SME DevelopmentSmall and Medium businesses (SMEs as they are popularly known) in the world have always been viewed sceptically as they were considered high risk businesses. But, times have seen the SMEs have turned fortunes and become profitable businesses with the application of new technology and new techniques. The steady rise in the SMEs has been attributed to the growth of Kenya’s middle class during the last few years, which has put the domestic consumer in a position of advantage.

We have seen that Small and Medium Enterprises (SMEs) are the lifeblood of all economies, especially developing economies and therefore it is essential to assist them to achieve economic growth in those countries. However, we find that lack of finance or getting capital are some of the main issues affecting SME development. In view of the current financial challenges facing businesses throughout the world, there is need for expert financial advice to assist the businesses that were seeking loans from banks and other lending institutions. Most of the SMEs face credit constraints where entrepreneurs have to rely heavily on self-financing or borrowing from friends or relatives. Another major challenge that the SMEs in Kenya face is the lack of proper infrastructures which can be found in all parameters. There are poor roads and inadequate electricity supply, to name a few.

The integration of East Africa’s five economies has improved further in the past five years and has facilitated cross border trading among these countries. The coming into force of the Common External Tariff  (CET) has resulted in reducing the tariff barriers to trade amongst member countries except for Kenya which has to pay five per cent tariff charges for Uganda and Tanzania-bound goods. The only reason for this was that Kenya was a far more richer country as compared to Uganda and Tanzania.

The establishment of a common market that allows free movement of goods across the region is expected to further help the Kenyan SMEs to take advantage of the neighbouring economies and help in their growth. This regional integration is sure to have a positive impact on the business of the SMEs. It is well known that SMEs face unique challenges which affect their growth and profitability and hence, they cannot contribute to the development of the economy.

The question that faces us is what can be done to alleviate the plight of small enterprises in Kenya? The first step in this direction is to encourage and promote local technologies and local talent. Due to their small size and limited resources these SMEs are unable to develop new technologies. The promotion of the local industries would reduce imports and promote indigenous goods and services.

Since a fairly large number of small enterprises do not have sufficient finance, government and other bodies can help fund these SMEs. They could also introduce low interests rates and a longer moratorium to ensure that they enjoy the benefit of the loan. SMEs have the potentiality of transforming a poor economy to a rich one, and therefore, the government should take all steps to help promote their growth.

Entrepreneurial Learning

We have seen that SMEs are the lifeblood of all economies, especially developing economies and therefore it is essential to assist them to achieve economic growth in those countries. However, we find that lack of finance or getting capital are some of the main issues affecting SME development.
SMEs have the potentiality of transforming a poor economy to a rich one, and therefore, the government should take all steps to help promote their growth.

Image courtesy: FreeDigitalPhotos.net

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