Chapter 8: Microfinance and the Growth of Micro and Small Enterprises (MSEs) in Sub-Saharan Africa: The Case of Faulu Kenya
Edited by Joseph Mark S. Munoz
Fred O. Newa INTRODUCTION Micro and small enterprises (MSEs) have been cited as a major contributor to poverty reduction in developing countries. According to the World Bank (2005) half the world’s population live on less than $2 a day, and 1.8 billion of those that live on less than $1 a day are located in sub-Saharan Africa (SSA). Before the 2008 financial crisis, the region grew at an average of 5 percent each year. The latest IMF World Economic Outlook (IMF, 2009) growth projections for SSA in 2009 were lowered to 1.5 percent. MSE development is important as studies show that they are significant contributors to poverty reduction in most African countries. CHARACTERISTICS OF MSEs Characterizing micro and small enterprises (MSEs) is often difficult due to the fact that there are no clear definitions. Different countries have adopted diverse classifications, depending on its purpose and stage of development. A small enterprise study identified over 50 different definitions in 75 countries (Neck and Nelson, 1987). Most definitions are based on capital investment, turnover or number of employees. Other definitions are based on enterprise net worth, sales volume, market size, amount of energy used in production processes, and degree of specialization of the enterprise (Neck and Nelson, 1987). The World Bank (1999) defines a microenterprise as having up to ten employees, with total assets or annual sales of up to US$10 000. Small enterprises have up to 50 employees with total assets and annual sales reaching US$3 million. 87 88...
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