Capital Generation as a Contribution to Economic Development

Economic development is a relatively new field of
economics that started only thirty years ago. Many
of the measurements applied in measuring the
effectiveness of small businesses are based on
measuring growth, which is not always directly
related to development. Using capital generation as
one of the measurable parameters in economic
development, a model was designed to measure the
contribution of small business towards capital
generation and, subsequently, development.

The model considered the contribution of small
businesses towards capital generation by measuring
growth in assets, owners' incomes, employees'
incomes and taxes paid. For these parameters to
contribute to growth, additional capital needs to be
generated by businesses. Job creation was also
measured as an important parameter used to calculate
employees' and owners' incomes.

The model can be used to analyse business
ontributions to development. The results and the
analyses show that the model can be used as a
successful management tool to analyse development-
related initiatives.