Challenges Faced by SMEs in Jamaica: A Literature Review

This literature review critically analyzes the challenges confronting Small and Medium Enterprises (SMEs) in Jamaica. It begins with an overview of the Jamaican economy, highlighting its historical context and recent economic reforms, including the role of international financial institutions and the contribution of various sectors like tourism and minerals. The report emphasizes the significant contribution of SMEs to Jamaica's GDP and employment, while also exploring the various internal and external challenges these businesses face. These challenges include difficulties related to technology adoption, regulatory burdens, financial resource limitations, and labor shortages. The report references government initiatives aimed at supporting SMEs and fostering a favorable business environment, underscoring the importance of addressing these challenges for sustainable economic growth. The paper highlights the importance of SMEs for the Jamaican economy, despite the challenges they face.

Running head: CHALLENGES FACED BY SMES IN JAMAICA
CHALLENGES FACED BY SMALL BUSINESS ENTERPRISES IN JAMAICA
Name of the Student:
Name of the University:
Author’s Note:

1CHALLENGES FACED BY SMALL BUSINESS ENTERPRISES IN JAMAICA
Table of Contents
SECTION 1.....................................................................................................................................2
1.1 Introduction............................................................................................................................2
1.2 Overview of the Economy of Jamaica...................................................................................3
1.3 Contribution of the Small Business Enterprises (SMEs) towards the national economy of
Jamaica........................................................................................................................................6
1.5 Summary................................................................................................................................8
References......................................................................................................................................10

2CHALLENGES FACED BY SMALL BUSINESS ENTERPRISES IN JAMAICA
SECTION 1
1.1 Introduction
As stated by Baxter (2018), the national economy of any nation is heavily reliant on the
business corporations which are operational within the spectrum of the concerned nation. Minto-
Coy, Cowell and Michelle (2016) are of the viewpoint that the different business corporations of
any nation not only directly contributes towards the economic growth of the concerned nation
but also contributes towards the reduction of the unemployment rate of the concerned nation by
offering the required amount of employment to the citizens of the nation as well. This becomes
especially important from the perspective of the different developing or for that matter the under-
developed nations of the world wherein it had been seen that the inadequate number of business
corporations had adversely affected their economic growth (Saner & Yiu, 2019). As a matter of
fact, in the particular context of Jamaica it is seen that the different business corporations of the
concerned nation, be it the small business enterprises or the medium business enterprises or
others, contribute more than 70% towards the national GDP of the nation (Kinlocke & Thomas-
Hope, 2019).
However, at the same time it had been seen that while making a positive contribution
towards the economic growth of the nations, the small business enterprises themselves are facing
various kinds of issues or challenges which in turn had also affected the economic growth of the
concerned nations. More importantly, in the majority of the cases it is seen that the challenges or
for that matter the issues that the different small business enterprises face are not only related to
the internal factors of their enterprises but can also be attributed to the external market conditions
as well (Johnson & Ruankaew, 2017). The objective of this literature review is to undertake a

3CHALLENGES FACED BY SMALL BUSINESS ENTERPRISES IN JAMAICA
critical analysis of the challenges that the small business enterprises of Jamaica are presently
facing.
1.2 Overview of the Economy of Jamaica
Jamaica, with a population of 2.93 million people, is the largest Caribbean Island and is
known for its picturesque or scenic beauty (Cia.gov, 2019). The concerned nation over the years
had a turbulent past and the effect of the same had been prominent on the national economy of
the concerned nation. For instance, in the 1970s, the inflation rate of the concerned nation was
more than 25% which in turn goes on to show the economic instability of the concerned nation
(Valliere, 2015). However, in the last decade of the 20th century, the Jamaican government
started to take the help of different kinds of economic reforms like “the four-year Extended Fund
Facility (EFF) by the International Monetary Fund (IMF)” through which around US$932
million were invested into the different sectors of the concerned nation, the “World Bank Group
and the Inter-American Development Bank (IDB) programs” which offered US$510 million to
stabilize the deteriorating economy of the nation and others (Schoburgh & Gatchair, 2016). In
addition to these, different regulatory bodies like the “Multilateral Investment Guarantee Agency
(MIGA)”, “International Finance Corporation (IFC)” and others were also established for the
purpose of enhancing the growth rate of the economy of the concerned nation (Spence, 2019).
The Jamaican government had started to reap the benefits of the above mentioned
programs which were being implemented by it in the latter half of the 20th century. For instance,
as per Worldbank.org (2019), the national economy of Jamaica is 58th largest one of the world in
terms of the net revenue generated by the concerned which as a matter of fact for the year 2017
was more than J$ 4.382 billion. More importantly, by dint of its different economic programs the
concerned nation had not only being able to facilitate the establishment as well as the growth of

