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It is estimated that 70% of Kenya’s Micro, Small and Medium Enterprises (MSMEs) fail within the first 3 years of existence according to a 2016 study commissioned by invest in Africa (11A) and Strathmore University.
MSME’s have huge potential for growth; they currently contribute about 45% of Kenya’s GDP and employ 80% of the countries workforce.
The following key areas need to be addressed in order to spur MSMEs growth.
- Accelerated Business licensing: According to a 2016 MSMEs survey report by KNBS, 80% of Kenya’s MSMEs operate without licenses. Majority of the licensed MSMEs (69 percent) had an annual turnover over of above 12 Million implying that the MSMEs that are registered are quite few (31 percent).
There is a pressing need to have a smoother coordination between the national and county governments towards harmonizing licensing procedures and manage levies being raised by the county governments.
- More Business Skills Training: These include leadership qualities, building up of a culture, setting up systems and crafting a great vision.
- Cash Flow Management Training: MSMEs must learn the ropes of managing their cash flow well. This is the very lifeline that can mark the difference between their business’ success or collapse. This includes the know-how to have a clear forecast and the right discipline of maintaining working capital to understanding the dangers of cash diversion.
- Enhanced Access to finance and credit: More than 70% of MSMEs lack access to medium and long term finance. This credit gap is particularly wide in Africa and Asia. According to the World Bank, the current credit gap for formal MSMEs is estimated to be US$1.2 trillion – the total credit gap for both formal and informal MSMEs is as high as US$2.6 trillion. There is an urgent need to improve MSMEs’ access to finance as well as finding smart solutions to unlock sources of capital, which will be crucial towards enabling this potentially dynamic sector to grow to its full potential.
- Embracing Business Networks: MSMEs that have joined support bodies such as industry-specific associations stand a huger chance on excelling. The unfortunate current state of affair however, as projected by 2016 National Micro, Small and Medium Establishments Survey shows that2% of the licensed and 75.6% of unlicensed MSMEs did not belong to any support group.