STRATEGIES FOR DEVELOPMENT OF RURAL ECONOMY

Research Question 1. Does the MUNAFA fund have an impact on SMEs’ performance? 2. What is the volume of loans granted by MFIs to SMEs? 3. What are the challenges SMEs face in assessing Micro-Credit? 4. What is the rate at which SMEs borrow from MFIs as against other sources of capital? 5. How efficient is the MUNAFA Fund in Supporting Small Businesses? Research Methodology The Mix Method Approach is used for this research. Data analysis was done using the Mixed Method Approach as the data collected was both quantitative and qualitative in nature. The quantitative data analysis was done by using descriptive statistics and the qualitative data analysis was done using the descriptive research method. A sample size of 120 potential respondents was identified using random sampling techniques. However, only 107 respondents consented to take part in the survey which constituted 89.17% of the total respondents. Data Collection Data collected for the study comprised both primary and secondary data. Primary data consists of data gathered from selected SMEs within the scope of the research field. This was done with the use of an interview guide and well-designed questionnaires. Face-to-face interviews characterized the data-gathering sessions on the field with owners of these selected businesses. Additionally, further information gathered from the individual MFIs was added to the set data gathered as primary data. The secondary data was obtained from the financial records of the two microfinance institutions under study and their existing data on granting loans to SMEs. The study was undertaken using the purposive sampling technique, the research covered strictly the two MFIs and their respective client. Theoretical Review The development of financial institutions in Africa can be traced back to the 16th Century when the tribe Yoruba in Nigeria formed Esusu which was a Rotating Savings and Credit Association (RoSCA) Microfinance, on the other hand, developed gradually and gained expansion from the narrow field of micro-credit. Microfinance as a tool of economic development springs from the banks’ lack of interest in low-income customers and experts who were well-informed about the successes of the market-oriented approach to microfinance in the 1980s and the early 1990s were rather skeptical about down-scaling projects. However, the development of microfinance started on a small scale in 2002 in Sierra Leone,with a number of providers using different models and approaches to provide microfinance. Sierra Leone is 98

said to have a relatively long history of government initiatives to promote and finance, small and medium enterprises (SMEs). The contributions of these SMEs to the economic development and growth of Sierra Leone are substantial, especially in the area of employment. Microfinance as a tool of economic development springs from the banks’ lack of interest in low-income customers and experts who were well-informed about the successes of the market-oriented approach to microfinance in the 1980s and the early 1990s were rather skeptical about down scaling projects, focused on the results of institution-building in microfinance and the conclusion of the research was “The most significant observation must be that non-profit institutions (including public sector and non-governmental organizations) appear to have a comparative advantage over for-profit institutions in providing formal financial sector services to poor people” Previous research reveals that entrepreneurship generates economic growth. There are pieces of evidence in the microfinance literature that proffered microfinance as one of the solutions for global poverty alleviation over the past three decades and this assertion has brought microfinance into the limelight, particularly in achieving the Millennium Development Goals (MDG) of halving global poverty in 2015. Microfinance addresses the banking system’s failure in breaking the vicious circle of poverty by financing the poor who could not meet the rigid conditions of banks’ demands for access to financing; this category of poor people who are referred to as ‘unbreakable are excluded in accessing financing or loans from the banks as they are classified by the formal banking sector as risky to be provided with loan facilities or financing without collateral. In addition, the request of the poor for small loans is deemed unprofitable by the banks observed that in the past decade, microfinance programs have demonstrated that it is possible to lend to low-income households while maintaining high repayment rates--even without requiring collateral. The programs promise a revolution in approaches to alleviating poverty and spreading financial services, and millions of poor households are served globally. A growing body of economic theory demonstrates how new contractual forms offer a key to microfinance success--particularly the use of group-lending contracts with joint liability high repayment rates have not translated into profits, and studies of impacts on poverty yield a mixed picture. On the other hand, research stated that MFIs serve households that are either just below the poverty line – ‘the richest of the poor’ – or just above the poverty line – ‘the poorest of the rich’ – in its strive to be profitable, developed a framework that encompasses both the poverty approach to microfinance and the self-sustainability approach. The poverty approach assumes that great depth of outreach can compensate for narrow breadth, short length, and limited scope. The self-sustainability approach assumes that wide breadth, long length, and ample scope can compensate for shallow depth. The research further stated the depth of outreach and 99

financial sustainability are like conflicting objectives thus a trade-off exists: outreach is only attained by sacrificing financial sustainability or by relying more on donations or subsidies. He suggested MFIs strive for breadth, scope, and length aspects of outreach instead of depth and others similarly focused on this trade-off. Microfinance sustainability is of equal importance as MFI is expected to be operational in the long term for it to have a significant impact on the poor and sustainability is defined as the permanence or the MFI’s ability to sustain its micro-credit and other operations as a viable financial institution suggested that MFIs can sustain their profitability by not lending to the poorest, given the higher cost per dollar of loan, but to the ‘less poor’ instead as overall welfare will improve. In addition, this study argued along with Ahmed, that microfinance is actually a response to the failure of trickle-down development policy to alleviate poverty in most developing countries, owing to asymmetric information. In addition Cull observed that Microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries, but high repayment rates have not translated easily into profits for most micro finance banks. Profitability, though, is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidies observed the widespread belief that the social and financial objectives of microfinance operate in opposition to each other and questions the assumption that trade-offs between financial performance and social impact are inevitable and fixed, and provide a framework for increasing performance for social objectives in even the yield-orientated microfinance institutions (MFIs); thus MFI can and should manage objectives trade- off. This is in contrast to the earlier ‘win-win’ vision of MFIs which rapidly reach scale and outreach bringing about positive impacts on large numbers of the world’s poor people, whilst at the same time becoming financially self- sufficient and therefore no longer dependent on external funding. Furthermore, among others, empirically observed that both outreach and financial sustainability can be pursued in best-practice support the view that the impact of subsidies on the efficiency of microfinance institutions (MFIs) is a key question in the field, given the large volume of subsidies received by Microfinance institutions (MFI) has unique characteristics wherein they face double bottom line objectives of outreach to the poor and financial sustainability while observed that the primary justification for subsidizing Microfinance Institutions (MFIs) is their enhancement of social welfare by extending credit to the poor households. Therefore, the recent emphasis on their financial self-sufficiency has created concern, that this may adversely affect the mission of social outreach. The advocates of microfinance argue that access to finance can help substantially reduce poverty, Research shows that women are more reliable and have higher pay- back ratios. Moreover, women use a more substantial part of their income for the health and education of their children. which contribution is seen as the most important (improvement of income, accumulation of assets, 100

empowerment of women, etc.). The latter issue deals with the question of to what extent subsidies to microfinance organizations are justified. Most studies aiming at evaluating the impact of microfinance address the first of the above three issues. Even though several assessments of the impact of microfinance on poverty reduction have been made, there is surprisingly little solid empirical evidence on this issue. The major problem with respect to investigating the impact of microfinance is how to measure its contribution to poverty reduction. Several studies measure the impact of microfinance by comparing recipients of microfinance with a control group that has no access to microfinance. In most cases, these studies apply non-randomized approaches. These approaches may be problematic, however. The changes in the social and/or economic situation of the recipients of microfinance may not be the result of microfinance. For instance, it is well-known that relatively rich agents are less risk-averse than relatively poor agents. This may induce rich agents to apply for microfinance whereas poor agents do not apply, that is, there may be a self-selection bias. In this situation, an ex-post comparison of the income of the two groups may lead to the incorrect conclusion that microfinance has stimulated income. In addition, in order to improve the probability of microfinance being successful, MFIs may decide to develop their activities in relatively more wealthy regions (i.e., nonrandom program placement). Obviously, this biases any comparison between recipients of microfinance and the control group observed that Impact assessment studies are of increasing interest to donor agencies. While the goals of IA studies commonly incorporate both ``proving'' impacts and ``improving'' interventions, IAs are more likely to prioritize the proving goal than did the evaluations of the 1980s. Explicitly, IAs are promoted by both the sponsors and implementer of programs so that they can learn what is being achieved and improve the effectiveness and efficiency of their activities. Implicitly, IAs are a method by which sponsors seek to get more information about program effectiveness than is available from the routine accountability systems of implementing organizations. IAs are also of significance to aid agencies in terms of meeting the ever-increasing accountability demands of their governments (in this era of ``results'' and ``value for money'') and for contesting the rhetoric of the anti-aid lobby. While recipient agencies benefit from this, they are one stage removed, and many are likely to see donor-initiated IA as an activity that has limited practical relevance for program activities. Based on the theoretical review of our study it is crystal clear the literature on microfinance is mixed, however, different approaches have been used to arrive at different results, and in some cases, the same approaches were used as an extension of previous studies. Some studies critic the results of other researchers. The purpose of this research is to determine the impact of Microfinance on the growth of Small and Medium Scale Enterprises in the Western Urban areas in Sierra Leone. As the study on impact has been significantly endorsed in the Microfinance literature hence its study in Sierra Leone is eminent. 101

