ROLE OF FEMALE ENTREPRENEURS IN POVERTY ALLEVIATION IN RURAL COMMUNITIES: THE CASE OF AKOKO NORTH-EAST LOCAL GOVERNMENT AREA IN ONDO STATE ,NIGERIA
BY
Dr Ebenezer Kayode Bowale
Corresponding Author
Adekunle Ajasin University, Akungba-Akoko, Ondo State, Nigeria
E-mail:
Mobile phone: +2348034644522
John B. Longe
Adekunle Ajasin University, Akungba-Akoko, Ondo State, Nigeria
Olufemi suaibu
UNIVERSITY OF LAGOS,NIGERIA
Abstract
The study assessed the role of female entrepreneurs in poverty alleviation in rural communities of Akoko North –East Local Government Area of Ondo State, Nigeria. It specifically analysed the socio-economic characteristics of women entrepreneurship and assessed the contribution of female-owned businesses to poverty alleviation in the study area. The main reason for this study was due to the fact that most studies on the relationship between businesses development and poverty alleviation have concentrated on aggregate effects of small businesses on poverty reduction with little attention on gender issue in rural areas. The study employed primary data. The target population was all the women-owned enterprises from five communities in Akoko North-East Local Government Area in Ondo state of Nigeria. Data were collected from primary source, using questionnaire on a sample of 205 female-0wned enterprises. Responses of the respondents were analysed using percentages and the chi-square tests were carried out to support the analysis. The study therefore concluded that female-owned microenterprises have played key role in poverty alleviation among the businesses’ owners in Akoko Division through income generation and job creation.
Key words: Female entrepreneurs, Akoko North-East, Poverty Alleviation
1.1 Introduction
Poverty is one of the main economic problems facing most countries in the world. There have been several strategies to tackle poverty in its various forms and dimensions. Of recent, there has been a shift from the capital intensive large-scale industrial policy. SMEs are viewed as a sector that creates substantial employment opportunity as they are relatively labour intensive. In the light of this, different levels of government in Nigeria have embraced the challenge of promoting small and medium enterprises since 1986 through the Small Scale Enterprises Programme (SSEP) as an engine for economic growth. There are many studies on the relationship between small businesses development and poverty rates and overall microeconomic performance on the basis of aggregate time series data. But most of the studies have neglected the individual traits of businesses and gender issue, and with less attention on rural areas. This study is gender sensitive as it investigates the roles of small businesses owned by women in rural areas in poverty alleviation.
1.2 Statement of the Research Problem
In view of the escalating level of poverty in developing countries constituting a serious problem to economic growth and welfare state of the citizenry, various policies were implemented which could not significantly impact on the level of poverty. The failure of various reforms and development programmes to impact on the level of welfare of the citizens in terms of poverty reduction particularly through employment generation, triggered the reappraisal of the role and importance of small and medium sized enterprises as a viable channel to attaining economic growth and development especially in terms of reducing the poverty level in the economy as was witnessed in the developmental progress economic transformation of some developed countries. In most developing countries, attention has not been focussed on development of businesses owned by women due to the perception of their traditional role at home. In Nigeria, there are few studies on the actual contribution of the women-owned micro, small or medium enterprises (SMEs) to employment creation, income generation and wealth creation in rural areas, hence this study.
1.3 Research Questions
The study addressed the following questions.
(i) What are the characteristics of Female business owners in rural areas in Ondo State, Nigeria with special attention to Akoko North-East Area?
(ii) Has the establishment of the female-owned enterprises alleviated poverty in the study area?
1.4 Objectives of the study
The broad objective of this study is to assess the role of small and medium businesses owned by women in reducing poverty in Akoko North-East Area in Ondo state, Nigeria through job creation and income generation. The specific objectives are to:
- Analyse the characteristics of female business owners in the study area.
- Assess the extent to which the SMEs have reduced poverty among the female owners in the study area.
