In 2014, the Kenya’s gross domestic product (GDP) was standing at 60.94 Billion USD based on the exchange rate on December 31, 2014. In 2006, slightly less than a decade ago, the GDP stood at 25.83 Billion USD. While the obvious contributors to the fastest growth of Kenya’s GDP would be attributed to macro economic factors like political stability, exponential growth of the technological landscape, a robust and growing economic environment among others, it is important to note that the growth of the small medium and micro enterprise (SME) sector has contributed to an almost exponential growth of our GDP.
The women and men who trade in wood crafts along the road, the art curators, the small agribusiness people in Kajiado and other parts of the country, the small scale farmers of coffee, aquaculture, maize, tea, pyrethrum and other produce.
The small companies involved in innovation at ILab, IHub and shared office spaces in the city. The Kenya’s vibrant digital community, the young men, and women who are walking the road less traveled of self-employment and in the process defying stereotypes of what makes success, are the backbone of this nation.
These are the men and women who need the helping hand of the Government and even foreign bodies to support them so that the ticking time bomb of youth unemployment can be nipped in the bud.
With a nation that has 60 percent of its population under 24 years, policy makers must be pragmatic enough to sense the changing times and the dwindling white collar jobs. In addition, the world is moving more towards self-employment and innovation. We must be proactive and develop sustainable solutions to anchor and support the SME industry.
Let me break down the figures for you so that you can appreciate the vital role that this industry plays in Kenya and we can also glean over some of the global statistics of this vital industry to draw parallels:
According to a 2015 research that was done by FSD Kenya, World Bank and Central Bank of Kenya to find out the state of SME’s in Kenya, one of the main challenges is what the GoK and the banking sector regard as the true definition of micro or small enterprise.
According to the Government of Kenya (GoK), firms are defined as ‘micro’ when they have between 1 and 10 employees and a turnover not exceeding KSh 500,000. They are considered ‘small’ when they have between 11 and 50 employees and a turnover not exceeding Sh5 million but it differs widely across banks thereby hindering the development of strategic initiatives.
There is an urgent need for the adoption of a unified definition of the micro and small enterprises.
But another Achilles heels that needs immediate attention is the marketing arm of SME’s. While they produce beautiful products that can easily be sold at premium value, very few have mastered the art and power of branding. They should learn to brand their products, shops and take advantage of social media to expand their markets.
As an SME, do you have a marketing plan? Do you have a dedicated consultant or employee who will help you to market your product? Do you go for training to empower yourself and become better? How much percentage of your profits do you dedicate to improve an area of your business that can miraculously increase your profits?
The agencies that have helped the big corporations need to have tailor made solutions for the SME sector.
Did you know that according to reports, Small and Medium-sized enterprises (SMEs) represent 99 percent of all businesses in the European Union (EU)? Kenyan banks loaned SMEs an estimated amount of Sh332 billion as at December 2013. This portfolio represents 23.4 percent of the banks’ total loan portfolios.
Small and Medium-sized enterprises (SMEs), firms with fewer than 500 employees, are the backbone of U.S. economy. They makeup 99 percent of all firms, employ over 50 percent of private sector employees, and generate 65 percent of net new private sector jobs. SMEs account for over half of U.S. non-farm GDP and represent 98 percent of all U.S. exporters and 34 percent of U.S. export revenue.
Yet more than 50percent of SMEs lack access to finance, which hinders their growth. According to estimates, 600 million jobs will be needed in the next 15 years to absorb the growing global workforce, mainly in Asia and Sub-Saharan Africa.
I want to urge the government and the private sector to identify gaps that exist within the SME sector and institute a corrective surgery. There should be increased platforms that can impart relevant skills like SME expo, training, networking opportunities, government tender process, open days, exchange programs among others. If we collectively strengthen the SME sector, our nation’s foundation will be growing a little more secure.