How Kenya can unlock the huge SMEs’ potential

The recent small and medium enterprises expo hosted by National Media Group two weeks ago was an eye-opener. The forum highlighted not only the challenges that the SMEs face, but also the opportunities that are available for them.However, it is appa...

The recent small and medium enterprises expo hosted by National Media Group  two weeks ago was an eye-opener. The forum highlighted not only the challenges that the SMEs face, but also the opportunities that are available for them.

However, it is apparent that overall the SMEs challenges far outweigh the opportunities. This calls for concerted and coordinated effort by all those responsible with coming up with solutions that will ensure that this crucial engine of economic growth is afforded a conducive environment to thrive.

Numerous setbacks were pointed out at the expo, hosted by NMG in partnership with the Kenya National Chamber of commerce and Industry (KNCCI). The prominent of these challenges are the lack of credit access and the inefficacy of agencies mandated to unlock the potential of SMEs.

But these are hardly the only hurdles standing in the way of a vibrant SMEs sector and an entrepreneurial culture. Other major setbacks include market access both local and internationally, unpredictable regulatory and business environment, multiple charges and levies by industry regulators and counties, competition from uncontrolled imports, influx of counterfeits and lack of subsidies to support SME exporters and access to technology.

It is time the sector was accorded the attention it deserves. It is ironic that SMEs have been neglected yet they are easily the strongest pillar of the economy going by statistics that indicate the segment creates jobs for more than 80 percent of the working population, and is responsible for 33.8 percent of the economic growth, according to data by the Kenya National Bureau of Statistics.

What is encouraging is that an assortment of solutions to these SMEs problems have largely been crafted by various players and all that is needed is just their coordination, implementation and application.

Various organisations and entities such the Kenya Manufacturers Association and Kenya Private Sector Alliance have designed roadmap for start-ups and small enterprises to beat teething challenges, attract financial support, and obtain mentorship as well as linkages to local and international markets.

A survey by Kepsa shows the businesses face hard times in a bid to expand in the local and external markets, with the alliance calling for deeper consultation between the government to help identify and address this market access challenges.

There is also an urgent to make State initiatives such as the Youth Enterprise Fund, Uwezo Fund, and 30 percent government tenders for special groups — youth, women, and people with disabilities — to be more effective. The way they are conceptionalised and operationalised make them unsustainable.

Currently groups can successfully apply for these funds even without their entrepreneurial capacity being properly evaluated. This has led to a situation where groups that lack business skills, acumen and drive get the loans or tenders. Your guess is good as mine how this would eventually turn out; left to their own devices, these groups will certainly fail in their business journey.

The best way out of this is to identify entrepreneurs and start-ups that have already made good progress and all that they need is just credit to expand. Focusing on such enterprises and entrepreneurs that are ready for take-off will ensure that initiatives such as Uwezo and Youth Fund have maximum impact while the loan repayment rate is kept high.

Giving loans to people who do not have viable ideas backed by a burning passion, resilience and resolve to see those ideas or dreams turn into reality is setting up for failure these state initiatives. This where the government, despite its good intention, has gone wrong.

The heavy burden of taxation has also emerged as a key stumbling block choking life out of SMES. Talks by sector players and taxman on how to reduce this burden have been held many times, but little progress has been made. Bold steps should thus be taken to ensure proposals borne out of these deliberations bear fruit. Piling taxes on SMEs is literally killing the goose that lay the golden egg.

Original Source: Business Daily