2.1 Literature Review
2.2 Theoretical Issues on SMEs
The last five decades have witnessed important developments in the conceptualization of the main issues relating to the SMEs sector and subsequent theoretical work on SMEs growth. These theories include: the labour surplus theory; the output-demand theory and the firm growth theory. The labour surplus theory is the main theory to the development of SMEs, which dates back to the seminar work by Lewis (1955). This theory claims that the driving force behind SME development is excess labour supply, which cannot be absorbed in the public sector or large private enterprises and is forced into SMEs in spite of poor pay and low productivity. The second theory explaining the development of the SME sector in developing countries is the output-demand theory. The theory postulates that a prerequisite for the development of SMEs is that there is a market for their products and services. Therefore, the SME sector will tend to develop a cyclical relationship with the economy as a whole. However, SMEs will also develop in competition with large enterprises in the formal sector, and their development will be constrained by formal sector monopolies. Structural adjustment and other policies that limit such monopolies, and attempt to create more competition, will therefore be advantageous to the SMEs, because this may allow them to capture market shares from the large enterprises. Proponents of structural adjustment and stabilization policies tend to base their arguments on this theory. Empirical studies based on the output-demand theory tend to focus on the upper end of the SME sector, particularly the manufacturing enterprises and the larger, more resourceful and successful SMEs, which have a potential to grow into the formal economy. In addition, a modified strand of the output-demand theory links SMEs and the long-run development of the rural agrarian economy in an anti-cyclical relationship, to the detriment of agricultural production (see, for example Bryceson and Jamal, 1997). As a result of monetization, commercialization and urbanization, the rural population turns to non agricultural activities and the money economy. This creates a growing market for SMEs’ goods and services.The third theory, known as the firm growth theory, contends that, as a result of industrialization and economic growth, SMEs are likely to disappear and be replaced by modern large-scale industry. This theory has, however, been shown to be inaccurate in the sense that SMEs do not normally compete directly with large enterprises; rather, they often tend to remain micro and small, co-existing with large multi-national companies. For example in a study of Botswana, Kenya, Malawi, Swaziland and Zimbabwe, Mead (1994) found that most SMEs started with one to four employees and never expanded; less than 1% grew to exceed 10 employees. In addition, the SMEs tend to find niches in the factor and input markets where scale economies cannot be exploited by large enterprises.
2.3 Conceptual issues on Small and Medium Enterprises (SMEs)
There are different classes of SMEs. Akerele (2000) classified SMEs as formal and informal SMEs, rural and high technology and knowledge driven small scale enterprises. SMEs in the informal sector are difficult to control as they fall outside the modern or formal sector of the economy. However they contribute job creation (Fluitman, 1989). Many of these enterprises usually make use of simple method of production (Dutta, 2005). These SMEs in the formal sector are usually registered with relevant agencies. Another classification of SMEs is the rural based SMEs. It is not actually easy to define the term rural SMEs. Some scholars are of the opinion that rural SMEs are those in cottage industry. Islam (1987) believes that the manufacturing enterprises using modern technology can also be so regarded. Some believe that rural enterprises must necessarily have a direct relationship with agriculture. It is important to know that diversifying rural economy through promotion of small business would amount to rural industrialization. Classification can also be viewed from the angle of the size of business. The United Nations Development Programme in its study UNDP (1988) defines micro enterprise as business engaging one to four employees while small enterprises are those with 5 to 25 employees. Others have classified those enterprises engaging 1 to 9 employees as micro enterprises and those engaging 10 to 49 as small enterprises while those engaging 50 to 250 employees as medium enterprises (CBN 2005).We have adopted this classification in our study
2.4 Concept of Poverty
There is no consensus on the definition of poverty due to its multidimensional nature. However, appreciable efforts have been made to provide operational definitions of the concept. Aku et al., (1997), Sen (1981), Soludo (2004) define poverty as a condition of low consumption. Others have adopted broader definitions such as inability to meet basic material needs which include food, water, clothing, shelter, education, health as well as environmental requirement, such as air, serenity and basic non-material needs such as political and community participation, identity, dignity etc Ajakaiye, 2001.In literature of poverty less attention has been paid to strategy of using small business development to alleviate poverty.
