Factors and Indicators of Business Growth
Senior 1 · Entrepreneurship
Factors and Indicators of Business Growth
Lesson 3 of 5
25 min
Ndayisaba bakes bread and cakes in a small rented bakery in Rubavu. In 2026 two hotels on Lake Kivu asked him to deliver 300 loaves every morning. It was the chance to double his business, and he had to refuse. (An illustrative case.)
Think about it: which of these problems could Ndayisaba fix himself, and which could he not?
Definition
Constraint to business growth: a problem or limit that stops a business from growing as fast or as far as it could.
Example: Ndayisaba's lack of collateral, which stopped him getting a bank loan for a bigger oven.
Definition
Collateral: something valuable, such as land, a building or a vehicle, that a borrower pledges to a lender; the lender may take it if the loan is not repaid.
Example: a land title offered to a bank to secure a loan.
Definition
Cost of finance: what it costs to borrow money: the interest and fees charged by the lender.
Example: 18% interest a year on a loan of Frw 2,000,000 costs francs a year.
Definition
MSME: a micro, small or medium-sized enterprise: a business with few workers and limited capital. Almost all businesses in Rwanda are MSMEs.
Example: a kiosk, a salon, a small bakery, a carpentry workshop.
In 2025 Access to Finance Rwanda (AFR) published a survey of how micro, small and medium enterprises use financial services, the Rwanda MSME FinMap 2024. It asked businesses about their biggest challenges. The five named most often were:
At the same event, speakers cited the National Institute of Statistics of Rwanda (NISR): 99.8% of businesses in Rwanda are MSMEs. What holds MSMEs back holds back most of the economy.
| Constraint | Mainly | How it holds growth back | A possible response |
|---|---|---|---|
| Lack of capital and access to finance | External | No money for equipment, stock or premises | Keep records, save and reinvest profit, borrow through a SACCO or a group |
| High cost of finance | External | Interest eats up the extra profit | Compare lenders; borrow only for projects that earn more than the interest |
| Small operating space | Internal and external | No room for more machines, stock or staff | Rent larger premises; work in shifts |
| Limited market access | External | Too few customers who can pay | Marketing, new customer groups, EAC markets |
| Competition | External | Lower prices and lost customers | Better quality, service or a special product |
| Poor infrastructure: power, internet, roads | External | Spoiled goods, lost orders, high transport costs | Plan deliveries; a back-up power source |
| Rising input prices | External | Costs rise faster than sales | Buy in bulk or with other businesses |
| Poor management and records | Internal | Wrong decisions; lenders refuse | Training; bookkeeping (Unit 5) |
| Lack of skilled workers | Internal | Output and quality cannot rise | Train staff; hire TVET graduates |
Tip
Turn each constraint into a question: "Which part of this can we control?" Ndayisaba cannot change the interest rate, but he can start keeping records now, so that next year a lender can see his profit.
Worked example 1: reading the survey chart
(a) How much more often was access to finance named than the internet? percentage points.
(b) In a group of 500 MSMEs like those surveyed, about how many would name access to finance?
(c) Why do the bars add up to more than 100%? . Each business could name several challenges, so the same business is counted in more than one bar.
Worked example
Worked example 2: is the loan worth it? (illustrative figures)
Ndayisaba can borrow Frw 2,000,000 at 18% simple interest a year. The bigger oven would add about Frw 300,000 of profit a year.
Step 1: the cost of finance for one year.
Step 2: compare. The loan costs Frw 360,000 a year in interest but earns only Frw 300,000 of extra profit: . The business would lose Frw 60,000 a year, before even repaying the loan itself.
Step 3: decide. At this cost of finance, borrowing is not worthwhile. He could look for cheaper finance (a SACCO loan), increase the extra profit (the hotel contract), or save and grow more slowly.
Warning
Don't blame only the outside world. It is easy to list external constraints (the bank, the competitor, the price of flour) and forget the internal ones. Ndayisaba's missing records and his single trained baker were constraints he could fix himself, and fixing them would also help with the external ones.
CrashCourse, "What Can You Learn from Your Competition?: Crash Course Business Entrepreneurship #4" (about 13 minutes). Competition is one of the biggest constraints on growth: watch for how a small business studies its competitors and finds something it can do better.
Practice
Sources and credits
Written by Ganzaa: the Rubavu bakery case, the table, the worked examples and the practice items. The bakery's figures and interest rates are illustrative (2026).
