EXPLORING THE FACTORS THAT HINDER THE PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN SOMALIA (CASE STUDY OF SMEs IN GALKAYO)

Abstract Small and Medium Enterprises (SMEs) play a crucial role in Somalia's economic development by providing employment opportunities, fostering innovation, and contributing to GDP growth. However, several challenges hinder their performance and sustainability. This study examines the factors that affect the performance of SMEs in Galkayo, Somalia, focusing on financial constraints, political instability, regulatory barriers, and human resource capacity. Using a mixed-methods approach, data was collected through surveys and interviews with SME owners, managers, and key stakeholders. The findings indicate that limited access to finance, lack of financial management skills, and an underdeveloped banking system significantly impact SMEs’ ability to grow and compete. Additionally, political instability and regulatory challenges create an uncertain business environment, increasing operational costs and discouraging investment. The study also highlights the role of inadequate human resource capacity, particularly in terms of managerial skills and workforce development, in limiting SME success. The research underscores the need for targeted interventions, including policy reforms, improved access to finance, and investment in business training programs. Recommendations include enhancing financial literacy initiatives, establishing SME-friendly policies, and fostering a stable economic environment to support business growth. These findings provide valuable insights for policymakers, entrepreneurs, and organizations aiming to improve the performance and sustainability of SMEs in Somalia.