Conceptually, poverty can be categorised into three groups, namely the subsistence, inequality and externality aspects. Subsistence poverty is concerned with lack of the basic needs such as education, health facilities, required by an individual to live in good health and be able to perform very well. The inequality aspect considers the extent of social stratification in the society relating to living standard. In this case, those with the least amount of income are classified as the poor whilst the proportion with the highest amount of income is the rich. The inequality aspect of poverty views poverty as a relative term indicating deprivation resulting from unequal distribution of resources. The externality aspect of poverty concentrates not on the hardship but focuses on the social consequences of poverty in the society. The definition of poverty in terms of subsistence level of living has given rise to the concept of absolute poverty which has been defined as lack of sufficient income or earnings to obtain the minimum necessities of life. It was against this background that the basic needs approach to the study of poverty came up in early 1970s.These elements of base needs include food, shelter, clothing and water. This is presumed to be better than alternative approach to accelerate growth or raising income of the poor through the trickling down effect.
In order to develop a more robust concept of poverty, Ajakaiye, (1989) was of the opinion that a review of theory of human need would be important. He supported the theory of human needs. This theory states that basic human needs should be able to establish links among individual needs, the achievement of goals and social institution in addition to the framework of Maslow hierarchy of needs. Ajakaiye (1998) therefore looks at poverty concept to include in addition to economic factors, enabling socio-cultural and political system which will eliminate weaknesses of the instant perpetrating poverty.
2.5 Theoretical Framework
The Keynesian theory attempts to explain how the level of income and output is determined in a capitalist economy. Based on some assumptions, it proposes that the equilibrium level of income can be determined by the equality of aggregate demand and aggregate supply or by equality of savings and investment. Thus, it assumes that plough back of profit into the business increases business investment of the SMEs which eventually yields improved income. Similarly, savings mobilized from the increased income are ploughed back into the economy with the same effect of improved investment and income. The poverty alleviation effect brings improvement in consumption and eventually living standard of respondents. This is the theoretical framework on which this study is based income determination. The Keynesian Theory of income determination is shown by the following identities
Y=C + I...... (1)
Disposable personal Income, Yd=C +S...... (2)
But Y=Yd...... (3)
And therefore C+I≡ C+S or I=S....(4).
The standard Keynesian function is written as
C=a +cYd...... (5)
Where C=consumer expenditure , a=autonomous consumption, I=Investment, Y = Total Income and Yd=disposable income.
2.6 Previous Empirical Studies on the Relationship between SMEs and Poverty Alleviation
Gebremariam (2004) examines the roles of small businesses in economic growth and poverty alleviation in West Virginia. In OLS and 2SLS regression analysis a positive relationship exists between small business and economic growth. A strong inverse relationship also exists between the incidence of poverty and small business and economic growth. Thus, the empirical result establishes the linkage between small business, economic growth and the incidence of poverty. But this study does not show systematic relationship between net job creation and firm size and the data used are state- specific. There have been many attempts to establish statistical relationships between official poverty rates and overall macroeconomic performance on the basis of aggregate time series data. Haveman and Schwabish 2000; Blank 2000.Blank and Card, 1993; Blank and Blinder, 1986;. The results from these studies show an inverse relationship between economic growth and poverty rates. Blank and Blinder (1986), for example, found that both the unemployment rate and the inflation rate were positively related to poverty rate, with a high quantitative effect of unemployment. Blank (1993) also found similar results apart from the post recession period of the 1980s where unemployment rate was found to be inversely related to poverty rate. Using GDP growth rate as explanatory variable, Haveman and Schwabish (2000) tested the differential effect of macroeconomic performance on the poverty rate for various periods. Agupusi (2007) assessed the role of the small business sector in poverty alleviation in Alexandra and to examine both government and private sector initiatives for supporting small business development for poverty alleviation. It is observed that small businesses are not playing the expected role due to number of constraints including a lack of policy that deals adequately with the semi-formal and informal business sectors, the predominant sectors in Alexandra. The overall finding indicates that with positive interaction between development agencies, and small businesses in Alexandra, predominantly informal and semi-formal SMMEs in Alexandra could not only alleviate poverty but could also contribute to the general transformation process.