The Concept of SMEs in Sierra Leone In Sierra Leone, available data from the Registrars’ General Department indicated that 80% of companies registered are micro, small, and medium enterprises. This target group has been identified as the catalyst for the economic growth of the country as they are a major source of income and employment. Data on this group is however not readily available. The Ministry of Trade and Industry estimated that the Sierra Leonean private sector consisted of approximately 16,000 registered limited companies and 22,000 registered partnerships. Generally, this target group in Sierra Leone is defined as: 1) Micro enterprises–they are businesses that employ up to 5 employees with fixed assets (excluding real estate) not exceeding the value of $10,000; 2) Small enterprises–are businesses that employ between 6 and 29 employees with fixed assets of $100,000; and 3) Medium enterprises–they are business entities that employ between 30 and 99 employees with fixed assets of up to $1 million. The definition of Small and Medium Enterprises Development Agency in Sierra Leone applies both the ‘fixed asset and a number of employees’ criteria; hence, it defines a Small Scale Enterprise as one with not more than 9 workers with ownership of plant and machinery (excluding land, buildings, and vehicles) not exceeding 10 million Leones (an equivalent of USD 600). Purposes of Establishing SME In establishing SMEs, various objectives are taken into consideration before establishment before the SME becomes operational. When respondents were asked about these objectives; varied objectives were given such as summarized below: ❖ To generate income to support their family’s well-being. ❖ To serve the community. ❖ To support the growth of the Sierra Leonean economy ❖ To create employment opportunities for other Sierra Leoneans ❖ To be self-employed Discussion The data collected was analyzed to inform our discussions, conclusions, and recommendations to practice and further research. The study had a sample population of 120 potential respondents identified for the questionnaires. However, only 107 respondents consented to take part in the survey. During data entry and cleaning, it was realized that 9 respondents gave 102

contradicting and inconsistent data which led to the study eliminating them from the analysis of the study data. The remaining 98 respondents were considered valid and their responses were analyzed in the study giving a valid response rate of 81.67% was considered sufficient for the analysis. The questionnaires distributed were divided into two categories, one category for SMEs and the other for MFIs. A total of 120 questionnaires were distributed for responses and from the 120 questionnaires given to respondents, 107 were received representing an overall response rate of 89.17%. However, as the result of 9 respondents contradicting and inconsistent data the data analysis was directed at 98 respondents made up of 2 completed questionnaires from MFIs and 96 questionnaires collected from the SMEs. Table 1 indicates the analysis of valid data collected (valid data refers to the 98 respondents after data clean-up). Analysis of Responses (SMES and MFIS) Category Questionnaires Responses Responses Rate in Percentages SMEs 118 96 80.00% MFIs 2 2 1.67% TOTAL 120 98 81.67 Source: Designed By Researchers (March 2023) The analysis of research questions based on evidence drawn from our respondents was done chronologically and understandably Research Question is referred to as: R.Q 1. Does the MUNAFA fund have an impact on SMEs performance? The responses from the respondents show that have a positive impact on the performance of SMEs. When SMEs were asked whether the existence of Munafa Funds has had any impact on their business, it was found that the majority of them, precisely, 78 percent recorded a positive impact as the Munafa Fund assisted the growth of their businesses also lead to the increase in the number of employees, and were able to meet family needs, while 12 percent of businesses remained unchanged but accentuated to stability in their businesses. This analysis is shown in Figure 1. However, none of the respondents indicated a negative effect of the existence of MFIs on their business but all the respondents accentuated stability as a positive indication of MFIs’ impact on SMEs and this helps to reduce the poverty burden. The women respondent within the stability category further explains that with access to the Munafa Fund, they were able to meet the needs of their children in school, provide meals at home, and were able to maintain a stable business. Our findings are consistent with previous research which revealed that access to finance helps substantially reduce poverty. 103

Source: Designed By Researchers (March 2023) R.Q 2: What is the volume of loans granted by MFIs to SMEs? The study shows that the majority of SMEs are granted the total amount they applied for. Ninety-four percent (94%) of the studied sample were granted exactly 100% of the loan they applied for while 4 percent of the SMEs also being granted between 75-99% of the loan and the reminding 2 percent of the total sample was given less than 50% of the loan they applied for. The analysis of access to MFIs by SMEs is further shown in Figure 2. However, the general response from the beneficiaries shows a period of uncertainty in the granting of loan facilities. Source: Designed By Researcher (March 2023) R.Q 3: What are the challenges SMEs face in assessing Micro-Credit? The accessibility to credit facilities was predominantly found in accessing short term with a 54% rating whereas 44% of the respondents indicated they wanted to have a medium-term credit facility from the MFIs and 2 percent requested long-term credit facilities. The majority of the respondents have 104

been successful in almost all of the loans they have applied for. Short-term credits dominate in MFIs however, microfinance finds it very risky to offer medium and long-term credit as loan defaults are likely to be higher with such facilities. In addition, the need for short-term credits is driven by the fact that most SMEs use their loans to finance recurrent expenditures incurred in the day-to-today running of their business. The access to MFIs through the Munafa Fund even though quite remarkable has numerous challenges which mostly discourage SMEs from accessing credit when the need arises. Available data from the various respondents brought to the fore several challenges they face in accessing the loans. These challenges were categorized into: Delays in Loan Processing, Entire Process being Cumbersome, and Required Collateral displayed in Figure 5. As shown, 55% of respondents had issues with delays in the processing of loans by MFIs with regard to duration which can linger from several to weeks into months. The findings also showed that 35% of respondents saw the entire process as quite cumbersome owing to the numerous documentation and other clerical processes SMEs needs to pass through before securing the facility. The remaining ten percent (10%) had difficulty in securing the required collate. As common to many schemes, especially with respect to financial institutions, accessing credit facilities come with its own challenges that impede the process and hinder the full potential of utilization of credits granted however, if such challenges are not addressed considering the sensitivity to how microfinance institutions design their appropriate products and services, as well as the efficiency and effectiveness involved in creating the appropriate products and services the microfinance institutions can lose their customers if their needs are not satisfied. 105

R.Q4: What is the rate at which SMEs borrow from MFIs as against other sources of capital? SMEs need credit for varied purposes this could either be for business expansion or credit obtained used for other purposes rather than for business expansion. The issue of credit requests and intended purposes received varied responses from SMEs as some needed recapitalization as often as possible. As indicated in Table 3, the research pointed out that 58 percent of respondents did not often need loans as compared to 34 percent who often required loans. The minority consists of 6 percent of respondents who require loans very often. This analysis gives credence to the fact that even though beneficiaries of MFIs do need credit most of the time for their business they do not apply for loans as many times as the need arises. Also, the researchers also found that SMEs hesitate in applying for credit as often as they need them due to the high interest rate associated with the facilities given to them and the difficulties they face in satisfying some prerequisites needed for the credit facility Summary of Key Findings Contribution of SMEs within Freetown Municipality The contribution of the SME sector to the economy in terms of employment creation cannot go unnoticed. The various SME sub sectors such as; Manufacturing, Service, Commerce, and others. Commerce i.e. buying and selling vastly dominates the SME sector (93%) according to this research. The research reveals that little investment is required to initiate and run such businesses in addition, they do not require any supervisory procedures. The research shows clearly that a large majority of the SMEs i.e. 72% in the Freetown Municipality area are operating at a Micro stage as they hire the services of six or fewer staff in their various businesses. The sector though with a huge potential for growth is however faced with a huge capital constraint. Micro Financial Institutions have come to surmount this money constraint by providing start-up capital, as most respondents indicated MFIs to be their chief source of start-up capital according to the research. MFIS Contribution to the Business Activities of SMEs The research findings establish the enormous contribution of Micro Finance Institutions (MFIs) to the growth of the SME sector to curb the issue of capital constraints since most SME entrepreneurs indicated they could not readily access credit from traditional banks. These contributions are enumerated as follows: 106

Better Access to Loans In this research, it was indicated that about 99% loans requests of most SMEs were granted by the MFIs. Most of the SMEs were in the micro stage of operation and some were even newbies in the business, therefore, they required small loans also a lot of the SMEs dealt with more than a single MFI. These loans facilitated an increase in their capital base thus their businesses. MFIs have created an attractive platform that allows Microbusinesses to save the little income they earn on a daily basis with little cost. The savings accumulated are the basis for the number of loans to be granted. With this background, the habit of saving has been improved through such activities of MFIs. Business, Financial, and Managerial Training MFIs have provided support services for SMEs in the form of business, financial and managerial training. As most SMEs lack the requisite knowledge and some have little knowledge in financial management, this sort of training had beneficiaries make informed financial decisions. In addition, 86% of the respondents indicated that the general services offered by MFIs have had a progressive result on their various businesses of SMEs. Challenges SMES to Access Loans The research exposed some of the major challenges SMEs had to overcome in their bid to access meagre loans for their business as most respondents reiterated; these are delay in processing as most documents took a longer time than usual to process. Cumbersome procedures had to be overcome as most entrepreneurs in this sector were semi-literates and so filling of loan application forms proved to be difficult. Some of the SME respondents find the process of accessing credit as cumbersome and the synopses of these challenges are: ❖ In ability to provide the collateral securities in cases where they are demanded. ❖ High interest rate was mentioned as one of the challenges faced in accessing credit. The high interest rates in most cases make clients unable to repay their loans. The MFIs on their part provided some of the challenges they also face in granting credit. These are: Problem of repayment of loans ▪ Lack of collateral security required on the part of the SMEs ▪ Poor records keeping on the part of the SMEs ▪ Lack of transparency in the business accounts and related business information ▪ Lack of proper documentation in terms of business registration and a permanent business 107

