Efficiency of Small and Medium-Sized Enterprises in Liberia: The Case of Monrovia

Abstract

The study looks into the efficiency status of Small and Medium Enterprises (SMEs) in Monrovia, Liberia. Stochastic Frontier Analysis (SFA) techniques are employed to analyse primary data to investigate the technical efficiency of the selected SMEs. Estimation results show that SMEs in Monrovia are generally inefficient. The mean inefficiency is 21 percent, and around 11 percent of the SMEs interviewed have inefficiency of over 30 percent. Despite the meagre financial resources at the disposal of the SMEs in Monrovia, there is an apparent underutilisation that needs to be addressed. Moreover, the study used a Two-Limit Tobit model to identify factors that influence the efficiency of SMEs. The results indicate that entrepreneur experience, energy/electricity (the proxy for infrastructure), and access to credit do positively influence the efficiency of SMEs in Monrovia. One of the policy implications for post-conflict Liberia is that enhancing efficiency of SMEs requires the government to prioritise the formulation and implementation of requisite policies for building and strengthening SMEs entrepreneurial capacity and network.