The role of small enterprises in promoting economic growth and social welfare

Abstract

The objective of this study was to identify the ways in which small businesses influence the socio-economic development of a country, and to develop recommendations for promoting such development using the Republic of Kyrgyzstan as a case study. The recommendations and the conducted analysis were based on the study of statistical data reflecting the functioning of Kyrgyzstan’s economy, the state of the labour market, and the situation of small businesses in the country. The recommendations were also informed by the experiences of India, Malawi, and Zimbabwe. The research found that Kyrgyz small businesses contribute to the country's economic development through their involvement in sectors such as trade, agriculture, hospitality, and contracting services, collectively accounting for approximately 9% of national output. Furthermore, small enterprises generate employment (approximately 2% of total employment), thereby increasing job availability and consequently reducing both poverty (29.8%) and extreme poverty (5.1%) across the country. The study identified two major challenges facing small businesses in Kyrgyzstan: limited access to finance and a low level of financial literacy among the population. These challenges significantly impact the capacity of small enterprises to contribute to the country’s socio-economic development. As a result, addressing these issues has emerged as a priority for the government in its efforts to enhance the efficiency of national economic operations and improve the social welfare of the population. In practical terms, the implementation of programmes to promote social entrepreneurship, with components aimed at improving the financial literacy of small business personnel, is essential. It is also advisable to introduce measures for establishing collective financing clusters and systems of mutual guarantees between large and small enterprises. These findings are of both academic and practical value, as the measures proposed serve as direct policy recommendations for the Government of Kyrgyzstan.