Are efforts towards SMEs yielding results?

As it appeared in the Daily Nation on March 3rd 2020
Dr. Lucy Kiruthu

Small and medium-sized enterprises (SMEs) continue to play a crucial role in Kenya’s economic development. Not only are SMEs in Kenya a source of livelihood for many, but they are also a key part of the production and distribution network of large corporations and the government. Statistics from the Central Bank of Kenya indicate that SMEs constitute a whopping 98% of all businesses in Kenya. However, their contribution to GDP is a meagre 3%. Unfortunately, many SMEs in Kenya do not have a clear business model, struggle to stay afloat and many die before their 10th anniversary. This is despite the fact that almost every week, there are news about renewed efforts targeted towards SMEs.

The efforts towards supporting SMEs vary in nature. Some are by the government while others are by the private sector. Some are geared towards equipping the business owners with knowledge and skills others aim at providing access to credit. Almost every bank in Kenya has an account or a credit facility specifically targeting SMEs. These financial cum lending institutions go to the extent of establishing business clubs and even offering capacity building and exposure to the SMEs. There are also those efforts that seek to reward SMEs who seem to be outperforming their peers. Year in year out we receive news about the top 100 SMEs. In addition, we come across news of business competitions, conferences and Expos targeting SMEs. There is no doubt that the efforts towards SMEs are numerous. The key question is “are these efforts yielding results?”

An effort that yields results is one that has tangible benefits for the recipient. Has the involvement of both the public and private sectors in SMEs borne fruits? Has there been a significant improvement in the SME sector over the last few years? As a country, we lack deep insights into the SME sector. It is not obvious what impact the various interventions have had. It is also not very evident which SME sectors require extra support and which ones are already thriving. Besides, most efforts towards supporting SMEs are haphazard. I am convinced that a lot of time is spent talking about SMEs rather than supporting them with interventions that assure their survival. For the efforts towards SMEs to yield better results, there is need for us to rethink SMEs as an engine for economic development.

As a country, I believe we have an opportunity to learn from others. A few countries have been proactively supporting SMEs for decades. Germany’s economic growth, for example, has mainly been attributed to the growth and sustainability of their SMEs. Most SMEs in Germany focus on producing a single high-quality product and export it globally. These SMEs are not only concentrated in the urban areas but are dispersed across the country. To help these SMEs accumulate adequate capital, the German government has kept the tax rates for SMEs low. What have we as a country learnt from Germany? What can we learn from countries where SMEs are thriving? How can we streamline our efforts for better results?

Dr. Lucy Kiruthu is a Management Consultant and Trainer. Connect via twitter @KiruthuLucy

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