The role played by entrepreneurship in economic development

  

Date Posted: 4/17/2012 7:47:10 AM

Posted By: sashoo  Membership Level: Silver  Total Points: 382

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Entrepreneurship plays a significant role in the country's development. According to Harbison, entrepreneurs are prime movers of innovation. Sayigh describes entrepreneurship as a dynamic force.

Indeed, an entrepreneur is the person who perceives a business opportunity and converts it into a viable business plan culminating into a business venture ultimately.

THE ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT.

1. EFFECTIVE UTILIZATION OF RESOURCES:
Entrepreneurship is all about putting to better use the resources which are considered to be of low value with an aim of earning income. An entrepreneur comes up with ideas of how to use what others may consider waste. This improves the economy of a country through taxes and creation of jobs which improves the standard of living of the beneficiaries. The Kenyan sisal plant is, for example, being used by small scale entrepreneurs to weave quality bags such as “ciondo”, table mats, lamp shades etc. These items sell internationally.

2. INCREASE IN PER CAPITA INCOME:
Economic growth is measured in terms of a sustained increase in real income. It is the entrepreneurial communities who complement and supplement the economic growth increase per capita income by identifying and establishing profitable business ventures.

3. IMPROVEMENT IN PHYSICAL QUALITY OF LIFE:
Entrepreneurs supplement the economic growth by enhancing the physical quality of life. Establishment of enterprises leads to increase in employment avenues both directly and indirectly. Consequently, poverty is alleviated as per capita income grows. This results in improving the physical quality of life which is an indicator of economic growth.

4. GROWTH OF INFRASTRUCTURAL FACILITIES:
Entrepreneurs help in the growth of infrastructural facilities such as roads, bridges, buildings, factories, etc. which are the cornerstones of economic growth. Establishment of factories and industries in a particular locality presupposes the growth of infrastructural facilities.

5. EXPORT OF HANDICRAFT ITEMS:
Entrepreneurs play a significant role in producing and exporting handicraft

items. They generally use the local traditional skill, traditional technology, local knowledge and experience for producing traditional art and craft and handicraft items. Nowadays, such items are on demand in foreign markets - jewelries, carpets, stone carvings, handbags such as the world famous “ciondo”, table mats, etc. They are both exported to foreign markets and sold locally at markets such as the Maasai Market in Kenya, which has become immensely popular with foreigners, as well as the local people.

6. PROMOTION OF TECHNOLOGY:
A few years ago, the Jua Kali sector in Kenya came up with new technology for making gas burners (jikos) that use bio fuel from cow dung. These jikos are made from locally available materials that are truly affordable to the low income earners even at the village level, and the gas is produced through a real easy process. This has improved many homes since the cost of fuel has become affordable for them. A particularly recent innovation in the same line is the solar-powered LED lantern by a young 2010 CNN Kenyan nominee, Evans Wadongo who was rated among the 2010 top 10 CNN Heroes. The thinking behind this lantern is to help light Kenyan rural homes and save on fuel costs, keep eye problems caused by smoke from tin or bottle lanterns at bay and conserve the environment.

7.EXPORT PROMOTION:
Entrepreneurs produce high quality products that attract an unusually wide market. Some of their goods are sold in the international markets thus bringing foreign exchange to Kenya. Entrepreneurs from other countries, through exchange programmes, bring their goods here in Kenya to sell in organized exhibitions. This gives an opportunity to the local entrepreneurs to learn and exchange new ideas with their counterparts from different countries. There are also Kenyan entrepreneurs who have identified attractive markets in foreign countries to sell Kenyan products and culture. One such Kenyan is Ibrah, who is operating a successful “ugali-nyama-choma” resort in USA, a favorite dish for most whites there.

8. CAPITAL FORMATION:
Capital formation is the most crucial element for economic growth. It is always necessary to step up the rate of capital formation so that the economy accumulates a large stock of machines, tools and equipment which can be geared into production by the entrepreneur. Besides, capital formation in the economy may be brought about by the formation and up-gradation of skills of human capital. This is in terms of knowledge and skills which can be utilized to raise the level of productivity whereby economic growth can be accelerated.

9. CREATION OF EMPLOYMENT:
The role of entrepreneurs in establishing micro, small and medium enterprises is perceived as a powerful medium to address several socio-economic issues - the key issue being the generation of employment opportunities. In a developing economy like Kenya, where labor supply is higher than demand, the role of entrepreneurs is well much significant. Entrepreneurial development gives rise to economic independence through self-employment. Creation of micro, small and medium enterprises by the entrepreneurs can lead to the creation of both self-employment and wage-employment opportunities, thereby solving the problem of unemployment in the economy.