address Credit Utilization Rates The research shows that 72% of SME respondents used the loans for the intended purpose and this brought about a major growth in the SME sector. It also stabilizes the operations of the MFIs for progress and better services. However, 28% of respondents misapplied the loans, which meant inability to achieve growth in business. This misapplication of business loans defeats the purpose of MFIs; in the worst case clients would be unable to repay loans there by causes a steady rise in loan percentage default and the need for collateral securities for even meagre loan requests. Conclusion and Recommendations The research on the impact of MFIs on SMEs revealed an up surge of Micro Finance Institutions within Freetown municipality proved very progressive notwithstanding the associated challenges. It is worthy to note that the operations of MFIs have curbed the major challenge of the SME sector to a very large extent such as ready access to loans. The research findings also show that the MFIs have contributed to the development of SMEs through the delivery of non-financial service such as Business, Financial and Managerial training programs. Microfinance Institutions have largely established and developed the area of revenue mobilization with their saving schemes which has brought savings to the door steps of the clients, the readiness to receive meagre amounts on a daily basis and above all less costly. This has enhanced the savings habit of the sector as little revenue recipients who were unable to save with the commercial or traditional banks are offered a big opportunity to save. This has aided in reinvestment of the capital saved .It is also worth mentioning that MFIs provide better access to loans than the traditional banks to the poor. As the upsurges of MFIs in Freetown Municipality have improved the activities of SMEs tremendously, the research reveals however that MFIs are faced with few challenges that can undermine their purpose of making loans easily accessible to SMEs. It is worthy to highlight these challenges. The research shows that a good number of MFIs require collateral security before loans are granted and this has an adversely effects on SMEs as some are unable to provide the collateral requested. Some members of the SME sector misappropriated their loans for non-business purposes. In the midst of these challenges, the research SMEs within Freetown Municipality have tremendously progressed as the sector and have provided entrepreneurs with a solid financial support. We proffer the following recommendations to improve service of MFIs within Freetown Municipality and also sustain the progress and improve the growth of the SME sector. The growth of SMEs does not only rely on access to loans but also the creation of favorable 108

and formidable business environment The MFIs have a great responsibility of making sure that proper use of loans for the purposes intended facilitates business acceleration. This can be achieved by making credits or loans client-oriented and not product- oriented. Also, appropriate and wide spread monitoring activities should be provided for clients who are granted loans to sustain MFI operations and enhance the growth of SMEs. The MFIs could be swift to measure check successes by considering factors like high rates of loan repayment, client outreach, and financial sustainability, however, these cannot be considered a success if these activities are not replicated in the progress of the SMEs. The Micro Finance Institutions can research very profitable business lines and grant loans to clients who have the capacity to capitalize on such business lines in order to reduce default rates. The MFIs provide business and financial training on a regular basis and in most cases tailor-made toward the training requirements of their clientele. In addition recommendations for the future researcher is; An investigation into the default of Microfinance Loan in Sierra Leone; An Exploratory Research on the Slow Processing of Microfinance and its Impact on SMEs. Research Ethics There are no foreseen ethical issues involved in this research. 109

Impacts of Microfinance Institutions on the Development of Small and Medium Enterprises in Sierra Leone - A Case Study of Lapo Microfinance Institution Makeni Branch Mr. Mohamed Wurie Kamara, Assistant Secretary, Human Resource Management Office (HRMO), Sierra Leone E.mail: [email protected] ,Phone: +23277243155 ABSTRACT A well-functioning and developed Small and Medium Enterprises (SMEs) sector is a function of economic growth, which is according to economic theory. According to Kalu (2018), this sector of Sierra Leone economy lacks the funds to finance its activities towards contributing to the growth and development of the Sierra Leone economy. This is a result of the fact that, the Micro, Small and Medium Enterprises (MSMEs) that are operating in this sector of Sierra Leone economy are unable to access the financial services of the money deposit banks in the country. This is so because, these money deposit banks in the country (Sierra Leone) avoid doing businesses with these enterprises as they believe that, the risks and associated cost of doing businesses with these enterprises are considerably high due to inability of these enterprises to supply the required collateral securities for money deposit banks loans and advances as well as, the associated costs of operating accounts and carrying out transactions with these enterprises. Therefore, those enterprises are left at the mercy of the funds the entrepreneurs of these enterprises were able to raise themselves either through their personal savings or through borrowings from friends and relatives for the financing of their business activities. As such, the development of this sector is impaired due to this problem of lack of adequate funds to finance every viable business idea that could contribute to the development and growth of the economy. Introduction The main purpose of this research is to investigate the impact of Microfinance Institutions on the development of small and medium enterprises in Sierra Leone. A case study of Lampo Microfinance 110

and microcredit are relatively new terminologies in the field of development owing to the fact that their coming to prominence was in the 1970 (Robinson 2009). Before this time, in the 1950 through to 1970 the provision of financial services by Government or donors was done in the manner of subsided rural credits programmes, which ended with high loans default, high losses and an inability to reach the poor households. As time passed by, 1980 became the turning point in the Microfinance industry as Gramen bank and BRl began showing as institutions that can provide small loans and saving services that are profitable on a large scale. They stop receiving subsidies owing to the fact that they were commercially funded and fully sustainable and could impact a wide outreach to customers/ clients. The term "micro-credit" came into existence in development during this time. It differs from the subsided rural credit programmes of the 1950 and 1960 as micro-credit is based on repayment by charging interest rates that covers the cost of service delivery and its centre focused was on customers/clients who depend on the informal sector for credit. In the 1990 "saw accelerated growth in the number of microfinance institutions created and an increased emphasis on reaching scale" (Robinson 2001). Dichter (1991) refers to the 1990s as "the micro finance decade". However, microfinance is now seen as an industry that has its growth in Micro-credit institutions which changed from the provision of credits to the poor people and to the diversification of other financial services such as savings and pensions when they notice the poor also a demand for these services. Microfinance, according to Otero (1999) is “the provision of financial services to low- income poor and very poor self-employed people”. These financial services according to Ledgerwood (1999) are generally made up of savings and credit but can also include other financial services such as insurance and payment services. According to Schreiner and Colombet (2001) Microfinance is “the attempt to improve access to small deposits and small loans for poor households neglected by banks. Therefore, microfinance involves the provision of financial services such as savings, loans and insurance to poor people living in both urban and rural settings who are unable to obtain such services from the formal financial sector. Brac is a micro finance institution that was founded by fazle hassan abed in 1972 in sulia in the district of sylhet bangladesh in the aftermath of the war of independence in 1971. Brac began as a small-scale relief and rehabilition project in 1972 aimed at helping people overcome the devastation and trauma of the war. After some years Brac started redirecting its effort towards long term issues of developing small business and empowerment. Today Brac is the largest development organization in the world today in terms of the range and scope of its programs and the 111

size of its workforce. Lampo pioneering holistic model of development. By the end of 2010, Lampo, Sierra Leone reached over six hundred and twenty thousand eight hundred and seventy thousand, eight hundred and seventy four (620874) sierra Leoneans with their activities. Lampo provides regular job for four hundred and nine sierra Leonean (80%) and support six hundred and eight (608) local volunteers whose capacity was built, maintained and expanded through training and supervision. Lampo Sierra Leone continues to grow and is expected to reach out to more than nine hundred and seventy thousand, eight hundred and seventy four (970874) micro finance members, majority were woman owners of small business enterprises. Micro credits and micro finance are relatively new terms in the field of development , first coming to prominance in the 1970s according to robinson (2001) and oterio (1999). Prior to them, from the 1950s through the 1970s, the provision of financial services by donors or governments was mainly in the form of subsidized rural credits programmes . These often resulted in high loan defaults , high losses and inability to reach small business enterprises. (marguerite robinson, 2004) states that the 1980s represented a turning point in the history of microfinance in that MFIs such as grameen bank and BRI began to show that they could provide small loans and savings services profitability on a large-scale outreach. They received no continuing subsidies, were commercially funded and fully sustainable and could attain wide outreach to clients (robinson, 2001). It was also at this time that the term "micro credit" came to prominence in development (microfinance information exchange 2005). The difference between micro credit and the subsidized rural credit programme of the 1950s and the 1960s was that micro credits insisted on repayment, charging interest rates that covered the cost of delivery and by focusing on clients who were dependent on the informal sectors for credits (bid). It was now clear for the first time that micro credits could provide large-scale outreach profitability. The 1990s saw accelerated growth in the numbers of micro finance institutions created and increased emphasis on reaching scale" ( robinson, 2001). Micro finance had now turned into an industry according to robinson (2001). Along with the growth in micro credits institutions, attention changed from just the provision of credit to the poor (micro credit) to the provision of other financial services such as savings and pensions (micro finance) when it became clear that the poor had a demand for these other services (micro finance information exchange, 2005) The establishment of small business enterprises started as far as the inception of the barter system. It started in anthems-greece around 500 BC. Around this time, people had surplus products waiting to 112

dispose of them for other products, as this continued, others developed the idea of getting different products and later exchanging them to those who may have the need for the products. This idea spread through the world in the 18th century, it came to Africa when slave trade introduced in Africa when slave trade was introduced in Africa where people where exchange for materials things like guns, gun powder, tobacco and others. In the middle of the 15th century. This trade came in Sierra Leone when slaves were bought from different parts of the world and packed at bunce island for shipment to South American sugar cane plantations. The challenge therefore is to evaluate and ascertain whether these MFIs have created a positive or negative impact to the economic activities of the population through the creation of accessible sources of funding to the small business enterprises as well as individuals at less stringent conditions. The background above sets the basics for the study. Statement of the Problem The expectations of the smallest businesses to raise funds from the formal financial institutions after taking-off with personal savings, assistance from friends or relatives and loans from informal lenders are cut short. Smith (2018) stated the following as the problems the MSMEs are facing in the hands of formal financial institutions; the perception of MSMEs as high risk, Inability of the MSMEs to prepare acceptable/bankable business plans, Discriminating cultural practices, which at times make it impossible for women to borrow and High transaction cost of servicing small and medium enterprises often scattered loans. Therefore, how then is the development of SMEs in Sierra Leone impaired by these listed factors? Also, of what relevance are these listed factors to the topic of this project work? Aim The purpose of the study is to evaluate the impact of microfinance Banks on small and medium business enterprises in Sierra Leone. Objective of the Study ● To know the impact of Microfinance Banks on small and medium enterprises in Sierra Leone. ● To find out the impact of small and medium enterprises in the economic development of Sierra Leone. ● To investigate the problems facing the microfinance institutions industry in Sierra Leone. 113

