELOPMENT OF SMALL BUSINESSES.

• Legal and regulatory costs.

• Costs of financial institutions in providing financial services.

37
 FIVE

5.0. SUMMARY, CONCLUSION AND RECOMMENDATIONS

This chapter presents the summary of the findings of the study, conclusions and

recommendations. Before a summary is made, it is important to have an overview of the

objectives of the study. The researcher set the following objectives as given below:

411 To identify factors or problems that generally affect most small businesses at

Kabalagala and Kansanga.

• To find out what government policies hinder the proper runnmg and

development of small businesses.

411 To find out what steps the government has taken to help small businesses to

overcome their operational problems.

411 To identify and recommend practical measures to rectify the situation.

In an effort to achieve the above objectives, the researcher formulated a questionnaire and

interviewed respondents, which was used to gather data from owners of small businesses.

Data was processed and analysed using a computer for accuracy.

5.1.SUMMARY OF THE FINDINGS.

This study attempted to examine the causes of failures of small-scale enterprises rn

Kabalagala and Kansanga. Small-scale enterprises have peculiar problems which have

caused for their failure up to now. As a result, it is noted that more concentrated effort is

necessary by both the. government and the small-scale businesses to have a bright future

and also to play their rightful role in the economic development of the country.

38
5.2. CONCLUSION

The study set out to analyse the causes of failures of small-scale businesses. The major

conclusion that was drawn from the research findings is that many businesses fai I

because of shortage of capital, premises, competition, limited (seasonal) market /

holidays and limited (seasonal) market / holidays. Capital is the major problem to most

entrepreneurs of Kabalagala and Kansanga.

5.3. RECOMMENDATIONS

In study, it is evident that small-scale enterprises have a vital role to play in the industrial

and economic development of Kabalagala and Kansanga. However, little can be expected

of them unless certain strategic measures and programmes are put in place to reactivate,

upgrade and restructure them.

Government should reduce the legal and the regulatory costs, should also lower the costs

of financial institutions providing financial services, and furthermore, it should put in

place policies that encourage competition among financial institutions and promote

innovations that lower the costs to financial institutions providing credit to SMEs.

Special problems of small scale enterprises call for a promotion and development strategy

which must of necessity, make three provisions: an institutional framework, a financial

plan, and a supporting service system.

5.3.1. AN JNSTJTUTIONAL FRAMEWORK

Organisations like Uganda Small Scale Indust1y Association (USSIA), Ministry of

Finance, Planning and Economic Development, Uganda Manufacturers Association

39
(UMA), Development Finance Company of Uganda Ltd and Ministry of Tourism, Trade

and Industry should organise public lectures, workshops and seminars on the issue of

failure and sustainability of small-scale businesses.

5.3.2. FINANCING PLAN

In this aspect, attention should be centred on mobilising and directing funds to the

promotion and development of small-scale enterprises. Measures to increase the

availability of funds to small-scale enterprises are proposed.

1. An integrated self-sustaining capital market system should be put in place.

11. There should be a deliberate crusade to mobilise deposits and create a domestic

capability to finance small-scale enterprises.

111. A small-scale enterprise centred and cost effective credit delivery system should

be initiated to integrate credit with support service systems.

The above measures should be implemented by all parties concerned namely:

a. Government, small-scale enterprises themselves, financial institutions and non-

governmental organisations which deal with these enterprises. That is the

government should affect enabling legislation to induce critical reforms in the

banking system to give rise to specialised institutions tailored to peculiar needs

and characteristics of the small-scale enterprises sector.

b. Small-scale enterprises should constitute themselves into grassroots savings and

credit groups. What small-scale enterprises can do by themselves to mobilise

funds is a role that should not be compromised.

40
 c. NGOs should induce small-scale enterprises to constitute themselves into self-

help groups and cause financial institutions to loosen the screws on the credit for

them.

d. Small-scale enterprises, whenever possible should be given credit in form of the

materials they are going to use in their enterprises, to stop diversion of these funds

to their family problems.

5.3.3. SUPPORTING SERVICES

Service functions such as coordination, training, market research and procurement out to

be revamped.

If any accelerated development of small-scale enterprises has to occur, essential

supporting services such as Uganda Small Scale Industry Association (USSIA), Ministry

of Finance, Planning and Economic Development, Uganda Manufacturers Association

(UMA), Development Finance Company of Uganda Ltd and Ministry of Tourism, Trade

and Industry have to be in place.

Small-scale enterprises target groups should be assisted to improve their capacity to use

available government services to maximum effect. On the other hand, the support

services thus established should have links between small-scale enterprises and the

nation's system of resource development.

In conclusion, strategies suggested take the social and economic implications both to the

government and small-scale enterprises target groups.

