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

Abstract

This study applies Stochastic Frontier Analysis to primary data in order to investigate the efficiency of Small and Medium-Sized Enterprises (SMEs) in Monrovia, Liberia. The study used the Two-Limit Tobit Model to identify factors that influence the efficiency of SMEs. The Tobit regression results reveal that entrepreneur experience, electricity (the proxy for infrastructure), and access to credit, positively influence the efficiency of SMEs. The policy implication for post ­conflict Liberia is vital. Enhancing the efficiency of SMEs requires the government to priorities the formulation and implementation of the requisite policies to build and strengthen entrepreneurs' networks. Such policies could stimulate the diffusion of knowledge to inexperienced entrepreneurs to learn from the experience of veteran entrepreneurs. Furthermore, improving the basic infrastructure and providing broader access to credit will enhance SMEs' efficiency in order to augment their contribution to e1nployment, economic growth and poverty reduction.