Research Questions The study was guided by the following research questions ● What is the impact of Microfinance Banks on small and medium business enterprises in Sierra Leone? ● What is the impact of small and medium enterprises in the economic development of Sierra Leone? ● What are the problems facing the Microfinance industry in Sierra Leone? Significance of the Study Small Business enterprises are very important to communities for they provide goods and services needed by the communities. When these business enterprises are well managed, they will definitely grow to big enterprises, but if poorly managed because of inadequate knowledge of managing business enterprises, it will lead to a failure and absolute collapse of the business. However, carrying a study on this topic is of great importance to different people and or groups in different ways as follows: To the researcher, the study will widen his knowledge on the topic in question by reading many books written by different authors. The researcher will also be exposed to a wealth of experience in SME's operations. The study will also benefit other researchers as they will use this as a reference guide to other related research they may want to undertake in future. Small Business holders will benefit immensely from this research because the findings and recommendations will help improve on their skills in managing business enterprises. When these holders benefit from the study, they will in turn benefit the community because the required gods and services will be appropriately delivered. Scope of the Study The scope of this research work will cover the various financial services provided by Microfinance institutions to small and medium enterprises. The study will further cover the contributions of small and medium enterprises in Sierra Leone. 114

Limitations of the Study In every research process there is a bond of limitation. As a researcher who aims at presenting a well-balanced research study is no exception. My research is limited to the following: Financial constraints: this is one of the major problems that I faced while undergoing the research process due to the limitation of finance. The researcher has to work by foot in order to source information from the micro finance institutions and small business enterprises. The other constraints I encounter is the typing and printing of this work. Time: time is also another major constraint I encounter while in the process of research. I am very busy at campus for the whole week to find it difficult as to catch with small business and the banks when the later does for half day or not at all Attitude of business people: the attitude of small business is also another constraint faced by the researcher, taking into considerations their state of business makes hardy speak to me more especially responding to questionnaires. Small Business enterprises are very important to communities for they provide goods and services needed. Definitions of Terms Microfinance: It is defined as an array of financial services, including loans, savings and insurance, available to poor entrepreneurs and small business owners who have no collateral and would not otherwise qualify for a standard bank loan Enterprise: This can be defined as any institution or organization that is set up to carry out business activities with the aim of making profit and satisfying public wants. Small and Medium Enterprises: They are enterprises that employ a small number of workers and do not high a high volume of sales. Such enterprises are mostly privately owned and operated sole proprietorships, corporations or partnerships. Money Deposit Bank: 115

They are resident depository corporations and quasi corporations which have any liabilities in the form of deposit payable on demand, transferable by cheque otherwise usable for making payment. MFI- Microfinance Institutions BRI - Bank Raykat Indonesia MFB: Microfinance Bank Enterprise – an organization created for business ventures Customer/ Clint – a person or organization that obtains goods and services Review of Literature Reviews on the Impact of Microfinance Bank On the Profitability of Small & Medium Business Enterprises Olaitan (2005) defined microfinance as ''the provision of credit, savings repositories and other financial services to low income earners or poor households to create or expand their economic activities to improve their standards of living''. Singha (1998) states " micro credits refers to as small loans, where as micro finance is appropriate where NGOs and MFIs supplement the loans with other financial services( savings, insurance). Therefore micro credits are a component of micro finance in that it involves providing credits to small businesses. But microfinance involves additional non-credits financial services such as savings insurance, pensions and payment services (osusu credit 2005). The provision of micro finance services focuses on three core dimensions of poverty alleviation. The MFBs offer enterprises development facilities by assessing people, individually and in groups to access financial services to start and grow enterprises which can sustain them and their families above the poverty line. This is mainly through the access to micro credits services for building up self employment in forms of loans at interest free, low interest and market rates (Rogaly 1999). Concept of Microfinance The concept of microfinance is not new. Savings and credit groups that have operated for centuries include the "Susus" of Ghana, "chit funds" in India, "tandas" in Mexico, "arisan" in Indonesia, "Cheetu" in Sri Lanka, "tontines" in West Africa, and "pasanaku" in Bolivia, as well as numerous savings clubs and burial societies found all over the world MFIs can assist individuals and groups to become more financially secure. Savings can also act as guarantee against outstanding loans and are mandated payment especially for emergencies. 116

Mbaguta, H. (2002) stated that “Formal credit and savings institutions for the poor have also been around for decades, providing customers who were traditionally neglected by commercial banks a way to obtain financial services through cooperatives and development finance institutions''. One of the earliest and longest-lived microcredit organizations providing small loans to rural poor with no collateral was the Irish Loan Fund system, initiated in the early 1700s by the author and nationalist Jonathan Swift. Swift's idea began slowly but by the 1840s had become a widespread institution of about 300 funds all over Ireland. Their principal purpose was making small loans with interest for short periods. At their peak they were making loans to 20% of all Irish households annually. Other micro finance services that are offered by MFBs include provision of; financial literature by training people to develop basic competencies which can be used to guide their assets. Lapo conduct training for their client to have background information on the activities of micro finance institutions being worn by misusing the already available resources. Counseling and financial management which help people develop debt management skills to avoid loan defaulting which can lead to loss of the securing assets or collateral security. According to the International Journal of Economic Development Research and Investment, microfinance institutions are meant to speed up the rate of economic growth and development. This is because, the public have neither the funds nor technical ability to invest in small and medium enterprises (SMEs) which is most time considered as the driving force in economic development, together with the fact that, they are unwilling to do so as a result of their regard for quick profits which are readily or obtainable elsewhere. Developing countries like Sierra Leone, at various stages of development are unable to raise enough domestic resources to meet their development goals. This situation results from a low level of aggregate income, which limits the level of saving and finally loanable funds for investment projects such as small and medium enterprises. The role of Micro Finance Banks in developing Small and Medium Enterprises in Sierra Leone is not to be underestimated. According to Adamu, 2015 a key characteristic of small and medium enterprises (SMEs) over the world is that they are generally managed and controlled by their owners either as sole proprietorship or partnership. SMEs are also largely local in their areas of operation. They greatly depend on internal sources of capital and are reasonably small in size within the industry. Small and Medium Enterprises (SMEs) are a major driving force in the private sector of the Sierra leone economy, but majority of these enterprises are starved with funds. According to UNCDF (2004) Microfinance has a very significant role to play in development 117

according to proponents of the concept of microfinance. Many studies have shown that microfinance plays three key roles at the heart of development which includes the following: ● It helps very poor households meet basic needs and protects against risks, ● It helps in making improvements in household economic welfare, ● It helps to empower women by supporting women’s economic participation and so promotes gender equity. REVIEW ON THE IMPACT OF SMALL AND MEDIUM ENTERPRISES IN THE ECONOMIC DEVELOPMENT OF SIERRA LEONE The small business administration defines a small business as one that is independently owned and operated, is not dominant in its field, and meets employment or sales standards develop by the agency. For most industries these standards are as follows. This also shows the same trend as in Sierra leone, although the exchange value makes the financial criteria to be different. The small scale enterprise sector is a major economic sector in most African countries including Sierra leone. As indicated by Kuteyi (2013), small and medium enterprises drives their country’s development as they create employment and contribute to the gross domestic product (GDP). In the opinion of Ariyo, (2008); Ayozie and Latinwo (2010) and Muntala et al (2012), there is the greater likelihood that SMEs will utilize labour-intensive technologies thereby reducing unemployment particularly in developing countries and thus have an immediate impact on employment generation. Small and Medium Enterprises are expected to facilitate the growth and development of human and capital resources towards general economic development and the rural sector in particular According to Arewu and Adeyemi (2011), Small and Medium Enterprises have been considered as the engine of economic growth, and that the major advantages of the SMEs is their employment potential at low capital cost. This is because the SMEs are relatively more labour- intensive than large enterprises. SMEs official or unregistered (shadow economy) that have become important sources in the provision of employment as well as value added. One can highlight the long-term economic effects of SMEs as: As pre capital income increases, the contribution of SMEs to GDP and employment increases. As per capital income increases, the contribution of the unregistered economy decreases. Registered and unregistered SMEs together contribute about 60%-70% to GDP on average. However, as GDP increases, the share of the unregistered economy decreases. 118

SME development depends on a number of factors. In broad terms they can be outlined as: Macroeconomic factors Business environment Growth opportunities Historical determinants REVIEW ON THE NATURE OF FINANCIAL SERVICES OFFERED BY MICROFINANCE BANKS TO SMALL AND MEDIUM BUSINESS ENTERPRISES. Auren and Krassowska, (2004) indicated that “the provision of micro-finance services can be facilitated by business development services. These services can help build financial and business management capacity of rural households, improve their technical skills, provide local support services for enterprises with emphasis on marketing, and establish linkages between forest communities and micro-finance services. Business development services should grow with the development of small-scale enterprises and cater to their evolving needs”.For instance, microfinance institutions should provide business development services for improving access to micro-finance are: training of rural households in funds management, loan application, bookkeeping and accounting; preliminary loan appraisal of small-scale enterprise financial planning; consolidation of small individual proposals into a bankable portfolio of forest-based enterprise plans; and support to micro-finance institutions for monitoring and supervising the implementation of small-scale enterprise activities. Business development services can also help micro-finance institutions to assess risks related to small-scale enterprises. Embedded services such as training to producers and quality control, provided by buyers of commodities, can also positively improve access to micro-finance services by increasing microentrepreneurs' skills and the marketability of their products. MICRO CREDIT SERVICE According to Thomas (2003) explained that “Micro-credit consists of small loans provided to poor households or micro-enterprises. Micro-credit is normally characterized by standardized loan products with short maturities, limited amounts, fixed repayment schedules and high interest rates. Most micro-finance institutions require potential borrowers to save before applying for a loan in order to demonstrate their intention to develop a long-term banking relationship. When the amount saved reaches a specific level, the lender will consider granting a certain amount as a loan. Although forced savings might be effective in helping to control moral hazard risks, they increase the effective interest rate and restrict potential borrowing Small-scale enterprises, especially when engaged in wood forest production, may need financing for larger investments that have prolonged amortization periods”. 119

