Why reliable financing for start-ups is crucial

Start-ups are basically baby companies formed by one or more entrepreneurs aiming at developing unique products or services that can penetrate the markets. Kenya has a good number of start-ups that are struggling to sustain themselves in the national and international markets.

Start-up Stash, an online directory of tools and resources for start-ups, lists top Kenyan start-ups to watch in 2021. The June 12 edition lists the top 10 start-ups as M-Kopa, Twiga Foods, Copia Global, Sendy, Africa’s Talking, AZA Finance, Little, PayGo Energy, Lendable and Kibanda Topup.

Start-ups contribute to economic growth. An online article on the Startup Stash web page says that, despite the difficulties that local start-ups face, the counties’ ecosystem is the best in Africa. They collectively raised Sh21 billion last year. With emerging start-ups, the economy is expected to grow by five per cent this year and 5.9 per cent in 2022.

Positive economic growth encourages inward investment and improves revenues, which can be spent on long-term public sector works.

The government’s efforts at reducing unemployment, which is a major problem all over the country, should include its being supportive of startups since they provide new opportunities.

Kenya National Bureau of Statistics data shows the country’s unemployment rate was 7.2 per cent in September last year after doubling to 10.4 per cent that June, when more than 1.7 million Kenyans lost their jobs to the Covid-19 pandemic.

Surplus production

Start-ups also enable a country to be self-reliant by making products and services within the reach of the citizens. This helps to reduce importation while surplus production is a boost to exports.

Despite the above, most entrepreneurs still face challenges in establishing their businesses due to lack of finances. Once a business is set up, it can sustain itself but, without finances, it’s difficult for one to start a business no matter how small it could be.

Last year came with challenges not only to upcoming start-ups but also existing ones. Businesses were forced to adopt new survival strategies in the midst of the pandemic. With restrictions for physical contact and interaction, they had to shift to online transactions with cost implications. Most collapsed due to lack of finances to shift to new marketing and business strategies, which affected the economy.

There are efforts by different players to support start-ups through financing and capacity building. Capacity building through training and sensitisation is important but, without finances, it’s useless.

Financial sources for start-ups include banks, microfinance institutions, Youth Enterprise Development Fund and venture capital. We also have incubators and accelerators that provide mentorship, training and funding for potential start-ups with examples being Lake Hub, Agrilab, Villgro, iHub among others. Relatives and friends can also chip in.

Let’s all support start-ups to create employment.

Ms Mwanja is the communications manager, Kenya National Chamber of Commerce and Industry. [email protected].