4CHALLENGES FACED BY SMALL BUSINESS ENTERPRISES IN JAMAICA
various small business enterprises but also had been successful in attracting numerous foreign
direct investments into the concerned nation as well (Danielson, 2019). As a matter of fact,
presently it had been seen that agriculture contributes less than 7.5% towards the national
economy of the concerned nation and the majority of the economic contribution is being made
by the different service corporations as well as the business corporations of the concerned nation
(Cia.gov, 2019). In addition to these, it had been seen that the concerned nation had been largely
successful in developing a strong tourism industry, mineral industry which focuses largely on the
bauxite/alumina resources of the concerned nation and others (Lundy, 2018). However, at the
same time it needs to be said that despite the different initiatives undertaken by the Jamaican
government it had been seen that the GDP growth rate of the concerned nation was only 1.9% for
2018 and this is being indicated by the below given figure-
Figure 1: Annual GDP Growth Rate of Jamaica

5CHALLENGES FACED BY SMALL BUSINESS ENTERPRISES IN JAMAICA
Source: Worldbank.org (2019)
Kinlocke and Thomas-Hope (2019) are of the viewpoint that an important factor which
had directly contributed towards the low annual GDP growth rate of the nation under discussion
here can be attributed to the large amount of international debts that the concerned nation
presently has presently. This can be explained on the basis of the fact that the debts which the
concerned nation took from the World Bank, the nation of USA and others for the
implementation of the different economic reforms had still not being repaid and thus it is seen
that a substantial amount of the revenue generated by the concerned nation every year goes to the
World Bank or the nations from which it took the loan (Hossein, 2016). In addition to this, the
extreme weather events accompanied by the different natural disasters which the concerned
nation faces almost on a regular basis had also adversely affected the business prospects of the
different corporations which are operational within the nation and thereby slowed down not only
their growth rate but also the growth rate of the economy of the concerned nation as well
(Valliere, 2015).
As stated by Spence (2019), an interesting fact to note regarding the economic framework
of Jamaica is the fact that unlike the other developing nations of the world which even in the 21st
century are heavily reliant on the agricultural sector, the nation of Jamaica is largely reliant on its
business sector. Best, Francis and Robinson (2017) are of the viewpoint that this is perhaps one
of the most important reasons why the majority of the business regulations or for that matter the
stipulations that the different corporations of the concerned nation are required to follow are very
lenient in nature and also it had been seen that the Jamaican government takes the help of various
measures so as to facilitate trade and commerce. As a matter of fact, it is seen that presently
various major business corporations like Sagicor Life Jamaica, Digicel, GraceKennedy Ltd,