Wenner D (1995) argued that “Micro-credit is most often extended without traditional collateral”. If physical collateral were a requirement for borrowing, most MFI clientele would be unable to participate due to their extreme poverty level. Because borrowers do not have physical capital, MFIs focus on using social collateral, via group lending. Group lending encompasses a variety of methodologies, but all are based on the principal of joint liability. In essence, the group takes over the underwriting, monitoring, and enforcement of loan contracts from the lending institution. MFIs provide similar products and services to their customers as formal sector financial institutions. The scale and method of delivery differ, but the fundamental services of savings, loans, and insurance are the same. Notwithstanding, to date most efforts to formalize micro- finance have focused on enterprise lending (loans for enterprise formation and development) which remain by far today the dominant product offered by MFIs (Nourse (2001). Review on the Problems Facing the Microfinance Industry According to Muhammad (2010), studies that focused on the challenges that face microfinance sector in Pakistan which are also applicable to the microfinance of Sierra Leone includes the following: improper regulations, increasing competition, innovative and diversified products, profitability, stability, limited management capacity of micro finance institutions (MFBs) etc. On the other hand, the rate of poverty in Sierra Leone, along with other opportunities, is paving way for the growth of this sector and offering a huge market potential for microfinance. On this basis the sector presents a lot of opportunities such as: stimulating growth of economy, women empowerment, increasing volume, accessibility and outreach, economics of scope. MFBS’ Challenges in Serving Small & Medium Business Enterprises Lack of appropriate risk assessment methodologies. Most of the surveyed MFBs report the lack of adequate risk assessment methods as the main challenge to serving small businesses. Many institutions (51 percent) do not have separate methodologies for micro and small enterprise risk assessment. Most of these institutions use their existing microfinance risk assessment tools for small business clients despite the fact that a different level of client analysis, including financial analysis, might be required. The lack of appropriate mechanisms to manage risks seems to have important implications for MFBs that are trying to expand to small business markets. Recent research on banks that have a small business portfolio shows that those that are high performers in terms of returns on assets (ROA) conduct additional “validation” checks for small businesses with weak financial records. They underwrite on average seven times faster than low performers and allocate more time to monitoring the small business portfolio (Small Business Banking Network forthcoming). 120

Inadequate MFI products. Most MFBs offer standard short-term credit to their core micro clientele. However, small businesses often need other products that many MFIs do not currently offer. Hence, institutions that wish to retain their business clients in the long term will have to find solutions (including institutional transformation) that will enable them to cater to the changing needs of these clients over time. Alternatively, MFIs may make the strategic decision to focus on a specific small business segment or to target only small businesses up to a certain size and with limited needs in terms of financial services (IPC 2011). MFBs have recently started diversifying their product mix. For example, during 2006–2008 a sample of 600 MFIs that report to MIX more than doubled their number of deposit accounts. Monsura Zamana (2013) stated the problems facing the Microfinance industry in Bangladesh, However Microfinance is the provision of financial services which involves loans, savings, insurance to people on a small scale, such as businesses with low or moderate incomes. Despite these good thinking of microfinance, there are still several challenges towards their successful operations. 1.Multiple borrowing or overlapping: Overlapping or multiple borrowing by an individual borrower or household is well thought-out as an disturbing issue that is facing the operation of the Microfinance industry. 2. Misuse of credit by borrowers: In most times, when MFIs want to issue out loans, MFIs do not review in detail what the borrower is doing with the money borrowed. All most care is that the barrower meets their criteria of lending money. So therefore the misuse or unproductive use of credit becomes a usual practice. 3. Lack of innovation: Most MFBs has not being able to bring out a new way of doing things in the microfinance industry. From almost the establishment till today almost every MFIs go behind Grameen Model of micro financing. All Microfinance follow the same way of doing thing without innovating new ways. Severe lack of training and education: The research and training capability of MFIs is poor more especially on their staff, owing to the fact most staff of Microfinance knowledge limited to just issuing out money. MFBs are facing many emerging issues to meet the present and future challenges. Reaching economically backward region: MFBs has not effectively in reaching the people of economically backward regions of the country. As a result, MFBs showed poor performance in 121

economically backward areas. A cross section of these people are living in the extreme rural areas (the hard to reach areas of the country). Targeting women as borrower and its Social Dilemma: Most of the microfinance borrowers are targeting the women, owing to the fact that women are trustworthy. In usual practices, the rural community does not appreciate women to go in public and participate in financial activities as a social dilemma. Microfinance also face the problem of targeting the right households to issue out loans. Less attention to ultra-poor: Micro financing is to target the poor that remain unserved by the formal banking sector. But there are not much important interventions for the ultra-poor segment. Lack of capital: Despite the microfinance sector has reported a notable growth over the years, there is a lack of capital for some of the microfinance institutions in most country. Insufficient repayment time by the microfinance institution to the borrower: Most of the micro-loans are given for the start of micro-enterprises for a short Period and the loan would have to be rapid from the cash flows generated from the business. Research Methodology Research Design The research was designed in a manner that it will provide relevant and accurate data that generated answers to the research questions. The design was therefore evaluative in nature as it provides a systematic assessment of the operations of the Microfinance institutions. The researcher will make use of the triangulation which involves the use of quantitative and qualitative. An analysis of Microfinance institutions was also important in carrying out this study. This involved designing questionnaires that provided answers to the research questions and objectives of the study. Study Area Makeni City is located in the Northern part of Sierra Leone between Bombali Shebora chiefdom and Makari Gbanti chiefdom. According to the provisional result by statistics Sierra Leone, its has a population of 126,059 in the 2015 census. The socio-economic activities of the people of Makeni is farming and trading activities. The source of living for the people in the city is based on their socio-economic activities. Makeni has a population that is ethnically diverse, despite majority of the people are from the Temne tribe. There are other tribes with diverse population like Limbas, Korankos, 122

Lokos and others. Krios is the primary language used for communication by all tribes in the city. Makeni is known for its religious tolerance despite the majority of the people in the city is Muslim but it has a significant and diverse Christian population. Sources of Data Primary Data This has to do with facts collected by the researcher himself through the research project through sources such as questionnaires, interviews, Observation, telephone, etc. In this study, questionnaires along with personal interviews would be used to get information from the respondent. Secondary Data Secondary data has to do with the facts that are first collected by researcher which are going to re-used by other researchers. It involves the published or second-hand information such as census, text books, articles, journals, internet sites, workshop/seminar papers etc that was collected earlier for purpose other than the current study. Population and Sampling Target Population This study will be conducted in the small and medium business enterprises in makeni. This group has been chosen because they provide the economic base to all other economic sectors in the country . There are about three hundred SBEs owners in makeni. Some of these are literate, others illiterate, men, women, adults, youths, disabled, dropouts, etc. So the study will target about 60 respondents of which part of it will be workers of microfinance institutions, SBEs owners and other stakeholders in the business sectors in Makeni. Sampling The sampling consists of fifty merchandise carefully selected to represent all the components of the Microfinance institutions and makeni SBEs owners. The sample is composed of literates, illiterates, dropouts, men, women, adults, youths, disabled, etc. This sample will be carefully selected from all the main business districts across makeni. 123

Sampling Techniques The study will employ simple random sampling techniques to select the sample. The simple sampling techniques refers to selecting members (Merchandise) at random for the purpose of the study. It is mainly used to group populations into homogeneous subsets that shares similar characteristics. It will also be used to ensure equitable representation of the population in the sample. It is preferred for this study because it ensures that everyone has an equal chance of being represented. Research Instrument There are several instruments used to collect data. They include self-administered questionnaires, personal interview (structured and semi-structured) and direct observation. Two sets of questionnaires were designed for all categories of respondents. One set was designed for the management and workers of BRAC and another set for those Manchandise within the township of Makeni. Items considered relevant to the study were included in the questionnaire. Procedures for Data Collection Data collected for this research was quantitative and qualitative in nature and is subjected to simple evaluative and descriptive analysis respectively. The researcher was able to analyze data from the field by using basic statistical tools like percentages to determine the frequencies of responses obtained from the questionnaires. The data was analyzed collectively for each set of the response categories using tables and pie charts, and narrative notes where necessary. Person to person interviews were also used by researchers with the help of recorders, notepads and recorders. Interviews were done with predetermined questions and interviewees were allowed to express their opinion freely. The researcher uses observation as one of the tools in obtaining data more especially in a situation of differentiating between the actual facts from opinion facts in the collection of data Review of relevant documents relating to the said topic "The impact of Micro Finance Institutions on the development of small & medium enterprises in Sierra leone". The researcher is faced with the challenge of scanty reading materials, but makes use of those available in textbooks, journal, magazine, newspaper, internet and other sources. 124

