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APRIL 2013
A PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR BACHELORS DEGREE IN ACCOUNTING AND FINANCE, COLLEGE OF BUSINESS AND FINANCE, AHLIA UNIVERSITY.
MANAMA, BAHRAIN
ACKNOWLEDGEMTS
This research paper would not have been possible made without the help and support of many people. I would like to express my sincere gratitude to my supervisor Dr. Wajeeh Elali who believed in me and supported me from the very beginning of this research. Im grateful not only for his guidance and expertise but also for his assistance, understanding, trust and patience. I have been truly fortunate to have him as my supervisor.
I would further like to acknowledge and express my thanks to Dr. Ilene Valian Agana a Business Counselor at ITPO Bahrain UNIDO who showed interest in my research study and encouraged me to attend the Enterprise Development & Investment Promotion Program (EDIP) to gain deep understanding of the research topic. I wish also to extend my thanks to Mrs. Anji Benhamed and Dr. Muneer AlMubarak for evaluating my research questionnaire despite their busy work load. Their valuable feedback was a great asset for my thesis. I would also like to thank my parents for their unconditional love and support throughout my life whom without them I couldnt be the person I am today. Finally, I would like to thank all those who assisted me in completing my research project.
ABSTRACT
Small and Medium Enterprises play an important role in the economic development of both developing and advanced economies. SMEs are seen as the engine growth and are essential to sustain competitive and diverse markets. However, small businesses face various challenges during the start-up stage limiting their development. Therefore, the aim of this study is to identify the challenges and opportunities facing small businesses in Bahrain at this critical point. The study
used both primary and secondary sources for gathering data through a survey questionnaire. The study found that financial and marketing challenges are the main obstacles for small businesses, understanding market requirements, access to finance and finding customers are the biggest challenges at the start-up phase. However, other findings confirmed that the rules and procedures for registering small businesses are simplified and getting easier. Also, Bahrain provides a friendly environment for small businesses that helps to empower them during the start-up phase represented by Tamkeen support schemes programs, UNIDO training programs and consoling and business incubators.
Bahrain is like many GCC countries that seek to shift from an economy built on oil wealth to a productive, globally competitive economy. It launched the Economic vision 2030 by Economic Development Broad in 2008 that aims to create an environment highly conducive to entrepreneurships and innovation. To achieve this vision, Bahrain is focusing on developing a competitive Small & Medium enterprises sector (SME). According to Annual economic review (2010) the central informatics organization estimates these enterprises contribute nearly 28% of total nominal GDP. Statistics show that micro, small and medium enterprises represent a significant part of the Bahraini economy, over 90% of all businesses operating in Bahrain are small and medium enterprises.
Therefore, SMEs sector accounts for a sustainable part of Bahrain industrial output besides contributing significantly to employment generation as well as foreign direct
investment. As well, the Ministry of Industry & Commerce (MOIC) developed a policy initiative to activate, promote and develop this sector and its contribution to the National Income.
However, due to various reasons, some SMEs end up closing down business at an early stage. According to Moya K. Mason (2009) The Small Business Administration (SBA)
stated that more than half of new businesses will disappear in the first five years. Statistics show that 8 out of 10 new businesses fail within the first three years. Therefore, the aim of this paper is to study the challenges and opportunities facing entrepreneurs during the start-up phase of creating their small businesses in Bahrain.
1.1
Ministry of Industry and Commerce (MOIC) defined SMEs as the following: Micro Enterprises would involve full time employment up to 10 persons with annual turnover up to BD 100,000. Small Enterprises would involve full time employment more than 10 and up to 50 persons with annual turnover of BD 100,001 1 million. Medium Enterprises would involve full employment more than 50 and up to 250 persons with annual turnover of 1,000,001 5 million.
However, in this research the researcher targeted Micro enterprise but for the sake of easiness for the reader and respondents, she replaced the word Micro-enterprises with Small businesses.
1.2
Research objectives
The primary objective of this project is to study the elements that affect the creating of small businesses. To study the challenges that affect small businesses during start-up phase. To identify the opportunities available for entrepreneurs in Bahrain.
1.3
Research questions
What are the challenges facing entrepreneurs during start-up phase? What are the opportunities available for entrepreneurs in Bahrain?
1.4
The
Research Methodology
project relied on qualitative and quantitative research methods together of
collecting information which are Semi-structured Interview and survey. A sample size of 70 entrepreneurs and professionals who work closely with entrepreneurs were chosen to answer a questionnaire that was prepared to cover the research objectives and collect data. The quantitative research methods was used to create statistical model to explain what, where, when. Whereas, the quantitative research methods was used to gain an understanding of underlying reasons and detailed descriptions. And thats what the researcher needed in her research.
1.5
Research Limitation
Although the research has reached its aims, there was some unavoidable limitation. Because of time limit, this research was conducted only on a small size of population of entrepreneurs and professionals.
5.3 Conclusions
SMEs are the engine of growth in developing and developed countries; they are a major pillar of the market economy and supply. This paper determined the challenges and opportunities facing entrepreneurs when starting their new businesses in Bahrain. The findings of the study showed that Bahrain provides a friendly environment for small businesses to be nurtured and mature in terms of support programs and institutions. Yet, entrepreneurs face different challenges such as understanding market requirements, finding customers and access to finance. The study identified the barriers of receiving funds from financial institutions due to high interest rate and lack of appropriate guarantors. However, rules and regulations for registering small businesses are getting easier in Bahrain which encourages many prospective entrepreneurs who operate in the informal phase to enter the market.