Protect small businesses
The value of loans restructured by micro, small and medium-sized enterprises (MSMEs) dipped by 11.6 percent last year.
Today is the Micro, Small and Medium Enterprises (MSME) Day, themed, “Building a Stronger Future Together.” MSMEs account for 90 per cent of businesses, 60-70 per cent of employment and 90 per cent of gross domestic product (GDP).
In Kenya, 7.4 million MSMEs contribute 40 per cent of GDP and employ 14.9 million citizens.
Kenya’s principal economic artery spur growth and development, create wealth and uplift millions from poverty. Wealthy nations have leveraged entrepreneurship and innovation to grow. MasterCard Foundation president and CEO Reeta Roy describes small businesses and entrepreneurship as the engines of economic growth.
Still, MSMEs often don’t have sufficient financial resources or products and services to be sustainable and create jobs. In 2011-2016, a KNBS survey shows, 2.2 million businesses closed down, 1.17 million and 1.03 million, respectively, in rural and urban areas. Many Kenyan small businesses do not celebrate their fifth birthday; 360,000 close shops every year.
In their book, Effective Small Business Management, Richard M. Hodgetts and Donald F. Kuratko highlight the causes of business failure. They include lack of marketing research, insufficient information about customers, failure to diversify the market, legal problems, inadequate records, nepotism, expansion beyond resources, absentee management, technical incompetence, and one-person management.
Turbulent times of technological, economic and political changes have seen many MSME implode.
Thankfully, Sessional Paper Number 2 of 1992, “Small Enterprise and Jua Kali Development in Kenya“, identifies the sector for support to “graduate into the formal sector“ and become a major player in job creation and economic growth.
The State ought to address core obstacles to MSMEs—such as structural infrastructure deficiencies, skill shortage and supply chain inefficiencies and cross-cutting constraints like lack of an enabling environment, stiff competition, informality and punitive taxation. It must reduce taxes and subsidise entrepreneurs.
Mr Muthama is a business and management lecturer at JKUAT and author. [email protected].
