Banks and micro-finance operators are encouraged to offer adequate training to borrowers which could help mitigate non-performing loans.
NAIROBI, Kenya, Dec 16 – Inadequate business skills, in addition to the lack of capital and access to markets has often been cited as the main factors contributing to the collapse of SMEs in the country.
According to the 2016 survey by the Kenya National Bureau of Statistics about 2.2 million SMEs shut down in the last five years leaving the sector with about 7.8 million enterprises.
Hand In Hand Eastern Africa Program Operations Manager Stephen Wambua says more needs to be done in giving the necessary training to SMEs especially in the rural sector.
“We have trained over 200,000 SMEs in the country for the last five years and we have seen a huge transformation through this with increased sustainability of businesses as well as employment,” Wambua told Capital FM Business.
According to the SME report, most of the closed businesses were in wholesale and retail trade as well as repair of motor vehicles and motor cycles sector which accounted to 73 per cent of the total closures.
The report also states that about 1.2 million were closed in rural areas compared to one million establishments that closed in urban areas.
Shortage of operating funds accounted for closure of 30 per cent of the businesses owing to increased operating expenses, declining income and losses incurred from businesses.
“Those who run the businesses in this sector lack adequate business skills mainly attributed to low levels of education. It is not sufficient to know how to produce a high-quality product. The producer must also know how to sell it effectively and how to control the financial side of the business and in doing that the entrepreneur must be skilled in business,” he stated.
Wambua also urged banks and micro-finance operators to give adequate training to borrowers citing that this could help them mitigate non-performing loans problems.
“In as much as we love how financial institutions are helping in getting people access to loans, banks need to further educate those taking loans on how to use the money. For SME sector to grow there is need for the sector to adequately strengthen itself and come up with solid solutions that can be implemented,” he stressed.
The Small and Medium-sized companies in the country are a huge contributor to the Kenyan economy.
The sector has so far employed about 14.9 million people with the unlicensed enterprises contributing about 57.3 per cent.
The enterprises contributed Sh1.6 trillion to the economy in 2015 which is about 28.5 per cent compared to Sh5.6 trillion of the whole economy.
Wambua was speaking at the sidelines of the Hand in Hand Eastern Africa national youth business contest in Nairobi bringing together 20 youth from across the country to showcase their innovative business ideas.
The platform will enable youth showcase business ideas ranging from ICT-Mobile technology, climate resilient enterprises and businesses that address a need in the community.
The 4 winners selected in the highly competitive Hand in Hand Youth Award, will get a chance to travel to Sweden for one week in May 2017 where they are going to connect with successful business owners for entrepreneurial advice.