Kenyans despise entrepreneurship denying it the best people who could innovate products that drive establishment of industries for job creation.
A study released by research, consulting and investment firm entitled ‘Closing the Gap Kenya’ says that people getting into business do so as a last resort after failing in life while astute and intelligent people are pushed by society to study hard and get employed in the public and private sector.
Releasing the report during a journalists’ dinner at Hotel Royale Orchid, Westlands in Nairobi, Intellecap mourned the lack of policy support as well as seed capital to help budding entrepreneurs scale up their businesses and also regularize them so as to operate within the law.
“Many get into business as a matter of necessity to earn money to sustain their families but will quickly quit as soon as other opportunities arise. It is this ‘necessity entrepreneurs’ who succeed but run their businesses informally without proper record-keeping and hardly understand legal requirements for running such businesses,” it says.
The researchers recommended that Small and Medium Enterprises(SMEs) formalise their businesses by keeping proper records and acquiring the necessary legal papers thereby readying their business for expansion.
Lack of skills
“No investor or bank will agree to fund a business without proof of records that gives a brief history of its operations. SMEs must end their hide-and-seek modus operandi and embrace openness which will help any investor to gauge its foundation for expansion,” said the study.
It observed that youth and women entrepreneurs faced additional challenges in accessing capital due to the lack of necessary business skills, appropriate networks and support required to succeed.
“At least 68 per cent of Kenyan enterprises say access to finance is a major hindrance coupled with high interest rates of upto 18 per cent, high cost of recovery for bad debt that stands at 40 per cent of loan amount and poor contract enforcement. Many SMEs are unable to offer collateral and lack of investment ready models,” it says adding that capital markets have also failed to develop products that suit SMEs.
While Nairobi has shown tremendous gain on availability of 20 incubation centres for start-ups, it urged for the devolution of the services to also benefit SMEs outside Nairobi.
The government could do well to support SMEs’ development so as to rope in the 80 per cent workforce into the tax bracket that would raise funds essential for carrying out major development projects that uplift livelihoods.