In rural Kenya, for example, some non-governmental organizations have chipped in by offering support especially to widowed mothers who have come together to start small businesses from their self-help savings while other women in urban areas have also come together to start up small enterprises to boost their income.

10. EMPOWERMENT OF WOMEN THROUGH ENTERPRISE:
Women entrepreneurs such as Mary Okello of Makini Group of Schools, Esther Passaris of Adopt A Light are the prime movers of women empowerment. In this context, empowerment through enterprise involves access to resources and markets, actual ownership and active control. These things lead to equity and equality among men and women and act as a lever for social stability.

11. CONSERVATION AGENT:
Entrepreneurship allows for maximum utilization of natural resources. Mr. Peter Ruigu Kirugi of Red Hill farm, Limuru, in conjunction with the GTZ project, has turned cow waste into a profitable venture. He put up a 32 cubic meter biogas plant in March 2010 to utilize the dung produced by his dairy herd.

The biogas promotion, pioneered by Promotion of Private Sector Development in Agriculture (PSDA), enables dairy farmers to get better value from the dung produced by their cows, as it is first used to produce energy before it is used as manure.

Biogas can replace all kinds of energy sources like LPG, firewood, charcoal and electricity.

Entrepreneurship promotes environmental friendly technologies like biogas digesters, energy saving stoves which use less firewood and also save time and money for the user, solar-powered LED lanterns, like that being developed by the 2010 CNN Heroes nominee, Evans Wadongo, etc.

OR

Roles of entrepreneurship in economic development

- Employment Job creation Entrepreneurs contribute to creation of employment opportunities for citizens. They start a business and employ themselves first then expand the same business to absorb more citizens as employees.

- Improved quality of life

standard Entrepreneurs are creative and highly innovative. They are able to design goods and services that fit customer specifications. They continually improve on the same in order to meet changing customer needs. They also provide income to citizens in form of salaries and. wages the citizens can therefore afford goods and services.

-Add to National Income

Entrepreneurs generate a lot of income from their businesses locally and overseas. The amount of money generated can be used for more investment or to provide citizens with goods and services

-Even distribution of income

Entrepreneurs spread out to all parts of a nation because it is the business opportunities; that guide them where to invest. In the process they open up in accessible areas for envelopment. The presence of entrepreneurs in different parts may mean more income, better infrastructure and higher quality of life for the local community.

- Bring new technology in production

Through their creativity and innovation entrepreneurs device different methods of production and provision of services. They are quick to adopt new and efficient operation methods. To survive in a competitive market, they may continuously engage in research on ways to improve production and ensure customer service and profitability.

- Increase investment

Entrepreneurs are investors and may increase the number of investments in a nation. In so doing, they create more wealth in a nation investment may suggest ability to meet basic needs and save the surplus for investment.

-Increase government revenue

Entrepreneurs contribute to government revenue through, various forms of taxes.

The entrepreneur’s firm whether registered as a company or not still has a legal requirement to pay its taxes and to furnish the tax authority with the relevant paper Work, The entrepreneur running a sole business will need to submit all his income in a given fiscal year and the business income from his firm forms part of this. An entrepreneur running a public limited company has the responsibility of ensuring corporate taxes are paid each year and in compliance with the Companies Act and any other legislation. Other taxes that the entrepreneur should furnish the tax authorities are taxes on the sales of good to the final consumer, personal taxes on his employees and any other penalties associated with these ; taxes. The various forms of taxes are source revenue for the government.

-Social responsibility

The entrepreneur should realize that his business will go a long way in getting public approval if it is seem to be doing something positive for the local community. Regular contributions to community projects will put the business in the good books of the community. This should be clearly highlighted in the company’s policy. The goodwill of the business stands to improve and this ensures support not only from regular customers but also the local authorities

-Formation of cartels

Cartels are formed by firms with the same business objectives.
Theirs is to establish favorable trade terms with suppliers so that when the goods reach the final consumer; sufficient margins have been made, this helps the many small individual firms that perhaps could not have had the same bargaining power as they do when in a cartel. in a way it fortifies the relationships between the various businesses and contributes towards healthy competition. The smaller firms eventually .grow and play important roles in the economy as well.

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