41
It is the task of both the private and public sector to cooperate in selecting and

implementing those measures which optimise benefits to the economy and well being of

the people of Kabalagala and Kansanga.

42
 REFERENCES

Biryabarema, E. ( 1998) Small-Scale Businesses and Commercial Banks in Uganda,

Uganda: Makerere University Press

Desai, V. (1997) Management ofa Small-Scale Industry (7 th Revised Edition), New

Delhi: Himalaya Publishing House.

Khanka, S.S (2002) Entrepreneurial Del•e/opment, New Delhi: S.Chand & Company
Ltd

Mary, A, Et al ( 1989) Strategy (or the Development o(Small-Scale Industries in

Uganda Working Paper, Kampala.

Megginson, W.L et al (2000) Small Business flr1anagement; An Entrepreneur's

Guidebook (3 rd Edition), New Delhi: McGraw-Hill

New Vision (Monday April 25, 2005)

Sharma, S. VS ( 1979) ,\'mall Entrepreneurial Development in Some Asian Countries; A

Comparative Study

Shukla, M.B (2003) Entrepreneurship and Small Business /lllanagement ( l st Edition),

Kitab Mahal: Sorojini Naidu Marg, Allahabad

U gadev Bank Ltd and Euro Action Acord ( 1988) Small-Scale Industries in Uganda,
Kampala: Survey Report Ugadev Bank Ltd.

43
 Aooendix

KAMPALA INTERNATIONAL UNIVERSITY

QUESTIONNAIRE

Dear Respondent,
l am currently carrying out a research on small-scale businesses.

Purpose of the study:

The main purpose of the study is to examine the causes of failures of small-scale
businesses. I declare that this research is purely academic in nature, which will enable the
researcher to be awarded Bachelor of Business Administration. I therefore promise that
all the data obtained using this questionnaire is totally and purely confidential. I am
therefore kindly requesting you to spare a few minutes to answer the following questions.
They involve ticking and writing where applicable and others require filling in.

Thank you for your time.

PART ONE; Background Information

l. Sex
Male (]
Female rJ
2. Age
a) 18-24 []
b) 25-29 [)
c) 30-34 [ J
d) 35-39 []
e) Above 40 []
...,
_). Marital Status

a) Single [)
b) Marriage (]
c) Widow []
d) Separated [)
e) Others (Specify) ..................................................................... .

4. Do you have children or dependants?

Yes []
No []

44
 5. Highest level of education
a) Primary level []
b) Secondary []
c) Certificate holder []
d) Diploma level []
e) Bachelor degree []
t) Others (Specify) []

6. Are you involved in any income generating activity?

a) Yes []
b) No []

7. What kind of activity or business are you in?

a) Service []
b) Repair []
c) Carpentry []
d) Market vendor []
e) Any other (Specify)

Your business is in which suburb? ........

PART TWO:

I. What is your main source of capital?

a) Loan capital []
b) Personal saving []
c) Capital from relatives [l
d) Others (Specify)

2. List problems you faced when beginning the business

a)
b)
c)
d)
e)
f)

3. What is the legal status of your business?

a) Registered Company []
b) Unregistered Family Business []
c) Unregistered Personal Business []

45
 4. Name the major products you produce/sell
a) .................................................................................. .
b) ........................... ··• ..................................................... .
c) ................................................................................... .
d) ....................................................................................... .

5. List the type of customers you get

a) ......................................................................................... .
b) ......................................................................................... .
c) ......................................................................................... .
d) ......................................................................................... .

6. How do you get to know customers?

a) Through newspaper advertisements []
b) Through friends' contacts []
c) Through commission agents/brokers [ ]
d) Through exhibitions []
e) Others (Specify) ..................................................................... .

7. Do you advertise your products?

a) Yes []
b) No []

8. What are the sources of raw materials?

a) ......................................................................................... .
b) ......................................................................................... .
c) ......................................................................................... .

9. What problems do you have in getting raw materials?

a) ................................................................................... .
b) ......................................................................................... .
c) ......................................................................................... .

LABOUR

1. Do you have sufficient workers?

a) Skilled workers Yes/No ......... .
b) Unskilled workers Yes/No ............ .
c) On average Yes/No ..
How many workers do you employ? Nos ..

2. \Vhat are the sources of your workers''

a) From schools and colleges []
b) From the locality []
c) From other districts []
d) Others (Speci

46
 3. How do you pay workers?
a) Piece rate rl
b) Per day []
c) Per month fl
4. Do you offer any other fringe benefits for workers'> e.g.
a) Free lunch []
b) Medicalcare []
c) Others (Specify) []

5. Since you opened your business have attended any training courses? Yes/ No .. .
If Yes, which institute and what course did you take? ............................................. .

6. Do you sponsor your staff for training? Yes/

No .......................... .
If Yes, where? .................................................................................................. .