6CHALLENGES FACED BY SMALL BUSINESS ENTERPRISES IN JAMAICA
LIME (Landline, Internet, Mobile, Entertainment) and others are operational within the
concerned nation (Cia.gov, 2019). The business operations of these corporations had greatly
contributed towards the economic growth of the concerned nation. More importantly, because of
the abundant employment opportunities offered by these corporations it had been seen that the
unemployment rate of the nation dropped down to 7.9% in July, 2019 and average wage of the
workers in the nation increased to J$272,604 (Worldbank.org, 2019). Furthermore, the
percentage of people presently living below the poverty line is 29.7% and the inflation rate had
also dropped down to 3.37% which in the latter half of the 20th century was more than 25%
(Cia.gov, 2019). In the light of these aspects, it can be said that the national economy of jamaica
had shown positive signs of growth in the recent years and an important factor which had
directly contributed towards this is the growth of the trade and commerce or for that matter the
growth of business within the spectrum of the nation under discussion here.
1.3 Contribution of the Small Business Enterprises (SMEs) towards the national economy
of Jamaica
Roofe and Roofe (2016) are of the viewpoint that it is true that the large-scale or the
medium-scaled enterprises within any nation play a pivotal role in the economic growth of the
concerned nation however at the same time the role played by the small business enterprises can
in no way be relegated to the background. Adding to this, Saner and Yiu (2019) have noted that
within the nation of Jamaica it is seen that more than 40% of the entire revenue generated by the
business activities of the concerned nation comes from the small business enterprises of the
same. For instance, commenting on the importance of the small business corporations within the
economic framework of the nation of Jamaica, Sharon Ffolkes-Abrahams, the “Minister of State
in the Ministry of Industry, Investment and Commerce” stated that “For Jamaica, SMEs provide

7CHALLENGES FACED BY SMALL BUSINESS ENTERPRISES IN JAMAICA
approximately 80 percent of new employment created. This group is the key driver of
innovation, employment and growth for the economy as a whole. We need to work more with
SMEs” (Jis.gov.jm, 2019). This is perhaps one of the most important reasons why the Jamaican
government in collaboration with Action Coach and Scotiabank announced the launch of a
program for the owners of the small business enterprises of the nation of Jamaica which would
invest more than $20 million into the different SMEs of the concerned nation (Jis.gov.jm, 2019).
As discussed by Johnson and Ruankaew (2017), the SMEs rather than the large-scale or
the medium-scale business enterprises of the nation of Jamaica are the backbone of the national
economy of the concerned nation. This can be explained on the basis of the fact that because of
the past history of the nation, its turbulent or erratic weather conditions, slow economic growth
rate and other factors the concerned nation had not been highly successfully in attracting foreign
business corporations to the nation (Minto-Coy, Cowell & Michelle, 2016). This in turn had
forced the nation to rely primarily on the different SMEs which are presently operational in the
nation and as a matter of fact it is seen that presently there are more than 500,000 SMEs in
comparison to the 103,000 SMEs of Singapore and 19.3 million SMEs of the entire European
Union (Baxter, 2018). More importantly, it had been seen that these SMEs of the nation of
Jamaica offer employment to more than two third people of the concerned nation and thereby
make a substantial contribution towards the national economy of the concerned nation
(Danielson, 2019).
However, at the same time it needs to be said that despite the economic contribution
made by the SMEs towards the economic growth of Jamaica presently it is seen that there are
various challenges or issues that they are facing within the spectrum of the concerned nation.
Some of the most important challenges in this regard are the challenges related to the effective

8CHALLENGES FACED BY SMALL BUSINESS ENTERPRISES IN JAMAICA
exploitation of technology, regulatory burdens, low productivity, inadequacy of financial and
other resources, labor shortage and others (Kinlocke & Thomas-Hope, 2019). Thus, it becomes
important for the Jamaican government to take the help of effective measures for the resolution
of the above mentioned challenges or the issues faced by the SMEs of Jamaica. As a matter of
fact, Sharon Ffolkes-Abrahams while acknowledging these challenges faced by the SMEs stated
that “We are committed to eliminating the impediments to the formation and sustainable growth
of businesses in the SME sector. Equally, we are committed to a legal, regulatory and
institutional framework that supports growth and development, which makes it easier to do
business” (Jis.gov.jm, 2019). Therefore, it can be said that it is likely that the Jamaican
government by undertaking the task of resolving the challenges faced by the SMEs operational in
the concerned nation would be able to accelerate the pace of its economic growth.
1.5 Summary
To summarize, the nation of Jamaica over the years had been able to attain the desired
level of economic growth despite the effective usage of different economic reforms used by the
concerned nation. However, at the same time it is seen that on the score of the mushrooming of
different SMEs in the concerned nation in the recent times the economic condition of Jamaica
had substantially improved in comparison to that of the 20th century. For instance, these SMEs
while making a positive contribution towards the GDP of the nation of Jamaica had also
substantially reduced the unemployment rate of the concerned nation as well. Having said this,
there are various challenges that the SMEs of the concerned nation are presently facing likes the
ones related to the effective exploitation of technology, regulatory burdens, low productivity,
inadequacy of financial and other resources, labor shortage and others. Thus, it becomes
important for the Jamaican government to take the help of adequate measures for helping the

