Factors That Determine the Earnings of Micro and Small-Scale Enterprises in Kenya

Topics: Employment, Economics, International Labour Organization Pages: 8 (2866 words) Published: August 12, 2008
The Definitive Characteristics of Informal Sector.
What is small and Micro-enterprises?
The definition provided by Central Bureau of Statistics (1984) in its statistical publication on employment and earnings as “ this consist of semi –organized and unregulated activities largely undertaken by self employed persons in the open markets, stalls, in undeveloped plots or streets pavements within urban areas and centers. They may or may not have licenses from local authorities for carrying out such activities as tailoring, grocery, kiosks, car repair etc. according to International Labor Organization (ILO)-1972 defined the SME’s as activities that escaped enumeration in official statistics which still happens but in small urban and rural centers. Ryan (1986) defined activities of the sector as those enterprises outside the tax net but cautioned that this is different from tax evasion by the formal sector registered enterprises. But this definition anyway does not hold much truth given that informal sector SME’s in Kenya pay various types of fees and charges to municipal and council authorities. 1.10 BACKGROUND INFORMATION.

One definition of economic development is an increase in national output. This occurs through the production process whose factors include land, labor, capital and human effort (entrepreneurship). According to economic survey 11 (1994), Kenya’s economic growth has fallen from 6% (1960’s and 1970’s), 4%in 1980’s and less than 2% in 1990. Kenya like other LDC’s took issue with small-scale micro enterprises as one of the seedbed of the future industrial development, which economists contend as the engine of economic growth, and development. This will ensure problems of unemployment and high levels of poverty (47% of the population in rural areas and 29% in urban areas) are reduced. Several financial institutions such as ICDC, K-Rep, KIE and trade offices have been established with an aim of helping small and micro enterprises grow in the country. Ademola Oyeyide (1990) said MSE’s is one of the instruments through which the government intends to achieve high levels of income, employment generation and poverty alleviation. Firms with fewer than ten employees provide 59% of the total private sector employment in Kenya. By the year 2000, 14Mn jobs will be required with moderate rate of employment in modern wage sector, an increasing number of people will settle down to MSE’s whose share of total employment in the economy is expected to rise from 4.9% to 7.1%. (Kenya development plan 1989-1993). Considering the fact that the government and private companies have embarked on the principle of Business Re-engineering Process (BRP) at the pretext of downsizing and rightsizing their workforce. This has resulted to massive outlays, early retirement for employees. Also the structural adjustment programmes (Sap’s) has left the government with no alternative but to retrench some of its workforce in order to meet conditions put by donor governments. It is in recognition of this short fall, that the Kenya governments together with a number of donor agencies and MFI’s have stepped in to assist the sector in achieving its full potential in contributing to growth and development in the country.

1.2 Statement of the Problem.
According to Baseline survey (1995), 70% of the new jobs came from the new starts and about 70% was from the existing enterprises. Also MSE’s accounts for 12-14% of GDP. Therefore with this consideration, our problem is to establish how micro and small enterprises has contributed to economic development through increasing levels of employment and incomes earned. Also find out what role does the MSE’s sector play in poverty alleviation for the population that would be desperately poor.

1.3 objectives of the study.
The general objective is to identify the key factors constraining the growth and transformation process of small and micro enterprises with the view of...
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