7. Do you get some government officials to train your staff on the job? Yes/ No .... .
If Yes, from which Department/ Ministry ................................................ .

BUSINESS DESCRIPTION

1. When was the business first established?

·Year..

2. ls the premise your own property or you rented it?......................... .............. .

If you rented it, how much is your monthly rent? .................................................... .
Who is the landlord?.... . ..................................................................................... .

3. Do you pay rates as well to K.C.C? Yes/ No............................ . ........ .

How much do you pay if yes? ................................................................................. .
Do you pay income tax to Ministry of Finance? Yes/ No ............................. .
How much do you pay?.. . .......................................................................... .

4. Comment on the amount payable ......................................................... .

5. Why did you select the particular area for business? (Please tick)
a) Near my residence []
b) Availability of skilled/ unskilled labour []
c) Other businesses in the neighbourhood []
d) Its an industrial estate []

47
 e) Availability of electricity []
f) Near the market for raw materials []
g) Availability of transport facility [)
h) Many customers around []
i) Availability of water []
j) Others (Specify) ..

CAPITAL FINANCE AND CREDIT FACILITIES

I. How much was your initial capital (Amount in Shs).

2. From which source did you obtain the initial capita]')

a) Own funds []
b) Borrow from friends and relatives []
c) Loan from bank [J
d) Other sources (State) . . . . . ........ .

3. What limits do you get in expanding your business (Please tick)

a) Limitation of own capital []
b) Limitation of raising a loan []
c) Markets for goods are limited [J
d) Lack of storage facility []
e) Lack of skilled workers []
t) Shortage ofraw materials []

4. Would you say your factory/ business was profitable last year?
a) Very profitable []
b) Profitable []
c) Made a loss []
d) Even []

5. How do you spend the profits earned? (If any)

a) Personal and family needs []
b) Increasing the production (re-invest) []
c) Save it []

6. Do you think you need assistance in respect of (Tick where necessary)

a) Obtaining registration []
b) Obtaining land/ shed []
c) Obtaining more capital (loans) []
d) Obtaining technical staff []
e) Training to keep book of accounts []
t) Training on the job []
g) Getting market for your products []
h) Facilities like water, electricity, etc. []

48
 7. Have you ever been visited by government/ non-governmental organisation on
your business? List name of organisation.
a) Ministry of Labour []
b) City Council []
c) Small Scale Industry Association []
d) Others (Specify) ...
What was the purpose of visit? ..

8. Do you keep records of your business transactions? ................................................ .

9. Are you aware of any banking/ financial institutions that assist small scale
enterprises like yours?.............. . .................................................................... .

10. If Yes, have you ever contacted any for assistance? ................................................. .

11. What type of assistance did you get if any? ...................................... .

PROBLEMS

1. Please list the problems you meet in running your business.

a) ................... .
b) ............ .
c} ............ . ......... .
d)
e)
f)
g) ........ .

2. Do you think the government is helping small-scale industrialists like you? Yes/
No ....
If No, in what ways should government give more help?
a) ... ... ... ... . ......... .
b)
c)

3. Are you a member of any society or organisation? ........................ .

4. What is/ are the functions of your society/ organisation?

49
 , Do you have any businesses besides the one you are doing'!
al .. . ......... . .. .. . . . .. . . . .. . . . . . . .. . . . . . . . . . .. .. . . . . .. . .. . . .. .. .... . . .
b) ... ........ . .... ......... .. ... ........ .. .. .... .... . . .. ......... .... ........ .. .. .. .. .. .... .
c)

6. What advise would you give to other small businessmen like you?

Thank you, for your contribution.

END

50
I INTERNATIONAL
UNIVERSITY
Ggaba Road, Kansanga • PO BOX 20000 Kampala, Uganda
Tel: +256 (0) 41 - 266 813 • Fax: +256 (0) 41 - 501 974
E-mail: admin@kiu.ac.ug • Website: http:/ /www.kiu.ac.ug

Office of the Dean

School of Business and Management

Date: 13 th March, 2006

TO WHOM IT MAY CONCERN

This is to inform you that Miss. Ivona N.Muzanila Reg. BBA/3906/31/DF is a bonafide
student pursuing Bachelor of Business Administration in the School of Business and
Management of this University. Her title·ofthe Research project is;

"CAUSES OF FAILURES OF SELECTED SMALL AND MEDIUM BUSINESSES

AT KABALAGALA AND KANSANGA, UGANDA"

As part of her studies' (research work) she has to collect relevant information through
questionnaires, interviews and reading materials from your place.

In this regard, I request you kindly to assist her by supplying/ furnishing her with the
required information and data she might need for her research project and also by filling up
the questionnaire.

Any assistance rendered to her in this regard will be highly appreciated.

"Exploring the Heights"