10 Problems facing the small scale industries in developing countries
- Inadequate capital. This is due to low incomes and limited access to credit facilities from financial institutions due to lack of collateral securities. This limits the operations of small scale industries in form of shortage of credit to purchase raw materials and other capital goods.
- Low levels of technology. There is use of simple machines which are old and outdated which require frequent maintenance. This increases the costs of production and leads to the production of poor quality goods and services.
- Unfavorable government policies. Such policies are in form of high taxes, lack of subsidies and the general lack of clear policy guidelines concerning the development of small scale industries in developing countries.
- Economic instabilities. For example high levels of inflation and fluctuations in the supply of raw materials. Such instabilities limit the growth of the small scale industries ill developing countries.
- Stiff competition from the imported manufactured products. The imported goods are cheap and of high quality while the locally produced goods by the small scale industries are relatively expensive and of poor quality. Therefore, they end up out competing the locally produced goods by the small scale industries.
- Poor and inadequate social and economic infrastructural facilities. This is reflected in form of poor transport network, poor storage facilities, shortage of power supply and limited financial institutions. This makes production and marketing of goods difficult.
- Limited entrepreneurship skills. This is due to limited skilled manpower required for successful management of small scale industries. This leads to low profit margins hence closure of the small scale industries.
- Limited markets for the locally produced products. This is due to the production of poor quality goods and low aggregate demand resulting from high levels of poverty in developing countries.
- Poor investment climate ill form of rampant political instabilities. This discourages private individuals from setting up small scale industries due to fear of losing life and property.
- Inadequate supply of raw materials required in the production of goods and services. Most of the raw materials like steel and capital goods are imported from other countries. This increases the costs of production hence limiting production by small scale industries.
CATEGORIES Economics
TAGS Dr. Bbosa Science
