Challenges of Small and Medium Enterprises in Kenya

Topics: Policy, Small business, Business Pages: 6 (1737 words) Published: October 28, 2012
"SME" stands for small and medium-sized enterprises – as defined in EU law: The main factors determining whether a company is an SME are: 1. Number of employees, and
2. Either turnover or balance sheet total
| |Employees |Turnover |or |Balance sheet total | |Company category | | | | | |Medium-sized |< 250 |≤ € 50 m |≤ € 43 m | |Small |< 50 |≤ € 10 m |≤ € 10 m | |Micro |< 10 |≤ € 2 m |≤ € 2 m |

These ceilings apply to the figures for individual firms only. A firm which is part of larger grouping may need to include employee/turnover/balance sheet data from that grouping too. The definition of micro, small and medium-sized enterprises is updated to take account of economic developments. The definition of enterprises according to staff headcount and turnover or balance-sheet total is essential for identifying businesses able to benefit from European Union (EU) programs or policies specifically designed for small and medium-sized enterprises (SMEs)

Challenges Facing SMEs in Kenya

It is generally recognized that SMEs (Small and Medium Enterprises) face unique challenges, which affect their growth and profitability and hence, diminish their ability to contribute effectively to sustainable development. In this article, the following challenges are briefly discussed: Lack of Managerial Training and Experience, Inadequate Education and Skills, Lack of Credit, National Policy and Regulatory Environment, Technological Change, Poor Infrastructure and Scanty Markets information, lack of Managerial Training and Experience. Many SMEs owners or managers lack managerial training and experience. The typical owner or managers of small businesses develop their own approach to management, through a process of trial and error. As a result, their management style is likely to be more intuitive than analytical, more concerned with day-to-day operations than long-term issues, and more opportunistic than strategic in its concept (Hill 1987). Although this attitude is the key strength at the start-up stage of the enterprise because it provides the creativity needed, it may present problems when complex decisions have to be made. A consequence of poor managerial ability is that SME owners are ill prepared to face changes in the business environment and to plan appropriate changes in technology. Majority of those who run SMEs are ordinary lot whose educational background is lacking. Hence they may not well equipped to carry out managerial routines for their enterprises (King and McGrath 2002).

Inadequate Education and Skills
Education and skills are needed to run micro and small enterprises. Research shows that majority of the lot carrying out micro and small enterprises in Kenya are not quite well equipped in terms of education and skills. Study suggests that those with more education and training are more likely to be successful in the SME sector (King and McGrath 2002). As such, for small businesses to do well in Kenya, people need to be well informed in terms of skills and management. SMEs in ICT appear to be doing well with the sprouting of many commercial colleges offering various computer applications. Further, studies show that most of those running SMEs in this sector have at least attained college level education (Wanjohi and Mugure, 2008).

Lack of Credit
Lack of access to credit is almost universally indicated as a key problem for SMEs. This affects technology choice by limiting the number of alternatives that can be considered. Many SMEs may use an inappropriate technology because it is the only one they can afford. In some cases, even...
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