NAIROBI, Kenya, Jun 23 – Access to finance, linkage with big businesses and limited effective corporate governance are the major barriers to Kenya’s SMEs growth.
This is according to a new study commissioned by Invest In Africa (IIA) and Strathmore Business School.
The findings of the study also highlight inability to scale up as another major barrier that has seen 70 percent failure rate of SME’s within the first three years of existence.
The cost of financing is the single largest challenge identified, followed by access to financial markets.
This has resulted to a gap between SMEs and large enterprises.
According to the report, money from family members and personal savings are the most popular sources of capital and finance.
“The single largest managerial operational challenge cited was the lack of capacity to identify opportunities from large businesses. Also, the biggest impediment SMEs face while trying to do business with big business relates to bidding due to high requirements by big businesses,” the report states.
Behind the study, a private sector team has come up with an initiative to bridge the gap between SMEs and big businesses.
The initiative dubbed Invest In Africa, works in partnership with both private and public sector companies, to identify and tackle the challenges of doing business in Africa, thus delivering more impactful and cost-efficient solutions.
“IIA’s key objective is to enable trade between larger companies and SMEs by providing better access to markets, enhancing SME skills and improving access to finance.” said Patricia Ithau, the Country Director at Invest in Africa (IIA).
The association has two flagship programmes – the African Partners Pool (APP) which connects large and small businesses, by allowing international companies to meet local content needs as well as promoting the goods and services of local companies to a wider market.
IIA’s second flagship programme is the Business Linkages Programme that consists of an SME Business Skills Development Programme that ensures SMEs are trained in business skills and governance standards needed to access corporate supply chains.
IIA chose Ghana as a pilot market and in October 2014 launched Ghana’s first online, cross sector business portal The African Partner Pool (APP).
The APP connects credible local SMEs to larger businesses, and provides access to the skills and finance needed to raise standards.
The Ghana’s pilot saw over 1300 suppliers across 20 sectors in the portal, 14 buyers transacting in the portal with the value of tenders hitting $539 million.
Among the global partners include Equity Bank, Tullow Oil, Ernest & Young and Clyde and Company.
According to the Kenya National Bureau of Statistics there are more than 17 million SMEs registered in Kenya, with 98 percent of the enterprises contributing 25 percent of the country’s GDP and employing up to 50 percent of the workforce.
“With the launch of the Kenya Chapter, IIA seeks to recruit 1000 SMEs and attract at least 20 partners on board within the course of 2016,” Ithau pointed out.
IIA has offices in the UK, Ghana and Kenya.
“We believe the challenges of doing business in Africa cannot be solved by one company or one sector alone. But by pooling resources and sharing knowledge, IIA leverages existing and new opportunities to drive long-term growth across African economies.” added William Pollen, Programme Director of Invest in Africa, UK office.