Why Kenya’s Small Businesses are Struggling and Choking to Death

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Micro and
small enterprises are a huge contributor to the country’s economy, especially
in the manufacturing sector.

Despite this,
the sector is grappling with bottlenecks that are choking its growth.

Some of the
reasons why the sector is struggling to thrive are lack of capital and
government laxity in empowering small businesses through retrogressive laws and
unitive taxation.

Other reasons
include:

Lacking
Adequate Skills

Kenya lacks adequate skills that can produce a solid pool of internationally competitive, tech-enabled businesses.

According to the
World Bank, Micro and Small Enterprises (MSEs) which are key drivers of the
economy face difficulties in improving their productivity due to poor
managerial practices and information failures around how to upgrade.

In addition,
most small businesses are run without mentorship which is key for those who
aspire to make it in business. The lack of mentors comes about because of lack
of willingness by those who have made it in business to empower those below
them.

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1 Limited Connections

2 The Hope

3 Read >>Why Indians are the Most Successful Business Community in Kenya

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Limited
Connections

Kenya, according to the World Bank, also has limited contact between traditional industry and tech-enabled start-ups. This is a missed opportunity for both sides wiping out gains or stunting growth brought about by reinventing the wheel.

“Kenya’s
other challenge includes limited connections to networks of international
mentors, angel investors, and venture capitalists all of which make it
difficult for local start-ups and SMEs to grow and compete internationally.

For Kenyan
women entrepreneurs, particularly those who own start-ups and SMEs; all these
challenges are even more pronounced.” The statement adds.

The Hope

Start-up
driven innovation is key for economic development as it creates new jobs for
the growing youth demographic. This gives hope to the sector which has been
stymied by the above challenges.

By
strengthening technology incubators and accelerators, the Kenyan SME sector can
only thrive.

In addition,
lenders have now started courting SMEs with the Standard Chartered Bank injecting
KSh6.3 billion in direct and indirect lending to SMEs in 9 months to September
2019.

The funds supported
more than 8,000 such enterprises in the process, the Bank’s Chief Executive
Officer, Kariuki Ngari has said.

According to
Ngari, the bank is conscious of the importance of SMEs to the economy and has
strengthened its business model to cater to the small businesses that
contribute immensely to the country’s Gross Domestic Product (GDP).

“This
reiterates our commitment towards supporting lending to the private sector,
particularly the Small and Medium Enterprise sector despite the prevailing
capped interest rate regime,” said Ngari in a dispatch to newsrooms.”

He added that
the bank appreciates the key role played by the SME sector play in sustained
growth of the Kenyan economy and we like to restate our commitment to
supporting the SME, and the private sector in general.

Ngari
welcomed parliament’s decision to repeal the cap on interest rates saying the
law had stifled credit growth to SMEs.

“The repeal
of the interest rate cap is a step in the right direction as it allows market
forces to determine interest rates and to price risk appropriately,” said
Ngari.