- February 20, 2020
- by jamesnjoroge
SMEs are the engines of growth, vital to most economies. Research suggests that micro businesses and SMEs accounts for 95% of firms in most countries. They create jobs, contributes to GDP, aid industrial development, satisfy local demand for service, innovate and support large firms with inputs and service.
In Africa, SMEs create 80% of employment, establish new middle class and stimulate demand for new goods and service. In Kenya particularly 80% of the jobs created in 2014 was dominantly by SMEs. In this economy most SMEs fall under the informal sector called Jua Kali, which means hot sun or fierce sun in Swahili. Initially Jua Kali referred to people working under hot sun or open air. By extension, the term now refers to people in self-employment or small-scale industries.
The informal sector is estimated to constitute 80% of businesses in Kenya, contributing 30% of Jobs and 3% of Kenya’s GPD. The disparity between the number of the SMEs and that of their contribution to the GDP is a bit paradoxical, and an indication of a struggling segment on an economy.
It is indisputable that SMEs have a high potential of creating employment and wealth similarly, but why is it that in our case study they create huge number of jobs but fail of create wealth in equal measures?
Most SMEs struggles with limited access to capital, raw material & inventory, market and lack of critical skills. To change the narrative the concerned stakeholders must work together to create a conducive environment for the SMEs to self-catapult to the economic powerhouses they should be.
Government need to revisit their policies, build necessary infrastructures, create tax incentives suitable to SMEs etc. For the private sector there are even more responsibilities to offer, such as offering of affordable and easily accessible loan for capital, free trainings, and creation of SMEs’ tailor-made products etc.