An evaluation of the factors that affect Small and Meduim Enterprises (SMEs) digital services industry in facililitating economic development in Zambia

Abstract

Small and Medium Enterprises have over the years played a role in the economic growth of many countries. Advancements in technology and digital transformation of economies has resulted in the increased use of ICT in the service industry. This research paper examines the factors that affect SMEs in the digital services industry in facilitating economic development. A mixed methods research design was adopted for the study. The primary data was collected using Questionnaires and Interview guide targeting a sample of about 100 SMEs in Zambian digital services industry. The study adopted the ARDL model to assess the casual relationship between SMEs growth and economic development using quantitative data, which can be used as a model for economies like Zambia. ARDL model results indicated a strong relationship between the variables SMEs growth and economic development. Other findings of the study are that SMEs in Zambia face difficulties in accessing loans due to high interest rates and collateral requirements. This lack of financial capital hinders their ability to expand their businesses. However, innovations such as ICTs provide affordable and efficient platforms for marketing, feedback, and learning in the digital service industry. The regulatory burden for SMEs is high, and government policies and programs are limited by challenges such as bureaucracy, and lack of resources. SMEs need to focus on financial planning, innovation, community engagement, and compliance with regulations to improve competitiveness, while governments can support digital service SMEs through funding opportunities, policies for innovation, social-economic initiatives, and favourable regulatory environments.