J A M A I C A
Small and Medium Enterprises Survey 1996
The micro and small business sector in Jamaica has been growing since the 1980s. There was, however, a faster rate of growth in the 1980s than in the 1990s. This growth has been demonstrated in a shift in numbers of firms in the various sectors with Wholesale and Retail Trade contributing greatest to the movement. There also appears to be, in percentage terms, a movement away from the Kingston Metropolitan Area and other urban centres into rural areas. This was not uniform among the sectors as the largest sector, Wholesale and Retail Trade maintained that representation with little change in the three areas.

Sole proprietorship remains the dominant form of ownership during the 1990s, the period for which data are available. At the same time, with marginal representation by partnership and cooperatives, this form of ownership appears to have slipped during the period. Incorporation of businesses was not practiced by the vast majority of operators and was found mainly in the Finance and Business Services sector. Data on the tenure of business premises showed that nearly one half operated out of own premises while another one-third operated out of rented premises. Squatting was definitely not a preferred form of tenure, with less than five percent (5%) adopting this form of occupancy. It is not surprising that more than eighty percent (80%) of micro entrepreneurs operated out of a permanent site.

The majority of micro enterprises was operated solely either by the proprietor, with partners or with unpaid (family) workers. This was so regardless of the gender of the operator. In the case of women, those operating with paid employees would more likely to be using less than five workers. In general, the ratio of female to male operators has been rising and was almost even in 1996.

By and large, the level of formalization with respect to their involvement in the government bureaucracy has not increased over the period. Large numbers report that they do not pay NIS for themselves or their employees while a significant proportion still does not have a BENO number. Also, a number of them report that they do not pay GCT, with a high proportion reporting non-applicability of both NIS and GCT to their business.

Operation during the last calendar year was fairly strong. Few of the firms reporting had closed during the year. Only a minority reported strong growth, however. This has been the pattern since the start-up of businesses of most of the operators. Some industries experienced stronger growth than others but in no industry did the majority of operators reported strong growth. The pessimism in relation to past performance was supported by their reports of actual performance while demand for their products was reported to be low although increased growth in demand for their products was acknowledged by the majority to be the main contributor to whatever growth had taken place. Few were optimistic with regard to their future prospects.

What were the main problems which the micro entrepreneurs have to face? In the first instance, the number of firms identifying no problems has fallen significantly. Of those reporting problems, the majority lists capital and credit as the main problem. Other problems named are low demand, inability to collect moneys owed, and supply problems both in relation to raw materials and other supplies. There was also a demand for qualified staff. Additionally, location and failure of customers to collect their finished goods were identified. This of course was more or less significant, depending on the goods and/or services being marketed.

The capital and credit problems being experienced are echoed in the sourcing of funds used both at and since start-up. Most entrepreneurs started their business using their own funds, either from their personal savings, the sale of assets, from other businesses or by "throwing partner" and it should be noted that the latter is still being used to provide funds for the business. There is a marked reluctance among micro and small business operators to utilize funds from financial institutions. A number of reasons have been given for this. Most state that the interest rates are either too high or just that they do not like to borrow; some reported that they did not have the necessary collateral while others admitted that they were afraid to lose the collateral they had. A minority indicated that they did not know how to proceed while a quarter of the operators indicated that they did not need the money. This latter reason was, however lower than in 1992 when the percentage reporting this was closer to thirty percent (30%). Micro and small business operators use financial institutions largely to operate checking and savings accounts; few use them to access loans. Supply problems were experienced by fewer micro business operators than those relating to demand. However, the main one identified, the high cost of supplies including raw materials and services, impacts directly on those operators who are experiencing cash flow problems since the majority of micro entrepreneurs pay cash on delivery for these supplies.

What is the contribution of the micro and small business sector to production in Jamaica? Insufficient data makes it not possible to find out the true position. Whereas some data are available on sales and on current stocks, the reports on stocks held one year ago do not allow for calculating this measure and hence no estimates of the gross output of micro enterprises have been derived. However, if one assumes that the level of stock change is not high , a comparison with the value of sales reported with gross output in the sectors covered by the survey suggest that the micro and small business sector contributes between ten and fifteen percent (15%) of the market as a whole. Expenditure data provided by the respondents may be not as accurate as is desirable and could be overstated in part. (This could be counterbalanced by the possible under reporting of sales). However, the reported data show possible gross profits in the sector although this varies from industry to industry with some reporting wide disparities between sales and expenditures.

How does the contribution to employment compare with that of production? Average employment per firm was estimated at 1.76 in 1996. Most of these were own account workers which comprised working proprietors and unpaid workers. It is estimated that own account workers in the micro and small business sector constitute about one third of all own account workers in the labour force; paid employees are estimated to be about one tenth of the national total. The trend has been shown to be rising.

Despite the problems being experienced, there has been growth in the micro and small business sector. The main reasons given for growth were the overall growth in demand for the kind of product or service being offered, improvement in the quality of product or service supplied, little competition and the adequacy of supplies. Twenty percent (20%) of operators gave as a reason the fact that customers considered their products or services to be better than their competitors. The overwhelming majority of micro entrepreneurs identified needs which would have to be satisfied for them to be able to expand. Four areas were considered important by many. These are: the need for more capital, increased demand, the need for more machinery and equipment and more space in their operating environment.

Finally, in assessing their contribution to management, the micron entrepreneurs have been reviewed using a broad set of factors. With respect to gender, the mix has been changing. More and more women are joining the group of operators. At the same time, the age composition has demonstrated that there are more persons at the upper end of the age scale than there were in 1992. With respect to educational levels, more persons at secondary level were found as operators but less with post-secondary schooling in 1996 than in 1992. With respect to skills, there was a percentage decrease over the period of operators with no basic training and there was an increase in those without training. At the same time, a higher percentage indicated in 1996 a need for further training than in 1992. The main areas identified in 1996 for additional training were: designing new products, management, technical basic skills, keeping written accounts, and marketing and promotion. A few operators, higher in 1996 than in 1992, identified negotiation with banks as an area which could be explored.

It was interesting to explore the reasons why micro entrepreneurs decided to run their own business. An increasing percentage gave as their reason that they could not find employment elsewhere; that they needed supplementary income; or that they wanted something more profitable to do. By far the highest percentage, although the level has decreased somewhat between 1992 and 1996, gave as their reason a desire to be independent.

The overall level of responsibility may be observed in the percentage of operators, both males and females, who were heads of their households. As would be expected, the majority of operators both in 1992 and in 1996, rely solely on the income from the business. The reliance was, however, greater in 1992 than in 1996. In the 1996 survey, while the levels of reliance on the private and public sectors remain at roughly the same levels, entrepreneurs in 1996 showed a heavy dependence on other sources, a category not separately identified in 1992.

Finally, it has been noted that the majority of micro entrepreneurs put in an average of 41 hours, with a significant percentage working 60 hours or more. This demonstrates the effort and energy that these operators bring to their job. As indicated earlier, more and more women are becoming participants as working proprietors in the micro and small business sector and at the time of the 1996 survey, their participation as operators was almost equal to that of men. Although, as was found in 1992, they operated at the smaller end of the sector and are concentrated at the narrower range of activities, their outlook and commitment continue to be the same or stronger than that of their male counterparts. Participation was greatest in Wholesale and Retail Trade and in Personal Services. The women involved have had, percentage wise, a greater degree of training than their male counterparts but the types of training have been generally at lower levels. Skills gained through training at post secondary are more common in the male than the female operators.


Hari Srinivas - hsrinivas@gdrc.org
Return to the Jamaica Page
Return to the Virtual Library on Microcredit