The Impact of Economic Fluctuations on SME Performance: Evidence from Hargeisa, Somaliland

Abstract

This study examines the impact of economic fluctuations on performance of small and medium enterprises (SMEs) with particular focus on Hargeisa, Somaliland. SMEs are the backbone of Somaliland’s economy, providing the majority of employment and income, yet they remain highly vulnerable to economic cycles, internal conflicts, droughts, and trade disruptions. The study employed a purposive sampling technique to select the six managers who had managed different business. Data collection was conducted through in-depth interviews, which provided participants with the opportunity to express their narratives authentically and in detail in secure and comfortable settings by using thematic analysis. The findings reveal that economic fluctuations-manifesting as exchange rate volatility, inflation and reduced consumer demand – directly undermine SME profitability, operational stability and growth prospects. The research underscores the importance of government support, access to capital, and strategic adaptation to enhance SME resilience amid ongoing economic uncertainty. These insights contribute to a deeper understanding of the challenges facing SMEs in volatile economies and inform policy recommendations aimed at strengthening their sustainability and growth. The study recommends for the policy-makers to enhance access to finance, which will facilitate affordable credit and financial product tailored to the needs of SMEs to help whether economic shocks.