9CHALLENGES FACED BY SMALL BUSINESS ENTERPRISES IN JAMAICA
SMEs to overcome these challenges which in turn would accelerate the pace of its economic
growth.

10CHALLENGES FACED BY SMALL BUSINESS ENTERPRISES IN JAMAICA
References
Baxter, Y. T. (2018). Jamaica: Unearthing the relationship between national development and the
volunteer sector. Insights on international volunteering: Perspectives from the Global
South, 61-74.
Best, A., Francis, B. M., & Robinson, C. J. (2017). Financial deepening and economic growth in
Jamaica. Global Business Review, 18(1), 1-18.
Cia.gov, (2019). Central America :: Jamaica — The World Factbook - Central Intelligence
Agency. Retrieved 14 December 2019, from
https://www.cia.gov/library/publications/the-world-factbook/geos/print_jm.html
Danielson, A. (2019). The political economy of development finance: public sector expansion
and economic development in Jamaica. Routledge.
Hossein, C. S. (2016). “Big Man” politics in the social economy: a case study of microfinance in
Kingston, Jamaica. Review of Social Economy, 74(2), 148-171.
Jis.gov.jm, (2019). SMEs Play a Key Role in Economic Development – Ffolkes Abrahams -
Jamaica Information Service. Retrieved 14 December 2019, from https://jis.gov.jm/smes-
play-a-key-role-in-economic-development-ffolkes-abrahams/
Johnson, F., & Ruankaew, T. (2017). A study of inventory control systems by Jamaican SMEs in
retail and manufacturing/distribution industries. Internafional Journal of Business and
Management, 12(8), 1.

11CHALLENGES FACED BY SMALL BUSINESS ENTERPRISES IN JAMAICA
Kinlocke, R., & Thomas-Hope, E. (2019). Characterisation, Challenges and Resilience of Small-
Scale Food Retailers in Kingston, Jamaica. In Urban Forum (pp. 1-22). Springer
Netherlands.
Lundy, P. (2018). Debt and adjustment: social and environmental consequences in Jamaica.
Routledge.
Minto-Coy, I. D., Cowell, N. M., & Michelle, M. (2016). Breaking the barriers:
Entrepreneurship, enterprise, competitiveness and growth in the Caribbean. Social and
Economic Studies, 65(2-3), 1-13.
Roofe, M. E., & Roofe, A. E. S. (2016). A Commentary on SMEs in Brazil: Lessons for Jamaica
and the Caribbean. Social and Economic Studies, 65(2/3), 161-227.
Saner, R., & Yiu, L. (2019). Jamaica’s development of women entrepreneurship: challenges and
opportunities. Public Administration and Policy.
Schoburgh, E. D., & Gatchair, S. (2016). Managing development in local government:
Frameworks and strategies in Jamaica. In Developmental Local Governance (pp. 127-
146). Palgrave Macmillan, London.
Spence, K. M. (2019). When Money is not Enough: Reggae, Dancehall, and Policy in
Jamaica. The Journal of Arts Management, Law, and Society, 49(1), 45-60.
Valliere, D. (2015). An Improved Measure of Entrepreneurial Intent: A Jamaica-Canada
Perspective. Journal of Eastern Caribbean Studies, 40(2), 42-63.
Worldbank.org, (2019). Overview of Jamaica's Economy. Retrieved 14 December 2019, from
https://www.worldbank.org/en/country/jamaica/overview

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