The influence of the business environment on the growth of informal businesses in Uganda

Abstract

Background: Informal businesses are important drivers of economic growth, especially in developing countries. These informal businesses often do not survive their first year of existence, with anecdotal evidence citing various challenges from the business environment.

Aim: This study explored the influence of business environmental challenges on the growth of informal businesses in Uganda.

Setting: There are various challenges from the internal and external environment that impede the growth and survival of informal businesses in Uganda. From the internal business perspective, informal businesses have poor business processes and do not have proper business strategies on which to focus their business growth strategies. From the external environment perspective, informal businesses do not understand their suppliers adequately. In addition, there is a lack of research on the relationships between internal and external business environments and the growth of informal businesses.

Method: Primary data were collected from 383 informal businesses using a self-administered questionnaire. The data were analysed using descriptive statistics in SPSS 21.0 (Statistical Package for the Social Sciences), while the relationship between the variables was determined using Pearson’s product moment correlation coefficient and tested using regression analysis and analysis of variance (ANOVA).

Results: The results showed that there was a significant positive directional relationship between the internal environment and the growth of informal businesses. However, there was a negative significant directional relationship between the external environment and the growth of informal businesses.

Conclusions: Informal businesses should pay more attention to the internal environment and appropriate strategies should be developed and implemented to ensure their growth.