Methods of Data Collection Data had been collected using primary sources. In this case, individuals concerned were contacted, especially workers of LAPO to give relevant information about what is requested of them within the terms of conditions of the study. The researcher also contacted the Merchandise and other stakeholders in the business environment in Makeni municipality. A few written and unpublished handouts about the LAPO Institution were also accessed which served as the researcher’s secondary source of data. However, the limitations or problems associated with the use of secondary data was carefully examined and taken into account including the possibility of inherent errors occurring in the extraction of secondary data for this study. The methodology that was used to carry out this research is be the triangulation method which takes into consideration both the quantitative and qualitative methods. This method also allowed analysis to be carried out on the data that was collected and explanations were given on them. Methods of collecting data included interviews, published and unpublished documents. Ethical Principles The researcher maintained key ethical principles throughout the research in order to ensure privacy and confidentiality to the respondent. All information from respondents with reference to the research would be kept highly confidential and it will be only used for the purpose of the research. Questionnaires were provided to all respondents of which they are free to answer questions on their own with no force of reliable and accurate data. Presentation, Interpretation and Discussions of Finding Presentation of Results: This section is structured in line with the study objectives in order to maintain in order to have a workable study. This will be further divided into the questionnaire administration, demographic characteristics of respondents and presentation of results on study objectives. Questionnaire Administration 125

RESPONDENTS ADMINISTER ED RETRIVEV ED PERCENTAG E (%) Management 2 2 5 Operational Staff 10 8 20 Clients / Barrowers 40 30 75 TOTAL 50 40 100 The Problems/ Challenges of Microfinance Industry in Sierra Leone The Challenges of Microfinance Institutions 1. Lack of adequate capital by SMEs 2. Lack of Innovation 3. High rate of defaulters in the repayments of loans 4. Lack of training and education 5. Lack of reliable clients data 6. Lack of managerial skills 7. Regulatory problems 8. More family responsibility of clients 9. Increased competition 10. Misuse of loans by barrowers The table above shows the challenges/ problems that microfinance institutions do face in their operations. These problems has the potentials to affect the operations of MFI’s in Sierra Leone and to a larger extent get some MFI’s out of business, if not properly handle. Most employees of MFI’s there are some problems which government are in better position to solved them while others are the responsibilities of all the stakeholders in the microfinance industry which includes Government, Microfinance institutions and business owners of SMEs. 126

Discussions The findings of the researcher reveals that out of the 40 respondents of the study, 10 (25%) of the respondents are male respondents and 30 (75%) of the respondents are female respondents. This simply implies that there are more male respondents than female respondents that participated in the research. This implies that most of the workers of Microfinance are women which can be tailored to honesty and fears of mismanagement of funds. Also the majority of the customers of microfinance institutions are women, especially in the rural area. The findings also reveal the marital status of the respondents shows the marital status of the respondents of the study. Out of forty (40) respondents, five (12.5%) of respondents are single. Twenty-six (65%) of respondents are married. Three (7.5%) of respondents have divorce their marriage and six (15%) of respondents are widowed. This implies that microfinance can rely on married women for repayment of loans and in the case of failing to pay, their husbands can come with the fear of losing in prisons or in hiding places. The findings of the research show the startup capital for small and medium enterprises in Sierra Leone. From the responses of the respondents, 4 (13%) of the respondents says they get their start up for their small and medium enterprises through Microfinance institutions, 2(7%) of the respondents says they raised their capital for their business start up through Banks, 16(53%) of the respondents says they raised their startup capital through personal savings and 8(27%) of the respondents says they raised their startup capital through friends and families relatives. So this implies that most of the owners of small and medium enterprises raised their initial working capital for their business startup. This is because their startup normally requires small working capital and credit facility don’t give to beginners with the fear of the risk that business will not survive to pay its debts. But however after establishment of their businesses, most business owners depend on Microfinance institutions for the expansion of their businesses. The findings of the research show the responses of the respondents on the contribution of small and medium enterprises in reducing the level of unemployment. Out of thirty (30) respondents, 18(60%) of the respondents strongly agree on the contributions of small and medium enterprises on the reduction of unemployment in Sierra Leone while 12(40%) of the respondents agree with the contributions of small and medium enterprises in reducing unemployment in Sierra Leon. So this implies that small and medium enterprises contribute to economic development by creating employment for a number of 127

Sierra Leonean. The findings of the research show the responses of the respondents on the means of services provided by microfinance institutions. 25(83.3%) of the respondents says the received loans from microfinance institutions, 3(10%) of the respondents says they received the services of savings/ deposits from microfinance institutions and 2(6.7%) of the respondents says they received the services of financial advice from microfinance institutions This implies that most business people are receiving the services of loans from microfinance institutions. This is because they considered microfinance as a source of finance they can use to expand their business after establishment and considered the bank as an institutions they can serve their moneys, they might not believe to save too much money with microfinance institutions because they think they don’t have the capacity of keeping huge sum of money. This is a disadvantage to some microfinance institutions and that leads to other microfinance gradually moving to banking institutions. The findings of the research show the challenges/ problems that microfinance institutions do face in their operations. These problems has the potentials to affect the operations of MFI’s in Sierra Leone and to a larger extent get some MFI’s out of business, if not properly handle. Most employees of MFI’s there are some problems which government are in better position to solved them while others are the responsibilities of all the stakeholders in the microfinance industry which includes Government, Microfinance institutions and business owners of SMEs. In addition, it shows the responses of the respondents on the defaulters of microfinance on the payment of loans. 19 (63.3%) of the respondents say yes they fall defaulters of paying loan on time while 11 (36.7%) of the respondents says they have never fallen defaulters of paying back loans to Microfinance. This implies that there is a challenge of loan repayment by the majority of customers of Microfinance institutions. This in one or the other disturbs the smooth operations of microfinance owing to the fact that the monies given to customers are collected to give to other customers applying for loans Summary, Conclusions and Recommendations Summary 128

The research study ascertains the impact of microfinance institutions on the development of small and medium enterprises. There is a strong relationship between microfinance and small and medium business. The two depends on each for their survival and growth. But microfinance is believed to have created a huge impact on the development of a number of SMEs. Despite this, a number of SMEs got their initial startup from friends and families or their relatives as noted in our findings. But after establishments and when they seek to survive, they seek loans from microfinance institutions for their development. The development of small and medium enterprises have a greater impact on the economics of our nation by creating a number of jobs for the people especially the young people serving as agents, laborers and personal assistants to SMEs owners, improving standard of living among others. However the drive of microfinance to develop small and medium enterprises does not enjoy overwhelming success but also looms with enormous challenges more especially defaulter’s as noted by our findings. The art of defaulters of small and medium enterprises owners’ failure to make repayment on time disturbs the smooth operations of small and medium enterprises. The data has been collected using both primary and secondary sources. The results are presented using tables and pie charts and they are sectioned consistently with the research objectives in order to maintain consistency. Conclusion The focus of the research is on investigating the impact of microfinance institutions on the development of small and medium enterprises in Sierra Leone, a case study of BRAC microfinance institutions. The research study concludes that the accessibility of loans guarantee the development of SMEs. This is more especially when the requirement of accessing loans is very easy, then the faster the development of SMEs. However it is very difficult to access loans from financial institutions more especially the formal banking institutions owing to the so many requirements ones has to go through before the approval of loans to entrepreneurs. So the intervention of MFIs to give out loans to SMEs to expand their businesses after establishment is very timely and impactful. The research study also concludes that SMEs are playing a crucial role in the economic development of Sierra Leone by cutting down the high unemployment rate. So therefore the government must create the enabling environment for SMEs to thrive so that they can better complement the effort of the government to provide employment for sierra Leoneans. The research study further concludes that the challenges of high interest rate and high defaulters of 129

repayment of loans affect the smooth operations of MFIs. MFIs must ensure they provide the necessary training and education to SMEs owners on the importance of payment of loans on time. However, from the findings of the research, Companies, business organizations, and other researchers have been exposed to Microfinance institutions and the development of small and medium enterprises. Recommendations Based on the result of the data collected and analyzed, the following crucial recommendations are recommended. Management Based on the findings that show that, microfinance institutions are relevant to the development of small and medium enterprises. It is recommended that management put mechanisms in place to help to ease and make loans accessible to SMEs owners on time to expand their businesses upon establishments so as to reduce the number of businesses closing down on a daily basis. It is also recommended to the management of LAPO to make provisions for their clients on financial management of households. So when they take up loans from microfinance institutions, they know exactly what business opportunities to exhaust, where, when and how to spend money on family issues. So this will reduce the rate of defaulters who will be on the run upon failing to meet repayment time with the MFI. It is also recommend to management of LAPO microfinance to increase its awareness and information dissemination of their available services to different unreached SMEs owners to know more about them and to do business with the institutionI recommend to management to form their clients into different entrepreneurial groups before they issuance of loans to the clients which will reduce the potential of defaulters to run away with funds of the institutions in order not to impede the operations of MFIs. Government 130

Based on the findings that show that, microfinance institutions are relevant to the development of small and medium enterprises. It is recommended to the Government to make regulatory policies that are favorable to microfinance institutions. It is recommend to the Government to create an enabling environment for small and medium enterprises to thrive by creating a level playing field for all players 131

PROMOTION OF CRAFTS IN NIGER Ms. Chaibou Mahamane Maria, MPFPE, NIAMEY, Ministry of Women and Children Production, Niger E.mail: [email protected] , Phone: +22795792368 Introduction Niger is a landlocked country located in west Africa, it is a mainly agricultural country but handcrafts occupy a very important place. The handcraft are the third largest provision of jobs after agriculture and livestock with more than 900.000 workers. A sector of great importance which contributes 20% to thé national GDP. It is therefore a sector which contributes to the reduction of poverty through its capacity to generate resources and its diversity as well as the possibility of working in both rural and urban area. Handcrafts help the country fight youth unemployment as well as the socio-professional integration of young people on the fringes of the school system. Nigerien hands craftsmanship through its richness and diversity, also contributes to the cultural influence of Niger beyond its borders. Craftsmanship is the transformation of products or the implementation of service thanks to particular know-how and outside a mass industrial context : the craftsman generally ensures all stages of its transformation, repair or provision of service, and their marketing. It is also an individual or collective identity. ( Membership in a category of more or less creative professions and generally independent professions). The objectives of this study 1. Promote the craft profession 2. Reduce unemployment through the involvement of rural and urban youth and women 3. Motivated the Nigerien population to consume local artisan products 4. Opening up Niger’s crafts to the outside world 132

