IMPACT OF GOVERNMENT POLICIES ON SMALL AND MEDIUM ENTERPRISES (SMES) IN CAMEROON

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

For African nations to achieve the Millennium Development Goals (MDG), which include eliminating extreme poverty and hunger among other things, they must experience rapid and consistent economic growth. Small and medium-sized businesses (SMEs) are now widely recognised as a key driver of industrialization and economic development in developing nations (Odd-Helge et al., 2018). In most nations, SMEs may have a major impact on reducing poverty and creating jobs. Additionally, Small and medium scale enterprises (SMEs) are generally regarded as the engine of economic growth and equitable development in developing economies. They are labour intensive, capital saving and capable of helping create most of the one billion new jobs the world will need by the end of the century. They are also perceived as the key to Nigeria’s economic growth, poverty alleviation and employment generation. (Agwu & Emeti, 2020). According to the World Bank (2019), micro, small and medium-sized enterprises constitute 99% of an estimated 19.3 million enterprises in the European Union (EU) and provide about 65 million jobs representing two-thirds of all employment. In the context of the developing world, SMEs in Africa constitute the larger proportion of businesses and employ a significant portion of the population, while Ojo (2022) also attributes the economic success of the Asian countries to the activities of SMEs. However, evidences abound that in regions or economies where enterprises have been actively promoted and encouraged, their poverty rates have declined. Nevertheless, achieving faster economic growth increases the likelihood of reducing poverty, as evidenced by the positive impact of growth on the well-being of the poor, as suggested by (Dollar and Kraay, 2022). Additionally, in Cameroon, there is an urgent need to enhance the environment for small and medium-sized enterprises (SMEs). The promotion of SMEs not only aids in poverty reduction but also contributes to the development of a more efficient private sector economy. Consequently, creating a conducive environment for SMEs has become a priority in the development strategies of many governments in the developing world, and it has gained increased attention from the international donor community. However, two primary factors have been globally recognized as significant obstacles to the development of SMEs: the regulatory/policy environment and access to finance. This study will specifically concentrate on addressing the first constraint, which is the regulatory environment impacting SMEs.  According to Mail (2021), a suitable regulatory environment is the single most critical component of an economic growth strategy. The equitable and long-term operation of market economies depends on rules, yet even the most socially required laws have costs and benefits, some of which may be excessively large. Private sector regulation is seen to be required to maintain fair trade and competition, but needless regulation burdens the industry, results in fewer, less effective businesses, and lessens competition. Therefore, appropriate regulation is necessary for a healthy private sector. Business must follow the law when it comes to the legal framework. Similarly, no strong private sector(SMEs) can exist unless an adequate legal framework exists in which to resolve disputes and facilitate efficient transactions, as well as to protect property rights. 

Furthermore, the impact of regulation on businesses, particularly its negative effects, has been extensively studied in the literature. There is a prevailing belief that small businesses bear a disproportionate burden from business regulations. In the case of SMEs, they tend to be significantly affected by regulatory requirements, bureaucratic red tape (excessive use or adherence to formalities), and associated burdens. Regulations have the potential to erode the competitiveness, hinder the growth potential, and jeopardize the viability of SMEs. Therefore, a survey will be conducted in order to examine the impact of government policies on small and medium enterprises (SMEs) in Cameroon.

1.2 Statement of the Problem

In recent times, there has been a notable increase in detailed research investigations addressing questions related to regulations and the regulatory environment concerning the development of SMEs. High level of corruption, declining of per capita GDP, lack of infrastructure, crushing internal debt etc. have not provided an environment conductive to development. On the other hand, the government of Cameroon has initiated efforts to formulate policies aimed at enhancing the small and medium-sized enterprises (SMEs) sector with the goal of promoting economic growth. There is a recognition that the private sector can play a crucial role in the overall development of the country. However, to maximize the effectiveness of the private sector's contribution, the government must establish a macro-economic environment conducive to their development. This acknowledgement underscores the importance of creating favourable conditions at the broader economic level to facilitate the growth and success of SMEs, ultimately contributing to the overall economic advancement of the nation. Furthermore, despite the effort of the government in order to improve the SMEs in Cameroon, the country still has a rigid business environment that hinders the development of local small enterprises and entry opportunity for foreign investors. This argument is supported by selected indicators of business environment and investment climate of the country extracted from World Bank indicator (2019).  Hence, it is in the light of these that the study seeks an examination on the Impact of government policies on small and medium enterprises (SMEs) in Cameroon.

1.3  Objectives of the Study

The main purpose of this study is to examine  the impact of government policies on small and medium enterprises (SMEs) in Cameroon. Specifically, the study will;

Examine the existing regulatory framework governing SMEs in Cameroon.

2.Investigate the availability and accessibility of financial support mechanisms for SMEs in Cameroon.

3.Assess the effectiveness of government initiatives and programs aimed at supporting SMEs in Cameroon.

1.4 Research Questions

The following questions have been prepared for the study:

What is the current regulatory framework governing SMEs in Cameroon, and how does it impact their operations?

How accessible are financial support mechanisms for SMEs in Cameroon, and what is the availability of such resources?

To what extent do government initiatives and programs effectively support SMEs in Cameroon?

1.5  Significance of the Study 

The findings of this study will provide an insight into the effectiveness of existing government policies affecting SMEs in Cameroon. Also, government authorities as well as policymakers will assess the impact of the current strategies and make informed decisions for the betterment of SMEs. Additionally, stakeholders and investors will help in provision of finance for intending entrepreneurs especially, teeming unemployed youth in the country to reduce the high rate of unemployment and improve economic development. Further more, subsequent researchers will use it as a literature review. This means that other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regard to the impact of government policies on small and medium enterprises (SMEs) in Cameroon.

1.6 Scope of the study

The scope of this study is boarded on the impact of government policies on small and medium enterprises (SMEs) in Cameroon.  Empirically, this study will examine the existing regulatory framework governing SMEs, investigate the availability and accessibility of financial support mechanisms for SMEs and assess the effectiveness of government initiatives and programs aimed at supporting SMEs in Cameroon.

Geographically, the study will be delimited to SMEs owners in Bamenda, Cameroon.

1.7 Limitation of the study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed. 

More so, the findings of this study are limited to the sample population in the study area, hence they may not be suitable for use in comparison to other schools, local governments, states, and other countries in the world.

 1.8 Definition of Terms

Government: the group of people with the authority to govern a country or state; a particular ministry in office.

SMEs: short form for Small and Medium-sized Enterprises. These enterprises are businesses that maintain revenues, assets, or a number of employees below a certain threshold.

Policy: is an institutionalized proposal or a decided set of elements like laws, regulations, guidelines, and actions to solve or address relevant and real-world problems, guided by a conception and often implemented by programs.