Abstract

Sierra Leone, like other developing countries, has continued to grapple with the menace of poverty despite several economic policies and programmes implemented by various governments. This study was therefore undertaken to assess the impact of small and medium enterprises financing on poverty reduction in Sierra Leone from 1991 to 2010. Using ordinary least square (OLS) analytical technique, data from the central bank of Sierra Leone (BSL) statistical bulletin were obtained. Findings revealed that there is a significant relationship between small and medium enterprises financing and poverty reduction in Sierra Leone. However, inflation rate has a negative relationship with poverty. Nonetheless, exchange rate has a positive relationship with poverty, whereas unemployment has a strong negative correlation with poverty in Sierra Leone. It was concluded that small and medium enterprises financing has a positive relationship with poverty in Sierra Leone. It was therefore recommended inter alias that adequate attention should be given to small and medium enterprises through channeling of more resources to the sector. And that the government should as a matter of urgency diversify the economy and create more jobs for the increasing population to reduce the unemployment rate in the country, thereby reducing poverty.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Small and medium enterprises have made great contributions in eradicating poverty in Sierra Leone. SMEs are regarded as the engine of economic growth to any nation’s development. The main advantage of the sector is its ability to employ at low capital cost. The labour intensity of the SMEs is much higher than that of the large enterprises. SMEs as a nursery of entrepreneurship are often driven by individual’s creativity and innovation. Besides the growth potentials and its critical role in the manufacturing and value chains, there wide spread in Sierra Leone and the multiple effects they have on the rest of the economy enable them to be the engine of economic progress. SMEs are main drivers of innovation, job creation, poverty reduction, wealth creation, income distribution and reduction in income disparities. After the economic reform on 1986, the small and medium scale Enterprises are seen as a key to Sierra Leone’s growth and poverty alleviation and unemployment in the country. Therefore, there is