The Different Craft Centers in Niger There is the artisan village of wadata in Niamey inaugurated in 1992, the complex Dosso artisan store inaugurated in 1996, the craft village of Dakoro inaugurated in 1997, the Palami craft village in Zinder inaugurated in 1998. The different types of artisan products in Niger : Silver jewelry, leather bags and belts, wallets, traditional hats, jewelry boxes, desk sets, leather shoes, decorative paintings for. Challenges facing the handicraft industry Crafts in Niger, Has been affected by the scourge of insecurity for several years Which is rife in the West African region, In Niger more than a million people live full time Or seasonally craft activities, These people see their Conditions of existence become more and more difficult, Due to the drastic drop in income Related to the sale of art objects. The artisan village of Wadata in Niamey, one of the largest artisan centers in the country, has seen its revenues melt away, Going from 3 million CFA francs per month to 300 thousand or even 200 One thousand CFA francs in monthly revenue due to the scarcity of customers made up mainly of tourists and expatriâtes. According to the director of crafts, the sector is made up of 16 branches subdivided into 46 trades which total 206 professions. The activity is considered one of the essential components of the national economy because it represents 1/4 of the wealth of the country. In 2014, Niger established a chamber craft profession on recommendation of the West African economic and monetary union. This structure's mission is to contribute to better organization, to the modernization and competitiveness of the craft sector and in the current context This room has quite a bit of work to do. 133

How deal the challenges facing the Handicraft Industry On June 30, 2022, representatives of sectoral departments, artisans and economic operators met in a workshop to discuss and validate the national policy and strategy document. The first documentation of its kind, this policy and strategy document is a road map that identifies weaknesses and proposes possible solutions to regulate and advance and pr and to advance and prosper the Central African artisan sector which until now has developed without a real political strategy and is not taken into account in the national accounts, crop failure, flood or famine. In addition, artisan activity in the CAR presents several interesting characteristics which can make the sector a lever for economic growth. The opening ceremony of the validation workshop of the national policy document and strategies for the development of the craft sector in the Central African Republic was chaired by the Minister of Small and Medium Enterprises, Crafts and the Informal Sector who declared in his opening speech: “I am and remain convinced that craftsmanship constitutes a launching pad which should allow us to place our country in the orbit of emergence and its full development “…” within a few years. Craftsmanship is identified as a vector of economic and cultural development because the growth of small and medium-sized craft businesses for the benefit of disadvantaged social groups, particularly women and young people, is likely to contribute to poverty reduction. Also, crafts would complement other strategic sectors of the country such as commerce, industry, tourism, culture and culture and agriculture. This is what justifies this reform which we consider to be the path which should favor the emergence of a new class of business women and men.business capable of taking charge of the destiny of the national economy and restoring the image of the Central African Republic. »The Acting Resident Representative of UNDP, Mr. Laurent Rudasingwa, who co-chaired the opening ceremony, emphasized: “UNDP,through the cooperation framework which links it with the Central African government, spares no effort to support initiatives aimed at promoting the private sector” and recalled some examples of activities carried out in 134

collaboration such as the development of the Code for Small and Medium Enterprises or the organization of Businesses or the organization of the first edition of the National Entrepreneurial Culture Day in 2021. The national policy document and strategies for the development of the sect Businesses or the organization of the first edition of the National Entrepreneurial Culture Day in 2021. The national policy document and strategies for the development of the sect development of the craft sector in the Central African Republic, now validated, the next step will be its submission to the National Assembly for review, adaptation and validation. How India is dealing with the challenges facing the Handicraft Industry The cultural and communication industries and activities based on creating such crafts play a very important role in the Indian economy and the continuous construction of India. These activities are structured around two poles, one highly industrialized, the other belonging to the informal economy. Failing to appear explicitly in Indian public debates, the scenarios described by the promoters of creative industries based on linkages between various activities in the creation and “cross-fertilization” of the whole economy and political and human development through creativity are mostly to be observed within less industrialized areas. The dynamic force of the main cultural and communication industries explains why they have no need of these solutions. Conclusion In my country Niger, the artisan sector contributes enormously to the growth of the economy and is made up of optimistic artisans who participate in the promotion of artisan products despite the multiple challenges facing this sector. All stakeholders in the country's economy, namely the authorities, women and young artisans and the entire Nigerien population must join forces and work so that this sector recovers. 135

Development Strategies Implemented by the Nigerien Government for the Emergence of the Rural Economy Mr. Ibrahim Halou Sahabi, Strategies of Development for Rural Economic,Niger Email: [email protected] , Phone: +22796827740 The beautiful country Niger, a Sahelo-Sahelian country which is located in the heart of the Sahel, and in the middle of the Magrebe countries and coastal countries, therefore entirely landlocked. The country's economy is based largely Is based largely on agriculture and livestock although the rainy season only lasts 4 to 5 months per year and more than 70% of the population lives in rural areas. Aware of these challenges and for the emancipation of our country's economy, the Nigerien government has implemented in collaboration with its technical and financial partners, both internal and external development strategies to promote the rural economy. For this reason, several strategies are implemented. The State of Niger has created a ministry of agriculture and livestock to specifically take into account the needs of this important and even essential sector of our economy. Then Niger State created an agency that sells at a moderate price and sometimes even gives free fertilizer to farmers. This agency is called “CAIMAS” - several projects and programs have been implemented in rural areas to promote and support their economy. Thus, agro-pastoral projects are set up almost everywhere in rural areas in partnership with the World Food Program via local non-governmental organizations to distribute goats, specifically to rural women in order to become economically independent. 136

They also make half-moons to recover the land Agro-pastoral farming exhausted for reasons not only of the irregularity of rain and the insufficiency of arable land. Then the State of Niger, in collaboration also with other NGOs, made many dams to be able to store rainwater so that farmers could cultivate off-season crops. It was always with the aim of developing the rural economy. Also taking into account the scarcity of rain or the rainy season which can be short, i.e. less than 5 months, the State distributes for farmers in partnership also with other NGOs, 137

short-lived seeds. These different development strategies implemented by the government to promote the rural economy have inevitably changed many things. Rural women make Small businesses, breeders take advantage of the half-moons made in the postural zone to feed the animals and farmers use techniques and strategies learned to enrich the land In order to have a good yield. However, and despite the strategies, projects and programs implemented and despite the progress noted, much remains to be done. Indeed, there still exist obstacles and inadequacies which drastically slow down the emergence of our rural economy. These inadequacies and obstacles are on the one hand natural, social, policy on a natural level, several obstacles hinder the development of the rural economy. Because, the scarcity of rain, the repetitive droughts, the epidemics for animals which kill thousands Animals, domestic significantly disrupt our rural economy. Then, there are social problems, they pose obstacles to our rural economy, there are social rules which prevent, for example, women from fully exercising their generating activities, Income, there is also insecurity which affects a large part of the rural area, this insecurity prevents the rural population from carrying out rural work. On the political level, the Nigerien government has not implemented sufficient strategies, projects and programs to be able to deal with natural and social disasters harming development. Of our rural economy in order to revitalize this economy and this is really due to the fact that the Nigerien State does not have sufficient technical and financial resources to meet the needs of stakeholders in our rural economy. For example, the construction of a dam in the Badaguichiri valley precisely in the village of Raha which began to be interrupted not only by lack of sufficient technical and financial means but also the dam is too small to Being able to retain rainwater for such a long period allowing farmers to grow off-season crops. Then the Nigerien State and its partners have implemented many mechanisms to extract groundwater to irrigate the fields in the event of insufficient rain, or to do a good and sufficient off-season crop. 138

Prospects for a more satisfactory and sustainable development of the rural economy To make the rural economy of Niger country stronger, the State of Niger must increase efforts to not only mobilize technical and financial means by seeking partners who could help revitalize activities such as agriculture and livestock which constitute the basis of economy, but also it must have awareness-raising strategies to make the rural population understand the importance of using modern technical means for more satisfactory output. Also, the Nigerien State must continue to promote the policy of economic empowerment of rural women by guaranteeing them good education and good training in small trades and their learning to undertake Also raise awareness among breeders about the importance of vaccines and also the State must have policies for processing local products. Support farmers growing off-season crops, especially onion producers, to multiply the crop by giving them sufficient modern means such as agricultural tractors or their promotions. 139

Reference : Sustainable development and inclusive growth strategies (SDDCI) Niger-2035 https://www.fao.org> Niger Economic and Social Development Plan (PDES 2022-2026 https://www.plan.gouv.ne> Rural development strategies in Niger https://www.inter-reseaux.org> 140

