The role of micro and small enterprises (MSEs) as engines of endogenous development in rural economies is increasingly recognized in development theory and has attracted the attention of policy makers (Tetteh & Frempong, 2009). According to Tacoli et al, (2003) MSEs add value to agricultural products and play crucial roles in the decentralised use and distribution of resources. Again, they augment government efforts to achieve economic growth and poverty reduction in rural and urban areas (African Development Bank, 2005). Wangwe (1999) argues further that MSEs tend to ensure balanced economic growth since they are concentrated in different parts of the country. Once more, Reijonen and Komppula (2007) posit that MSEs have been credited for introducing innovations into the market to serve as a catalyst for societal development (Reijonen & Komppula, 2007). The development and promotion of MSEs can deepen the manufacturing sector and foster competitiveness.
A vibrant MSE sector can also help to achieve a more equitable distribution of the benefits of economic growth by alleviating some of the problems associated with uneven income distribution (UNCTAD, 2001). Consequently, many development plans in developing countries have placed strong emphasis on the development of an entrepreneurial middle-class that create employment and has the potential to overcome institutional conditions that hamper growth in rural areas. For example, in Ghana, the Growth and Poverty Reduction Strategy (GPRS I &II) identified MSEs as engines of growth, wealth creation and avenues for employment generation for the majority of its citizens.
In Ghana, a vibrant MSE sector in the rural areas is very important since about 60% of the country’s population reside in these areas where poverty is more pronounced. According to the Ghana Statistical Service (2012), about 86% of the total population living below the poverty line in Ghana can be found in the rural areas. Recognising the critical role of the MSEs in poverty reduction, a number of existing institutions, which have a mandate to promote industrialisation in the rural areas, have been strengthened to facilitate more economic change on the countryside. Tetteh and Frempong (2009) posit that in order to build strong rural economy, the government of Ghana has set up National Vocational Training Institutions (NVTI), established entrepreneurial development programs as well as favourable conditions for micro financial institutions (MFIs) and other infrastructural services to encourage the growth and development of both informal and formal MSEs in the country.
The problems of rural development in Ghana have become a major concern today. This concern notwithstanding, the problems seem as intractable as ever. There are significant disparities in income and standards of living between the rural and urban populations (GPRS, 2004). This has resulted in the continuous increase in the movement of people from the countryside to the city, creating a serious social crisis, the ramification of which is affecting the quality of life. The manifestations of this include; people sleeping on pavements and others sprawling in shanty slums, ragged beggars, crimes and other deviant behaviours such as prostitution, drug addiction and alcohol abuse (GPRS, 2004)
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