Micro, Small and Medium Enterprises in Tajikistan: Drivers of and Barriers to Growth in Rural Area Mr. Saipov Sohibjon Agency on Statistic under the President of the Republic of TajikistanDivision Price and tariffs E mail: [email protected] Phone: +992934033533 Abstract Purpose: This article presents micro, small and medium-sized businesses (MSME) in Tajikistan, with an emphasis on its role in economic development and country growth. Tajikistan has made significant improvements in economic indicators for the years of independence. This growth is reflected in sectors in which MSMEs operate, highlighting the need for a better understanding sector and its role in the economic growth of the country. This article highlights sectors in rural areas of Tajikistan. The dataset provides information about the Micro Enterprise in rural areas, as well as specific factors influencing the growth of MSMEs, including labor force, capital, information and barriers to growth. Findings: This article is necessary to note all aspects of the development of the entrepreneurship sector in the context of rural areas in Tajikistan. Introduction The micro, small and medium-sized enterprises (MSME) in Tajikistan, with an emphasis on its role in the economic growth of the country. Over the past decade, Tajikistan has seen significant improvement in its economic performance, with gross national income (GNI) per capita increasing in real terms. By 69 percent between 2000 and 2022. The role of the MSME sector, and especially micro enterprise, at the present stage of development of Tajikistan, is important and insufficiently studied. MSMEs can prove critical to national economic growth due to the potential to absorb unemployment, their ability to 141

promote mobility in a challenging business environment, and their potential to enhance sustainability and competitiveness economics in regional and global contexts. IN a national context, recent changes in Tajikistan government policy may positively impact the MSME sector, including: ● Agricultural reform ● Reorganization of tariffs in connection with Tajikistan's accession to the World Trade Organization ● Tax reform This article is giving its impact on the economic development of Tajikistan, as well as an analysis of the main drivers and barriers to the development. The article also analyzes the role of key drivers of economic growth in this sector, including an overview of the characteristics of MSMEs, key growth sectors and detailed description of the development of sub-sectors. The Republic of Tajikistan is a sovereign state and has great growth in the agricultural sector which is more than 60 percent. Agriculture is one of the most important sectors to the economy of Tajikistan due to the high concentration of population in rural areas. The industry is one of the most complex industries to analyze, due to protracted land reform, institutional and market distortions caused by control over the main export cotton and weak transformation processes and insufficient financial and technological resources. The status of agricultural reform is complicated by the unfinished process of land reorganization. However, over the past five years, the amount of land transferred from collective farms has increased. Special attention is also given to other sectors of the economy for the development of small and medium-sized enterprises in the total share of GDP. 142

Tajikistan's GDP: Volume, Growth Rate, Per Capita, Structure and Sector Indicator Value Period DP volume 10.49 USD bln. 2022 nnual GDP growth rate 8.3 % 2quart 2023 DP per capita 1356 USD 2022 DP from agriculture 28466 TJS mln. | 2.593 bln. USD 2022 DP from construction 9164 TJS mln. | 0.835 bln. USD 2022 DP from manufacturing 19554 TJS mln. | 1.781 bln. USD 2022 DP from services 20590 TJS mln. | 1.876 bln. USD 2022 DP from transport 10734 TJS mln. | 0.978 bln. USD 2022 Certain territories were also selected for the development of the sector, it should be noted that Micro, Small and Medium Enterprises in Tajikistan: driving forces and obstacles to development to achieve this goal. The largest cities of Tajikistan, namely the capital and regional centers, naturally were selected as urban locations for MSMEs in the trade, services, and transport sectors. Dushanbe, Khujand, Kulyab and Khorog were selected, each city was then divided into several parts based on administrative divisions or different geographical locations. For the trade and services sector – areas with an intense concentration of trade and services have been identified. Objects located near the main transport corridors of each city were selected. 1. The role of MSMEs in the growth of the economy The economy of Tajikistan has experienced significant growth since independence. It should be noted that in the 2nd quarter of 2023, growth stood at 8.3%, while real GDP increased by 8.045 percent (annualized) at the end of the year, reflecting broad-based industrial growth 143

(including mining), agriculture, construction and other sectors of economy. The adverse effects of the war did not materialize as expected, while strong financial inflows supported domestic demand and liquidity. Remittances slowed immediately after the war began but increased sharply in the second half. That helped maintain a current account surplus and boost foreign exchange reserves by more than $2.7 billion at the end of 2022 to $3.4 billion in December, covering a year's worth of total imports. The importance of small and medium-sized businesses in the socio-economic development of the country cannot be overestimated. The development of small and medium-sized businesses smooths out the structural restructuring of the economy, reduces social tension, provides new jobs, and develops the regional economy. Of course, the creation of a medium-sized business, bypassing the small business stage, is quite possible, de jure and de facto, in the event of a reorganization of a large business or direct investment. However, as we noted above, if we approach this issue from the perspective of an evolutionary approach, the emergence of medium-sized companies largely depends on the sustainable development of small ones. In this regard, in our opinion, small companies that show stable growth, that is, successfully operating and developing for at least three years, should be classified as progressive small businesses. Identification of a positive vector for the development of small enterprises will allow more targeted support for such companies to quickly transfer them to the category of medium-sized ones. A three-year period of success is the most accurate indicator of the sustainability of small companies. The smaller enterprises developing move into the category of medium-sized ones, the newer jobs will be created and the more sustainable the socio-economic development of the state will be. Our country has sufficient development potential, having rich natural resources, Tajikistan can create favorable conditions to ensure its economic development and increase its total GDP, but such growth cannot continue indefinitely due to the inevitable decrease in the use of natural resources. We believe that emphasis needs to be placed on improving the organizational and economic mechanisms of state support and eliminating barriers to the further dynamic development of entrepreneurship in the Republic of Tajikistan. It is necessary to create conditions under which an increasing number of unemployed people will 144

be able to open and develop their own businesses. With proper attention to the development of small and medium-sized businesses, they can play a key role in the implementation of existing economic development plans and programs. Another step towards improving the business climate was the introduction of the One Stop Shop principle, which made it easier to register a business, as the number of required licenses and permits was reduced. In order to develop microfinance organizations, the Law of the Republic of Tajikistan “On Microfinance Organizations” dated 07.03.2012 No. 712 was adopted, which indicated that at that time more than 120 microfinance organizations operated in the territory of the republic. Also in 2012, were adopted the Law of the Republic of Tajikistan “On public-private partnership” and the Program of state support for entrepreneurship for 2012-2022. 2. Barriers to Growth Despite the annual increase in the number of small and medium-sized businesses, their contribution to the development of the state economy remains very insignificant. Such constraining factors as high taxes, corruption, bureaucracy and other existing problems that entrepreneurs have to constantly face in the process of doing business do not allow them to develop effectively. Limited due to the significant presence of the state, small and medium-sized businesses remain underdeveloped and play an insignificant role in the country's economy. Existing private companies are mostly small and do not reach full scale during the entire life cycle. Formal employment in the private sector accounts for 20 percent of total employment. Today in Tajikistan, the traditional disproportion in the rate and volume of growth between the able-bodied population and the quantity and quality of jobs created remains. Large enterprises are not always able to organize new jobs, and the opportunities for small and medium-sized businesses are limited. Despite all the measures taken, the activities of numerous state and semi-state structures for supporting small and medium-sized businesses in some cases come down to self-sufficiency, fixing the problems and obstacles that entrepreneurs face, and real assistance is of a single nature. One serious obstacle hindering the development of entrepreneurship is the high interest rates on loans issued by credit institutions. The problems of lending to small and medium-sized 145

businesses lie in the difficulty of taking the loan itself, since own funds are often not enough for business development, and the entrepreneur is often forced to borrow funds in the form of a loan or private investment. Nevertheless, most credit organizations give preference to trusted large companies for giving loans, because in our country the activity of entrepreneurship is risky and sometimes non-transparent. Entrepreneurs who need a bank loan are forced to turn to banks, despite the high interest they offer and the short repayment period. To ensure the return of the issued amount, banks require collateral, which can only be realizable values. With all this, on the part of banking experts, the real value of the proposed property is underestimated by 50 to 60% of its market value. Due to the underdevelopment of the mechanism for lending to small and medium-sized businesses, entrepreneurs are the first to suffer. Moreover, difficulties in lending to small and medium-sized businesses exist not only for the business entities themselves, but also for commercial banks. For them, lending to small businesses is a rather risky line of business. According to statistics from the National Bank of Tajikistan, the overdue debt of the loan portfolio of banks increases annually with a constant decrease in the volume of loans provided. Based on the above problems, several priority areas for the development of a mechanism for lending to small and medium-sized businesses in Tajikistan can be identified: ● Increasing the volume of financing aimed at subsidizing interest rates, socially significant areas of activity. ● Implementation of support for start-up entrepreneurs operating in small and medium-sized businesses through concessional lending. ● Promoting the development of interaction between commercial banks and small and medium-sized businesses by expanding the system of guarantee funds. The state needs to increase the amount of funding allocated to the formation of such funds at the state and regional levels. ● Improving lending conditions and lowering interest rates on loans. ● Creation by the state and financial organizations of special events (trainings, seminars, etc.) that help improve the legal and economic literacy of entrepreneurs. 146

Conclusions As a result, entrepreneurship is an independent, economically active process based on risk, the purpose of which is to systematically generate profit and increase personal income based on meeting consumer demand. An entrepreneur is, first, an organizer, owner and operator of his own economically profitable business, with the ability to analyze the market and take risks in order to legally make a profit. One of the main factors is to study and adopt the experience of developing small and medium-sized businesses in foreign countries and ensuring a smooth transition of the country to sustainable economic development. To do this, it is necessary to improve the mechanism of state support for small and medium-sized businesses - not an easy task: it is not enough to simply adopt state support programs; it is also necessary to develop a functioning mechanism that includes key elements of support even in the most remote regions. regions of the country. In the current conditions of the global financial and economic crisis and the constantly changing economic climate, it is necessary to assign a leading role to small and medium-sized businesses, as the main source of creating jobs and revitalizing the economy. We need support in the formation and development of those small companies that have the necessary growth potential for the transition to medium-sized businesses and the transformation of these economic entities into sources of economic transformation. Only when government support is based on the established concept of subsequent unified support measures and actions with specifically supported material, technical, information and analytical work can one hope for a positive result in the development of small and medium-sized businesses. medium-sized businesses in the Republic of Tajikistan. 147